6 Boston Developers to Watch in 2024
Developers to Watch
Sep 12
NAMES: Dan Rubin and Ray Hurteau
COMPANY: R|H Investment Group
Ray: My foray into real estate began with my father being a carpenter. So, over the summers in high school, I'd help him out, but I swore off construction and was focused on college. When I met Dan after we graduated Northeastern, he roped me back in, but in a different capacity. So, I'll let him explain how he sort of came into it and we became partners.
Dan: So, we didn't really cross paths during school, but once we graduated and we got full-time jobs, we ended up working together out of school on the same team and became close there. Stepping back for me, my entire family has been mostly entrepreneurial in the past. My grandparents owned their own businesses, my parents owned their own businesses, and/or took over the family business from my grandparents. So, my family's been predominantly entrepreneurial from the beginning. I guess my path was that my parents stressed “Go to college, get a good degree, and go work for a big company,” because that's the stable, most economically secure way of pursuing a career. I had started along that path and I would say for me the entrepreneurial bug bit me in college when one of my professors approached me and a couple other students in his class to start a business on the side and it was more on the engineering IT security side of things, but it was still starting your own business in a startup type environment. So, I had spent my junior and senior years in school working with him and some other students to try to build this business. It didn't end up panning out, but that experience helped lay the foundation.
In 2007 after I graduated, I was renting in Dorchester, Massachusetts (which is part of Boston), and I was renting a condo with a roommate. I think I was paying about $1600 a month so it was $800 a month for each of us, which was good, but it was still pretty expensive. I was sick of renting and wasting money so I thought there's got to be a better way to do this. I was like, maybe I should buy something. Do I buy a condo? Do I buy a house? So, I started digging around and I was like, well, maybe I'll buy a multifamily property. The housing market was obviously very, very different then. I started looking in 2008 and I think there were over 400 multifamily properties for sale just in Boston alone because of what had happened with the financial crisis.
I barely had any money at that point because I was just a year out of school. So, I purchased the property, did an FHA loan, put three and a half percent down. I paid $355,000 for a three family in the Savin Hill neighborhood of Dorchester in October of 2008. I think my down payment was like 20 something thousand dollars. So basically, I borrowed some money from my parents because I pretty much wiped out whatever I had saved at that point and then I needed some reserves. The bank wanted some reserves because of what was going on. So, I put 3.5% down and I lived in one unit with a roommate and I rented out the other two units and I basically paid for my entire mortgage and living expenses. That's kind of the start of where things began.
Dan: Yeah, it was a big swing. Obviously, it was a lot easier to swallow $355,000 than a million dollars, which is what the triple decker would at least cost you today, right? So, much easier pill to swallow, much lower barrier to entry. Rents were so much less. I was renting a three bedroom for $1150 a month or something like that. So, I ran numbers on the back of a napkin, very high level. There was no underwriting like we do now, but I said, here's what my mortgage payment's going to be and here's how much I can bring in from rent. I was like, well, this makes sense and this is how much I need to probably put into the place. It just needed appliances. I needed to redo a bathroom, maybe replace some carpet. So, I think I had to spend about $20,000 in renovation costs, but other than that, that was pretty much it.
Ray: I feel like I could answer the why for Dan, because he’s always said this when we were looking for properties at the beginning , and as we've progressed. It’swhy we've stayed in Boston; because Boston's such a resilient place. It has so many good things going for it. So, at that time, you were saying “I'm not going anywhere for the foreseeable future and like Boston. It’s close to my house.” Dan’s family is 30 minutes north of the city.
Dan: We were at Fidelity for quite a while, even after we started. I bought my first place in 2008 and then Ray and I did our first for sale development in 2010. I didn't leave Fidelity until 2015 and Ray didn't leave until 2016. I think going back, I think the reason for that was we have a steady W2 income so from a tax return standpoint and a lender standpoint, it allows us to qualify for loans. It allows us to continue to have a pretty decent income in addition to starting this side business. That was exactly what it was at first, was just a side business. We did not envision the business getting to the point where we would be quitting our full-time jobs and pursuing this full-time.
That's how the business progressed and grew. We said, "Oh, well maybe we'll just do one of these a year and we can have some pretty good side money and then we will maybe buy some rental property with the money that we make from some of these for sale developments and grow a rental portfolio and continue to work at Fidelity." At some point maybe we'll have enough to be able to leave Fidelity early, retire early. That was the initial goal. Ray and I, we didn't have significant others. We didn't have kids, so to Ray’s point earlier, we could take the risk. The first deal we did, no bank would finance us because we had no experience. It was also 2010, so the market was still recovering. The seller ended up financing the building for us.
He was the bank, so he held the mortgage and Ray and I paid for the entire renovation out of pocket. We took loans against our 401Ks, and we opened a lot of credit cards. Back then credit bureau reporting took a certain amount of time before a new credit card would show on your credit report. We applied for as many credit cards as we could in one day because it wouldn't hit your credit report right away. We maxed those cards out. I'm not saying to do this now, but that's what we did to get through our first project. It was fun but challenging, and we learned a lot along the way. Unfortunately, we didn't make any money on the first project.
Ray: HR Ventures was formally started in 2010. We didn't have any formal DBA, but later down the line we rebranded as HRV Homes because it just came off better. Not to get too far ahead, but we now call ourselves RH Investment Group, which is a little more institutional sounding and aligns more with where we're steering the ship.
Ray: Dan alluded to it earlier. We wanted to get into rental ownership because passive income aligns with replacement of social security, if it's even going to be around for us. We weren't ignorant of the fact that social security is broken and continues to be broken. The backup plan was some other income source and real estate seemed to be that source. We actually pivoted from the first development, a for sale development condo conversion, to a multifamily purchase of another property in 2012. Subsequently in 2013, I bought the building next door. So by 2013, we collectively own 3 rentals:Dan has his three-family from 2008. Him and I have a three-family from 2012. I have the three-family from 2013. At this time our eyes are wide open and we're looking for properties, but we're having trouble finding them.
Dan: We were having trouble finding properties where the numbers worked.
Ray: Correct. This is specific to what's on the market with MLS. The abundant housing choices that were available in 2008, , the ship was sailing on that. There were no more offers where you could get an inspection and get everything on that list done with no questions asked. We pivoted to “direct to seller” marketing. At that point, Dan was saying, "Well, we've got to find something different. Why don't we drive around and look for just the ugliest buildings?" At least this way we know how to underwrite them because it's a full remodel rather than guessing what’s behind the walls. It was easier to rip everything down to the studs and start over in a lot of cases.
Dan: Deal flow significantly increased between 2013 and 2016. Direct mail significantly increased the number of leads coming in. We were finding off market opportunities where the numbers made much more sense and we all know what the Boston market did between 2010 and 2020 before the pandemic. It was just basically an upward trajectory the entire time so prices just kept going up and up and up and up, and it was getting very competitive. There wasn't a ton of inventory. Getting those off market opportunities, we started taking on a lot more. I think between that and there were other things going on within Fidelity that helped force our hand. Between 2013 and 2015, we had five or six projects going at the same time. Having a full-time job and a part-time job became having a full-time job and a full-time job.
In 2015, I was working in Boston, but my team was being relocated to Rhode Island. I was presented the opportunity where if I left, if I didn't go, I would get a severance package. I said, "Ray, I think the writing is on the wall and this is the push that we needed to make the jump into doing this full time." Fidelity gave me six months of my full salary. I said, "I'm going to get paid for six months from Fidelity while I'm working on this thing full time. It gives me a six-month runway where if shit hits the fan, I can always find another job." That's the opportunity that I took.
Ray: We were in similar but different positions. Of course, keep in mind that during this time, both of us started dating significant others who would be our future wives. My girlfriend at the timewas in New Hampshire. I found a job within Fidelity that brought me up to New Hampshire, and I bounced between New Hampshire and Massachusetts for quite a bit. I would sleep in a room at my three-family, and then bounce between Boston and New Hampshire. This ping pong lasted even after having our first child. When kid number two came, that was it. The hammer came down and I had to be a full-time dad at home.
Dan: It was very impressive, Ray, what you were able to do.
Ray: I tried to thread the needle. To Dan's point, he took the package. We discussed it and said, "Okay, for six months, Dan, you're going to be out there doing stuff and you'll report back to me whether or not you think this is going to work." We discussed it. We probably knew by the first month that it was going to work. At that point it was just a waiting game. I wanted to finish the year out, get the bonus and profit share, and then that was pretty much it. The cool thing is my manager wasn't unaware of what I was doing. I disclosed it and we talked about it all the time, and he jokingly said he's going to mow our lawns one day. He always would say that. He's like, "Oh, don't worry, Ray, you'll be hiring me to mow your lawns." I said, "John, we live in Boston. There's no grass. It's all concrete."
Ray: A lot of trial and error, but also understanding that we can be comfortable doing what we've done and work within that framework. Or we can go a little bigger and see how that is. I mean for us it's always been, “I don't want to introduce too many new variables at once because it's the unknown that'll get you”. The known will get you every once in a while. You'll always get bit by something even though you shouldn't, but it's the unknown that really can get you. A good example of that is on our latest project. We were under construction control, and we were building an elevator for the first time, we're dealing with steel and podium construction, as well as a few other things that we haven't done before.
On the flip side, every project has hundreds of touch points. So it's not really that many new variable sin the grand scheme of things. Everyone has been very complimentary of our Lynn project, and we're pretty proud of it too. We were the GC and the owner. Typically, owners hire a GC, but one area that we like to think that we can add a lot of value and maintain control and order is by being this involved.
Dan: I think Ray and I purposely want to do everything ourselves at least once. That way, if and when we do hire for it, we know exactly what the job description needs to be and what our expectations of that person should be. I don't want to hire someone for something that I don't know anything about. We've also been pretty conservative over the years. We stuck to building two to eight units for a decade. I think we got very comfortable executing and understanding that process and building that type of product. And I think we said again during COVID, I think we said, “All right, I think we might be ready to take that next leap and level up”. It was definitely a very big undertaking and we hired some specialists to help us out along the way.
Ray: Both. A good example being bookkeeping. I did that as long as I could and probably for too long. I think we went through two or three bookkeepers before we finally found the right company. It's one of those things where you don't know what you don't know. The first company we brought on in a formal capacity did not do a very good job. It also exposed that we probably grew beyond the capacity of our CPA, so we had to move to a different firm for that service too. Luckily, our current bookkeeper recommended us to a CPA that they partner with and it’s been great ever since.
We're moving in that direction on property management. We currently have part-time, virtual property management. We're going to be looking to move that to full-time. Because it’s the back of the house, that person can also help out with other related matters. But on the front side, whenever there is an active project, we will need local boots on the ground. Dan can speak to that.
Dan: Yeah, I acted as the full-time super. I was on site every day, all day, as much as I possibly could be to troubleshoot, keep the project moving, things like that. But again, going back to the scale side of things, it's not sustainable. Ray and I should be working on growing the business and not working in the business. A lot of the stuff that Ray and I are doing is working in the business, which is good when we're learning it, but it's just not sustainable from a scale and a growth standpoint. So if we do another project of this size, we'll definitely want to hire probably a full-time super to be on site all the time, maybe having a part-time PM-ish type person or someone that can do a variety of tasks, both project specific and maybe business specific. But in order to grow, we are going to need to bring on some more folks and it's just a matter of budgeting for it as part of the project.
Ray: I mean, we just have similar mindsets in a lot of ways. And rather than having overlapping skill sets, we have more complementary skill sets. So if you have two people that do the exact same thing, you're going to be bickering and saying, “I want to do it this way”. The other person will say,” I want to do it that way”. At this point of our partnership, Dan jokes about me being his second wife. I mean, we are pretty much family at this point.
Dan: I think the biggest thing is we started this from nothing. I've seen a lot of partnerships have issues where if one person brings a lot more to the table than the other person, there could be friction down the line. To Ray's point, we do have complementary skill sets. I think Ray is much more conservative than I am, and so he grounds me a lot because I'm always more like, let's go, go, go. Let's push, push, push, push. I want to grow as quickly as possible. And Ray's like, well, let's hold on a second. Let's rein it in, Dan. But I think that works, right? Because on the same side, I'm not going to speak for Ray, but I kind of help push Ray a little bit sometimes.
Ray: Right, helping that outside the box thinking. Our problem solving process is funny. It's usually one person brings the other a problem, we “debate” with each other for a bit, then find a solution somewhere in the middle. What was it the other day? We were talking about the air ventilation. We'll agree to a solution and one of us will say, “okay cool, let’s try that and see how it goes”..
Dan: I think the initial catalyst for growing a social presence is a few things. In my mind I thought it would help from a deal flow standpoint and credibility. People see that you're doing things and ultimately a lot of our followers are agents and developers. The larger presence we have on social media, the more folks would send us potential opportunities. Secondly, it would help us with raising capital. We obviously have investors for a lot of our projects, and so I thought, hey, if we were growing on social media, maybe people that are following us or seeing that we're doing cool stuff, cool projects, they might want to invest as well. And I'd say that I spent a lot of time on social media for a good year or two. It's a lot of work. It's literally a full-time job and creating content and putting stuff out there and editing stuff. I think I got to the point where it was like, listen, it's starting to take away from my job of being on site and being involved in making these projects move forward. I would get into my car and be like oh shit, I forgot to take a video to put on social media or a picture. And I was like this is stupid, right? We grew to a certain point ... I think our Instagram grew to about 10,000 followers. It dropped back into the eights now because I haven't really posted much. I got to 10,000 and I was like ... I'm not seeing a return on that investment. I hired some videographers and stuff to make some YouTube content thinking similarly where if we provide some educational content, maybe that will help from a credibility standpoint, maybe we can monetize it or something at some point.
You really have to be so diligent on YouTube and social media these days where it's like you literally have to post daily if you want to grow and ultimately potentially monetize it. If I wanted to do that I'd have to hire a full-time social media marketing person. I just don't see where it would benefit our specific business from a development and/or building a rental portfolio. I think from a real estate brokerage or an agent, it's huge. Whereas if you have a really big following you can reach a lot of potential clients, or you could reach a lot of potential buyers agents, or buyers. I think there's a lot more value in social media on the agent broker side than more of a developer builder side other than showcasing your projects and having credibility. I don't know, Ray, have we ever gotten a deal off of social media? I don't think so.
Ray: No. I was trying to think while you were saying that. The one idea that we did have at the time was to grow a following. If we wanted to build something, showcase it while we're building it, and get something under contract during that process we could cut out the broker on the sales side if need be. But that never even came to fruition. To Dan's point, it's a lot of work. Then these platforms go in and change their algorithms all the time also which is super frustrating since you've shot it in a certain format, you've done certain thumbnails. I mean, I'm sure you've seen some of this on your end there, Adam, in terms of just having to constantly, not keep up with the Joneses but keep up with Google Instagram, Tiktok, and Meta.
Dan: On the podcast side, I think it ebbs and flows more so based on how busy we all are. I think the podcast is more of a hobby and a fun thing to do to all be talking to other folks in the industry and talk to folks that we might not otherwise be talking to, and form relationships and things like that. The podcast has been really fun. But again, we're busy, Marc's busy. We're close with Marc. I talk to him multiple times a week. We put out episodes when we can.
Ray: The content of the podcast is specific, right? We're looking at urban multifamily development and we're also trying to not be repetitive. Rather than put out content for the sake of putting out content, we want it to be unique and novel in that regard. We've had a couple people return where we felt like we didn't get enough of the story the first time or they were really exciting, or they're excited to be on the podcast. Going back to Dan's point about social media, I don't think we've even gotten so much as a tenant from any of our social media marketing. The one thing we get more than anything is people asking if we're hiring.
Dan: The podcast has been way more beneficial to the business than social media. A lot of the guests that we brought on to the podcast, we've ended up working with them at some sort of capacity for some of our projects and use their services. And I think that has been significantly valuable to the business which is great. Meeting folks in those specialized fields has helped our business tremendously.
Dan: I'm going to quote Guy Raz from the How I Built This podcast. He asks every entrepreneur at the end of the podcast, “Was the the way you built your business more luck or hard work?” I would say in our case it's a lot of luck. Obviously, we worked hard. But we were lucky to start our business at the bottom. We may never see that again in our lifetimes, right? Being able to buy our first few places when the market was super, super low was very lucky. Going into real estate now it's hard, right? It's very competitive, there's not a lot of inventory. This is across most of the country, right? The northeast is on a different level I feel, the northeast and the west coast.
If you're getting into it now, I would say you should partner with folks that have more experience and learn. Get a mentor and learn and grow that way. There's a lot of JV opportunities out there. That's what I would think if I was getting into it now. If I were to see where the market's at and know it's going to cost me over a million dollars to buy a rental property, I'm thinking, “would I even make that jump?” It's a lot more risk I feel these days.
Ray: Someone starting out today would most likely not have the income needed to do what Dan and I did when we first got started. And that's specific to the Boston metro area. Someone starting today may end up having to go to secondary or tertiary markets, for a better opportunity or place to start. Because rent prices have increased so much for everybody, I am still an advocate of having your first purchase be a multifamily. If you're in Boston or an area with a lot of multifamilies, do that. Even if you're coming out of pocket by $1000 a month, it's still going to be less than what you'd be paying on rent. Every little bit counts. A smaller negative is still better than the big negative. And then you get to learn how houses work, you get to learn how ownership and management works.
Personally, I think just based on the dollars, the absolute dollars and relative dollars, asset prices are probably 30 to 40% too high around here. Debt service is much higher than a few years ago and the relative dollars are all that matter. It doesn't matter about the past, it doesn't matter where we were, what matters is where we are now and what works best for everybody. Good luck to everybody out there, it's a challenge.
Dan: Maybe I'll change my answer a little bit. I agree with Ray. Real estate is a long game. Don't get into the business if you think you're going to be a millionaire overnight or within the first year, it takes a long time to build up wealth and accumulate assets. To Ray's point, I think there's a lot of first-time home buyer programs out there. And I think that if someone wants to get into it then they should find a multifamily property. And again, it will allow someone to take on something that they can actually live in, they can build equity, they can hopefully cover some of their debt service with rental income. And then they can take on some smaller projects and learn the process slowly over a few years.
Ray: I had a lot of different iterations, but one that I really gravitated towards for a while was working at NASA.
Dan: In my middle school yearbook it said, "What do you want to be when you grow up?" And I said, "A school bus driver."
