We recently talked with Bruno Muscolino, of Square Development. We discussed the best and worst parts of developing in DC along with our market predictions. BA: Good morning everyone. I'm Brian Athey, President of Congressional Capital, and I'm here today with Bruno of Square Residential. We're going to do a little interview today at one of their projects. This is a 4 unit project at 2150 Florida Avenue. As you can see it turned out beautifully. Bruno, why don't you tell us a little about this project and what you like about it. BM: Well this project is in a part of Dupont that's a great location. We are a couple of blocks from the circle and the metro station. It's at the intersection of Dupont and Kalorama. I mean Jeff Bezos' house is like a five minute walk from here. So its a great location. That was one factor. The second factor that we really like about this project is that it was an "easy one" in the sense that we just split every single level into a different unit. We didn't have to do anything too fancy like extend the back wall or go up. We were limited by historical renovations. BA: Yeah that actually helps when it's all sort of interior and you're not having to go up and that kind of thing. So you've talked about this project being easy. Tell us about a hard one. What's a hard project? BM: Actually, I have a project right now where we have a situation with the neighbors who are giving us issues with the chimney. You know when you have the plumbers, the sheeting and the neighbors, its just a mess. That, you know, issues with the neighbors is the hardest part to get through in this business. As far as construction I mean, you've got to watch out for, you know, acquisitions basically. If your acquisition is right, then its easier. You make your money on the purchase, not the out sale. BA: That's true,. You make your money on the buy in this business. And it is true that if you have difficult with neighbors, it can be a challenge. What I've found over the years is that if you have a bunch of projects at once, some of them just seem to be snake bitten or tough and some of them are easy like this one sounds to be and hopefully it all works out well. BA: So how did you get started in the business? BM: So that's kind of a funny story. I was a software consultant for about 10 years. Totally outside of this real estate field. Then a friend of mine who was actually doing some basic development, so I started investing with him in my 401K. I did 1 deal, 2 deals, 3 deals and then eventually I was like, "Why can't I do this myself?" So I started doing flips in PG County actually, of all places. Two flips in PG County and then we moved to DC flips. Then we did our first condo conversion and now we have a few going out. No more flips, just condo conversions. The shift was mostly due to risk management. Its a lot easier to do one flip than doing a building but there's a lot more profit in a whole building, which some people cite, right, there's quite a bit of future equity to be able to capitalize on any downsides. BA: Plus if you have a building which is a four unit and it doesn't go well, you can rent it out, convert your capital gains, and end up selling the units down the line, which I've done in the past. So what's your favorite thing about the business? BM: Acquisition actually. I love acquisition. Well, acquisition and everything. The thing I hate the most actually is dealing with contractors. Sometimes they're very difficult to deal with. Coming from a background of working with professionals, having to work with some people who sometimes are not responsive or reliable it's the hard part of the business. BtUt when you get a good project manager, all that headache goes away so I love it all right now! BA: Oh good! Well, that's good to hear. So what do you like the least? I think you answered that. The neighbor stuff? BM: The neighbor stuff. Well with the neighbors it depends, right, it depends on the neighbors. And a lot of people are just good people who want to get peace. And sometimes, they have their own thing, what they want to do with their house. You gotta do what you gotta do, they gotta do what they gotta do. But its basically like with any relationship. Any relationship you get with them and it gets much easier. That's the thing. It also has to do with the owner's position I think. So for us, we're going to start extending the chimney pretty early on. That way we don't have to deal with any of those issues down the line. Because when you do underpinning, it gets loud, its dangerous, they get upset and it gets more difficult. They stop enjoying cooperating during construction and they just try to get something out of you for the inconvenience. BA: Yeah what I tell people to do with issues like chimney extensions, things you have to work out with a neighbor, really try to do it upfront. I mean even before you buy the property if you can get a study period to deal with chimneys and other issues. And try to figure out a way to work with the neighbors so that it's a win win for everybody. You know really, the best borrowers of mine who have had good experiences with neighbors just the view that, hey look, it's an imposition to people and if I can be generous with them, usually good things work out. BA: So how many projects do you have going on now? BM: We have about ten. BA: Ten? Wow! BM: I mean, including the ones we are just selling. We have four, we are selling four condo conversions. We have three in the pipeline - three or four. And then we have another two that, yeah about another two that we are in the process of designing and we are about to acquire two more. BA: Good! That sounds good. So what is your goal for 2021 and beyond? BM: Hopefully as many units as we can. I mean, as long as they are great purchases. It's not a matter of just units. It's more a matter of trying to find the numbers that work the best. So we have about 70 units in the pipeline so hopefully, the best hopes are to double in the next year. That'd be awesome. I don't know if we can, if that'd be realistic. But, you know, if we could get to 100 units, that'd be awesome. BA: What's your view of the market? Do you think it'll be strong in 2021? BM: Yeah, for sure. I mean people are going tow ant to spend their money they're going to want to do vacations. I've been thinking about it and DC's going to be a prime tourist location again. it's going to be very strong for rentals. For rentals as far as tourism. I think people, you know, people want to come back to the city- that's my gut feeling. You know, who wants to live two hours away from work? Because I think work is going to start shifting to a more remote model but there are things that need to happen in the office sometimes. And I think its going to be a thing with part time in the office and part time home. But I do think the real estate market in DC is going to be very strong. Especially government workers, right? There's a lot for security, communications, support working on site and they're going to want to, they're going to want you on site. BA: I think so too. With interest rates being low for the foreseeable future, and people wanting to come back into the city and people wanting to have fun and be around each other. I think the market will be really strong this year. BM: Yeah. At the end of the day we are social creatures. So we want to go to bars with our friends, have a nice dinner with the family. Whatever you want to do like that, I think it's more difficult to do if you're in the middle of nowhere. BA: Oh, I know. Well, listen, thanks for your time. BM: No, thank you! BA: Let's do this again in the fall and hopefully not have to masks on. Hopefully everyone can get through COVID safely. I hope you all enjoyed, and we'll talk to you soon.

Congressional Capital President, Brian Athey, sits down to discuss his tips for success for first time house flippers. Transcript: Good afternoon, everyone. I’m Brian Athey, the President of Congressional Capital, and today we’re going to talk about tips for first time house flippers or those who have done really less than three house flips and are looking for a little bit of advice. My biggest point of emphasis for new house flippers is really to get a great team. What people end up doing is focusing on trying to buy something that might be a little bit overpriced, (try to) drive their construction number down, and somehow (try to make up an) artificial advantage with respect to construction, and that’s just the wrong approach. The right approach is to make your money on the buy (based on the profits you expect from the sale), hire a high quality construction company or do the high quality construction yourself, deliver a great product, and then sell that product for what you were expecting to sell it for or a little bit more money (than initially expected). You also should (hire) a great architect, (hire) a real estate agent that can help you and really evaluate the back end sales prices, and ideally (hire) someone who can help you select finishes so that the product that your putting on the market is something that people really want, instead of something that is just ordinary. What I am seeing in this (DC area) market is that there is a lot of demand for single-family housing, perhaps more demand than I’ve ever seen. You really need to nail it and put special things into the house. For example, something as simple as an accent wall in the living room, and you can look at some of our product or our borrower’s product for examples of that. Or you can use some lighting in the kitchen or something else that can really make the product stick out from the competition. So my advice is: get a great team, get a great contractor, get a good architect, and get a very experienced person to sell the house. If you do all those things, and focus on delivering a high-quality product, because that’s really what matters, then you’ll be successful (as a house flipper and developer). So, if you have any questions, please reach out to us at any time. Thank you!

Good afternoon everybody, I’m Brian Athey, President of Congressional Capital, and I am here today to talk to you about the most important thing in any Real Estate deal - which is protecting yourself from Downside Risk. One of the most important things you can do in protecting yourself from downside risk is picking the right hard money lender. Why does that matter? Because the right hard money lender knows how to protect you from the known downside risk when doing development deals. In fact, when our borrowers call us we ask them 3 specific questions designed to get at the risk level in that deal. The first of those questions, Is there a chimney on the adjacent property? And is it within 10 feet of the property line? The reason that matters is because if there is and they want to go up a level, they need a chimney extension agreement with the neighbor. If they don’t have one of those agreements or aren’t in the process then we are not going to do the loan. Why? Because we want to protect them from doing a bad deal and protect us from being in a situation where the borrower can’t harvest the value that they need to harvest from the deal to make it work for everybody. So, what you need to do is find a lender that actually knows real estate development, funded a lot of loans, can look for risk to help you, and can help you make your project be successful. So, if you are looking for a lender that can help you, give us a call we are here for you and we are looking forward to doing great deals with you in the future. Thanks a lot!

We recently sat down with Chi Perrus, the President of Paragon Construction. We discussed how he got into the development business, early challenges he faced and why he works with us at Congressional Capital LLC. Transcript: Brian Athey: Good morning everybody I am here with Chi Perrus who is the President of Paragon Construction. Today we’re here to talk about Chi’s background and how he got into doing developments and general contracting projects that he is doing in DC today. Chi Perrus: My background has been in commercial financing over the past 15 years I financed a ton of construction projects all over DC and the Baltimore area for small to mid sized developers. I decided to transition over to developing after working with great borrowers and developers and making cool projects. BA: Chi was great at lending and its really awesome to see that you started your own thing and the success you’ve been having. CP: Thank you. About 3-4 years ago I really got serious about making the transition. But I didn’t have the construction execution component, and that is when my partner Christian came in. We started with a few small flip projects. We eventually purchased a project by getting the money and equity from a lender who trusted us. We developed it and 3 months later we put it on the market and we received a contract within 4 days. BA: That is one of the most important things, the first project if it is one of your most successful then it jumpstarts your business. I can’t tell you how many times these people come to me and say “I’m going to do this first project, the math is not very good, but I want to get started”. That is the wrong way to do it. CP: The subsequent 2 projects did not go as well. BA: What was hard about the next 2 projects, and what has been hard overall? CP: I needed to surround myself with the right team. We dealt with the wrong architect that slowed the process down. There was another project where our marketing team was not equipped to sell that product which was a very high end project in Georgetown. BA: Having a great team is really important. Team is everything, and now it sounds like you have the right construction partner. CP: Another challenging component is the cash flow management. As a small developer, we need the cash to keep the projects going and keep ourself paid. I deal with a few banks for lending, and there has been some cases where it takes 3 weeks to receive money. BA: What do you think is a fair amount of time for lender to process a draw? CP: 3-5 business days BA: We try to do it in 3 days that is always our goal. What have you enjoyed? CP: I enjoy the entire development process. I enjoy finding the properties, underwriting the properties, working with the broker and lender. I really enjoy the whole process. It is like Christmas when I receive a contract. BA: It is all about pricing. You have to price it right and you will get low interest rates and high demand like this, but if you over price it you won't. Why have you worked with us at Congressional Capital? CP: A few reasons. When I thought about moving to the development side, Brian was one of the first people I called because of his experience within the market and understanding of development. Brian is a friend and a mentor of mine on the development side. I have sent you projects that I have been considering and you provide great insight. BA: It is just as important to keep people away from bad projects as it is to make great projects. I really don’t want to see people I care about losing money on projects. It is better to keep people away from bad projects than to push money into all projects. CP: Brian is brutally honest. There are a few parts of Brian's financing that is very beneficial. One is the draw process, Brian is very efficient at that process. In addition, structurally, Brian is the decision maker, so he doesn’t need to talk to anyone, he makes a decision there. He is very quick and very responsive. BA: This isn’t a team of 25-30 sales people. We make quick decisions to try and help our borrowers make great projects. Chi Perrus: Thank you we really appreciate that. You have been very integral in the success of the company and we look forward to working with you more in the future.

I often say that the first class in business school should be how to pick a good partner and should focus on the best partnerships of all time. Then, they should really focus on great partnerships that have been the driving force behind the great companies of the world. Great partnerships most often occur when people with complementary skill sets come together with a shared vision to accomplish a mission. For example, if you aren’t a natural at marketing and growing your business but are great at the substance of what you do, think of someone who can market and sell anything. Then let them focus on the business side, while you do substance. Of course, it isn’t enough to have complimentary skill sets alone, you must have shared values and be able to trust each other implicitly. Without trust, there can be no true partnership, but with trust, you can always know that the person you are battling to grow your business with always has your best interest and the best interest of the company at heart. Always remember, business is just like all other areas of life, if you surround yourself with good people, good things tend to happen. I have seen this play out time and time again in the years since I started Congressional Capital. From day 1 to the present, I have continually observed one thing that is both very obvious and also very true. Good people who work hard and execute, make good real estate deals better. Bad people, or even people who just aren’t willing to work hard (often the same people who blame others for their failures), make good real estate deals worse. It’s the same result every single time. It doesn’t matter that I do real estate, this principal appears to apply in all business ventures, as I have seen it play out time and time again in my investments in companies that have nothing to do with real estate. So, when I am asked to invest in operating businesses, I always make sure that I can spend substantive time with the people running the company and really get to know them before coming to a decision on whether to invest in that company. I firmly believe that it doesn’t matter what the product is, but that if the people running the company aren’t good people who work hard and are driven to succeed for the right reasons, then the business will never succeed. So, work hard in every aspect of your life to surround yourself with good people and good things will happen. #advice #partnerships #bestpractices #goodpeople #hardwork

When I was a young lawyer, my mentor at the large law firm where I worked told me something that I never forgot. He said, “Brian, lawyers aren’t sued for malpractice because their legal work isn’t good enough. They are sued because they aren’t responsive to their clients. You see, clients get pissed off when lawyers don’t respond quickly and if they get pissed about that and are frustrated with the result of your work, then they will sue you. But remember, it was because you weren’t responsive, not because of your work.” Over the years that mentor said many wise things to me, but that was certainly a pearl of wisdom that stuck with me. Since then, I have ALWAYS been incredibly responsive. Frankly, it’s the cornerstone of my business practices and something that I strive to impart on those I mentor now. In fact, I often say e that if you email me and I don’t respond within 24 hours it means one of two things: 1. - I am Dead. Which sucks for me. 2. - I am traveling abroad without internet access and by the way, I have two little kids, so I never do this. The point is, I respond very quickly and people appreciate it. It is a simple tool that has significantly helped my business. In fact, most of the successful people I know are incredibly responsive too. When I hear people tell me that they were too busy to respond, I often think of my friend who is a US Senator. He ALWAYS responds quickly. The truth is, if he can respond, so can you pal. So, when people tell you that you should shut off your email for a week while on vacation to get away, think of the message it sends to people you do business with. The message is clear. You don’t care enough to do the basics and respond to something that they need. Another message is equally clear, which is that they may as well send their business to someone else because that person can and will respond. By not responding, you are giving someone else an opportunity to get business that would have been and should have been your business. Think also about the fact that if you ignore your emails when you are on vacation, you will have so many to respond to when you get back that you will be behind for days. That’s not good for business either. So, my advice is simple: ALWAYS be responsive, not just when it’s convenient to you. People notice, existing clients stay with you, new clients will want to work with you, and your business will grow simply because you decided to be responsive.

Yes, there is a reason that we all studied history in school. And a reason many of the most successful people I know read biographies about the successful men and women who came before them. The reason is that there is SO MUCH to be learned from the events of the past. Look at the real estate business. Boom of the 1980s, bust of the late 1980s and early 90s. Many good years after a recession, bust in the late 2000s, many good years to follow. Bust soon. Shocking? No, same old story. So, how can a great mentor help you? Well, one of the great blessings of my life collided with the worst day of my life. Here is how—My Dad died suddenly at 54. He and I were very close, he was my friend, my mentor, he meant the world to me and I was devastated to lose him. I talked to him several times each day and suddenly, in one Earth shattering moment, my friend, my source of wisdom and a major motivating force in my life was gone. So, what next? Well, as I was left to work with my family to try to figure out what was going on in his various real estate endeavors, what I soon learned is that he had some great partners. These great partners were men much older than me who had been through far more ups and downs in the real estate business, and in life, than I had. Over time they became close friends of mine. In short, in the years following the great tragedy of my life - the sudden loss of my Dad - one of the great blessings of my life occurred. I grew close to a few of my Dad’s close friends who were much older than me and who have now played a defining role in my business and personal life. In fact, when I wanted to start Congressional Capital, I called one of my Dad’s friends and he helped. He has since become a very close friend and mentor to me whose friendship, wisdom and guidance has been a great blessing to me. To be able to call someone anytime to pick his or her brain about a challenge you face (and there are many when running business), is incredibly valuable. It can be re-assuring, it can help make a challenging decision seem simple, and it can help put things into perspective in a way that only years of experience can. The things that seem so daunting when you are in the middle of a tough decision, often seem far less so when talking with someone who has seen so many tough decisions and faced decisions far tougher than the one you are facing. That wisdom, that perspective, can be incredibly valuable. So, my suggestion to all new entrepreneurs is to find a great mentor with whom you can build a genuine connection and then learn as much as you can from that person. History, after all, is our best guide in life and we should all pay close attention to the wise words of those who did we were are doing, but did it years before, as those wise words can accelerate one’s path of success in remarkable ways.

Whether you are starting just out of college or are forging a new path later in life, starting a business, any business, is a huge undertaking. Brian, the President here at Congressional Capital is often asked for advice by those looking to start out on their own. Last night, while speaking on a panel at GCAAR, the topic came up again. So, for the next month on Monday mornings, we will be posting Brian's advice for anyone looking to start or improve a small business. Our posts will address: The Importance of Finding A Mentor How Responsiveness Builds Your Brand Why Who You Partner With Matters Hard Work: The Surefire Key to Success Like us on Facebook so you don't miss any of these upcoming articles! #blogseries #advice #bestpractices #gettingstarted #workethic

The right hard money lender can help borrowers make their projects successful in ways that banks simply can’t or won’t. Why? For two principal reasons. First, if you borrow from a hard money lender who has developed dozens of projects in the City and funded dozens more, you have the opportunity to get help from a lender who is a true subject matter expert when help is needed to make your project a success. Second, most bank officers simply don’t have the time or the experienced developing real estate needed to help borrowers with their projects other than to simply provide them capital. Is this bad? It’s not bad for every borrower, as there are many borrowers who don’t need or want help from their lenders on their projects. However, there are also many other borrowers who do need help along the way and that is when having the right hard money lender can be of tremendous benefit to borrowers. We take great pride in being a resource for borrowers who can call upon our experience when needed to help them navigate the many issues that can arise in the development process. So, I tell borrowers to call anytime when help is needed and many of our borrowers do call upon us for help when needed. How do we help our borrowers on regular basis? Reviewing floorplans. We regularly are asked to review floorplans and provide feedback to borrowers, which we gladly do. We use our experience to help identify layout issues in the planning stage to help save our borrowers time and money, while ensuring a better final product they can put on the market. Framing walk throughs. We walk properties after framing with our borrowers when they ask for our opinion of how the space functions whether we have a loan on the property or not. We recently did this with a borrower of ours on a property that we weren’t funding and moved a bathroom and made other layout changes that vastly improved the space. Consultant referrals. After many years as a developer and lender in Washington, we have used numerous good consultants over the years like engineers, architects, lawyers, interior designers, etc. and are always happy to connect our borrowers with them. For example, one of our borrowers recently needed a surveyor to finish the condo plat process, as his surveyor was inexperienced at that process, and we referred him to the surveyor we use who took care of the job. Conventional Lender Referrals/Analysis of Terms. We have relationships with several local banks and are happy to connect our borrowers with banks as needed so that they can find the right bank to meet their needs. We also are asked by our borrowers to review terms from conventional banks and provide our thoughts based on our market knowledge, which we gladly do. Strategy sessions for projects. Borrowers often ask our opinion about how they should develop a property, including unit mix and how to proceed through various approval processes. We recently sat with a borrower as he worked through the BZA process to analyze whether he should remove his BZA application due to opposition and proceed with a “by right” project. The math said to proceed with a by right project, so he changed course and will be better off for it. Help with finish selection. Borrowers often ask our opinion on tile and countertop stone selections, paint colors and cabinet styles, which we gladly provide. We develop so many projects and lend on so many others that we know what buyers want in particular markets often better than our borrowers do. Construction Professional Referrals. We are always happy to connect our borrowers with a plumber, electrician, sprinkler installer or other construction professional as needed. We routinely do this for our borrowers, which gives them access to subcontractors who we have used for many years whom we know are reliable people. As you can see, we take great pride in using our experience developing and lending in the City to help our borrowers. For borrowers who want and need help with their projects, whether it’s because they are relatively new to development or because they are developing a more complex project than usual, our knowledge can be a tremendously valuable resource to help their projects be as successful as possible. Ultimately, picking the right hard money lender can be incredibly important in ensuring the success of your project, so please call us today to start the process of working together on your next project. #banks #hardmoney #borrowers #advice

All of our best borrowers, have one thing in common, they have tremendous work ethics. They work relentlessly each day to accomplish their mission. A little story from years ago illustrates this point well…. Several years ago, I showed up at a property at 7AM and when I arrived, I saw my borrower standing in the front yard hand watering the grass. The sun was still rising and I asked him how long he had been there. He responded by saying, “I wake up at 430AM every morning with my eyes wide open and can’t wait to get into the City to start working. I love it here, there is no place like the US, where someone who grew up as poor as me can work hard and make a great life for himself. I am excited to start working every day Brian and I love building these houses.” At that moment, I know he had “it” and after funding over 40 deals to him, I was right. Day after day, year after year, I would show up on job sites and see my borrower driving a back hoe because one of the workers didn’t show up or carrying something into a building to help move things along. As his business grew and he went from 10 units a year to 20 and then to 60 and then to 80, it was always the same. Working hard to keep the projects moving, always bouncing from one job to the next and doing whatever needed to be done to execute a great project. Over the years, this borrower has achieved many great things and he deserves every ounce of his success, because he has worked relentlessly to achieve his goals. We have helped along the way, but it’s his story, we have just been there as a proud guide helping where we were needed. Sound like you? If you work hard and need a little help in your journey, please reach out to us. Yes, we provide real estate loans, but most of all, we love helping borrowers by providing the guidance they need to be successful. #borrowers #bestpractices #workethic #stories #gettingstarted