Ben Weber with David Johnson on KRLD (Copy)
David Johnson
You know, getting into the stock market is easy. You go out, you just call somebody up, or maybe you go online, you buy a hundred shares of Boeing for a couple of hundred bucks and sit back and see if you can make some money.
It's tougher in real estate, uh, and really a lot tougher in real estate because the barriers to entry are there, and especially if you want to get into North Dallas real estate. which has been so hot. We've got an oil man who's become a real estate man. That's gonna try to broaden that out and let the average Joe get into the real estate business.
Ben Weber is the general partner of TRM. That's Texas Republic Management. He joins us right now. It's good to have you with us.
Ben Weber
David, a pleasure to be here. Thank you.
David Johnson
So we have all these real estate guys on all the time and thinking North, uh, Craig Hall has been out at, you know, out, out there for 30 years waiting for the things to turn around and Jerry Jones has got deep pockets and he's, you know, made a big push into Frisco.
And how does, how does the average guy do it? How do I go out and get a piece of that?
Ben Weber
Well, you know, when you mention those two names, Craig Hall and Jerry Jones, I'm not even in the same category as they are. They're, they're developers and we are strictly land speculation. Um, our, our history in this, I was in oil and gas for, I'm still in oil and gas, but my primary business was oil and gas operations starting in 1983.
So, 30 years into that, uh, when oil was hovering at around 100 a barrel, we didn't think things had, uh, necessarily, uh, were not going to really get any better. We weren't looking for 125 or 130. And being in the oil and gas business, you know, there, it's a roller coaster up and downs. And so when, That up came at that point in my career, uh, we had, we chose to divest, uh, uh, a great deal of our assets at that point, which, uh, brought in a, a fairly large windfall of cash.
And so at that point in my career, I didn't feel like I was, uh, quite as, uh, ready to go risk it all on a roll of the dice, like I had an oil and gas for so many years. And so real estate, uh, my partner and I out of Houston decided we should look into real estate and I've been a lifelong resident of Dallas, um, over 70 years now I've been living in Dallas.
I used to ride up and down. The Dallas North Toll Road on my bicycle when it was a train track. So I've been here for a while. Exactly. And, and have seen the, the growth. So we, we basically followed the same formula as we did, I did, in oil and gas with real estate, my partner and I, and that is you try to get close to, uh, something that is proven and something that is going to bear fruit within a uh, relatively short amount of time, the path of progress, if you will, versus an extreme wildcat in terms of oil and gas, which is way far away from any known production, or in terms of real estate, uh, just throwing a dart at a map and going out and buying it simply because it's affordable.
I don't know that that answered the question.
David Johnson
No, it does, but, but, so how do you structure it? Do I get, I can give you, what's the, what's the minimum I can give you and get, get a piece of, you know, real estate that hopefully is going to be ultimately developed when the tollway heads out that direction?
Ben Weber
Well, our, our projects are put into partnerships. Now, my son in law and son have joined me in this business. They were both in tech and then when COVID came along, uh, both of them were not so fortunate and keeping their positions and, uh, they've evolved into this, uh, position of real estate partnership formation.
We uh, we form partnerships. First of all, we don't leverage any, any of the property. So you're paying cash for everything. That's correct. And then you cut it into pieces for like, it's like limited partnership interests. Yes. Um, we will buy the property for all cash, which is attractive to buyers. We generally or excuse me, sellers were able to, uh, close quickly, uh, based on title.
And we've been directed by some professionals that I won't necessarily name here. Uh, but we were working with a great, great group of professional people. And, uh, We're following trends and closeology, if you will. So once we close on the property, we'll hold it for a period of a couple of months up to six months.
We have an inventory of properties currently. And then we'll put them in a partnership. We'll be the general partner. We will take a fairly large portion of it ourself under the same terms and conditions as the limited partners will invest. And generally the investment ranges from 50, 000 to 100, 000 per limited partner interest.
David Johnson
And what's the commitment? What's the time commitment for something like this?
Ben Weber
Like I said, we talk about, you know, Craig Hall waiting 30 years to develop some land at Eden Point. Correct. Well, we, we also are in a green banana situation. We got green bananas and we wait for them to ripen. We, we do try to put ourselves in a position of eminent, uh, uh, progress where developments, mainly home developments.
And industrial and developments are occurring, uh, and, and slip in sometimes paying even a over market for the property, but, but seeing it with the idea that it can be developed pretty quickly. That is correct. And then you can turn the property pretty quick.
David Johnson
But again, are we talking a couple of years or?
Ben Weber
Uh, two years in some cases, but we, our partnerships are fashioned for a five year old.
David Johnson
So if I give you 100, 000, how much of that goes into real estate? How much, I mean, some of it's got to be in commissions and promotion and management fees and that sort of thing. But, you know, how much really goes into, into, into land?
Ben Weber
Once we have our partnership intact, we, like I said, everything's paid for. So the commissions that were, uh, present when we bought the property, generally played paid by the seller. We're the buyer. And so we don't have any commissions in terms of brokerage fees or anything like that. There is a management fee that comes along with this.
And we average approximately, uh, 2%. Of the total investment per year for management and outside of that. We, uh, do have a structure where once the property is sold and has achieved a two to one margin or better, then we crawl back in for another additional 25 to 30%.
David Johnson
Yeah, that's, that's, that actually is pretty normal. So are there any. So there's no leverage. Are there tax advantages like there are in the oil and gas business to buying real estate this way?
Ben Weber
I wish there were. There are minimal tax advantages, but when I say minimal, I'm talking just a handful of dollars. Everything that we own is generally in ag, so there's minimal tax on it.
There's, for the first few years of a partnership, there's minimal deductions that partners are able to take advantage of, but In the long term, no, there's no real tax advantage to, to this type of investment.
David Johnson
Yeah. It looks like you're doing, you're, you're tracking the growth and going north right along the toll way, right along US 75 coming out of, out of Dallas County proper.
Um, does that go on forever? I mean, how, how long? There's a lot of land up there. You have to be developed, I guess, but a lot of it is sitting and, and, and waiting.
Ben Weber
You know, David, sometimes I wonder if we're going to end up buying properties just south of Oklahoma City.
We try to hug close to the, to the Dallas North Toll Road and the path that it is destined to take. That it's, that is currently been mapped out that it's going to be taking all the way up to virtually the Oklahoma border. Um, we, we've followed the I 75 corridor to the, uh, new activity and, and, uh, Sherman area with the, uh, Texas Instruments and FinSAR, uh, tech companies building the chip plants that are up there.
Uh, the housing market is going to be, uh, The main driving force behind what we're doing in that area. Um, but where does it all end? That's a question we ask ourselves. And, and, and while we are moving north, we also have located a number of properties that are inside of what is currently considered to be, uh, an area that would be untouchable that, you know, it's beyond investor grade numbers that it's, it's only now available to a, it would only make sense for someone that's going to develop it to buy it. But, uh, we're, we're still able with all cash purchases to, to get in and. And buy at the right price that within a five year period, we're going to realize a profit.
David Johnson
Now, well, and then, and if you're all cash and you don't have a lot of leverage and a lot of debt service and aren't beholden to, you know, drastic moves in interest rates, then if push comes to shove, you can be patient, I guess.
Ben Weber
Again, it's the green bananas approach. We truly try to position ourselves in an area that is in the middle of imminent progress by and patiently hold.
We do not put in any infrastructure. We generally do a great deal of research on each property to find out, you know, one of the keys to any property is in value in the future is does it have. sewer. Does it have water? Right. Um, in most cases, we try to identify the source that's going to be bringing that to or near our property for a developer to say, hey, this is not going to be a monumental task.
We also work with county and city, uh, zoning and planning groups to find out exactly, you know, what, what is going to be the most desirable, uh, for them to. To be developed for a buyer and, and we go out and we have architectural and engineering plans drawn to specifications on options that developers could easily get approved once they went to a zoning group to have those approvals.
David Johnson
Well, and your timing, your timing looks great. I mean, the, the projections are that we're the third largest metropolitan area in the United States by the end of this decade, and maybe by the largest by the end of the century in the country. So I guess there's a lot of development yet to be done.
Ben Weber is the general partner of Texas Republic Management. Good to have you with us today. Thanks for the time.
Ben Weber
David, thanks for the, thanks for your time.
David Johnson
Thanks for more of our conversation. Go to krld. com slash CEO. I'm David Johnson. News, radio, 1080 KRLD.