The Minneapolis skyline from South Minneapolis by Chad Davis, April 16, 2019, https://www.flickr.com/photos/chaddavisphotography/ https://creativecommons.org/licenses/by/2.0/
Sean Sweeney, a developer of apartment buildings in Minneapolis, where almost a quarter of the population is Black or bi-racial, shared secrets of what works for him in real estate development in a recent Twitter thread.
Become an expert and move quickly, Sweeney told his 54,400 Twitter followers. “Staying squarely in our zone of competence is a superpower.”
The co-founder of Hall Sweeney Properties LLC, Sweeney describes himself in his Twitter bio as a design driven, community-focused real estate developer with $150 million+ in projects developed since 2017.
He and his partner, Jeff Hall, are the principals of the company and have a long history of successful developments in the Minneapolis and Milwaukee markets, according to the company website. Long-term investors, they have been recognized for a track record as active and engaged owners in the communities in which they build, as well as for innovative building design.
There is no formal training for real estate developers, but many transition into the business from other fields in real estate such as brokerage, acquisitions and investment, engineering, or contracting and construction.
“You may be a voracious learner … a vital ingredient of the journey many burgeoning property developers make … But just because you have the technical knowledge doesn’t mean you have the expertise to shepherd a project from start to finish,” wrote Matt Marsh, a real estate investor, consultant, developer, and broker. “Remember, you don’t know what you don’t know. And many of the unique skills developers leverage to complete a project are learned through previous failures.”
Hall Sweeney Properties have more than $400 million of real estate under management or in the pipeline.
Sweeney shared his process and priorities in buying and developing real estate.
When he makes an offer on real estate, Sweeney said it takes him less than three hours of work to make the offer. That wasn’t always the case. When “I made my first offer on a development site, it took me 4 days to get comfortable with the number,” he said.
Now he says he can execute on a deal quickly because he rejects 99 percent of deals after a quick glance. “I start in my circle of competence and stay inside of it,” he said.
When he first started as a real estate developer, Sweeney said he was knocking on doors, following up with people, and pounding the pavement to build his network and credibility.
“Now, I get phone calls when there’s something to look at. Very fortunate to have that reputation with brokers and their dealmakers.”
Sweeney said he focuses on developing apartment buildings in great neighborhoods. In every deal, he said he’s looking for development sites in neighborhoods that people want to live in and are already established in.
“I will do almost whatever it takes to get to a deal in a great neighborhood first,” he said. “This has been ingrained in me since I started in the industry, especially since the neighborhoods we’re entering are extremely competitive.”
Getting the neighborhood right can overcome most obstacles in multifamily real estate, Sweeney added.
“This is our napkin math confidence range, where we’re experienced enough to submit LOIs (letters of intent) without opening up a spreadsheet.”
When he takes his first glance at a deal, Sweeney said he does a quick sniff test, checking out what the neighborhood is like, how many units he can build, and what are the building height limits and zoning restrictions.
“I typically know the area well enough to do this by myself, but if it’s unclear for any reason I’ll call my architect to do a quick FIT plan (a basic architectural plan of a space to determine what can fit in a given space)” he said.
“It’ll usually take the architect less than an hour to get back to me with an answer. Once we know basic unit count & zoning, I look for rental comps close to the location. Often, I know them off the top of my head. Again, market focus. This helps me estimate yearly revenue & if I need to double check, it’s pretty easy to find this info.”
After this, Sweeney said he calls his general contractor to get a spot check on the price to build. “We usually have a 10 minute conversation and we’ll be close on construction cost. Occasionally, he’ll ask for an hour to confirm any unusual site conditions.”
At this point, Sweeney said, he has looked at the deal himself and consulted an architect and builder all within two hours of the deal coming into his orbit.
“This gives me the key info to build an LOI, Number of units, Average rental price, Cost to build,” he said. “This is really all I need. Staying squarely in our zone of competence is a superpower.”
Sweeney said he makes some small edits to a template letter of intent and sends it off to the broker or seller. “We want to know at the LOI stage how easy or difficult this seller may be,” he said.
On some LOIs, he said he will consult an attorney, “especially if we already know the seller is going to ask for non-standard items, but this isn’t common. Ideally, we are looking for a reasonable seller we can work with before we spend several weeks negotiating a purchase agreement.”
There are thousands of reasons why the offer may be rejected, “but you’ll never know what those are unless you move fast and be first to the table,” he added. “As a general rule, most opportunities in life work this way. Become an expert, then move quickly!”
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