00:00:05:16 - 00:00:29:22 Speaker 1 Hello friends. Welcome to the Your Project Shepherd podcast. I'm your host, Curtis Lawson, and we are here to teach that every successful construction project has four components demonstrated by the simple drawing of the house. The foundation is proper planning. The left wall is your team, the right walls, communication and the roof is proper execution. Have all four of these components in place and your project will succeed. 00:00:30:00 - 00:00:54:10 Speaker 1 We are here to help professionals and homeowners alike make the best decisions about designing, planning, and building custom homes. If you'd like more information about how Shepherd can help you with your project or business, visit us at your project shepherd.com. And now, here's today's episode. Are you ready for your morning? Oh yeah, I'll do the official clap. 00:00:54:11 - 00:01:00:21 Speaker 2 You don't have, my class where you break in. You do your three to between your fingers in the palm of your hand. 00:01:00:23 - 00:01:14:12 Speaker 1 Hey, friends, welcome back to a new episode of the Your Project Shepherd podcast. I am joined once again by Toner Casting, formerly of Toner Home Matters. He has left that company. Yes, he is now with Toner Home Performance. 00:01:14:12 - 00:01:30:01 Speaker 2 That's right. One company stopped. The other one started fresh. No ways to say a good time to rebrand. They say that you need to rebrand every five years. We actually made it about seven years on the last branding, new website, new videos. So. 00:01:30:05 - 00:01:32:13 Speaker 1 Why the switch from toner matters to toner home. 00:01:32:13 - 00:01:53:04 Speaker 2 Performance? So as we started to branch out and grow our organization not only in the rest of the state of Texas, but also across the South, people looking up what I do is there's no reference point like they how do we look up a building forensic expert or a building performance designer that doesn't exist. So the most key term that people do recognize is the term performance. 00:01:53:06 - 00:02:17:17 Speaker 2 So we wanted to go ahead and get that in there. Matters was kind of originally part of their, you know, the states of matter. And we have that represented in our logo and little forms and fashion. And that felt really good to us. But it didn't make any sense to anybody. So the performer performance and just we're trying to, to make it easier to find us online, that was really kind of a complaint that people had on a regular basis. 00:02:17:17 - 00:02:35:10 Speaker 2 I never knew that you existed. I wouldn't even know how to find you. So we're hoping that we can help, generate that a little easier for folks. And I just wanted to make sure that, we could make our name even longer than it was before I did. Had to fight for the toner app.com like hard core. 00:02:35:10 - 00:02:36:16 Speaker 1 Toner, Hewlett-Packard dot. 00:02:36:16 - 00:02:55:15 Speaker 2 Com. Yeah. I mean, that's exactly right. So the guy who owned it used to work at Hewlett-Packard when they thought they would sell ink from a long time ago, and he got canned and he still owned the domain, and he wanted a ton of money for that domain. So I now know how to negotiate for no, for domains. 00:02:55:15 - 00:03:01:08 Speaker 2 Okay. Get it down. We got it down. So very, very agreeable price. But toner HP is you know how that's going to roll. 00:03:01:09 - 00:03:05:13 Speaker 1 You probably the promise him that you you're going to be selling like ink for for HP printer cartridge. 00:03:05:13 - 00:03:26:00 Speaker 2 That's that's correct. Yeah. Yeah that it wouldn't be doing. And he thought that it would get like really really popular that people would only go to the printing company to buy their ink. And I'm like, no, that didn't really work out man. Yeah. So he had done anything with it in forever. But I do like the shortened I like we have a longer name but a shorter website address or email address. 00:03:26:00 - 00:03:31:02 Speaker 2 So I still just couldn't buy toner.com. That dot that's that's been gone for a long time. 00:03:31:07 - 00:03:36:17 Speaker 1 Yeah I think it's a great a great switch. But it really defines what you guys do. 00:03:36:17 - 00:03:43:17 Speaker 2 It's more literal. Yeah. And and more logical to people as logical as my organization can be right. Yeah. But thank. 00:03:43:17 - 00:04:04:07 Speaker 1 You. So today I wanted to talk about something that in your forensic business, in your home performance business, you deal with a lot, and I end up dealing with a lot with you, and I'm. And on my own also. And that is spec houses and production houses. And I think both of us get a lot of work because these things exist, right? 00:04:04:08 - 00:04:05:06 Speaker 2 Yes. 00:04:05:08 - 00:04:33:17 Speaker 1 And so we've talked on this podcast a lot. In fact, our focus has been on building custom homes. And let's be honest, most people out there in the world are not going to go build a custom home. It's something that's either out of reach financially for them or it's something they don't have the time for. Most people out there are going to buy a, you know, a resale inventory home, or if they want a brand new house, they're going to go buy a spec house that somebody builds or a production house, right? 00:04:33:23 - 00:04:37:20 Speaker 2 That's correct. And just to be clear, when we say spec house, we mean speculative. 00:04:37:20 - 00:04:38:16 Speaker 1 Home speculative. 00:04:38:16 - 00:04:58:05 Speaker 2 Right, folks? So to bring it into the, Houston context, if you have a piece of land and you don't know if there's oil under it, if you do a spec. Well, right, you're speculative. You're trying to see if that will produce money or not. So a spec home, you know, the word spec is shortened for speculative. They're trying to make money. 00:04:58:05 - 00:05:20:02 Speaker 2 This is for profit. And that's really the the two ways that these these products line up each other against each other. They're both builders trying to build something for profit versus a custom home. You're not trying to build it for profit, so you are trying to build it on a budget. Right. There's our there are times where we have clients who try to build to make sure that they are in comparable values, right? 00:05:20:02 - 00:05:28:02 Speaker 2 Especially if they're borrowing money on that. But then we have plenty of customers who build houses way more expensive than what the market will bear, right? 00:05:28:02 - 00:05:33:05 Speaker 1 Yeah. So you're right. So the builder is speculating or, you know, the other oilfield term is wild. 00:05:33:07 - 00:05:34:08 Speaker 2 That's right. 00:05:34:10 - 00:05:37:00 Speaker 1 We're wild cat. And on some houses. 00:05:37:02 - 00:05:58:09 Speaker 2 That's right. And in the end I would say that typically in town structures have been spec homes because the production builders are building in developed neighborhoods, which are going to be roughly out of town or out on the area. But like where we're sitting right now in Bel Air, the neighborhood right behind us, this was a this these were all production homes. 00:05:58:09 - 00:06:10:21 Speaker 2 These were was a development, the neighborhood had builders that came in. They built a lot of similar style structures, but now it's in town. And if you were to build in the same neighborhood, it would either be a spec home or custom. Yeah. 00:06:10:22 - 00:06:41:04 Speaker 1 So it's it's, you know, time changes that. Right. So this area was developed in the 1940 or so, let's say 1940, the 1960s when this part of town was initially developed. And like you said back then, it was post-World War Two, kind of a big boom during and post-World War Two big housing boom. And so this, this neighborhood used to be the suburbs, even even though we're close to downtown, relatively, this was the suburbs of these were speculative or production houses back then. 00:06:41:06 - 00:06:59:09 Speaker 1 And it's, you know, like in my neighborhood, which is ten minutes south of here. That's why you see the same floor plan over and over, just like we go out to Katy or The Woodlands or whatever, where, wherever the development's happening, happening, you'll see the same floor plans repeated over and over, with maybe a different elevation on the front. 00:06:59:11 - 00:07:15:02 Speaker 1 Right? Yeah, same thing here. So when we go and remodel houses in these neighborhoods now, I walk in and I'm like, yeah, I've done this floor plan 20 times in the past. I've remodeled this house 20 times. Yeah. People walk in there like, I don't know, I don't know how to remodel this house. Like, how do I reconfigure this? 00:07:15:02 - 00:07:21:15 Speaker 1 I'm like, dude, I've done this house so many times, I can tell you how to build this house right now, right? 00:07:21:17 - 00:07:33:02 Speaker 2 Yep. So they benefited from that then. Now, of course, the lot's going to be more expensive. There's some redevelopment associated with it, but, which one do you want to start with? Do you want to start with spec or production. 00:07:33:06 - 00:07:59:13 Speaker 1 So to start with with spec houses. And one thing is so, so we kind of touched on this, but we, we see again spec houses in infill areas and infill typically means again, we're in an urban area, we're kind of refilling what's already there. And sometimes there's also a use change too, right? Like especially the closer you get to downtown where you used to have one house on a lot. 00:07:59:13 - 00:08:10:14 Speaker 1 Now one house sometimes sometimes becomes two, 3 or 4 houses or more on a lot because you're changing the use and the density of that property also. 00:08:10:15 - 00:08:34:17 Speaker 2 And and I appreciate that. I appreciate the opportunity to move to more dense infill properties. That's how we keep things somewhat under control in terms of pricing. But let's categorize the specs that the themselves into two different groups. We have spec homes that are built by professional spec home builders. I could name a couple, but we're not going to do that today. 00:08:34:19 - 00:08:57:03 Speaker 2 They do this for a living all the time. They do. They have a brand they build, they could do 100 spec homes in town this year. I'm the one I'm thinking of in particular. Does about 700 spec homes in town a year, and they're accountable. They're they have employees and and got people that have been with them for ten, 15 years. 00:08:57:05 - 00:09:21:04 Speaker 2 That's the type of spec home that I like. The other type in this type that I see the most forensic issues on and legal issues on is the investor driven spec home, which I would call an investor home, not a spec home. Spec home is, you know, speculative is because it's part of your business plan, but an investment builder is just trying to put up a house, make some money and fly. 00:09:21:04 - 00:09:29:21 Speaker 2 And one of the things that they do is every time they do a new development, let's say they buy a property in Soho. You know, someone was. 00:09:29:23 - 00:09:31:00 Speaker 1 Some hotel. 00:09:31:01 - 00:09:41:08 Speaker 2 Soho, South Montrose. I made that up. So I'm just trying to get it out there, though. So, so if you're in Soho, versus Mo, which is. 00:09:41:08 - 00:09:41:22 Speaker 1 Northern. 00:09:41:22 - 00:10:04:10 Speaker 2 Ireland, that's even North Montrose. Thank you. Versus IMO and and WeMo. So, so. If they could do that in LA and in Manhattan, I can do that here. I can make up little sections and just be the guy who names all that stuff. But if you go to North Montrose and they're doing a, they bought a lot and they broke it up into four townhouses, right? 00:10:04:12 - 00:10:23:04 Speaker 2 Driveway going down the left hand side, 1 to 3, and then one at the rear. If that is an investor, what they'll do is that East development, they'll put them underneath a different LLC. And they might do one down the street but it's under a different LLC. Why is that. They're reducing their exposure and their risk. 00:10:23:05 - 00:10:34:09 Speaker 2 Yeah. Because they're not planning on building those things very well. They're going to do the absolute minimum. And they're not pro builders. They do not do this on the regular. Yeah. Right. 00:10:34:10 - 00:10:42:07 Speaker 1 Oftentimes they're an investor who's hiring the cheapest contractor quote unquote, to build for them. So they're just the money man. 00:10:42:07 - 00:11:02:14 Speaker 2 Correct. So we can go out to to rice, not Rice Village. Military Heights. So up kind of off the Washington area, and they're all of a sudden you see this? It's a builder. And I never knew this builder existed. And I'll go find him and he's like, oh, yeah, I was building for X, Y, Z production builder yesterday. 00:11:02:16 - 00:11:28:15 Speaker 2 Now I'm building this. And what the investor does is he goes out and finds a young builder and says, hey, be the builder here. And what that builder doesn't realize is that he's building that project for the investor, but he's also carrying the warranty on for townhouses that are being built like garbage. Townhouses in particular are already extremely challenging pieces of architecture in order to perform properly. 00:11:28:17 - 00:11:50:06 Speaker 2 Very, very challenging. And then they're being built in a medium that does not allow for the most cognitive solutions to be applied, because economically they don't want to apply those. They are big, tall, painted pigs, and they are so good for my forensic business and they're so difficult to fix. So then why do they keep getting built? 00:11:50:08 - 00:11:52:17 Speaker 2 Because the average ownership is only three years. Yeah. 00:11:52:18 - 00:11:53:19 Speaker 1 Which is big demand for them. 00:11:53:19 - 00:12:15:21 Speaker 2 Big demand. And people can sell them. They can sell those pig houses over and over and over again. Because have the next buyer can have an inspector come through. It could be an engineering group that doesn't sections. They're not going to see what we see. And the the owners that currently are selling it, unless I've been out there or someone like me, they don't even know what to disclose. 00:12:15:23 - 00:12:31:12 Speaker 2 They just think that this is just it. But man, the stores, the restaurants, the coffee shops, the location sell that house today. So difference between investment driven spec homes and professional spec homes. I think we need to delineate between those two. 00:12:31:14 - 00:12:55:14 Speaker 1 Yeah. So a a professional spec home builder often you know you see more of that maybe less of those in those areas and more, you know, like a, like a belly or West University memorial where they're buying oftentimes a larger lot or, you know, a single family, project and not not trying to throw up 4 or 6 townhouses on a lot. 00:12:55:19 - 00:12:56:15 Speaker 1 That's correct. At the time. 00:12:56:15 - 00:13:20:13 Speaker 2 Most of the time. So I was in Austin, Austin on Friday, East Austin, at the back of an older neighborhood, there was a bunch of open or trees and stuff like that. And the guy bought a six acre plot. Six acre plot in East Austin will take it. Now there's, 19 little individual single family homes. 00:13:20:13 - 00:13:43:05 Speaker 2 They're not townhouses, two story, you know. Of course it's Austin, so it's kind of mod style. In that group I've done work with before, they do, they have like 5 or 6 of those developments going on. They do, you know, about 100 to 140 project. You know, properties that get completed a year. They have a lot of risk, right, that they have to accept. 00:13:43:07 - 00:14:10:15 Speaker 2 And they're they're willing to do things better because they don't want to risk that brand. They also do all the financing and house and all this kind of stuff. So we're looking for something that's going to be someone that's going to be there and responsible to warrant it. So I would warn everybody, if you're buying a house from someone who's just an investor, get ready to know that you have basically no warranty, because if something goes south, they're just going to bail on the LLC. 00:14:10:19 - 00:14:11:12 Speaker 1 Yep. 00:14:11:13 - 00:14:12:12 Speaker 2 And that's the point. 00:14:12:12 - 00:14:37:15 Speaker 1 Yeah. In any of these spec building or production building scenarios. Right. The builders profit is maximized by building these things as efficiently as possible. And that means time means building as fast as you can hold it the least amount of time. And also that means cost. Build it as cheap as you can to maximize your profit. Right? It's like it's like any business you want to build your widget as cheap and fast as possible because you make the most money. 00:14:37:17 - 00:15:02:19 Speaker 2 Well, I would say not like any business because if you're in business for a long time, you can't. It's not a sustainable business model because risks will catch up and offset that. Right. The, the bigger pro spec home builders, they value, the things that are under the skin, right? Not just, hey, a bunch of really beautiful marble countertop and let's paint it, you know, white or whatever the most recent design trend is, and push this thing out the door. 00:15:02:21 - 00:15:22:03 Speaker 2 They know they don't want that AC system that's not going to work to come back to them. That's going to create a challenge. Right? They want to think about things like the the durability. So, what's really popular in investor driven is when you come into the garage, they put down that they don't put down a coating, they paint the garage floor. 00:15:22:03 - 00:15:39:20 Speaker 2 Well, the older guys, they're more professional spec home builders. They know that they you can't do that because the slabs that's still wet. So I come into an investment one and what's what's happening in the garage. But what's all bubble all bubbled up because you just bought it. And I tell my clients that they're like, well, I want to see the thing. 00:15:39:20 - 00:15:59:10 Speaker 2 I'm like, no, you you actually got what you paid for, right? Had he done the better AC system, the better envelope, the better insulation, you would have paid for it. Yeah, and that's going to be the case in almost all of these scenarios we're talking about today is important for our clients to know what they are buying. Right. 00:15:59:12 - 00:16:20:17 Speaker 2 And to be honest about it. But the reason why these things exist, the reason why new homes are popular, is because it appeals to the most basic psyche, shiny and pretty, right? And that's all they know. And then, especially if it's their first purchase, or maybe their second purchase they haven't had until, you know, until you've had a challenge or something, you don't know to question it. 00:16:20:18 - 00:16:21:21 Speaker 2 So, yeah. 00:16:21:23 - 00:16:53:20 Speaker 1 You know, oftentimes the things that are shiny sexy, right? They just get prioritized as over over quality. And so, you know, it's going to sell the house, but that's not good for the, for the, for the customer, or more for the house, you know, long term. Yeah. One thing I also wanted to say is there's, there's some there's some crossover sometimes between kind of the custom and spec world, you know, a lot of, a lot of times you see the word custom used in a company's name. 00:16:54:01 - 00:17:15:03 Speaker 1 Yes. I mean, like our, my, my homebuilding company has crafted custom homes. And you see the word so and so. Custom homes used a lot even on companies that just do spec for. And so people are like, oh, I bought a custom home. No, you didn't buy a custom home, you bought a spec home. And the guy just had the word custom in his title. 00:17:15:04 - 00:17:35:21 Speaker 1 Custom is when you you're there from the beginning, you're you're working with them to design, you know, pick out everything that you want. That house is being built for you, right? In a spec house, like you might get if you if you come in in the middle of the process, you might get to pick out the countertops in the tile, but you're gonna have a chance to affect the floor plan or the structure or the mechanicals, probably. 00:17:35:21 - 00:17:36:05 Speaker 1 Sure. 00:17:36:05 - 00:17:50:22 Speaker 2 So that kind of brings in the semi custom spec world. And this is where the speculative builder. So we had let's let's kind of build a ladder here. The bottom rung is the investment builder right. The next one is going to be the speculative builder. And right around that same thing is going to be the semi custom home. 00:17:51:00 - 00:18:05:09 Speaker 2 These are typically production builders that are building in town. So great example. Newmark Homes does this trend maker or tri point does this David weekly does it weekly. 00:18:05:11 - 00:18:06:17 Speaker 1 Partners in building does the. 00:18:06:17 - 00:18:26:20 Speaker 2 Vibe. Yeah. Partners are building. Does it. And then they, they do allow you to come in and kind of alters it. They all have their own process. You're most likely starting with a plan that they've already done someplace else before, and then you're altering it. So it is not true custom. But you do get a ton of choices on your fit and finishes, right? 00:18:26:20 - 00:18:29:22 Speaker 2 Flooring, paint, colors, countertops. They go through their process. 00:18:29:22 - 00:18:38:07 Speaker 1 They probably are going to alter their basic specs of the home, though. They're not going to say, oh, for this home, we'll give you the option to do, you know, thermoplastic giving and give it a zip. 00:18:38:09 - 00:19:03:08 Speaker 2 No, you're getting what they you're your standard spec. You're getting what's out in the suburbs. Now, we have had good experience with weekly when our clients have gone to Weekley and they've done all of our specifications, new marks done all new Mark already built an extremely high performance structure to begin with. They're probably the best envelope performance out of any builder in the state of Texas production wise. 00:19:03:08 - 00:19:22:21 Speaker 2 Or they match most custom like really high end custom stuff. That's really. They're different though trend maker tri point. They will do some modifications. Most of these I would say most production builders we've done projects with either in town or in their normal neighborhood. They're almost always okay with it because it's just a change order for them. 00:19:23:00 - 00:19:42:04 Speaker 2 They get paid more money on that so they don't really mind. But but the only thing that would hinder that is the process. Does it come up their process because on their short money, they can't add another 30 days to that. That will start to mess with their model. And some of them become so large that communicating these kind of requests becomes a little bit of a challenge. 00:19:42:04 - 00:20:04:23 Speaker 2 But I love the semi production stuff, semi-custom stuff. We have a lot of clients who are coming out of medical situations or failure houses, and they want something to go to, and this is the level that will bring it to them, because they also don't have time to wait. Right? A speculative builder doesn't necessarily build as fast as a semi-custom builder will. 00:20:05:00 - 00:20:20:14 Speaker 2 So I have a client right now, who's coming out of a very bad situation. They need to get into a new space. They don't have time to build custom. They said they would if they had time, but they don't have two, two years to commit to that. Right? Don't even own a lot starting from absolute zero. 00:20:20:14 - 00:20:40:16 Speaker 2 That's a two year process, if you're lucky. So they went into, a semi-custom home. They made some change. The house is almost done. It's like a flooring stage. But they hadn't installed the final, outside units yet, so we were able to make some modifications. There are some there are further modifications they want to make, but they'll do after they close. 00:20:40:22 - 00:20:58:22 Speaker 2 So they'll be in that house next 30 days, dramatically improve their situation. And I think for a really killer deal. But, you know, you and I could drive down a street and we can pick out what the semi-custom production guys. Right? Yeah. All the time for sure, because it's it's just not as cool looking. 00:20:59:00 - 00:21:20:01 Speaker 1 Right? I actually know a designer here in town. I'll tell you, he later, a designer who will have, a semi-custom builder build a house for them, get it to a certain point and then not finish it out, and then they will come in and rip out some of the finishes and then kind of, like, customize it. 00:21:20:01 - 00:21:37:00 Speaker 1 Yeah. And they can they can build that cheaper than if it is built the house from, from scratch. So they'll get like a weekly or a PIB or somebody and they'll, they'll pay them to build kind of their base house. So their cheapest cost per foot. Yep. They'll come in and add all their finishes and then sell it for top dollar. 00:21:37:00 - 00:21:55:17 Speaker 2 I've got a client like that in Dallas who has another semi-custom builder, production builder, and they buy the cheapest one story. They make, and she buys a lot anywhere in Dallas, and they build it. And she does that. She makes all she uses, but she uses all of their selections. She doesn't go in and rip anything out. 00:21:55:17 - 00:22:22:16 Speaker 2 She goes into their selection. But because she's an interior designer, she just makes awesome choices, like really, really good choices. And because she does this so much with them, they give her a discount they don't charge or the change order fees. So she's producing these really cool looking production homes in a kind of fringe area of Dallas. And they look I would do it. 00:22:22:18 - 00:22:44:12 Speaker 2 She but her interiors are beautiful. Like I mean like they're awesome looking. So it's like the she can work with the most common materials and make them look so good. And she basically says the only profit you're paying for is my design fee. So you're buying the house at cost, plus her design fee. So really cool business model. 00:22:44:14 - 00:22:47:02 Speaker 1 Could be a new a new model for us to get into. Yeah. 00:22:47:02 - 00:22:47:20 Speaker 2 Just to. 00:22:47:22 - 00:22:52:01 Speaker 1 Start like like basically buying production houses and tweaking them and reselling the. 00:22:52:01 - 00:23:10:10 Speaker 2 Thing is that builder came to her and said, hey, we're not going to do this model anymore. She goes, no, no, I need that model, right? It just fit everything. And she knows their models also. So she buys a narrow lot or a wide not lot, no shallow lot. It was a pretty cool, thing, but she used to be their head of design. 00:23:10:12 - 00:23:12:14 Speaker 2 Their head of interior design. That's cool. Yeah. 00:23:12:17 - 00:23:15:20 Speaker 1 Pretty cool. All right, so we got kind of got off track. Where were we? 00:23:15:20 - 00:23:20:15 Speaker 2 We we're on semi-custom, which is right before we get to straight up production. 00:23:20:17 - 00:23:21:06 Speaker 1 Okay. 00:23:21:07 - 00:23:46:02 Speaker 2 So we've had investor, we've had professional speculative builders, which you'll typically find in larger accumulated lots. Right. Where there's 10 or 15 or maybe even 45, they also have the purchasing power to buy those larger pieces of Earth, right? Yep. Still going to be in town, but not like sliced in between two little existing houses and no mow. 00:23:46:07 - 00:24:12:05 Speaker 2 So now we have the production house, right? I work for a ton of production builders. We do their building performance design. We help them how to understand how to make their houses move forward, reduce their risk. When a client comes to them and they have a particular health need, will come in and consult on that. We also do a bunch of litigation support for production builders and custom builders and spec builders, and they always want to try to do better. 00:24:12:07 - 00:24:35:20 Speaker 2 I will say, and I want to make this statement really clear, some of the best builders, if not the best builders, are production builders. There are those out there that are just trying to hose you and people feel like that, but it's also someone who's buying a house and they expect more than what they're purchasing. So they're buying a $400,000 house for they think it's a $800,000 house. 00:24:35:20 - 00:24:59:23 Speaker 2 Right. And they're not honest about what they're considering. Right. Or what they did purchase. And I had to kind of sometimes be the velvet hammer to remind them of that. Right. And we said, let's work with what you have. And this is especially the case if someone has a medical condition and they don't tell the builder, and they expect that this new house is going to meet the very particular needs of their medical condition, that's just naive. 00:25:00:02 - 00:25:20:23 Speaker 2 Yeah. If not borderline ignorant. So, we very regularly recommend to some of our most challenging customers to go buy a production home and to understand what they're going to get and either work with the builder to modify to meet their needs or buy what they what they get, and then make them make the modifications on their own. 00:25:21:01 - 00:25:31:02 Speaker 2 It's going to be out in the county, right? It's going to be way out there. But if that's where but you know what we get what that we don't get within in town good schools. 00:25:31:04 - 00:25:31:17 Speaker 1 That's true. 00:25:31:23 - 00:25:38:06 Speaker 2 Right? I mean you fight, go try to find a spec home where your kids can go to Memorial High School and tell me how much that's going to cost. 00:25:38:06 - 00:25:40:17 Speaker 1 Yeah. Two, three, $3. 00:25:40:19 - 00:26:03:23 Speaker 2 Right. And then that's totally different. I mean, there are some extremely high end spec homes, and they are built as if they are custom structures. And that is totally different, right? I've got one that we're working on right now. It's going to it's going to hit the market in next month for $4.6 million in River Oaks. I don't consider that a spec home even though it's being built for sale, but it follow the exact same process as a high end custom home. 00:26:03:23 - 00:26:18:21 Speaker 1 See, I, I think there's a lot of those types of homes out there that are built like crap, though. I mean, like, I, I don't know how many of those, you know, high end spec, houses that I've been through that I just thought were total garbage. 00:26:18:21 - 00:26:39:18 Speaker 2 We just had a conversation about when I got up here was like, the first thing we talked about. That house in particular, though, is built to our standards, and it's marketed as such, and they're asking a premium for it. So and it comes with a different set of guarantees. I go to plenty of spec. There's plenty of very, very expensive spec homes that have horrible performance standards. 00:26:39:20 - 00:26:40:20 Speaker 2 And that's the. 00:26:40:20 - 00:26:41:20 Speaker 1 French version. 00:26:41:22 - 00:26:45:06 Speaker 2 That is that that's the Spanish version. Horribly, horribly. 00:26:45:07 - 00:26:50:18 Speaker 1 Okay. That's a that's French too, right? Daniela say horrible. Say horribly maybe. Sure. I don't know. 00:26:50:20 - 00:26:51:06 Speaker 2 It feels. 00:26:51:06 - 00:26:54:12 Speaker 1 Better. I took French in high school, but I can't remember. 00:26:54:14 - 00:26:55:14 Speaker 2 The reason why I say that. 00:26:55:14 - 00:26:57:04 Speaker 1 Is I can ask where the bathroom is. 00:26:57:04 - 00:27:12:23 Speaker 2 I don't know what happened on my spell check, but every time I write horrible, it changes it to horribly. And I and I feel to it's u humorous for me to change it back. So every time I write something horrible it comes with like. I also think it downplays the severity of that term. 00:27:13:01 - 00:27:21:10 Speaker 1 Since we're on that topic, my, my, my daughter has had a Ford Escape old car that they were driving. We always joked it was the escape. 00:27:21:10 - 00:27:22:05 Speaker 2 It could escape. 00:27:22:09 - 00:27:34:12 Speaker 1 And so when I typed it one time, I added the little the little tilde on on the E for our family group text. And now every time I type the word escape, it comes out as a desktop app on my phone. 00:27:34:17 - 00:27:36:04 Speaker 2 So that's. 00:27:36:04 - 00:27:40:05 Speaker 1 Awesome. That's great. Finally saw the escapee this weekend. But you okay? No more. 00:27:40:05 - 00:27:48:10 Speaker 2 Escaping. No escape. So those. Really? That's a really good point. More expensive doesn't necessarily mean that you're getting better. Better quality. 00:27:48:12 - 00:28:04:06 Speaker 1 Right? Right. Because sometimes you're still dealing with the investors, even on the even on the high end stuff. I know there's quite a few investors here in town that build kind of a couple million dollar spec houses. And they're, they're, they're building to some terrible, terrible standards. 00:28:04:06 - 00:28:22:23 Speaker 2 But then I have I know some people here in Houston, in Austin that build, you know, spec homes. And they say they're building to these really cool performance standards and they're not. Yeah, it's very social media driven. And I remember walking one and this guy has a ton of followers and everything in the basics that he was missing. 00:28:23:01 - 00:28:34:17 Speaker 2 I had to pull the Hoosiers stare into scenario and I'm like, hey, you're not allowed to shoot, bro. You can only run back and forth. No more shooting for you until you get done with these basic Hoosiers. Yeah, Hoosiers. 00:28:34:17 - 00:28:35:18 Speaker 1 I thought you said Hooters. 00:28:35:20 - 00:28:56:20 Speaker 2 No, no, not at Hooters, I do. It might be a you can come up with that one for the next one. But in Hoosiers, you know, Gene Hackman says, yeah, no more shooting. You guys just running and that's it. So. And I and I feel bad because I still see this guy marketing his houses, and I'm like, as if they're like, these wonderful structures in they're not. 00:28:56:22 - 00:29:19:02 Speaker 2 So if I think at the really, really high end level when they do well with this, people appreciate it. And but that's even more important for them to do these processes, because those homeowners, those homeowners can talk to you. They have they have attorneys on retainer. They're pissed. Right? But a lot of times what will happen is there's so much profit in those houses. 00:29:19:04 - 00:29:37:13 Speaker 2 The builders will throw some money at the situation when things go south and appease a homeowner. And there's this, this kind of rate of life in real life interference. When you have an issue, it's important to you in the severity is there and the severity comes down as life pushes it down. 00:29:37:13 - 00:29:37:22 Speaker 1 Right. 00:29:37:22 - 00:29:51:14 Speaker 2 So sooner or later you look back and you're like, I remember that was a problem, but my life pushed it all the way down to where it's not a consideration anymore in a builder or a trade, or some might throw a little effort or money at it for that time. 00:29:51:14 - 00:29:52:21 Speaker 1 Being can make it go well. 00:29:52:23 - 00:30:17:09 Speaker 2 It's appeasement. Yeah, right. The piece them until they start talking about anymore. It's a interesting factor that the more expensive the house is, not the better of the house. Right. Especially when you start getting to, like, really, really expensive finishes and I going stuff and I'll tell you that that's really my case. And almost all of my projects in California, they are the most gorgeous pieces of architecture materials. 00:30:17:11 - 00:30:39:00 Speaker 2 I mean, like we're talking, you hold this, you can't walk three feet without someone stopping you and telling you how much something costs and and how extreme it was. But then I have basic issues, like they were supposed to use schedule, l copper, and they use schedule M copper. Right. And now the recirculating pump is busting all the seams, and I have 40 leaks in it. 00:30:39:02 - 00:30:41:00 Speaker 2 Right. Because that's where they said money. 00:30:41:02 - 00:30:42:06 Speaker 1 Yep. 00:30:42:08 - 00:30:43:21 Speaker 2 So kind of crazy. 00:30:43:23 - 00:31:02:12 Speaker 1 Stepping back a second, I was going to say that there's kind of this progression at least that I've seen this progression of of contractors, to be honest, I went through the same progression. So I'm not talking bad about this. But oftentimes when, contractors go through this, this growth, they kind of start off doing it. They started like me. 00:31:02:12 - 00:31:16:13 Speaker 1 They started doing remodels, right? You start doing remodels, you start doing baths and kitchens and you do a whole house remodel, and then you do additions and then you're like, you know what? I could build a new house. So but I've never built one for a customer, so no one's going to hire me. So I'm going to build a spec house. 00:31:16:15 - 00:31:35:09 Speaker 1 So you go from being a remodeler to I'm throwing out spec houses now and then you do open houses. People are like, oh, this is nice. They hire you to do custom houses and now you're a custom home builder. Yep. And so it's this progression that a lot of contractors go through or on the other end, it's a guy that he worked for a production builder. 00:31:35:11 - 00:31:52:17 Speaker 1 And now he's like, hey, I, I've been working for this production builder. So I went up 100 houses a year. I'm sick of this, but I like building houses. So now I'm going to shift over. I'm going to build my own spec house. Yes. So those are kind of like the two pathways that people often get to being a a builder, right? 00:31:52:19 - 00:32:01:06 Speaker 2 Most definitely. And, and there are some that stay at the spec side because they don't like homeowners. Right, right. Which that's the variable. Yeah. I. 00:32:01:06 - 00:32:03:13 Speaker 1 Don't like risk. That's why I don't do a spec house. 00:32:03:13 - 00:32:22:16 Speaker 2 That's right. And if you do, you know, they do the things like the lock per house said to lessen that risk. So or in the end, they buy these warranties that give you the feeling like you have a warranty is really just kind of a insurance policy. Yeah, it's like an small insurance policy, but it's in either way. 00:32:22:16 - 00:32:44:11 Speaker 2 When we get to the production side, think about the liability that a production builder has, the practice they have, can they make mistakes? Yes, they can make mistakes. They're only as good as the worst subcontractor. Is the business model perfect? No. They're still trying to make profit from that house. Right. So they are they're going to make considerations. 00:32:44:11 - 00:32:57:23 Speaker 2 They're not going to choose the best feature of every feature that can go into the structure from mechanical through the flooring. Right. You're also getting a lot. And what I see a lot of house for your money still, especially. 00:32:57:23 - 00:32:58:17 Speaker 1 Your oh yeah. 00:32:58:18 - 00:33:21:15 Speaker 2 Yeah Houston standards all day long. The amount of house you get for $500,000 in Houston is ridiculous. It is by even just two hours away standards and Austin or saying even San Antonio is actually we can talk about Antonio one day house. Right. What you get if you want the best $500,000 production house in Texas, come to Houston, don't go to Austin, don't go to Dallas. 00:33:21:17 - 00:33:46:20 Speaker 2 And it's just it's just cheap, dirt, convenient. And the schools are going to be awesome, right? You're going to. But you're going to have 6000 kids in your high school. Like, yeah, good luck. But you've watered down the top 10%. Like least 600 kids will get to the top 10% versus between your office and my office here is Bellaire High School, extremely competitive high school. 00:33:46:22 - 00:34:00:13 Speaker 2 Right. And good luck with that. And to in to live in that area. You they're either in an apartment or you're in a very expensive structure. Yep. So, you know, if you buy a new spec home in Bel Air, it's going to be one one at the minimum. 00:34:00:15 - 00:34:08:16 Speaker 1 Not even anymore, really? More like 1618. Wow. Yeah. I mean, the lot price. You just can't. You can't build it that cheap anymore. 00:34:08:18 - 00:34:10:04 Speaker 2 It's just crazy. 00:34:10:06 - 00:34:29:11 Speaker 1 Let's talk about, you know, if if you're going to buy a spec house, you know, infill. What what types of questions should you be asking and what types of things should you be looking for? So let's say I'm going to go buy a house here in Bel Air. It's a spec house. Million and a half dollars. Whatever. 00:34:29:15 - 00:34:34:16 Speaker 1 What should I be asking that builder or what kinds of things should I be looking for? 00:34:34:16 - 00:34:51:12 Speaker 2 Sure. So ask about their process first. How? What is the process for building this? Where do they start with the designs, right. If they say in-house, in-house typically means that you're not you're not going to an architect. You're buying the plans online or you have a draftsman. So that's your first kind of statement for quality. 00:34:51:12 - 00:34:59:04 Speaker 1 That's or it could be in-house, meaning that builder has a partnership with an architect or a building designer. Correct. Using kind of some of their stock plans. 00:34:59:04 - 00:35:19:08 Speaker 2 But we want to go back to the very, very beginning. Right. Where where was it designed? Okay. And then how was it engineered typically by structural engineering. Right. The good thing about being in here in town is there's probably going to be permit and there's probably going to be inspections. When you get out of town, your likelihood of permits and inspections dropped dramatically. 00:35:19:10 - 00:35:38:07 Speaker 2 Unless you're in an area like Dallas, where every single little suburb has its own permitting entity. But even in Austin and Houston, as soon as you leave town, it's the wild West of building houses, right? No. What what that's going to mean. And just because they're permitted doesn't mean they're being built better code does not mean they're being built to perform really, really well. 00:35:38:09 - 00:35:56:18 Speaker 2 Code is the minimum standard for a structure. So what is that process. And so this the process will tell you the quality of your spend. So if they say, oh yes, then we have an interior designer or then we use a building performance designer that all these other things are going to be missing. But you have to know to ask these things. 00:35:56:18 - 00:36:21:15 Speaker 2 The good thing is they can go back and listen to season one all the same thing, the same teammates that your season one family used. A good spec builder should also be doing it. Yes, the reason why they wouldn't is because they don't want to involve those decisions so they can make poor ones on their own. And that's why, same thing with these semi-custom guys. 00:36:21:17 - 00:36:42:19 Speaker 2 What is their process now? They may have an architect in and house because they do so much work. It's just better to have an architect and keeps cheaper and better control. They're going to have a guarantee they're going to have better engineering, right. Because they need to have that engineering done. Now it's going to be built faster. And how is it being built faster? 00:36:42:19 - 00:37:04:18 Speaker 2 Because they have a very tight schedule. So sometimes we both believe that fast build yields blow quality. And I don't think that's the case because I've seen spec homes built by investors drag out forever. When we see their the would go gray on the exterior because it just outlasts how long, how long, how fast they can build because they're not experienced in it. 00:37:04:20 - 00:37:18:15 Speaker 2 Their trades aren't reliable and loyal. But then you get to the production home. Right now we're out in the neighborhood, and those houses should be built quickly. You have full time staff there just to build every single day. 00:37:18:15 - 00:37:33:20 Speaker 1 And and the same trades are building the same floor plan over and over and over. Correct. Well, you know, the framers especially like you see these guys sometimes building these houses without looking at the plans that much because they built the same plan over and over so many times. They know. 00:37:33:20 - 00:37:51:00 Speaker 2 It. They know it. And that's good, right? We want repeat now. Also, what's good from that is if a problem arises they typically figure it out right. And he gets worked out in the first house or two. And then they go back and they, they don't make that mistake again over and over again. 00:37:51:02 - 00:38:05:04 Speaker 1 I was gonna say also some of the new, you know, technology quote unquote, that's out there now, like from BFS, they've got this, precut framing package to, to where, like, they can deliver a whole house. The framers never cutting the studs for it. 00:38:05:04 - 00:38:22:17 Speaker 2 It's a Lego set. It's awesome. It looks really cool when it's delivered. It's all color coded, like it makes. I want to go do it almost. Yeah, right. Not one, not quite. But, Yeah, that's a really cool in a lot of these production builders already have that, especially the large national builders. You know, these are public companies. 00:38:22:19 - 00:38:45:21 Speaker 2 So they do have to deliver a profit. But their profit is derived not just from building a house cheap, their profits derived from the financing that they also offer. They're able to market, and, and bring people to a product, that helps them control their profit margins. They have all these other other ways of managing their their margins. 00:38:45:23 - 00:39:06:06 Speaker 2 Right. Not just like Aspect Builder is. I know I get paid one time. Yep. And that's at the close of this house. So if they have a neighborhood that let's say a particular house is not that profitable for them, but the overall neighborhood is because they have a good mix of type. That's okay. Yeah. So there's a lot of flexibility. 00:39:06:06 - 00:39:25:07 Speaker 1 They also participate in a lot of other programs like, rebate programs from national material manufacturers, a lot of incentive programs from utilities. These guys can be getting three, 4 or $5000 in rebates per house from the utility for participating in all the different programs offered. 00:39:25:07 - 00:39:42:16 Speaker 2 And they are the ones that drive pricing, that the production builder is the person that keeps affordability in housing. It is not the custom guy is not the spec guy because they're the ones who feel it. So they're the ones who are at Texas Association and Builder stuff. 00:39:42:18 - 00:39:44:07 Speaker 1 National Association of their lobbying. 00:39:44:09 - 00:40:06:11 Speaker 2 They're lobbying. They're paying money because they care about the price of a two by four. They care about the asphalt price that goes into the shingles. They care about the the concrete price. So all custom homes, all spec homes in town, they need to thank the production builder for controlling their costs. So and the end user gets that. 00:40:06:11 - 00:40:33:00 Speaker 2 So. And the reason why Texas is still an affordable market, by comparison, is because of the the lobbying from the production builders and because our legislature cares about that. They recognize it as a key industry, and they want to try to control those costs. So I know sometimes people paint the production builder as a devil. They're they should be painted more as a saint. 00:40:33:02 - 00:41:01:18 Speaker 2 Especially in that kind of aspect. I just spent a lot of time with, this last week with the guy who was the president of the EPA, and then Tab and then KNB, and he has dedicated his life, and it's his second half of his, not not his life, the second half of his career, life to lobbying for the benefit of the homeowner, to try to control those prices in a ton of their profit that they resync into, that. 00:41:01:19 - 00:41:07:23 Speaker 2 I think it's a really cool aspect that most people don't respect is so. 00:41:08:01 - 00:41:33:05 Speaker 1 All right. So we, we, tend to meander a little bit, which is okay. But back to back to, things people should be looking for when they're, when they're buying a process. First a spec house, the process I was going to add into that, as part of the process, which is one of the things that if you go back to that first season that you mentioned, what what person on your team or what team members do you have that are doing third party inspections? 00:41:33:06 - 00:41:50:17 Speaker 1 Correct. So when you're building a spec house, is your engineer doing walkthroughs? Do they have a building performance person doing walkthroughs to the. Do you have a, you know, like an extra envelope person doing inspections? Like, who are you utilizing to make sure the house is built the right way? 00:41:50:17 - 00:42:10:03 Speaker 2 Correct. And in most production builders, they're going to have the best versions of that. They're going to everyone's going to have third party times ten typically. Additionally that builder or that superintendent, he goes through training. He has people he can call and he doesn't have a question. The spec builder, especially the investment one, it's they don't have any oversight. 00:42:10:05 - 00:42:34:01 Speaker 2 The regular spec builder will have superintendents, but many cases, they're left on their own to do that kind of work. We have one large spec builder, and I've done training for him before. And when I sit in the training room, it's full of other superintendents, and it's like the lifetime movie network of superintendents. These are all the supers that worked at other places, and it didn't work out. 00:42:34:01 - 00:42:59:13 Speaker 2 And this is where they landed. I mean, like the number of bad out, it's it's my room was so high. Because they're just they, they don't do necessarily the best work as a superintendent, but they're left on their own, right. So they can just go wander off and do that kind of stuff. So the quality of your superintendent is key, and there are some great, spec builders that build in town. 00:42:59:13 - 00:43:25:04 Speaker 2 They do, and they have really, really robust training programs, and they pay their superintendents really, really well, which you want to have a superintendent that makes a good living, right? You want him to be happy to be there. Then is the financing how are you paying for this? Yeah, because the investment house, you're just going to bank and hoping that that house is less money than what it comes out for. 00:43:25:06 - 00:43:43:23 Speaker 2 We're going to pay the difference amount when you go to this speculative builder, they will have relationships with financial institutions that they can refer you to. And then you go to the production builder and they have them in house and they will they will do, they will tell you what you can't afford and you can't afford. They will walk you through that process. 00:43:44:00 - 00:44:05:01 Speaker 2 Right? Yeah. And then it's all said and done and you move in. Now the test starts, right. Getting a house up is not the hard part. Maintaining the house and that relationship afterwards is key. So you know, what does the investment guy do I have is when I call the investment guy do you do you do. This number has been disconnected. 00:44:05:01 - 00:44:29:01 Speaker 2 You cannot okay. So that's the first one. And then when I call this the speculative guy, you get someone on the phone, they go, okay, we'll, we'll have some. We'll let someone know an email. Right. You're dealing with regular communication. Then you get to the production builder and they go, great. Thank you. There's a form online, and those forms online are not blowing you up. 00:44:29:01 - 00:44:53:02 Speaker 2 That's because they weren't written record. Right. And it's a process. It's a form online. Please fill it out. You will be contacted at exit date. They will have a resolved by this date in those warranty managers, which I have a list of warranty managers that I want to hire from production homes. That is so deep. But I value those clients and those those are some of their best, best tools. 00:44:53:02 - 00:44:56:06 Speaker 1 Yeah, the warranty guys, those companies are often their best employees. 00:44:56:06 - 00:45:19:11 Speaker 2 Yes. Yeah. Best attitude, best knowledge base. And they're very similar to how we learn. We learn from everyone's mistakes. That's where our strength comes from. So for us to hire a warranty manager makes sense because they've been learning from those mistakes. But and also, and I'm sure you've experienced this sometimes having your project manager who's running a project stop down and go do a warranty. 00:45:19:11 - 00:45:20:20 Speaker 2 Is that efficient. 00:45:20:22 - 00:45:30:14 Speaker 1 You know? Well, I mean, for me, sometimes it works out because he's the guy who built the house. He knows the ins and outs of it, but it's not. It's not the best use of his time. 00:45:30:14 - 00:45:47:22 Speaker 2 Yes. And but, production wise, it is not. You will not have the guy who built that thing watched it get framed, come out there and be a warranty manager, and they're super patient, and they can show up at 530 in the evening. And they know all the trades and they're I love that. 00:45:48:01 - 00:45:48:19 Speaker 1 Yeah. 00:45:48:21 - 00:45:52:23 Speaker 2 But you're out in the suburbs. You're not in town. Typically. 00:45:53:01 - 00:46:07:10 Speaker 1 Again, with them though, they're building the same house so many times that, like that warranty guy knows that floor plan, like, so it's not like AA1 off customer or in town spec house where the only guy that knows that house is the what is the super who built it? 00:46:07:12 - 00:46:29:13 Speaker 2 And I will say that in terms of range of warranties, the investor, it's all types, right? I've had windows that were installed upside down. I had one the other day. They installed the windows backwards. So instead of reflective solar he can coefficient reflecting the the heat out it reflected it inward. And it was just cooking. It was like a, like a little oven in each one of these rooms. 00:46:29:13 - 00:46:53:01 Speaker 2 And I didn't know it until we saw that the stamp was backwards on it. And the bottom left hand corner and this window actually stamped its windows. So nothing wrong. I don't even know how they did what I do know how they did it. But anyways, then you have the the semi production guy or excuse me, the, the regular spec guy who does some volume or stuff like that. 00:46:53:03 - 00:47:10:03 Speaker 2 They're going to be a little more responsive. They're going to have to bring those kind of things into themselves. But we're only going to really see more kind of product issues, like I'm dealing with one right now and it's a they all the dishwashers they bought, they just have a, problem with them. They won't stay level. 00:47:10:05 - 00:47:32:03 Speaker 2 So it's for some reason as because the motor was turned, vertically. So the centrifugal motion pushes the back feet down. So it's like all of a sudden it doesn't drain because it's pooling in the back. So everyone's complaining about stinky. They're washed whatnot. Dishwashers are. That's a manufacturer issue, but they have enough clout with the manufacturer. 00:47:32:03 - 00:47:38:23 Speaker 2 They're just getting all new dishwashers, I think, like 184 dishwashers. Man, that's a lot. It's Bosch. 00:47:39:00 - 00:47:40:00 Speaker 1 And thousands of. 00:47:40:02 - 00:48:08:18 Speaker 2 Thousands of dishwashers. But then. So they're going to have some manufacturing issues and stuff like that. Not a lot of window issues, envelope issues. Then we have the production builder. And almost all of their issues are related to owner operational issues. Running the AC's too cold, not maintaining the house. Right. When things are built really, really efficiently. They also requires that it be maintained efficiently. 00:48:08:20 - 00:48:38:13 Speaker 2 So and a lot of that is because they, they the ease of acquisition of that home doesn't generate someone who's concerned about, the maintenance. They believe an easy acquisition means that it's easy maintenance, which typically means by normal human nature, no maintenance. Right. And they have they spend so much of their time explaining, well, maintenance, sir, you guys just put all these new flower beds in and all the mulch is above your weep line. 00:48:38:15 - 00:48:56:01 Speaker 2 So the reason why you have so many earwigs is because you're trapping moisture inside this. And mulch is nasty, nasty stuff, and it carries bugs and germs and all this kind of stuff. Or they don't change that filter out because they're so excited that everything showed up. But once they read that warranty book. Yeah. 00:48:56:03 - 00:49:12:12 Speaker 1 I mean, it's it's like the kind of like car business too. It's like the Ford Escape buyer is not the same buyer as the, as the mailbox buyer. Right. So the mailbox buyer is going to care about if they're going to take the time to maintain, if they're going to use. 00:49:12:12 - 00:49:17:13 Speaker 2 Mailbox actually comes and picks up your vehicle and gives you another mailbox while they do. Yeah. Did you know that? 00:49:17:16 - 00:49:19:00 Speaker 1 No, I mean. 00:49:19:02 - 00:49:20:10 Speaker 2 Next next year you'll know that I. 00:49:20:10 - 00:49:38:11 Speaker 1 Got rid of my my, my mailbox years ago, so I forget about that. But no, but but you know, the the buyer who's buying more the volume product is is is generally not. I'm not I'm making a big generalization. They're going to be the ones who are just using the product. They're not as concerned about the maintenance. 00:49:38:11 - 00:50:08:04 Speaker 2 But and that's also why our production neighborhoods five, ten years later look really ragged. Right? Because and for all that large of a volume of owners to all equally maintain their structure so that visibly they don't look decrepit is really low. So we say, you know, production of production home at year ten, in when you're going to buy it is one that you're going to need to start addressing these issues. 00:50:08:04 - 00:50:13:04 Speaker 2 So the the rate of maintenance and the quality would dictate the quality of that house at year ten. 00:50:13:10 - 00:50:19:04 Speaker 1 Unless they have a really, really strong HOA who's on people's ass about making sure that, yeah, the neighborhood looks good, but. 00:50:19:04 - 00:50:38:08 Speaker 2 But the HOA in a new development is owned by the builder until it's 90% done. So these developments that it's going to take them three years by the time they actually flip over, it could be a year 4 or 5 to the actual HOA. And then the HOA kind of has to find their way through things, enforcement arms, all that kind of stuff. 00:50:38:10 - 00:50:59:08 Speaker 2 So it's a week. We could have a whole conversation just on HOA stuff. In fact, I have a really great attorney who who resolve HOA issues. Right. And and that's important because you do need to know what you're buying into. Fortunately in Houston we have a lot of lack of HOA. We have a lot of lack of that kind of stuff in town. 00:50:59:10 - 00:51:00:03 Speaker 1 We do. Yeah, but. 00:51:00:03 - 00:51:01:05 Speaker 2 Not out of town. 00:51:01:06 - 00:51:20:15 Speaker 1 I will say that, you know, some of the new developments, I'm thinking like Cinco Ranch in Katy, right. That was set up really well. So, like a year ten of Cinco Ranch. That's that was good. That stuff was still looking good because as soon as those houses started to slip, the HOA would be all over. Like, you have to fix the outside of your house. 00:51:20:15 - 00:51:49:17 Speaker 2 Single ranch broke up the HOA by phase, not by the entire development because it was going to be, what, nine, 28,000 houses or something like that. When it's all said and done? So when we see Go Ranch, it could become its own city in itself. But in the and it's HOA fees decline or as things start to become more expensive, there's those production homes I think can wear out versus but that investment home it'll look like hammered bananas. 00:51:49:19 - 00:52:00:13 Speaker 2 One year. Right. Because the finishes on the outside, a lot of those finishes they did buy, they look really good, but they're not as turns of the best quality. 00:52:00:16 - 00:52:17:21 Speaker 1 Yeah. So I think about like, countertop, like you can, like, look like some of those houses have. When do you buy it? Oh, it's a fantastic looking quartz countertop is very on trend. Right. But it was the cheap version of that. So after five years that white quartz is now yellow. 00:52:17:21 - 00:52:32:05 Speaker 2 No it's still when you have the big island and there's a double sink in the middle. And where does that crack happen? Right in front of the sink. Because that was the weak access point. And that's the sink with expanded contract with temperature and weight from it. We go and crack it right there in the middle all the time. 00:52:32:05 - 00:52:38:00 Speaker 1 Yeah, I mean, I've seen a lot of yellowing quartz because the the cheap stuff doesn't have the same. 00:52:38:03 - 00:52:39:05 Speaker 2 It's the resin that yellow. 00:52:39:05 - 00:52:43:12 Speaker 1 Yeah. Yeah, it has the cheap resin at it. And I start looking at crap after a few years. 00:52:43:12 - 00:53:01:22 Speaker 2 That's right. Yep. So and then those little things like the, the, the caulking that they used didn't have a UV, base in it. So it starts to yellow really, really fast. Fencing is a big one, right? What a fence looks like in three years. Same thing with our shingles. We're dealing with one right now. 00:53:01:22 - 00:53:23:23 Speaker 2 Spec home. And their pockets filling up with the granules from their roof because they use an extremely cheap roof. The shingle, the asphalt shingle. And it's just shedding all of its particulates, at a really, really high rate. And it's getting into the pool. And then it got into the pool equipment and it just shredded all the motors. 00:53:24:01 - 00:53:47:06 Speaker 2 So we actually, in order to prove the the damage to the pool was from the granules off the roof, we took a sample of the roof granules, out of the pool. Then we took a sample off the roof, and then we sent it out, and then we sent the impellers or the to another lab, and they did the exact same process they would to see if this bullet matched this barrel. 00:53:47:08 - 00:53:55:11 Speaker 2 So they rather determined the average diameter of the granule matches the average diameter of the scratching on the impeller. So that's how we prove the two things. 00:53:55:11 - 00:53:55:23 Speaker 1 Staying. 00:53:56:04 - 00:53:56:16 Speaker 2 Yeah. 00:53:56:20 - 00:54:01:02 Speaker 1 How pissed off you had to beat your builder to go to that length to prove. 00:54:01:04 - 00:54:10:01 Speaker 2 We're actually we're actually representing the pool builder. The pool builder was like, this is in our fall. Yeah, but he's already replaced that motor twice. 00:54:10:01 - 00:54:10:12 Speaker 1 Okay. 00:54:10:12 - 00:54:18:10 Speaker 2 So they he sure didn't play it like it's his fault. I'm like, you should have gone through this. The beginning goes. No one would have gone through this. At the beginning. They were just. 00:54:18:10 - 00:54:20:16 Speaker 1 Being. I would never think of something like that. 00:54:20:16 - 00:54:39:02 Speaker 2 No, no. In the manufacturer paid for the first motors. So he. The manufacturer replaced all the motors. The first time he replaced in the second time it's happened again. And because they were also cleaning the pool by the time he would get there to see what was wrong, they're keeping the pool clean. Yeah. So the granules weren't there. 00:54:39:02 - 00:54:57:16 Speaker 2 I'm like, don't clean this pool for 30 days. Just let it be. And I came there and it was just like covered in the innards at the hot tub side. So it's really, really small and all that. They drain on a hot tub. So the hot tub drain to volume ratio is much, much higher. Anyways, we could have a whole conversation on pool. 00:54:57:16 - 00:55:08:11 Speaker 2 We already had a conversation on pools, but lately I think we're 15 or 16 pool claims this year. So it's got it's a funky business. 00:55:08:13 - 00:55:14:08 Speaker 1 All right. So add that to the list to see two two episode ideas in the last five minutes. Write that down. Danielle. 00:55:14:08 - 00:55:21:02 Speaker 2 Yeah. So, it's the they're fun but in anything with the roofing side. Right. So yeah. 00:55:21:06 - 00:55:39:01 Speaker 1 So to kind of put a bow on this discussion, wrap this thing up here. So we talked about things to to to look for things to, to consider when you're buying a spec house or production house. So again on the on the spec side it's talk to them about what their process is. Understand like what their team was. 00:55:39:03 - 00:55:47:06 Speaker 1 Go back and listen to season one of this podcast and then take those same steps and ask the builder, hey, how do you handle these things? 00:55:47:07 - 00:55:48:21 Speaker 2 Because those are the right steps. 00:55:48:23 - 00:55:57:04 Speaker 1 Do you have the team? Do you have the third party inspections that are taking place to make sure this thing was built per the. Yep, per the per the specs. You know. 00:55:57:06 - 00:56:01:20 Speaker 2 How do you finance this? How do I pay for it? And what happens after I move in? What is your process? 00:56:01:21 - 00:56:13:12 Speaker 1 What is your warranty program like? Do you self warranty this? Do you have a third party warranty? What is the warranty right? Yeah. If you and if in if they say there is no warranty that's a red flag. 00:56:13:12 - 00:56:32:15 Speaker 2 Yep it is. And some of them will actually take the houses and they'll take one LLC and sell the house to another LLC to cancel out the new home warranty. So when you're buying it, you're buying it from a secondary LLC with no no associated warranty. Yikes. And I have another ones where they will rent them for two years. 00:56:32:17 - 00:56:49:14 Speaker 2 And then there's zero warranty at that point. So, lots of ways through this, I could probably teach a class on how to scam somebody really, really well if I wanted to. Right? Because we see we see it on both sides. But, what would you do? So based on this, what would you buy if you had to start your. 00:56:49:15 - 00:57:13:19 Speaker 2 Let me, let me let's frame it real fast. Young family got you both your kids. They're about to be in high school, or they're about to be in elementary school. Right. You've got $650,000 to play with. That's what you can afford. That doesn't mean that you necessarily have it in cash or anything like that. You're probably in your low 30s, let's say 35 years old, and you're moving here to Houston. 00:57:13:19 - 00:57:16:00 Speaker 2 Which one are you going to do? 00:57:16:01 - 00:57:39:04 Speaker 1 I mean, it depends on on what your lifestyle is and what you like, how you want to live today. Because, I mean, to some people living in town and being close to things to do is super important. And some people living in the suburbs and having really good schools and all that and, and safety is more important. So it's really prioritizing what's important to you. 00:57:39:09 - 00:58:04:11 Speaker 1 But if we're purely looking at it, housing, the quality of the housing stock and things like that, that you're picking up for 650, I would say go to the suburbs and buy a new production home. But, you know, I, I made this choice when I was in my 20s. My wife and I wanted to live in town. We wanted to be close to restaurants and stadiums and, yeah, arts and all the things that we like to do. 00:58:04:13 - 00:58:24:02 Speaker 1 So we made the decision to buy an older 1950s home and stay in town because that's what was important to us. And our our kids have been at good schools. I mean, like we paid for private school. Again, that's the decision that we had to make, right? Yeah. We decided we're going to pay for private school for a certain amount of time and then thank God they got into it. 00:58:24:07 - 00:58:36:02 Speaker 1 Amazing magnet program at the Performing Arts school. So our school situation has been fantastic, but that's not the case for everybody. And again, that was just a lifestyle choice that we made. 00:58:36:06 - 00:58:57:22 Speaker 2 Yep. And and we started I would I would go production, I would go out to the suburbs and maximize that. So the first like major ownership opportunity and I don't know I didn't know what I didn't know. Right. I would go out to the suburbs. I think one reason why you also were okay with an older house is because you were in this game, right? 00:58:57:22 - 00:59:17:06 Speaker 2 And and you also had a confidence I could do anything. I mean, hell, you ran pizza places before we did this. You could do anything. Earth. Right? So I would, and I did this person, we bought a production home, a really, really cute, absolutely adorable production home in Dallas was our first house, and I was we had babies and starting life. 00:59:17:06 - 00:59:34:12 Speaker 2 And my dad told me, you don't need to save for escrows. You can pay that at the end of the year. That was a horrible recommendation, dad. I should have had it all go into escrow because coming up with that, you know, it's, I loved it. I loved the newness. I got to learn about the house. 00:59:34:12 - 00:59:51:06 Speaker 2 I didn't change my filter, my media filter. I lived in the house for three years. I didn't change until I moved out and and was told about it. Shame, shame. So I love that. But I also appreciate the, the the structures we're in now, which don't look like production homes. Yeah. 00:59:51:06 - 01:00:08:12 Speaker 1 So I mean, financially, if you plan on staying in one place for a long time, it's, it's it's a a good buy, especially in a market like Houston. I'm thinking about my best friend, he and his wife bought a brand new house in Cinco in 1999. 01:00:08:12 - 01:00:10:11 Speaker 2 Oh, they should have bought for 99. 01:00:10:12 - 01:00:31:17 Speaker 1 They still live in the house today. The same house, raise their kids in it. Their kids are now going to college, and that house has probably tripled in value from what they paid for it in 1999. You know, they've hired us to, to do like three, three, three, three projects on the house over the last, over the last 25 years. 01:00:31:19 - 01:00:44:20 Speaker 1 But man, that was a great buy for them. I mean, they've the they bought it for a great price. They paid it off. Yep. They upgraded it. They got the great schools and now they're they're in a great financial position today because of that. 01:00:44:20 - 01:00:50:15 Speaker 2 And probably where they live in Cinco, it's so much easier to get out of Cinco than if they were going there. 01:00:50:15 - 01:00:55:08 Speaker 1 Now it's the old part of Cinco. Like it's like inside inside 99. 01:00:55:11 - 01:01:02:23 Speaker 2 Wrapped inside 99. They're actually in town. They're inside the third loop. So no see. And that's. 01:01:02:23 - 01:01:04:15 Speaker 1 Great. Basically, live in Houston. Yeah. 01:01:04:15 - 01:01:20:22 Speaker 2 Basically at this point. See that's a that's a really good example. Right. And that worked out for them. And they stuck around. And I think everyone needs to and this is really where you're a good realtor is going to come in and help you figure out you do want to get the most house and the best location that you can afford. 01:01:21:00 - 01:01:46:18 Speaker 2 And I would say sacrifice space over, amenities, right? Your proximity to your school, restaurants, the really nice H-e-b. Right. That kind of stuff. So it's a it's an interesting this is a great topic today. I think people a lot of people ask this question. I'm glad we were able to highlight those kind of in between the investor and the semi-custom stuff, because I think that works out for a lot of people. 01:01:46:20 - 01:02:09:15 Speaker 2 And I do see that. I believe that all three of them, other than the investor one, you can find people that have the processes that we talked about, that have the accountability that we spoke about and can help you find that right solution. There are going to be other ones that don't. It's not an equal across the board. 01:02:09:17 - 01:02:25:11 Speaker 2 But speaking from Texas, I, I could someone could call me up and in fact, I have a call today on this almost very, very similar subject. Should we build new or should we go find something else. And we're going to talk through that and we're going to refer them to, you know, some really, really awesome providers. 01:02:25:11 - 01:02:55:17 Speaker 1 Yeah. My advice to wrap this up is stay away from the townhouses that the investor built, townhouse developments in town. I think almost all of them suck. There may be a couple good ones out there, but as a rule, stay away from that stuff. If you're going to buy a spec custom, we'll say right, right, like a high end spec house, try to buy it from somebody who is a true custom builder who's also built in some, but you have some brand, somebody who's been in business for a while that you can look and say, you know, that guy is building a lot of spec houses. 01:02:55:17 - 01:03:15:20 Speaker 1 It's not just a one off thing. Buy from an established company that you can look at their track record of building this type of product, to know that they're still going to be there for five years. If you have a problem, stand behind it. And somebody that has a good team, somebody that already hires toner to do their building performance, somebody who's hiring there and and listening to third party inspectors. 01:03:15:20 - 01:03:28:16 Speaker 1 It's funny, you know, our friend Rondo and Riley, I talked to her and she says, you know, this builder hires me to do their inspections, but, I mean, they never hire me to go back and re inspect to make sure it got done right. Yep. Same thing with you. I'm sure. 01:03:28:16 - 01:03:30:06 Speaker 2 People hire your time and order. 01:03:30:06 - 01:03:31:04 Speaker 1 You to write their spec. 01:03:31:04 - 01:03:31:12 Speaker 2 And then you're. 01:03:31:12 - 01:03:56:18 Speaker 1 Opening up. And then they never actually do it right all the time. So not only somebody who hires a toner or a rando in, but somebody who also follows up and make has them come back to do the inspection. Yep. To make sure that the performance standards are actually met. Yes. Most definitely. And then advice on on the production home side, my big piece of advice is like like you said, understand what it is that you're buying. 01:03:57:00 - 01:04:06:00 Speaker 1 Don't expect a $400,000 house to perform or to be $1 million house. Understand the product that you're purchasing. 01:04:06:00 - 01:04:26:10 Speaker 2 Correct? And I'll sum that up. And when I was a, 21 year old home builder and I was walking around to a new home with a family and the home, the wife said something. I'm like, well, that's that's not included in what you bought. And she stopped down and looked at me, said, this is a quarter million dollar home. 01:04:26:12 - 01:04:35:03 Speaker 2 That kind of summarizes what her perception of the situation was. I at the stop was like, oh yeah, you're right. It is technically a $250,000 house. 01:04:35:05 - 01:04:50:00 Speaker 1 Right? I mean, I've had people say something like that in relation to a like, this is a quarter billion dollar home. It's 2.5 million. And I'm like, yeah, but it's not a billion, is it awesome. 01:04:50:00 - 01:04:50:20 Speaker 2 Well thanks. Good topic. 01:04:50:20 - 01:05:13:20 Speaker 1 Today. Yep. Thank you for being on. And thank you all you listeners and viewers, for joining us on this episode of the Your Project Shepherd podcast. We'll see you next time. Mr.. If you found this helpful and enjoy listening, please support us by liking and subscribing here on your podcast platform. And also join us on our YouTube channel. 01:05:13:22 - 01:05:34:10 Speaker 1 We want to continue to bring you high quality content and expert guests, and your support truly helps us to continue this journey. If you have any questions for me or my guests or any feedback for us, you can email us at podcast at your project shepherd.com. Thanks again. 01:05:34:12 - 01:05:39:13 Speaker 1 Somebody for always doing. William. Who was that alarm? Okay. Shame on you. 01:05:39:16 - 01:05:40:09 Speaker 2 Oh, no. We got to go.