#7 R. John Anderson - An Insightful Journey From Tradesman to Developer
Jan 26, 2024
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In this podcast, R. John Anderson, a tradesman turned developer and influential figure in urban planning, shares his unique journey. He discusses his early challenges, the impact of the 2008 financial crisis, his transition to a successful developer, insights on small-scale development and building sustainable communities, and his perspective on 'form follows finance' in urban planning.
Utilizing underutilized and vacant spaces in strip centers along arterial roads can be a profitable investment for small developers.
House hacking, where buyers live in one unit and rent out others, is a smart strategy for young and small developers to make housing more affordable.
Debt service coverage ratio (DSCR) loans based on property cash flow can be a useful financial instrument for small developers, especially for projects where traditional financing is difficult to obtain.
Deep dives
Opportunities in Corridors of Crap
One interesting financial opportunity for small developers is to utilize underutilized and vacant spaces in strip centers along arterial roads. By dividing and renovating these spaces, developers can create smaller, more affordable commercial units that are in high demand. These spaces can be leased out to office or service-based businesses, offering a more attractive alternative to second-floor spaces in larger buildings. This approach can provide immediate rental income and be a profitable investment.
House Hacking for Affordable Housing
For young and small developers, house hacking can be a smart strategy. House hacking involves purchasing a duplex, triplex, or fourplex where the buyer can live in one unit and rent out the other units to generate income. This rental income can then be used to offset living expenses, making housing more affordable. House hacking can also be done with new construction, where the developer lives in one unit and rents out the other units. This strategy allows for investment in real estate while minimizing living expenses.
Debt Service Coverage Loans
Debt service coverage ratio (DSCR) loans can be a useful financial instrument for small developers. These loans are issued based on the cash flow generated by the property, rather than personal credit or income. The loan amount is determined by the debt service coverage ratio, which measures the property's ability to generate enough income to cover loan payments. DSCR loans typically have longer terms, such as 30 years, and can be a good option for small-scale commercial or residential projects where traditional financing may be hard to obtain.
The Importance of Small-scale Projects
Small operators, such as local community banks, can excel at small-scale projects due to their agility and ability to build trust with the community. Large operations, on the other hand, rely on economies of scale but lack the personal touch and flexibility. It is essential for small operators to focus on a steady stream of containable projects that allow for learning and refining their craft.
Building Relationships and Effective Communication
Developers, especially those from design firms, often struggle with effective communication and validating others' feelings. It is crucial to personalize interactions and understand individuals' perspectives to build trust and facilitate successful collaborations. Forming relationships and effective communication are essential in navigating the complexities of the development process and achieving desired outcomes.
Today I sit down with the infamous and inspiring R. John Anderson, also known as 'R John the Bad'. We dive into John's unique story, from his early days quitting high school to pursue his passion in the trades, to his transformative experiences as a developer and influential figure in urban planning.
I met John in 2016 at an Incremental Development Alliance workshop he was putting on in San Antonio--teaching normal folks how to be small-scale developers.
I love his message about "form follows finance", and that, while it is good to romanticize and dream, we also have to live in reality if we want to get anything done.
🔹 Key Topics:
- John's early challenges and how they shaped his career
- Impact of the 2008 financial crisis on his philosophy
- Transition from tradesman to a successful developer
- Insights on small-scale development and building sustainable communities
- John's perspective on 'form follows finance' in urban planning
🔹 Connect with R. John Anderson:
John's Blog: https://www.rjohnthebad.com/
Incremental Development Alliance: https://www.incrementaldevelopment.org/
🔹 Timestamps:
00:01 - Introduction to John Anderson
01:06 - John's early life and entry into construction
03:15 - Shift to architecture and impact on development philosophy
05:25 - Experiences with large-scale projects and learning from failures
08:50 - Influence of Leon Kreer and the New Urbanism movement
14:28 - Insights on public service and infrastructure development
20:08 - The journey towards incremental development and small-scale projects
33:04 - Strategies for young developers in the current financial landscape
43:52 - The concept of 'form follows finance' in urban design
01:00:37 - Exploring opportunities in urban renewal and sprawl repair
John has a lot of bits of wisdom and insight for anyone interested in architecture, urban planning, and sustainable development. Thanks a ton for coming on!
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