In this episode of The Same Day Podcast, host Yoni Schmidt sits down with Jose Berlanga to discuss how to navigate market cycles and build a sustainable real estate business. They explore strategies for managing risk during economic downturns, the importance of balancing growth with financial discipline, and how to avoid the pitfalls of over-leveraging. Jose also shares insights on effective leadership and building a resilient team to weather any storm.
Thriving Through Market Cycles: A Blueprint for Sustainable Success in Real Estate
Jose Berlanga is the Co-founder of Tricon Homes, a real estate development company focused on revitalizing urban areas in Houston. With over 35 years of experience in industries ranging from oil and gas to residential construction, he has overseen land acquisitions and sales exceeding $1 billion and led his company to over $100 million in revenue. Jose is also the author of The Business of Home Building, where he shares insights on building successful businesses in the construction industry.
Here’s a glimpse of what you’ll learn:
- [2:21] What inspired Jose Berlanga to be an entrepreneur, and what keeps him motivated
- [7:19] Overcoming the unexpected challenges of starting a new business venture
- [13:23] How managing expectations can transform your business outlook
- [15:48] Jose talks about how moving from Mexico City to Houston shaped his approach to business and entrepreneurship
- [22:04] The importance of understanding the business side of construction
- [26:12] What are the most important aspects of building a home should clients consider?
- [33:02] Jose shares the role he played in revitalizing Houston’s inner city
- [36:46] Strategies Jose uses to weather economic downturns in real estate
- [42:41] Way to ensure your team stays motivated
- [49:16] Jose’s advice for aspiring entrepreneurs
In this episode…
What does it take to build a thriving real estate business, especially in the face of unpredictable market cycles? Many entrepreneurs struggle with finding the right balance between risk and opportunity, particularly when interest rates soar and materials or labor costs fluctuate. How can you protect your business and thrive during economic instability?
According to Jose Berlanga, a seasoned entrepreneur and real estate developer, the key is preparing for downturns and carefully managing risk. He highlights that businesses often fail because they over-leverage, leaving little room to adapt during market shifts. Through hard-earned lessons, he emphasizes the importance of maintaining reserves and scaling operations cautiously, always anticipating the next slowdown. With these strategies, he believes that businesses can not only survive but thrive, even when the economy is uncertain.
Resources mentioned in this episode:
- Yonatan Schmidt on LinkedIn
- Mat Zalk on LinkedIn
- Walter Bowser on LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
- Keyrenter Property Management email address: [email protected]
- Jose Berlanga: Website | LinkedIn
- The Business of Home Building by Jose Berlanga
- Tricon Homes
Related Episodes
- “Exploring New Possibilities in Entrepreneurship” with Chip Gaberino on The Same Day Podcast
- “Revitalizing Communities Through Multi-Concept Restaurant Development” with Elliot Nelson on The Same Day Podcast
- “The Future of Financial Advising: Building Relationships Over Returns” with Morgan Martin on The Same Day Podcast
Quotable Moments
- “I fear the opposite. I was more concerned about embarking on a journey where I would have to depend on others.”
- “Once you get into this activity, you’re in it until the activity says it’s time to go.”
- “If you don’t plan to be there overseeing and monitoring all the A to Z, it’s an issue.”
- “In business, you can’t do it part-time. You cannot do it just to make a few dollars.”
- “We talk about finding our passion. I’m working on that, even after close to 40 years of being an entrepreneur.”
Action Steps
- Embrace flexibility and adaptability: Being flexible allows you to respond and adapt to unexpected challenges and changes in market dynamics, which are inevitable in any entrepreneurial journey.
- Prioritize effective financial management: Keeping detailed track of financial inflows and outflows is crucial for maintaining a healthy cash flow and ensuring long-term sustainability.
- Build a strong network and collaborations: Establishing a robust network with partners and industry peers can open doors to new opportunities and provide invaluable support during challenging times.
- Invest in continuous learning and improvement: Engaging in lifelong learning and seeking mentorship can help refine your skills and adapt to evolving industry trends.
- Cultivate a strong work ethic and lead by example: Demonstrating dedication and a strong work ethic not only drives personal success but also inspires and motivates your team.
Sponsor for this episode…
Keyrenter Property Management:
This episode is brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 0:05
Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Yoni Schmidt 00:20
Hi there. Yoni Schmidt here, hosting today’s episode of The Same Day Podcast where I connect with top business and real estate leaders. Past guests include Chip Gaberino, a restaurateur entrepreneur, Elliot Nelson, CEO of the McNellie’s Group, Morgan Martin of Merrill Lynch, and many, many more. Today’s episode is brought to you by Keyrenter Property Management, a rental property management. We are a full service property management company helping our clients buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. That is why no matter what rental you have single family homes, condos, townhouses, apartments. We have the management solutions for you. Go to keyrenterpmc.com or email us at [email protected] for more details. Today we are excited to welcome Jose Berlanga, a visionary entrepreneur, author and developer with over 35 years of experience across diverse industries from oil and gas to real estate development. As the co-author of Tricon Homes, Jose has been instrumental in revitalization of Houston inner city, leading his company to over $100 million in revenue and managing land acquisitions and sales exceeding $1 billion. With his recent book, The Business of Homebuilding. Jose shares invaluable insight on insights on building successful companies in residential construction, offering guidance on everything from financing to land acquisition, and his disciplined strategic approach to business has earned him a reputation as a mentor and industry leader. Today, we are diving into his entrepreneurial journey and getting his expert advice on land development, real estate and building businesses from the ground up. Welcome. Thank you so much for being here.
Jose Berlanga 02:02
Hello, Yoni. Great being here. Thank you for having me on your show.
Yoni Schmidt 02:07
Yeah. So let’s just dive right in. You know, you’ve built and co-founded multiple successful businesses. And, you know, I’m curious to know what inspired you to enter the world of entrepreneurship and what keeps you motivated today?
Jose Berlanga 02:21
Well, what what made me jump into this journey of entrepreneurship? I think it was two main reasons. One was the the fear of putting my destiny in somebody else’s hands. I think more than anything, a lot of people fear entrepreneurship in starting a business. I fear the opposite. I kind of went in the other direction, where I was more concerned about embarking on a journey where I would have to depend on others to climb the ladder of of success. So. So I thought it might be a good idea to start very young, incidentally, to to start a career inventing a job, as they say now, creating my own opportunities. And I started doing that. And also I saw many examples of entrepreneurship and entrepreneurs, such as my dad was was one of them more. He was a great sales person. He wasn’t necessarily much of an entrepreneur because he always had the difficulties of of growing and building businesses. But he was amazing at selling, and I just followed his footsteps. And in trying to acquire that personality and the ability to to create opportunities. So I started young enough where before you know it, I never really considered. I was going in a different direction, and then one business led to another and to another. And before you know it, destiny takes over.
Yoni Schmidt 04:05
Yeah. And it’s never as you planned. Yeah. What is it that today keeps you motivated?
Jose Berlanga 04:11
Well, you know, if you have that personality that is always antsy and curious, it’s hard to stop it. There you can. You can probably add that once you you get into this roller coaster of businesses and activities and responsibilities, it’s hard to stop. It’s hard to walk away from from this lifestyle, let’s call it, of always being busy, of always having a longer list of things to do than the day allows. Also, I have small children. You know my family. I want them to look up to me and not see me as someone that just retired too young and ended up not not doing a whole lot with with the the second stage of his life, which I consider it to be. Now, now, you know, I continue to reinvent myself and to do interesting things, but I don’t think although I want to slow down, there are actually part of the answer would be that entrepreneurs and businessmen are their own worst enemies. We sometimes don’t know what we want. We don’t know how much we want to participate in business. I am horrible at understanding the level of involvement and the level of effort and time that each deal is going to require, and I start getting into these businesses and later realizing that, wow, why am I doing this to myself? Am I not getting into all these things that I don’t necessarily need at this age and at this stage of my life, but but at the time, you know, there’s a little bit of a gambler personality in every entrepreneur. And when I see good opportunities, I find it hard to say no and to walk away from it. And once you created a network of partners, friends, people within the industry and they bring you those opportunities, they bring you deals. At some point, whether you want, even if you want to retire and slow down, you end up jumping on some of those opportunities. So so it’s yes, yes, I keep getting into more stuff than I can handle. And and I, you know, I enjoy it, but I, I do at times think that I would love to take a slower pace in more passive type of investor, but not yet. I haven’t done that yet.
Yoni Schmidt 06:56
Yeah, I love that. Can you give us an example, I guess, of a time that you were starting something new or getting into some new opportunity that you thought, you know, this is going to be pretty clear cut and dry. And then you realized, you know, this isn’t really what I thought it was. And these are the challenges that I’m now facing and how you overcame those challenges.
Jose Berlanga 07:19
Well, the answer is every business experience. And other than small transactions, if you talk about individual transactions, yes, there are some simple ones and there are some that go relatively smooth in in as planned. Rarely do they just does anything in business go as you planned it, but when it comes down to starting or building a business, without exception, they have all gone much more complicated, much more difficult than I ever anticipated And here’s here’s why. Part of the initial response as to how do you become an entrepreneur? I didn’t necessarily see myself as an operator, a business operator, which is part of owning a business. I thought of myself more from some of the previous mentors and and figures that I followed. I loved doing deals, starting things, buying and selling, brokering, commission based type of activities where you can come in and out of the deal, move on. Take a month off if you would like. Take a break. That is my personality by nature, I am dyslexic, I am A.D.D., I’m highly distracted. I find it difficult to sit in front of a computer for 20 hours or in an office is very difficult for me, but somehow I suffer from something called being responsible. Highly responsible. I don’t know how to leave things for later or for tomorrow. And little by little, every business that I’ve ever participated in, I begin to face the fact that these business require administrative tasks and a lot of responsibilities, even when you have help and support. They need your time. So before you know it, in all of these businesses in different industries, including real estate, I end up operating them against my will just because I begin to grow. They begin to suck you in. They begin to become something important to you, where you’ve invested enough time and effort and money, and now you don’t want to lose what what you’ve achieved. So it mentally forces you to get more and more involved in the day to day. So the to answer the question, they’re all challenging unless you find and if you’re lucky enough to get into a business that is not only profitable, but cookie cutter and very repetitive, where you can hand off a lot of the responsibilities. There is the thing. I just haven’t been lucky enough to get into those type of industries where I can hand off specific tasks, departments, areas of the business. But all of my transactions and all of my activities are different. They they differ from one to the other, and they require a lot of your participation, a lot of common sense, a lot of creativity, sort of. I talk a lot about the difference between owning and operating and building a business versus a practice. A practice is one where you are the person making things happen. You are the doctor, the attorney, the architect, the professional, the dentist that has to be there in order for things to run and for you to make money And for one reason or another, a lot of my activities have ended up being that way where I have to analyze the deal, the purchase, the acquisition, the design of things, the way that things are going to come together. So they become troublesome because that’s just the nature of of owning a business and, and starting something that by definition, you’re entering a world of the unknown. And every day is going to bring you a sequence of events that are, most of them, surprises in, in little by little. I’m I’m going to say that after all these years, the surprises, the problems, the headaches, none of that has gone away. The only thing that gets a little better is your ability to deal with them, to your ability to make quick Decisions to have the thermometer. The gut feeling of where to go, what to do, what not to do that gets better, but the flow of problems and headaches and obstacles. I don’t think that goes away in most businesses, only that you just get more accustomed to dealing with them and addressing them. You become better at investing only five minutes on an issue when in your earlier years, you would spend an hour to solve something that now you can take care of in just, you know, a quick conversation and you start becoming very frugal with your time and very efficient. So but but yes, they are. It’s a challenging world because it’s competitive. Unless you are lucky enough and blessed enough to have invented something. Businesses are very, very competitive nowadays.
Yoni Schmidt 12:46
Yeah, Yeah. I love that. I mean, that’s a ton of wisdom. I mean, I love the, the the your take. And just like your, you dissecting, you know, the challenges to overcoming, you know, obstacles in your business and your day to day because it it is easier to deal with them as time goes by. But it takes a lot of time and it takes a lot of experience and it takes certain scenarios, right? Being entrenched in certain scenarios that you learn from in the past to then deal with the things that pop up later in the future. Yeah, yeah, yeah.
Jose Berlanga 13:24
And let me add something that because it’s important, I’ve lived it over and over when I walk into a deal, I, we all talk about expectations. You know, when I, when I jump into a business or an activity, even a day’s worth of work and I expect it to be easy. I really set myself up for failure. I end up discouraged because I end up spending more time, more work, more effort than what I anticipated. When I go in, even when I walk into my office telling myself, hey, I’m going to be here until I’m done, until I complete what I need to achieve for the day. Without many expectations, I have better results. I have a better state of frame of mind than when I go in thinking that things are going to be easier and faster. So preparing yourself mentally and knowing that, hey, once you get into this activity, you’re in it until the activity says it’s time to go. You don’t make those decisions. The business owns you. Yeah, the company owns you and not the other way around. So lowering the expectations as to how quick and how much money you’re going to make out of each one of these transactions, it’s it’s much more successful than when you focus on the results. We all know that. But emotionally it’s hard to do.
Yoni Schmidt 15:05
Yeah, yeah. Very interesting. Jose, let’s talk a little bit about your personal life. You moved from Mexico City to Houston, if I’m not mistaken, in the 1980s. Right? Yes. How how has that, you know, how did that transition shape your approach to doing business and entrepreneurship in general and being here in the United States? I’m also a transplant, so I moved from the Middle East about 14 years ago. So I can relate. Although although I’ve had family in in the Midwest and in Oklahoma growing up, so I visit often and so it was easy for me to adapt. Was it similar for you?
Jose Berlanga 15:49
It was a very easy transition for a number of reasons. I was very lucky, very blessed that my my father was in the oil and gas and the valve and piping for the oil and gas industry. So we used to travel to Houston a lot as, as as a child, I was involved with the United States growing, growing in Mexico City, although my heart is still there in my culture and a lot of the fun things being so close to where I live, it’s it’s got it’s fun and fascinating aspects. But United States, since I was a child was amazing to me. It was. I saw it for what it was from a very young age. The land of opportunities. Traveling here mesmerized me by looking at the structures, the highways, the infrastructure in general. The Cleanliness, the order. Everything attracted me about it. So it wasn’t a scary transition. It was a natural transition for me. When the time was right and I and we were able to come here when I started going to the university here of Saint Thomas, it made sense to come here and I was excited. Now one side was here, I couldn’t wait. School sort of got on my way. I wasn’t I wasn’t a good student. I wasn’t one of those brilliant guys or girls ready to go to college. I just saw it as something that needed to be done, and I needed to get it out of the way. But what I really wanted to do was to run a business, to start a business. So I couldn’t wait. And I did it immediately. The moment I started going to college, I started a business simultaneously, which was a huge advantage. It gave me a lot of head start to get into, get experience and understand how things work. So I began to learn it. I began to adapt to it, and before you know it, it wasn’t a it wasn’t a difficult thing. One thing that helped me and and you will agree with this being that you are bicultural it there are there are pros and cons. The the pros was that I brought a a fresh mentality, new ideas, an open mind. I could do business with the two places I began my exporting company because I understood the mentality of both both regions, let’s call it. And it was easy for me to to begin trying to figure out how to serve and attend the needs of, of of the audiences that I was start getting. So having that additional culture and that additional language helped me a lot. The, the the setback obviously is that you you don’t have initially you don’t have that experience. And many of us, many businessmen and women entrepreneurs that go to another country assume that they can continue to conduct their activities in a similar manner. And and that is a big mistake. I was one of those that I, I was wise enough when I began to understand that I didn’t know much about anything and that I needed to learn, so I paid attention. I learned how to talk to people in a different country, how to get along with everyone, how to understand the systems, the mentality, the the process, how to structure things. And little by little I incorporated myself more and more. But I always went under the assumption that things needed to be done differently than where I came from, and that helped me a lot. But but yeah, to me it was it was never difficult because I started a business when I didn’t have that much financial burden, obligations or responsibilities. This is something that a lot of young people need to understand and listen. Most of us want to have fun when we’re young, when we’re in college, when we’re in in our early stages of our career. And yes, at some point I’ll get serious and I’ll start focusing on money and business and a career and success. But time flies. Time goes by very fast, and before you know it, you have other responsibilities. Call it marriage, children, expenses, a mortgage, so on and so forth, and it becomes harder to take those gambles. So when you have the opportunity to do it young before you acquire all those responsibilities and obligations. It’s highly recommended, but unfortunately we don’t we don’t all think that way. We want to wait and put it off for a later date.
Yoni Schmidt 20:55
Yeah, I’m definitely sometimes feeling that myself. And I’ve been the victim of, you know, I’ll I’ll start this when I’m ready. I’ll start this when I’m ready. And, you know, the reality is, you know. No, just you have to start it now and just go along with it. And whatever comes your way, you have to deal with it. The mentality also aspect that you were discussing earlier is one that I’ve really noticed coming from the Middle East to the United States. You know, the mentality in the United States and the Middle East is so different in the Middle East. It is, you know, very direct and blunt and to the point and aggressive. Whereas here in the United States, things may go about a round or away, you know. You know, not not as direct as, you know one would anticipate. So I do find that very, very interesting. Let’s talk a little bit about, you know, your book, The Business of Home Building. Right. You emphasize the importance of understanding business, the business side of construction. What’s the biggest challenge that you would imagine new builders face when transitioning into this industry today?
Jose Berlanga 22:06
Not not having a plan, is one of them. Not raising the right amount of cash and and definitely underestimating the difficulties of of this in most other industries. Incidentally, this this book I recommend it for for new entrepreneurs. It talks a lot about very fundamental entry level business procedures, steps, items, things, subjects that one must think about before starting in, in, in any, any industry whatsoever. So although it’s more geared, it’s, it’s a little bit more focused in, in residential construction and construction in general, whether you want to invest or flip properties or, or develop or, or anything or become a real estate agent or broker or even buy a home for your for yourself and understand how the industry works. Some people nowadays want to build their own home. They want to understand a little more about it, but it also talks about what are many of the subjects that we sometimes neglect to consider when we start a business, and part of it is because they appear so obvious. Oh, I got to do accounting. I got to, you know, there’s a technical side, there’s the business side, there’s the legal side, there’s I have to incorporate this. But we take him so lightly instead of just sitting down, write them down. Organize them in a chronological order. Understand what are all of these things that are going to be important and at what moment in time? Even understanding part of the growing pains that one has to face. At what point do I need an extra employee? When is it too late or too early to hire someone? Or to add a little more overhead? Or why add overhead as opposed to maybe outsourcing a service? These are applicable to any industry whatsoever, but I chose this as my first book because I could see it translating to to a lot of industries. Yet this is the one where I’ve spent more years in my career and I enjoyed it. I really needed to unload all this information. I’ve been an entrepreneur for so many years and I feel like at some point you definitely need to start putting some of these on paper and and perhaps validating all of those stories, thoughts, examples, failures, adversity that you run into. The do’s and don’ts and start kind of summarizing them and in one place. So so this this was a great process for me. It’s not an easy one, but I highly recommend anyone who has been long enough in any industry, and they understand the ins and outs to attempt to write a book. It takes time. It takes a lot of focus as we were discussing. But it’s incredible to to to begin to understand all of the the steps that led you to where you are, the journey as, as, as it took place. And and I love it. I’m going to continue to do it.
Yoni Schmidt 25:34
Yeah, I love that. That’s a very inspiring in, in in translating this into like, the world of construction. Right. What’s one thing I guess that or that you’ve seen in the past that a client, you know, failed to maybe consider when they’re building their own home? Have you? I’m sure you’ve come across some stories. I mean, in terms of permitting, in terms of, you know, layout design, stuff like that. I mean, what’s what are the most important aspects that clients who are wanting to build their own home should consider?
Jose Berlanga 26:12
There are a number of them. It’s I’ll try to name a few, because this is what some some of the topics that I discuss refer to. The fact that we don’t realize how difficult it is to operate a business or to even build a home, particularly once you add these additional pressure points, which are time and money, budgets and deadlines. Anybody can build a car or a house or a watch if you have unlimited time and unlimited resources. But once you add a time limit, because time is money, caring cost the opportunity cost of your resources, once you incorporate those two, it becomes very, very difficult. So one of the biggest ones is underestimating the time and the coordination of so many other pieces of the puzzle that must come together in order for things to work, particularly if you want to make money. Here’s another one. Anyone can do it, but not everyone can make money at it. That’s a huge difference right there, because now you have to adhere to a very, very tight numbers, programs and schedules. And and I often talk about accumulated delays, accumulated overages. I went over a couple of hundred dollars here and there. And yeah, I may not be that much, but when you add that times 50 different subcontractors, materials change orders, overages, delays, losing one contractor, having to go to another one and replace it and having to pay another deposit. And so there’s a lot of coordinating factors. And if you’re not there all the time, we think that we can do this as a part time. And it becomes very difficult when you’re delegating this. This industry is is next to impossible unless you hire a turnkey company that is going to be accountable for the entire process. But if you want to be the GC, the general contractor that’s going to be operating and working a lot of these stages. There’s a reason I look at it as a moving factory, where there are very few ways to manage the day to day, unless you are there and under one roof in one factory, everything is in one place. You can supervise, monitor and watch what’s happening in your construction sites. The moment you leave, production slows down. Errors occur, things get installed that you didn’t think were supposed to go there, and the costs begin to add up and to accumulate. So if you don’t plan to be there overseeing and monitoring all the the entire A to Z, it’s it’s an issue. But also yeah, not keeping track. A big one is not keeping a very, very detailed track of where you spend every single dollar, because it’s it’s very easy to lose track. Both money coming in and out from draws from whether it’s from yourself, loans from investors. Before you know it, you don’t know what went in and what went out. And what was it for? Was it for the electrical part or the plumbing or the sheetrock, or was it for the roofing, or was it too much of this? Was this for a change order? Why am I spending more money? I don’t even know. And a lot of people go through that where they start overspending and they have no idea what happened or why. They’re short. It’s very, very, very common.
Yoni Schmidt 30:15
So so so hiring a company like Tricon Homes can, you know, alleviate that burden for homeowners that want to build something for themselves? I would imagine.
Jose Berlanga 30:28
Well, you know, in our companies, the companies that I run and operate, we are not very big on custom building nowadays. In order to custom build a house, it has to be in the multi-million dollar range in order to be feasible for a builder. Because now you become you start working for just one person, one consumer, and it’s got to be worth your time. You have to assign a lot of resources in one superintendent and the design team and so on and so forth. In my case, the bulk of my activities have been what we call speculative spec home building, where we build them, and we don’t even put them up for sale until they’re close to completion. In order to do that, you have to know the product. You have to know the market and understand your audience. Know what the product must contain. If you don’t, then now you’re you’re you’re you’re gambling, you’re guessing what your consumer wants at any price point. So it takes years. It takes experience to little by little understand what it should contain in order to sell properly for your projected prices and what I recommend to home buyers and investors. Buy a finished product, understand the value, negotiate it well, understand who’s building it, the name behind it. But unless you have, you know, excessive resources in in in extra time to play with I don’t know many people that had fun doing it. Yeah, let’s put it that way. It is a source of a high level of stress when you attempt to do it yourself, just like anything else. So I recommend just buy a finished product or update it, you know, make a few minor changes, change the paint colors. Change the countertops if you. That’s easy. You can always go back at the end and and make minor corrections. But starting from the ground, coordinating a million little items and steps is is it’s very it’s easier said than done.
Yoni Schmidt 32:43
Yeah. It’s a that seems daunting in the grand scheme of things. Tell me, Jose, you played a key role in revitalizing Houston’s inner city. What motivated you to focus on urban development, and what are some of the challenges that you faced in in this process? Can you talk about that?
Jose Berlanga 33:02
Absolutely, absolutely. The inner going in the inner city was a little bit of an accident, and it was a little bit because it’s what we could afford. At the time. There were several several reasons. One, we didn’t want to compete with the with the big companies and back. I’m talking back in the 80s, back in the 80s, when we started building. I’m sorry. I’m sorry. 90s. In in in the 90s, the revitalization process of the inner cities began. We were very early. Nobody knew about it. And a lot of the inner city neighborhoods were forgotten, dilapidated. They looked horrible. They were scary, worn down. And you wouldn’t really even want to drive through some of these areas at night that now are, are are hip, cool and new and amazing. So we began building in, in, in some of these areas because the lots, the land was very inexpensive and we could offer a product, an entry level product in great locations close to downtown that people could afford. But it was a gamble. We didn’t know if they were going to sell, we didn’t know if they were going to work. So, so and, and and the other one is yes, we didn’t want to go to the suburbs where the bulk of the big builders were. It was it’s much easier for a developer to buy a thousand lots at a time. The big companies that do this, then to buy 2 or 3 lots at a time, it’s just not worth their time. Their economies of scale don’t work. So as as a newcomer, as a small investor builder, that worked for us and we grew in those areas. So our timing was somewhat correct. We didn’t know it at the time. At the time, we did not know that the timing for redevelopment was there with the traffic. We kind of felt like it that it made sense to build in the inner city, but we weren’t sure at the. And before you know it, we started building more and more. It began to work, and we had a lot of people following then, but it was a combination of a little bit of luck, a little bit of timing, and it made sense financially. We couldn’t really the developers and the suburbs wouldn’t really even want to sell you their land. They had contacts and relationships and partnerships with with the big companies out there. So it only made sense for us to start that way. And before we know it, we were a relatively decent sized operation building where none of the other larger players were even interested in.
Yoni Schmidt 35:47
Yeah, and in the 90s, I guess that was after the 1980s economic downturn that Houston had had suffered. So I guess that was a pretty opportunistic time to come in. Let’s talk a little bit about market downturns. And, you know, economic instability in your segment of the real estate industry. Tell me a little bit about like specific strategies that you’ve taken to protect your business and during these challenging times. Right. Interest rates go up. Lumber prices, you know, are through the roof and then come back down. Materials, labor costs. I’m sure you’ve seen the whole, you know, spectrum of changes. What do you do with your business to protect? To protect the business. To protect the revenue. To protect, you know, the finished product. To not compromise on the quality that you’re. And that’s ending up in the consumer’s hands.
Jose Berlanga 36:46
Oh, yeah. That’s that’s a wonderful question because we never know when things are going to slow down and how bad they’re going to get. This is a fact. I don’t care who you are. There are trends. There are cycles. We understand that this is a cyclical business. But you named it this. This every cycle is different. There are different reasons for a downturn, and none of us know exactly when they’re going to begin and how hard they’re going to hit. Sometimes they are because of an overproduction. It’s created by developers, builders and investors. We overproduce. The mortgage companies had a little bit to do back in the 2000 and 809. Obviously, we created a bubble in the 80s. It was an economic issue, more and more generalized. This time it was Covid. I’ve been through short bad cycles that only lasted maybe six months to a year because of interest rates, because unemployment, the economy kind of slowed down. Now we are so informed, globalized, that there are two types of slowdowns that are amongst the many. You have the actual economic slowdown and the psychological slowdown. There are times when buyers are there. The economy is working. Things are moving along, but we perceive. Everything to be going the wrong way as the wrong time to buy a house in that happens, you know. So it’s a self-fulfilling prophecy when enough people start thinking that way, all of a sudden the markets change and the markets slow down. So that’s going to happen. What do I do? First of all, I’ve learned the hard way. Believe me, I’ve I went broke, not bankrupt, which is a big difference. But I’ve gone broke several times, which is something I’m was not fun at the time, but I’m proud of having been able to get back on my feet and start my business again. In this business of real estate, from having a multi-million 100 plus million dollar a year company we went to almost out of business due to leverage. When everything stopped, we had a tremendous amount of leverage. We had lot positions everywhere. We had construction projects everywhere. We had an incredible amount of overhead and all of a sudden things came to a full stop managing that. I feel like that earned me a PhD in decompressing companies gradually because you can get rid of land positions. Nobody wants them. You can get rid of houses fast enough. If you get rid of your staff. How do you complete your work in progress? But you can finish it and you can pay it off to the bank. So it was a very, very difficult time. We maneuvered it. We we managed it one day at a time and went through it. So we learned the hard way how to manage growth. And to answer the question, what do we do now is we’re always under the assumption that things are going to get difficult, and we don’t get way in over our head when it gets to getting too many developments. Too much debt. Too much leverage, too much overhead. You have to have reserves. You have to have the awareness that it is just a matter of time before things turn and plan for it. Don’t get into anything that you cannot support for a period of time. Because yeah, yeah, the carrying costs can kill you in in your operation. Can kill you very rapidly.
Yoni Schmidt 40:52
Yeah. I mean, that’s one thing that I’ve learned at a young age is leverage can be dangerous in these economic downturns. So I tend to try and get into my deals with a lot of equity and, you know, try to not be as leveraged so that I’m not beholden to the to the bank. It’s tough sometimes because, you know, a lot of people, especially during Covid, right? We’re taking we’re taking advantage of the low interest rates, and they were financing to the max as much as they possibly could. You know, I don’t know if if builders necessarily had to get into that same situation where they were I guess, at, you know, 85% LTV on, on development and land acquisition. But that is that is interesting to me, I guess. Let’s talk a little bit about your leadership style, which, you know, must have come into play when these economic downturns occur. And then, you know, you you said you earned a PhD and decompressing the company. Right. In a smart and frugal way. Because you’re right, you can’t just lay off all of the staff because then who’s going to be doing all the work? It can’t all fall onto your plate. You’re only one person. Right. So leadership has to come into play here. You’re known as, you know, someone who loves to, you know, inspire the team through strong work ethic and, you know, mentorship. It’s in your book. It’s what you, you know, tell tell us it’s on your website. It’s you know what I hear from this conversation in general? What in your mind are the key principles to that you follow to ensure that your team stays motivated and it also aligns with your vision?
Jose Berlanga 42:41
That’s that’s an interesting subject that has several several issues attached to them. There’s many, many there’s not one single aspect that will make you a good leader. I think it’s your desire. People can read your passion, your willingness to be there during good times and bad times. As they say, everybody likes to be the boss until it’s time to be the boss, until things get tough and it’s time to take accountability for things in leadership. So when things get difficult, they have to. Your team has to see that you are there to solve problems, to stay calm, to relax the situation. It. It takes years to master the the art, let’s call it of of leadership. But you have to care. You have to care about your company. You have to care about your staff. You have to invest a lot of time in in your employees. Understand what each one is driven by, what each one is there to do. Understand their potential. I, I’ve, I’ve really, really feel like I’ve invested. One of my moments of pride is to see a lot of my employees go on their own and become millionaires and come back and somewhat thank me for it. This this is amazing. They they they’ve seen how I work and lead by example. First one to get there, last one to leave the office. I’m always willing to do everyone’s work. I’m willing to listen and understand everyone. And and I want to make sure that everyone is working in, in, in, in an activity that they enjoy. It’s very important for me that nobody is in my company just for a paycheck or just to fulfill an activity and, and fill up an area of my company. I want to know that they’re in this job because this is what they want to do, because they enjoy this type of work and because they see themselves growing within that particular activity. So I don’t just hand out work and duties and responsibilities. That’s part of it. I like to invest. I’m very hands on. That has been a problem as well because it can interfere with your speed of growth when you mentor and you invest too much time. Personalized time with each area of your business. You know, you you you tend to not exponentially grow, but at the same time you create a great philosophy. The problem one of the saddest times has been when I have to let go of of some of my staff. When a cycle changes and all of a sudden you cannot afford everyone. And this is, this is a very emotional, very devastating process that I hope not many have to experience, but it is just part of business. So something how we mitigate this, and I think many corporations are doing this now is that we keep the essential employees and we outsource a lot of services. In our previous business model, we used to hire everything we wanted to control every step of the process down to, I mean, we had our own it, our own marketing, our own plan runners. We had our own engineers and designers and architects and purchasing and accounting and sales, you name it. It was all under one roof. When, when things began to fall apart and we realized that, that we couldn’t afford all these people, we never went back to that level of overhead and full time employees. We began to interesting that we began to hire some of those same people, but as outside contractors that way. Now, our responsibility was strictly due to attach to the level of volume that we were doing. So that’s how we’ve mitigated some of that in the future, that now we’re outsourcing a lot of our services and it’s working great. We’re a much lighter company. We can do just about the same volume. We can diversify much quicker and and at the same time not have that level of stress that we call when we have that, that volume, that that amount of pressure in your overhead, it forces you to take on projects that you don’t necessarily want to, but you have to keep feeding the monster. Keep, keep you have to keep everybody busy. And sometimes it’s counterproductive.
Yoni Schmidt 47:49
Yeah. That’s really interesting. And I love that you said, you know, I love that you said that. And, you know, taking on those employees as contractors just allows you to be leaner and meaner and operate a lot more efficiently. And yeah, tie it to your actual production. There’s an old saying to train your employees to the point where they can leave. They can leave you right, and treat them in a way that they’ll never want to, is something I can’t remember who said it. Maybe. Maybe it’s like Sir Richard Branson or I read it in one of his quotes or something, but I truly believe in that, and it’s very inspiring. And I’ll remember that not to have that, you know, high pressure on overhead to force you to take those projects that you don’t necessarily want because you’re right. That is, you have to feed the monster to keep the, the, the overhead to keep, you know, the payroll going and the overhead, you know, in line. So I guess lastly, just for all of those inspiring entrepreneurs, especially those, you know, entering into the real estate industry, what’s one last piece of advice that you would offer, you know, to help them navigate the complexities of the industry and build a lasting, successful business.
Jose Berlanga 49:16
Wow, there are so many! Again, one of my problems all the time is narrowing down my thoughts and compressing them into short answers. We we often now talk about finding our passion. I’m working on that. Even after, you know, close to 40 years of being an entrepreneur, believe it or not, I, I, I follow a little bit of a different philosophy because I’m not one of those people that easily found his or her passion. I recommend that if you don’t find it, start. Start working. Get busy. Find an activity that attracts you and don’t wait for the perfect job. Little by little, you can start tweaking and adjusting and improving and finding your way. But I think that youth now is so enamored with the concept of finding their passion that they won’t take responsibility for starting something just because it doesn’t seem to be the perfect job, the perfect activity. And they procrastinate. Beginning this journey of of of a career. Call it a corporate world or entrepreneurship particularly. The other aspect is, you know, be ready to give it your all in in business, you can’t do it part time. You cannot do it just to make a few dollars and and enjoy yourself. There’s a misconception. Business is tough. It’s cutthroat. It’s competitive. Don’t jump in just thinking that you’re gonna. It’s a walk in the park, and you’re going to have time to do everything else that you want. And that’s why I’m going to go on my own. If if you embark on this journey of entrepreneurship is because that’s what you really, really want to do. You want to devote time, energy, effort. And if you don’t have that passion, what I do recommend, if you’re a case like mine where I wasn’t necessarily in love with any given product or service, I just wanted to improve myself, be better, and make a great living and feel good about what I did. Start identifying what are you good at? What are what is your talent? What do you excel at and create a business around the talent, around what you think you can excel at rather than what you, and not only what you enjoy. Because sometimes we enjoy doing things, but it doesn’t mean we’re any good at it. It doesn’t mean we’re going to make money at it. And we also ultimately have to make a living. So if you can merge those two, That is what I’m currently trying to do. Believe me, it takes many years sometimes. Don’t expect it to happen overnight. Trying to merge what you like, what you enjoy, what you’re good at and actually make a living out of it takes a little bit of time. So that’s yeah.
Yoni Schmidt 52:25
That’s a great intersection to be at. I hope we all get there soon. I think, you know, I do love what I’m doing and I’m really enjoying it. And it also allows me to grow. And I know that, you know, you’re embarking on this journey of rebranding, right? Yourself and your your now is it you’re writing your second book or did you finish publishing your.
Jose Berlanga 52:51
I finished. I’m about to publish my second book and I’m writing the third one right now. I’m. Yeah, I don’t know how I’m finding the time, but I’m finding moments here and there, so that’s great.
Yoni Schmidt 53:05
Love that. Well, if you’re if you’d like to check out Jose’s book, we’ll put the link to The Business of Home Building in the comments below. And so you can find it on Amazon. And thank you so much, Jose, for being here, chatting with us, inspiring me and educating me on, you know, how to build successful, you know, lasting businesses. And I’m definitely taking a lot from this conversation.
Jose Berlanga 53:41
Yoni, thank you so much. It’s been a pleasure being here. Hope we can do it again.
Yoni Schmidt 53:46
Likewise. Let’s chat after you write. After you publish your second book.
Jose Berlanga 53:50
Absolutely. I would love to. I love it.
Outro 53:56
Thanks for listening to The Same Day Podcast. Tune in to a new show each week and be sure to subscribe to get future episodes.