Seth: Hey folks, how's it going? Seth Williams here. You're listening to the REtipster podcast. Today, I'm talking with my friend, Chris Duff from Serious Land Capital.

So I first met Chris at the Land Unconference Inner Circle this past fall. He's been a great guy to know in this business, extremely knowledgeable and very well connected with other folks throughout the land business. Today, I wanted to sit down and really get to know how his business works.

So Chris and and his partners are land funders. But it wasn't always that way. We're going to hear about how he discovered the land business and what his experience was like as a land operator and how and why he decided to pivot into the funding space.

And in that funding space, there's all kinds of things we're going to talk about, like the types of projects he works on, the different pros and cons of being a funder, the unique challenges of this kind of business, and where he thinks the future of this niche, the land space, is headed.

So, Chris, welcome to the show. How are you doing?

Chris: Doing well, Seth. So lucky and honored to be here. I've been listening to your podcast and following your teachings really since my partners and I got into the space.

So, glad to be here and be able to share some of the knowledge that my partners and I have gained accordingly with your audience and help keep this industry moving forward.

Seth: So glad to have you following along over the years and glad to talk to you in this format too. So maybe you just start off with your story. So what were you doing before you discovered the land business? And how did you get into land? And what led you to this funding space that you're in now?

Chris: Yeah, definitely.

Seth: So it's kind of three questions in one there. Sorry about that.

Chris: Fortunately, it's one I've been able to answer before here. And when everybody, anybody who might be considering entrepreneurship and so forth, asking, hey, what's the history and everything.

And yes, some folks have a really smooth pathway. They just find their niche right away and off to the races. I'd say that's probably the minority of folks that I know that have tried to pursue their own businesses and so forth.

And mine was definitely the opposite. I'm a physician by training, a medical doctor. That type of pathway didn't really fit with me from dealing with the hierarchies and not controlling your own schedule and so forth and dealing with unruly patients and everything.

And so I tried coming out of medical school to start a med device company with another friend and colleague at that time. That crashed and burned kind of spectacularly. And then I was left at a reckoning, okay, coming out with a medical degree here, this business didn't work out, what other skills can I build up?

So I started learning more in the internet marketing space, eventually joined a company that was doing crowdfunding marketing agency out in San Diego for Kickstarter and Indiegogo campaigns. So I was working for them as a while, polishing up some of my marketing skills and also tried to start a couple other businesses with other friends on the side there, including one where I was attempting to sell backyard chicken coops.

So still to this day, my friends will still joke, hey, you traded away a path along having a medical degree to go sell backyard chicken coops. So it was definitely a turn from the original direction that I was headed. And that one ended up not having quite the right market fit there.

So eventually, as I kept working at that marketing agency, then got poached away to a healthcare venture capital fund out in New York that one of my friends was a co-founder at.

And you'll hear kind of a common refrain that most of the opportunities I've found, I've tried to work with closer friends of mine. That's always been a passion and goal from even high school days. And you'll see how that lends into the land business.

But yeah, I worked in VC for a while, gained a lot more experience there, both on the marketing side as well as how to underwrite some of these larger, more complex biotech, med device, health tech deals.

And then heading into 2019, after doing that for a few years, one of my other closest friends who had been working in Wall Street for a time, was planning on leaving that industry. We're close high school friends and had always intended to work together. The timing was right. So I decided to leave VC then as he was leaving his position.

And so we started exploring a whole bunch of different companies. We had a big spreadsheet just trying to outline what are the best opportunities to go from a monetary upside perspective to room for growth in the market, how much freedom would it afford us.

And so we looked at all kinds of things from like dog walking business, pet insurance. We looked at multifamily investments as a limited partner, for instance. My friends and I had been in crypto for a long time, close to 10 years or so at this current period in time.

And so we looked at, could we do Bitcoin mining, guys? We'd moved down to Texas and doing like flare gas operations. So a whole grab bag of different opportunities that we looked at, but ultimately settled on land in late 2019 as we were introduced to this individual that was running about a million-dollar business in Florida. Mostly off tax auctions, back when you could actually find margin on tax auctions.

I know it's almost impossible nowadays that the markets are so efficient, but he was making a good living there. So we started investing in him, picking up some skills. Ultimately, we decided to build our own business within the land space, not focusing on tax auctions.

So this is where RETipster came in and getting out the direct mail and getting a couple buy for $1,000, sell for $5,000 deals under our belt and realizing, hey, there's really something there. And so we started pursuing this business. And I should mention that this was with a partner from Wall Street, as well as another high school friend.

So we three are kind of the core partners here. Those two had run a single-family residence rental business prior, so already had some real estate experience. I came in as more of the operator here. And so we just started developing kind of the whole standard land flipping business.

Fortunately, we came in during late 2019 through 2020, 2021. Those type of markets might not never come again, where it was very easy to buy, very easy to sell, you get a lot of mistakes out of the way. Hindsight's always 20/20, probably could have earned a lot more money with the experience we have now.

But, you know, at the same time, it was great downside protection, because we got out a lot of rookie mistakes compared to today's market where it's far less forgiving, and you have to be a lot more careful with your your investments.

So, you know, we did that for a few years, but ultimately, as this industry has continued to grow and you get a lot more capable individuals who pursue deeper and deeper niches and more specific marketing techniques, I think, like the Callans and the Ajays and so forth.

And, you know, my partners and I were kind of looking at ourselves like, this is not really our primary benefit that we can bring to the industry. Like we're not the the best marketers out there. We're not the best at talking to sellers. But what we do know is we know how to structure capital.

Fortunately, we have a fair amount of capital to work with to put into deals. So this was at the time when a lot of the coaches in the space were advocating for people to use OPM, other people's money, try to scale up your business by going after bigger deals, even if you have to share some profits with funders.

And so ultimately, just about a a year ago, a little over that, we decided to completely stop marketing out on our own and just start advertising ourselves as funders. And it was much better kind of service market fit. And we've grown tremendously since then as we've settled into this.

Seth: Yeah, that's really interesting to hear about your journey, man. Sounds like after the whole like medical device thing, it's almost like you were trying to do anything but become a medical doctor. I mean, you listed off a lot of different things.

It's actually funny, though. I hear from time to time, from active medical doctors and surgeons and stuff like that who are trying to get into the land business. Just kind of goes to show, being a doctor with all the work it takes, all the money and time and all this stuff, it's kind of portrayed as like this glamorous, like this is the epitome of existence. Like this is what everybody wants, but like, “not really.” It has plenty of drawbacks and hidden costs and not hidden costs that go along with that, too.

So it's interesting to see how that works.

Chris: Yeah, absolutely. And even my friends and colleagues still in the medical space, you know, some who really, really love medicine, just gung-ho, do it in their spare time and everything.

I mean, most of them are pretty burnt out working, you know, even less than 10 years out of school here. So I mean, that's a whole other discussion podcast we could have.

I know there's a lot of other folks discussing that and the issues of the healthcare system and paperwork and yeah, the burnout and so forth. But you got to take the pros and cons of different paths in life.

But I knew this one would work out better for me. And even with the ups and downs, because during that journey, there were plenty of times where things were going better. And then you're not so good. Like we had a really rough 2022 and nearly didn't make it out of that. Had a buckle down and kind of consider, hey, like, is this even a viable business for us anymore?

And ultimately, sometimes you just need to stick with it long enough, stay in the market and be able to pivot accordingly. And once we found out that, hey, our niche is really becoming a funder in the space, that's when we were able to start accelerating again and build up our revenue and profits.

It's also interesting when the moment came, when you realize like this land flipping thing, like this isn't for us, like we're going to let go of this dream to pursue a different dream.

Seth: So I think that's something a lot of people understandably have a really hard time with is knowing, when do you call it quits? At what point do you just say, you know what? I tried it. I don't get it. It's not working for me. Or maybe it used to work for me, but it's not working anymore.

How do you know when to pull the plug? Because it's kind of like the opposite of this glamorous thing that everybody likes to talk about. Is it like, I succeeded and I hit this home run. We're talking about the opposite of that. Like I'm hitting a low point. I'm at the end of my rope. I can't cut it.

I feel like it's not talked about enough. It's like, how do you know when to abandon an idea and just go in a different direction? It sounds like, I don't know if it's easy or not, but you guys had a different direction you could pivot in somewhat easily because of your background with underwriting and venture capital and all this stuff. Like you kind kind of got that world. And also the market was sort of headed in that direction anyway.

Was it difficult for you to say, well, you know, we're not going to do land flipping anymore. We're going to totally hit the reset button and do this thing instead. Like, was that a long, difficult process to get there? Or was it a pretty natural, like you figured it out pretty quick because you just knew what else you could do and be useful to the market?

Chris: Yeah. Great question here, Seth. Fortunately, this particular pivot was more of the latter where it was more of kind of a natural growth within an industry that we had already developed. A few years’ worth of experience and had already reached success and previously funded internally using friends and family capital and so forth. And then have already underwritten hundreds of deals at that point. So it was a little easier for us to pivot there.

But yeah, your question about when to potentially eventually quit or move in a different direction? I mean, that's kind of the age-old and golden question here.

I know Seth Godin's written a book about it called The Dip, for instance. I read that in the past during other transitions in my entrepreneurial journey.

The only thing that I really try to keep in mind, and again, I've failed at plenty of things, probably will fail at many others over the course of my career. And when you look at the stats, don't feel too bad that about it when you look at the rates of business success in the U.S., because I think the stats now for like finding a business that at least succeeds for at least a year, you have to on average start at least seven businesses.

So like, I think I'm on like number seven or eight. So I'm right in the middle of the pack there. So just just keep that in mind.

But to me, the kind of analogy to keep in mind here is that when you're starting the business, even a lot of the times, I wouldn't even worry about setting up your LLC or the branding or so forth. Just try to find somebody who's willing to buy your product or your service.

Don't worry about all the legalese, anything like that. Just see if you can get some product market fit first off, and then fill in all those details later.

And what it should feel like when you're on the right pathway is like if you're driving down a street and you're just hitting green lights, I guess just, oh, I'm kind of just getting on a roll here. And there's not really any blockers that I'm feeling that it's kind of an instinctual feel that you'll develop over time.

But that's what I really look for in any type of venture that I'm going after. And again, speaking from experience, where I was just routinely hitting yellow, red lights, dead-end walls, all of that. Whereas, you know, when we were able to pivot to the funding model, that again, was already an industry that we had developed a bit more experience, but it was just pivoting into something that was, frankly, more exciting for us. Removing parts of the business that, like I mentioned, we weren't that good at that, was a big kind of depressor for energy. And yeah, I really don't like talking to sellers or doing the marketing and so forth.

So an energizing feeling to go into something that I knew we were more suited to and luckily started hitting those green lights almost immediately within the first couple of weeks. So affection, kind of luck there as well as seizing the opportunity.

Seth: Yeah. I like that analogy, hitting the green lights. It's well-put. Sometimes, given what you said about it takes, what is it? Six or seven or eight tries before you find one that works? It makes me wonder, I don't know if that's the answer, but it's like, if I know I have to do all these tries and a bunch of them aren't going to work. How do you do this in such a way that each failure isn't catastrophic, ike it doesn't just completely wipe you out financially?

Do you set aside, I'm going to put 10 grand into this business and I'm just setting aside that money to burn. If I don't make money by the time I'm out of that, then I'm done.

Because you just kind of think through it that methodically. I'm sure it depends a lot on the business itself and your financial position and all this. But when I think about how I go after a business, like if I believe in it, I'm going to kind of wipe myself out financially until I decide that it's not going to work. But I wonder how I could protect myself and safeguard myself so I don't do that, you know?

Chris: Yeah, different risk tolerances, different personal situations. You know, some folks, they might've already accumulated a pile of money from their W-2 that they have set aside to start a business. Others are earlier in their career and don't have that opportunity.

So, you might have to start like a lower cost business, like consulting or freelancing, for instance, where there's almost no startup costs.

And yeah, I'd count land as one of those. I've seen the influx of people joining this industry over the past few years, especially since 2020. I mean, you only need a couple thousand dollars to start some cold calls and some mailers. You have to take some real focus and staying power to last.

But fortunately, it's a pretty low-cost entry business, especially if you utilize funding partners and so forth for going after bigger deals and able to keep costs lower accordingly and not trying to hit massive growth trajectories. So that's how I would kind of think about it from a strategic side.

But yeah, I've known some folks who wanted to start a new shoe company and order $250,000 worth of inventory before they'd even sold like a couple pairs. So, that to me is like, man, you're really setting yourself up for disaster without having found that fit. So to me, it's all about doing low-cost experiments first.

Is somebody willing to open up their wallet to pay you for something? That is the hardest thing to do. It's the nature of business, right? But as soon as you find them, start gradually increasing the amount of expenses into growing accordingly.

And yeah, whether that is bootstrapped, slower build, or do you need investment from outside partners? How fast are you trying to grow? I mean, those are whole other questions to look in. Largely dependent on certain industries as well. It's not like you can start a biotech company totally bootstrapped.

So you just have to kind of pick a pathway that might be the best fit for you.

Chris: You mentioned there's three people total on your team. Is it yourself, Vivek, and Omar? Do I have that right?

Chris: Everett is the other core partner. So Omar is another closer friend of ours, but he has had a background working at Blackstone.

Also, yeah, more institutional background, he’s done a lot of real estate underwriting, especially in the commercial space. And so he serves as a consultant for us to assist with our full spreadsheet due diligence pathway for late-stage funding opportunities. So we were able to kind of triangulate across multiple different input and underwriting sources for our deals.

Seth: Okay. So we've got Chris, we've got Vivek, we've got Everett, we've got Omar.

Chris: That's right. That's the core equity partners.

Seth: Okay. And do you each own like 25% or something? How is that broken up?

Chris: Yeah. Sorry for that. So Omar is not an equity partner in the business. He's just serving as a consultant. So we'll just pay him on a per-deal basis based on the diligence he's providing.

But in terms of the actual DBA, Serious Land Capital, Seeking Land is our LLC. It's just three equity partners split evenly. So all the money going into the business equally split from an inbound perspective.

But because we might each do different work, I'm more of the front-facing day-to-day operator. So I have more upside from a profit perspective in the business, but that's able to change over time as we continue to grow and responsibilities increase and decrease.

Seth: So Chris, Vivek, Everett, you're all 33.3% owners or partners in this. You all put in equal amount of money when a capital infusion is needed. What are each of your roles? Like what specifically does Chris do? What specifically does Vivek do and what does Everett do?

And why is it set up that way? Like, how did you decide Vivek is going to sit in this seat and do these things? Like, is he good at certain stuff or have some history in that part of the business?

Chris: Yeah, certainly. So this is, again, another thing that's changed over time since we started the business, especially transitioned into this funding model.

But, you know, like I alluded to, me as kind of the primary day-to-day operator. So, definitely more of the the face of the business, like a lot of the inbound people looking to chat about deals they want to bring or get to understand our funding model and so forth.

I'll be the primary person that that's going to speak to them for the various in-person events. I'm usually the designated person to go, though, as we've continued to grow, like for instance, you met Vivek a few weeks ago. And so we're trying to increase our presence there accordingly as our outfit grows.

Underwriting the deals, that's my primary role within the company. Fielding offers with realtors, ultimately deciding on buy price and so forth, that largely falls to me as well, as well as working with the clients, bringing us deals, developing marketing strategies for our firm.

So it's a mix of kind of a CEO, COO type role within the company, or even a chief investment officer. Yeah, more of that kind of CIO role. I've never really cared about what those labels are. But you know, some people can kind of orient what they might mean within a similar type of company. So that's largely where where I sit.

And then I have a Philippine virtual assistant, who's our only core VA who works with us. And then we just have hundreds of various contractors that we're dealing with, other consultants, realtors, and so forth that we consider part of our business, but you know, not directly part of of our payroll.

And then, yeah, still on that partnership level. So Vivek, he kind of has the best connections within the capital industry. I mean, he had been on Wall Street and lived on the East Coast for over 10 years. He's still there, currently planning to move back to Texas here shortly.

But a lot of the mentors and folks that he knows, really large bank roles. And so, you know, as we continue to grow, he's able to keep those connections warm and have pretty ready influx for capital as needed for us.

And that's definitely a luxury compared to a lot of other operators or fund managers to be able to reach the folks who are worth in the single high seven figures at minimum to the eight to nine figures and so forth. Oftentimes, they have a lot of gates in place to be able to reach them, let alone develop a relationship where they're willing to inject capital into your business. Especially in a more difficult macro environment, high interest rates and so forth, where capital markets are tighter. That's a highly valuable skill to be able to pull capital as needed.

So he helps out a lot from that perspective. And even if it's not as readily utilized as we are currently growing, it becomes more and more advantageous as we grow larger and need larger check sizes in order to keep our company rolling.

Plus, he's just kind of accounting and math genius. You know, he was like valedictorian at our high school and everything. So I'm not really a math guy, so I can send all these other, you know, spreadsheet questions and so forth to Vivek and Everett and be able to not have to feel that on my own. So, yeah, it helps out a lot from the numbers perspective and capital structuring.

And then Everett is… he didn't go to law school, but he basically serves as an in-house attorney. He works at a hedge fund in New York currently, but handles a lot of underwriting and the legalese for our deals.

So we were able to in-house our LLC agreements or a number of our funding legal documents and so forth, things that might cost tens of thousands of dollars from hiring another attorney. We were able to do all this in-house so that helps a lot.

Plus, he just manages our books extremely well. We operate across the country, so tax burden should theoretically be pretty high. But because our books are so tight and we're able to display the net asset value of our company or the exact multiple uninvested capital across all these various deals, every single cash influx and efflux out of the business, it keeps our tax burden very low.

And we're able to present that to potential capital partners into our business since we have such kind of a tight understanding of our financials, which is very difficult to do. I couldn't do it on my own.

So again, this is kind of demonstrating how we're able to differentiate roles within the business.

And Everett is also, we have kind of the Goldilocks mix within our company. Like Everett is more the Papa Bear saying no to almost everything and a harsher underwriter for deals. Vivek's more of the Mama Bear kind of softie within the business. Hey, let's go for it. I'm kind of in between on both sides there.

So it gives us a good balance across risk tolerance between partners, which allows us to be more conservative on average across things, but not fully overlooking opportunities for growth as well. So that served us well too. Too.

Seth: And the way you found these people, are you just past friends with them? Is that kind of how you knew them? Like, is it kind of a luck thing? Cause not, I mean, I've got friends too, but they're not necessarily like business geniuses. So how did that come together?

Chris: Again, this is just super lucky for being high school friends. Vivek and I met our senior year in high school and really just hit it off. We've been best friends ever since. You know, we're in our mid-thirties, so it’s coming up into like 20 years or so of friendship.

Everett was one year below us, but you know, he had always been friends since high school as well. And I just think, some of the people you hang out with, you start figuring, hey, what's our real interest? Chris, what are we talking about outside of school or hanging out?

And a lot of times it would focus on general macro or microeconomic items going on in the news or like, hey, we're considering, look at this new business model, this new tech firm that came out. How are they growing accordingly?

So, you know, a lot of our conversations were heading that direction anyway, or you always think, how could we monetize this idea accordingly? And so always more business-oriented.

But that's one thing. Obviously, the next step of actually building a business together is a whole other animal. And it's definitely not for the weak of heart. You got to have a strong stomach for it. We've had some very difficult discussions, to put it lightly.

Again, that could be a whole other podcast in and of itself about how to work with healthy partnerships and also being friends, too, and how to mix that. Not take things personally when things get difficult and so forth. I've made probably every mistake in the book so far. Deep, deep scars from mistakes having been made. But fortunately, we've been strong enough to make it through all the hurdles so far.

But yeah, I wouldn't have it any other way. Personally, I think when you can succeed with friends in a business, there's almost no greater feeling. And being able to provide other opportunities for other friends and family and help grow their wealth too, it's just so exciting for us.

Seth: Yeah, I know. I haven't had a ton of experiences like working in a business context with friends, but I have had some and you're right. It's inevitably those hard conversations come up. And I think if you've got maturity on both sides, like you can get through just about anything.

And it's actually kind of feel good to get through that and realize like we had this hard conversation. We both came out of this better. It's kind of like building a strong marriage, you know, like it's inevitable that you're going to have these moments of tension and conflict, for lack of a better word, but it's not all bad.

And I think everybody kind of grows in maturity when you can get through that stuff. So yeah, that's cool, man.

Chris: Absolutely. Yeah. Like you mentioned the marriage part. I mean, I think we had talked about before picking a partner for a spouse is probably the most important decision in your life, at least I would say so.

So picking business partners would be a close second there. I mean, arguably, even more than my wife, I'm more intertwined financially with Vivek and Everett, just such deep roots and tendrils that, yeah, pulling that apart would be a multi-year journey at the very least.

So before you get deep in with somebody, you really have to understand what's at stake.

Seth: So it sounds like when you guys get a new deal, all three of you look at it with your underwriting glasses on. Is that correct? And if so, how crucial is that to have all three of you looking at it? Like, say if it was just you, for example, how much harder do you think that would be? Or like, do you think you would have made worse decisions if it was just you looking at stuff?

Chris: Yeah. So that's been another part that's evolved within our business because primarily it is just me doing the initial underwriting. So I was trying to have my VA put this together in time, but the data was a bit more complex than I thought, but I was trying to figure out, okay, how many deals deals? Am I actually saying no to over a period of time? Has that grown or decreased over the last year?

And off a rough estimate, and I think I'd mentioned this to you the other time, I'm on average probably saying no to 90% to 95% of deals coming our way. Most of that's related to pricing or just it's not a quality property. So that initial cut is pretty much all me at that point.

And then if it actually makes it to that next stage where we're going to do deeper diligence, set up a whole spreadsheet, start the realtor conversations. Figure out the utility situation and any other kind of key diligence, which I'm sure we'll get into. That type of stuff would only happen after that first cut.

And generally that is where I'm going to have my VA set up the initial diligence spreadsheet. Then I'm actually going to have our consultant and friend Omar fill in that whole spreadsheet. And then, so he's going to assign a value of what he thinks it's worth. I'm going to review that and then ultimately decide what I think it's worth as well. And usually by that point, we'll also have a local realtor's opinion.

So it's kind of a triangulated process from an underwriting pricing perspective.

And we also have historical analysis of where all of our properties have sold in relation to what we expected them to be, especially according to what the realtor mentioned. Because oftentimes, hey, it's just part of the business. like the realtors are more optimistic for what they anticipate selling a property as, but most of the time we're selling at a bit of a discount from what they mentioned to us.

So we have that all built into our spreadsheets based on all the historical analysis of our deals, whatever a realtor tells us, do we have to take off 7.5%, 8% based on what we've sold it before. So we have that built in with Omar's valuation, with my valuation.

And so then all of that is present on a final dashboard, where me, Vivek, and Everett will then have an investment committee, usually every Friday, where we go over, where I present, hey, this deal is basically all set for funding. Here's all the diligence, according to what we've gathered so far. Here are the risks here. Are they worth taking?

And ultimately, at that step is where we'll decide as a team, are we going to go ahead with this purchase or not?

So multiple fail-safes built in and multiple different folks providing opinions there. And this has really been refined over time because I've made mistakes in the past, Omar's made mistakes in the past. Relying on realtors too much has been an issue. Or if things get too busy and I'm pushing deals ahead without consulting Everett and Vivek on it, we've just missed something.

Those haven't been the best deals either. So that this has been a continuing evolving process after making many mistakes along the way.

Seth: So where do your deals come from? Like, do people hear about you through your daily due diligence thing you do on Facebook or you have a website or are you advertising somewhere? How does that work?

Chris: That's another thing that's changed over time. So when we first decided to be funders, we weren't known within the industry there. So that required a lot more on the ground work to get our brand out there.

Seth: What did that look like? What is this on the ground work you had to do? Like, did you reach out to people specifically?

Chris: Exactly, yeah. It was just almost grassroots marketing at its core there. I actually had my VA at the time go through every land community. Most of them are on Facebook, some are on other platforms, Discord and school, for instance.

And so I would have him go on and then look, just try to search for certain keywords, like funding or land funder, capital needed for a deal, for instance. And I'd search the entire history of that Facebook group. And then we would log all of that into a Google Sheet, what they had asked for.

And it didn't matter to me when they had asked for funding, even if they had, a lot of these Facebook groups, again, the industry's grown by like 2019, 2020. So there wasn't a lot prior to that. But even if folks had been asking for funding three years ago at the time, like back in 2020, I would still reach out and say, “Hey, not sure if you're still in the industry. Obviously, I'm super late here, but I just wanted to let you know, my company's providing funding.”

So we were able to get leads that way. There was no barrier in so far as reaching out. It was just a lot of focus and how do we get our name out there and direct communication, direct messaging.

There's a lot of other folks, frankly, I think are a little bit more lazy. If folks say, hey, I'm looking for funding on a deal, and then they'll just say, okay, DM me as a comment. That's not really building a connection with somebody. So I put in the extra effort to send over our whole website, had the whole FAQ built out. Here's our criteria, everything like that.

So that helped us stand out, I think, as a bit more of a serious operator within the funding space.

So that's how we initially started. And then, you know, there were a couple areas, Fund My Land, which I know is a pretty basic website we’ll get into. What we're trying to build is one that is a bit easier to use from a user experience perspective. But we got on there, so we were able to get some leads from people reaching out accordingly there.

And then, yeah, there was just some kind of word of mouth over time as we started to work with some folks.

But it was really a lot of that initial hustle of just anytime somebody posted something about funding, we were immediately on top of it, trying to follow up and seeing if we could work together.

Seth: Yeah, I will say, I admire that approach, not just posting some, Hey, looking for a funder. Because can't stand that when people do that. And I remove them every time I see it because it's basically spam.

But that whole idea of actually looking for people who are talking about relevant stuff and reaching out to them personally, showing that you're actually putting thought into their situation, these are totally different things. But back when I was starting my self-storage construction project, I had posted a couple of things in some self-storage communities, just kind of asking questions about getting started.

And there was a consultant that reached out to me very similar to the way that sounds like you did. And he just said, “Hey, Seth, I noticed you're starting this construction project. Do you need help with getting things started? Need a second set of eyes or anything?”

I ended up paying them like $25,000 in consulting starting up just because they took the time to reach out.

So I would definitely recommend that whatever you're looking for, whether you need funding or you're offering funding or something completely different, don't just do these mindless posts all over the place.

I know it's tempting because it feels like free advertising, but it's extremely annoying and not that helpful to the community when you're not really getting to the point and not actually showing that you understand somebody's situation and care about it.

So, and also say regarding that funding thing you're putting together. So I'll just plug it for you. It's landfunding.partners and it's pretty well put together. If you go and check it out, I'm actually linking to it as one of our five current directories. Go to retipster.com/directory, you'll find some directories that I've put together to find accountants and realtors and attorneys and CPAs and drone pilots and all this stuff.

And one of them I was going to put together was land funders. But then I heard about what Chris was doing. It's like, man, you're doing this way better than I can or want to do. So I'm just linking directly to his. So go check out landfunding.partners and you can kind of get a quick look at, I don't know if it's like literally every land funder in existence, but it's pretty much all the notable, more well-known ones.

And it's just a well put together site if you need help with funding.

Chris: Very grateful to you for that, Seth. And yeah, we tried to put together every known land funder.

You know, it's hard to find all of them because some of them are just under wraps where they might only have like a Gmail associated or hey, like DM me. And, you know, they somehow have capital put together for deals.

But, you know, even since you had linked that on your site, some other funders who weren't already on had already reached out to be added. So, you know, your REtipster reach is already helping to fill out the directory even more than it had already been put together.

And yeah, so just to remark on that briefly, too, as the industry has grown and a lot more funders have entered the space, you know, that there wasn't, in our opinion, kind of a well put together directory for funders and being able to kind of sort,, I'm looking for equity funder like

Serious Land Capital, or I'm looking for hard money lending, debt funding. I’m a more experienced land operator and can take more personal risk that way. Or, hey, I'm just looking for transactional funding.

So this tool helps you sort out those types of funders that are specific to your needs much easier. And you're able to have a comparison table so you can look over kind of all the most basic questions everybody asks land funders: what's your deal requirements and purchase purchase price range, and so forth.

So you can just compare multiple funders at once, cross all of those different parameters, or look at all of them on a certain page if you just want to scroll through every single one, or there's just a page linking all of the contact info for the various funders.

Because yeah, we know some folks just like to grab every email and reach out. It's not the best way to start a relationship, but I can say that there have been some folks that we've worked with that just did kind of that spray-and-pray send out, as opposed to following up with some of those folks. So that's the type of approach that you want to take that's available for you on the site as well. So just try to hit all of those angles.

But yeah, just developing it as a tool for the community where we're not earning any money on it or anything. Obviously, our firm is pretty well featured on that site. But we feel like from a objective perspective, we can advocate for ourselves across any of those parameters. And it only helps us build a better business by knowing who the other funders are out there and what they're offering as well.

So yeah, appreciate that plug there.

Seth: So let's talk more about these deals that you guys fund. So when we're looking at the value of the property itself, or maybe the acquisition price or the sale price, whatever that is, help me figure out how big is too big for you guys and how small is too small. Like what is the size range of deals you guys fund?

Chris: Yeah. So even that has changed a bit more since we started. When we started, we were pretty much open to anything because it was reputational play. Even if we can do something smaller, we're only going to earn a $1,000, $2,000 bucks on it. But we could do larger deals down the line there and develop more of a track record and reputation within the industry.

But after we had quickly done that, we started ratcheting up the purchase price that we're going after. So we prefer going after deals that are between $50,000 and $500,000 in equity per deal. We'll not do anything below $20,000 at this point.

Seth: When you say an equity per deal, are you saying that is the purchase price or that's the equity that you're getting as a result of the purchase, like the spread between your purchase and the value? What do you mean by equity?

Chris: Yeah, so that would be the total cash injected into the deal at origination. So that allows us to go after larger deals. You know, like we could go after a $2 million subdivide if the seller is willing to hold debt on the deal. But if we're able to get it for like a 20% down payment, and then, you know, there's various other engineering, clearing costs, whatever that equal out or, you know, it doesn't have to be exactly 500,000, but around there, that'll make the deal far more attractive to us.

Because cutting a $2 million check, we could put that together, but the amount of risk that we're putting into one deal just doesn't make sense for the current size of our business. We try to diversify over a larger number of assets that are returning capital at different times to help keep our business moving. So that's how we're adjusting for risk currently.

And even within that $500,000-mark, things that are north of 275,000 or 300,000, we'll oftentimes look to syndicate that deal out with other internal capital partners. So we'll still be managing the deal as Serious Land Capital, but we might only inject like 100,000 ourselves and then just raise the remainder of that capital from other individuals or businesses and then split the profits on the back end. So that also gives us flexibility that doesn't come up as often as the lower range.

You know, there's a lot of folks who might bring us lower value deals, we prefer not doing anything below 20,000. The spreads are just too low there to motivate realtors to sell lower value properties, even if you're paying them a higher commission rate. It’s just not that much and your closing costs are going to eat into the relative exit value of the property as well.

So we just prefer not working with those lower value deals as much and save more of our available equity for higher value purchases, 50,000 plus.

Seth: So going back to the valuations that you were talking about earlier, when you or Everett or whoever looks at these things and figures out what do I think this thing is worth? Like, what is it likely to sell for? What are you looking at to get these valuations? Like, tell me all the sources, which ones are most important?

And then how often do you end up being wrong about those valuations for better or worse? Like, how accurate is it in the end?

Chris: Yeah, judgment is always the hardest thing to figure out as an investor, right?

I mean, it's something Naval Ravikant talks about often, and it can be such a long-term metric to check in on too, because you could have just gotten really lucky for six months to a year. And frankly, that was us. Anybody who was operating the land space in 2020, 2021, you might have thought you're like the best investor in the world.

And then, you know, the market turns into more of a buyer's market. It wasn't even really a buyer's market or a seller's market. It was hard to buy, hard to sell. And all of a sudden you're like, wow, I'm not nearly as good as I was, both from a valuation side and a selling side.

And you can kind of get punched in the face really quickly there. And all of a sudden, your judgment is not as good as you thought it was.

So I'm constantly thinking about that and, you know, trying to stay focused on the base principles. And, you know, it can be tough sometimes because now that I’ve become more of an authority in the space, you can start attributing a little bit more ego associated with it: “Hey, I've looked at a lot of these deals and kind of skip over some of these steps. And I know where this is going.” But that's a very easy way to trip yourself up.

I've made that mistake still to this day by not getting back to the raw fundamentals of underwriting, which is just critical, especially because this is not an easy market to operate in currently. And again, there's a lot more competition in the space, so it requires constant focus.

So I always have that warning going on internally and try to mention that to as many folks as possible. Number one rule in business, don't lose money. That's the name of the game here. So you just have to be conservative.

But when it comes into the actual business, strategy and tactics here. So there are multiple touch points whenever a deal is coming our way. So let's just, for instance, say somebody, I should mention, we get a large range of experience levels from investors sending us deals. So some might have only been operating for a couple of weeks. They send us, hey, here's an APN, the county, purchase price, anticipated closing date.

That's enough for us to get started. We'll advertise. We want to be simple to work with. We're not going to require written OPVs, opinions of value, or CMAs from realtors just to get started. Frankly, we think that's a little complex and not that necessary in our experience.

But let's just say I get that initial deal in with just the base amount of info. What I want to do first is just check the basic principles of that deal.

So I'm just going to pull up my Land ID, which every land investor should have at this point. I know when it was MapRight, it was more expensive, like $100 a month or more than that. Now I think the most basic Land ID is like less than $10 a month.

So really, everybody should have that since it brings in so many different key parameters for underwriting land deals, especially all the terrain maps and so forth.

So I'm always going to want to be checking that before anything else. So I might do an initial scroll out. Okay, how close am I to a larger city? just understanding how rural it is versus not. And that's not necessarily a critical piece for us, but it might give me an understanding of how hot the market might be or what the buyer pool might be, depending on how rural or suburban it might be, or even possibly urban.

But we'll invest in infill, rural, doesn't matter, feel comfortable with all of that. But that's my initial piece of that, like where am I in the country?

Because we invest nationally, right? So it's just, you have to be able to position yourselves and understand, there are different geographic considerations, depending where you're looking at in the country. And then I also might know how close am I to the coast or, you know, the ocean or mountains and so forth.

So then I already know what are some of the next steps I'm going to be looking at in regard to this deal. Do I expect there's likely going to be some flood zone or wetlands impact? And is that going to impact my decision making as much as it was in another part of the country?

So for instance, this property, when I zoom in on it, might be covered in flood zone, but if it's close to a coast and I see there's other improved properties around and maybe it's only in a 500-year floodplain instead of 100-year, there's no floodway with it, no core wetlands impacting it. Then that flood zone doesn't really matter to me.

But if I see it's in an area where there's significant flood zone impact, and I see all the surrounding properties within the flood zone don't have improvements on it, that's going to cue a red flag much quicker for me. And, you know, at that point, I might throw out the property entirely.

This is going to be high risk to build on, for instance, maybe if it's large enough, it can be considered for recreation, you know, hunting and so forth, depending where you are in the country. But even hunting properties, I want to make sure, hey, is there a possible creek area, or is it maybe connected with some state- or national-owned land where wildlife and game can come in that that's going to make it more viable?

So all of these different underwriting principles are going through my mind as I'm taking an initial look at the property just to consider the possible utility there and whether I'm going to kill the deal immediately or not.

So you know, that flood zone wetlands piece is always going to be a core visibility feature that I'm going to have on my Land ID pretty much anywhere I'm at. If it clouds your vision too much, once you already understand it, then you can turn those off.

But as far as my base ones that I have on, I have those on. I have the contour on, so I understand the elevation piece. And then oftentimes I'll have the soil map on initially just to understand, again, is there a higher risk for the property being able to perk if we're expecting septic to be installed, especially in a more rural area? Probably 85% of properties that get sent our way are going to have septic involvement compared to sewer.

So, you know, that's always something we're considering. And a quick rule of thumb on soil maps, having learned from some soil scientists before, almost anything can perk nowadays, but it just depends on what type of system you might be looking to install.

So if you're looking to install a conventional septic system, which might run, five-ish thousand dollars, depending where you are in the country, you want to be aware of clay-based soils or anything on Land ID that might say excess water on it. Sometimes that's not always a deal killer, but if there's a soil map portion that is along a strip of wetlands, for instance, and says excess water, and I can see that not that many people have built within that particular type of soil, then I want to be much more careful about investing in that property.

And if I am going to take it more seriously, going to want to make sure that perc test is done prior to purchasing, because yeah, you can be misled sometimes, you know, hey, there's no real wetlands involvement here, but my soil map is telling me that wetlands impact in terms of a perc test might expand more than what it's showing me on the map.

So that's another piece I'm keeping in mind. But even if you have clay-based soils, excess water, you might still be able to get those aerobic or mound-based septic systems. But that could cost the end buyer closer to $10,000, $30,000, depending where you are in the country. So you want to be baking that into your price.

And then how does that compare to other properties that are currently comps on the market in relation to what your total exit value is going to be? And were they able to get conventional systems or did they already have aerobic or mound based systems built into that anticipated exit price?

So these are all things going in there.

Seth: I actually learned an interesting trick on that from David Hansen, who you introduced me to, in episode 176 of the podcast. He was talking about wetlands and something I'm aware of is that a lot of times those of wetland maps, like just the map itself on a Land ID is not necessarily right. There's just a lot of flaws in that.

However, if you just call a wetlands consultant and have them do a desktop review, so they don't actually have to go there. They can just look at it with a more critical eye and understanding what they do. They can usually get a pretty accurate, 90% accurate look at that to confirm or deny the likelihood of actual wetlands, regardless of what that wetlands map says.

So when I heard him say that, I was like, oh yeah, that totally makes sense.

But in case anybody out there has never thought of that, just keep in mind, you can always just call a consultant and get their quick five-minute review. And I don't know if they charge for that or not, but it can at least give you more confidence on whether this is actually a wetland concern or not.

Chris: Precisely. Yeah. Leverage experts whenever you can.

Seth: Yeah. So I want to shift gears here, talk a little bit more specifically about how you partner with operators.

So question number one is what is the typical profit split between you and the operator? And when I say “operator,” I'm talking about the person who finds the deal, but doesn't have the money and they need the funding. So what is that typical profit split? Does it depend on like their level of experience or it doesn’t matter and it’s just the quality of the deal? What would impact that?

Chris: Yeah, so a mix of all of the above. We built out a lot of custom agreements for various deals here. But, you know, I'll just mention some standard parameters.

Let's just assume it's a vanilla deal across different purchase price ranges. So generally, if we're going to be purchasing below $100,000 purchase price here, net expected market value of the deal, we'll start at a 30-70 split, 70 in favor of you as the land investor.

For instance, and that will be a time-graded approach. So if we're able to close within 60 deals or 60 days, then you'll be able to get that split. And so that period of time starts when our money is wired into the title company up until the time the deal is closed and we receive the wire back.

Seth: Just clarify one thing. When you say you're able to close within 60 days, you're talking about closing on the sale price. So 60 days between you buy and sell, right? Which is a pretty fast turnaround.

Chris: I mean, it's really counting on finding a buyer within the first month. You're just anticipating, usually like a 30-day standard close. So you're really having to move there.

Seth: So if it goes beyond 60 days, then does it change in some way or what does that change to?

Chris: Yeah. So then the profit split will increase in our favor accordingly.

So then beyond 60 days, it'll go up to a 40-60 split still in your favor. That's up to 90 days. And then from 91 to 120 days, it will change from a 45-55 split still in your favor. And then beyond that 120-day four-month mark. That's when it will become a 50-50 just until the deal is sold there.

So that really incentivizes proper target purchase price as well as a conservative fast exit price. And even though we might earn higher profits by letting deals sit longer, it really pays for us to keep our capital moving because the sooner we can get things out, the more deals that we can do.

Plus, it helps our reputation. This is a marketing game as well here. So if somebody makes a claim about us on one of the land communities, hey, you know, Serious Land Capital, they really drag their feet closing deals, they could bring up bigger profits. It could be a death knell for our business. So we're never incentivized to act in that manner.

And, I know a lot of more experienced operators who, in this buyers market, might take on average four to six months to sell anyway. We're, on average, quicker than that. Out of the 25-plus deals that we've funded over the last year, I don't have this in front of me, but I think only two have gone beyond the four-month mark at this point.

So maybe three, as of the last month, a larger deal that we were expecting to take a bit longer to sell anyway. But we are very aggressive with getting properties moving. If I'm not getting a good response or serious interest within two weeks, oftentimes, we're ready to pull the trigger and do price cuts accordingly, oftentimes weekly.

And this is assuming all of our marketing is already set up, drone photos, et cetera, properly advertised across all different platforms. But assuming all that's taken care of, price is really the primary driver. And we'll just keep lowering until we find the market to move it.

Seth: Yeah. So what happens if this deal goes 6, 9, 12, 18, 24, 36, you know, just what if it just keeps going and going and this thing does not sell? Is there a point at which it's like, okay, operator, you're out. We're going to keep all the money and no matter what happens.

Or does it just stay 50-50 forever? Like, is there a consequence in the operator's shoes if something just takes forever to get sold?

Chris: Yeah. So technically, in our base boilerplate funding docs, we'll have a 12-month cutoff to where, if the property sells over this period of time, we're going to retain all the profits. That is really only built-in in the circumstances that the operator and the land investor bringing us the deal is handling the disposition of the property on the sell side.

So the vast majority of the time, I'd say 95%, 99% of the time, we're going to be working with a local realtor anyway. And because our company is holding title on the deal and the one signed the listing agreement, we're usually the direct liaison with the realtor.

So, again, we keep our realtors on a very tight leash. You know, we don't sign a 12-month agreement. We do max of six months. So everything is incentivized for a faster sale. If there was some you know catastrophic event where we just cannot figure out how to get this thing moved or maybe there was something that occurred on the underwriting, like some mineral rights issue or some environmental impact that just somehow slipped past diligence that we're gonna have to deal with to find a way to move this property, then we're totally fine with resetting the JV funding documentation to remove that 12-month.

Because it's not not the operator's fault. They're not the one out there trying to dispo and so forth. They shouldn't be punished for it accordingly.

So again, we haven't even gotten remotely close to that before. And again, we're very open to reworking that accordingly. So that's how we would handle that.

Seth: Yeah. And am I correct in assuming that you hold title to this property as the funder, not the operator?

Chris: That's right. Yeah.

Seth: As I hear you talking about getting these properties sold, it almost sounds like this is up to you to get the property sold. You're doing a lot of the work or working with realtors and that kind of thing.

Is that correct? Or does the operator have some responsibility? Like, it's on them to get this property sold?

Chris: Yeah. So that also can vary depending on the experience level of the operator bringing us the deal. You know, if it's somebody brand new in the industry, hey, they might've found a good deal where there's real upside there.

And because my partners and I, we have a full understanding of the land industry. So we're going to do all the diligence regardless because it's our capital at risk here. So it's always an alignment issue. You know, even if we have somebody very experienced, it's still on us to make sure that all our I's are dotted, T's are crossed because, if the deal goes kaput or we miss something, it's 100% of our capital that's on the line, not the operators there. So we're always going to be double checking that work regardless.

But sometimes we're able to defer some of the responsibilities. If we have a more experienced operator, they might have had a local realtor they've had good success with in the past. That makes our job a lot easier, not having to find one and chat about the deal, have them visit the property and so forth. That can be a bit more time-consuming. Or maybe the operator has already called the city and figured out the zoning, utilities, and so forth. That saves us some internal work as well.

And, occasionally, the operator, if they already have good experience with the realtor, might actually be fielding the conversations and offers coming in on the back end. Usually that defaults to us, but not always.

So we're quite flexible in that regard, where we can adjust to the level of experience that the land investor is bringing to our business. We prefer working with folks who are more experienced; that's less work for us, but we're not necessarily going to turn somebody away just because they don't have all the processes in place.

And we're here to help and grow the industry because our business is totally reliant on operators bringing us deals. So, you know, if folks are struggling in that arena, it collapses our business as well. So that's why we try to provide so much value in terms of helping with underwriting or providing feedback on why different deals didn't work out or, hey, here's how you talk to realtors to get them to respond to you and provide opinions of value and so forth.

That's what we're able to provide as a smart money funder.

Seth: So on the selling end, when we're trying to get this property sold, does the operator have any responsibility whatsoever or is it zero? Like it is 100% on Chris to find the agent and work with them until it gets sold? That's kind of what it sounds like, but maybe I'm misunderstanding it.

Chris: Yeah. Again, because it can range there. So finding the realtor is probably the hardest part to do. So that's great when an operator can bring us a solid local realtor. And we're pretty choosy with them and we'll bias ourselves to working with hyper-local realtors who ideally have sold a nearby comp within the lagging three, maybe six months.

So that's our primary target when it comes to realtors, versus somebody who might have three or four counties that they work with in the area. And we might've worked with them before, but they don't necessarily know the hyper-local area that we're looking at.

So to me, I'd be more focused on finding somebody who's hyper-local rather than somebody I already have a relationship with unless I know they can operate in a larger area.

So finding that realtor is the most critical piece. And we can do that or the operator can do that. And I should just mention an aside here, just because anybody doing bigger deals, you're oftentimes going to be working with local realtors there. I really like to get them on the phone and get a better understanding of how they're thinking about the property, compared to getting written CMAs or OPVs.

Because oftentimes I just don't find those that valuable. Certain infill areas where markets are very efficient. Yes, those numbers can be more reliable. But when you're looking in a lot of rural areas, those type of CMAs are oftentimes not telling me anything that I don't already know. Because by the time I'm chatting with a realtor, I've probably already comped out the property anyway. And so that's not necessarily helping me get a better understanding of whether to pursue this or not.

So I want to talk to somebody who has the on the ground knowledge. What are buyers looking for? Do they need surveys done? Are perk tests necessary? What's the build type of activity there? Is there seasonality in the market? How intelligent is this realtor speaking to me? Are they responding to my texts or my calls more often than not? Or is there a big lag time in between there?

If they're not really responding to me, they're probably not going to be the best from incoming buyers as well there. Or can they tell me much more detailed knowledge? For instance, we were looking at a property in Colorado where a lot of inventory on the market, but there was a lot of differentiation and variance in the type of properties.

And this realtor was able to tell me, hey, your property is actually positioned much better because the way the geography and terrain are oriented, an end buyer on this particular parcel is not going to get like 60 mile per hour gusts coming in in this direction.

So that's the type of info that I need to hear in order to make proper buying decisions that aren't necessarily going to be conveyed over a CMA or, you know, just kind of simple text or email conversations with realtors.

Seth: The reason I'm asking about this stuff in terms of whose responsibility is it to sell is because the way I've seen other funders do this is they put it totally on the operator. Like, “You are the operator. Get it sold. We don't care how, but get the thing sold.” And that's kind of the reason why there is that step down in the split as time goes on.

Like if it takes more than 60 days, now we're at 60-40. It's more than that, now it's a 50-50. It's almost like a motivator for that operator to like, hurry up, like get it sold, keep going.

But it sounds like you're kind of doing a lot of that. And in some situations, it sounds like it varies, but it just makes you wonder, like, It almost sounds like maybe a potential misalignment. If there is a change in the split as time goes on, then maybe it should be on them instead of on you.

Why are you doing that work? Or am I misunderstanding something? Or maybe it wouldn't change things in terms of how that's supposed to work.

Chris: The alignment… you can look at it in a couple different ways. And this is something my partner Everett will harp on more than anything.

In regards to the alignment, ultimately, we have to trust ourselves internally to get things to move, because it's 100% of our capital, right? Like it's all upside for the operator, assuming we're able to sell it profitably.

So even if their split might go down over time, it's still just pure profit, not necessarily impacting their day-to-day business. You know, maybe they need some of those funds to market out more, try to grow their business in other ways.

But for the most part, in our experience, you know, folks kind of hand off a deal. And they're not necessarily that interested in maintaining the dispo side of the business anyway.

And frankly, from a reliability perspective and incentive, we want to get our money out ASAP and also try to hit the profit margins that we're orienting to.

Seth: Is that in any way a conflict of interest? I'm not in any way saying you would do this, but in general, if a funder is in charge of the selling process and if the commission split goes more and more in their favor, the more time goes on, wouldn't that be an incentive for you to just kind of sit on it for a few months until it takes longer?

Whereas if it's the operator's job, it's like, no, I'm going to get this thing sold because I want the most money out of this thing. Do you think it's a thing or would that ever be a concern?

Or it's almost like if you were going to be in charge of selling it. Automatically you get more of the profit because you're doing a huge part of the job that they don't have to do.

Chris: Yeah, it is. And I mean, that's something we grapple with sometimes. I know some of the funders will operate in different ways depending on how much responsibility we're taking. You might change up the splits.

It's sometimes something that we’ll build into the agreements. Like, yeah, if we're especially taking a lower value deal, for instance, and we're having to do the whole ground up operation, we might ask for a 50-50 straight off the bat here. So there is some customization that can be built into specific circumstances.

But like I mentioned a bit earlier, it's really a reputational type of thing because there's plenty of funders out there. If we had a monopoly on the industry, then yeah, the alignment could be more set up in the funder's favor of like, well, people have to come to us anyway, so we can just sit on these deals and rack up as much profit as possible.

But that's also assuming you have enough capital to be able to turn over because that's the risk of the game. There's plenty of folks who have sent us over deals where they presented it to another funder and then the funder was maybe anticipating on another close happening and didn't. They don't have the capital to close.

So you could play that game, hold on to properties for longer, try to generate more profits. But if your business is growing at the same time and you don't have that replenishment or you can't just pull in more management equity to invest in the deals, you're playing a very dangerous game there that can also hit your reputation.

But again, on the flip side, if you somehow developed a nefarious reputation as a funder where people are thinking, okay, they're not fielding offers properly, or maybe there's not an ongoing dialogue, I feel like they're hiding something from me. And just to rack up more profits, then you're not going to get repeat business. They'll just go to another funder who might operate in a faster way.

So there's built-in checks and balances in the industry. And we feel over time that we've always acted in the best interest of our clients. Because the more business that they bring to us and word of mouth and everything is only helping us regardless of potentially lower profit splits coming to us if we move on properties faster.

So hopefully that answers a bit. It's never like a fully easy answer. But on average, we're always trying to move things ASAP, especially since we pursue cash sales.

Seth: And part of what I'm getting at with all these questions, or I guess just something to understand, is that this whole land funding profession is absolutely not an exact science. It's not an established thing where it's like, this is the way it's supposed to work.

Every funder I've talked to handles things a little bit differently. And it's kind of about figuring out, okay, what is the balance that works for us and that operator?

So that's kind of why I'm trying to figure out, Chris, like, what's working for you? And that whole thing about safeguarding against a bad reputation in the market—like, that's a very real thing. And I've heard stories from different operators who will say like, yeah, man, this funder totally screwed us out of our money. They took all the profit and didn't share their split with us. And digging deeper into it, what it really was, was the funder was just adhering to their partnership agreement or their JV agreement that they signed. Like they were just doing what they both agreed to, but the operator didn't really read it or didn't understand it.

And what it comes back to is sort of like this line of communication between the funder and the operator. So like there's a deadline coming up. If something's about to change, that shouldn't be a mystery. It shouldn't be a surprise to anybody. Just because it's in the contract doesn't mean that the other person is going to perceive you as doing things aboveboard.

I just think it's an important thing for everybody out there who is either a funder or trying to use a funder to like really understand that contract. Like both parties should get it. And when there's something on the horizon, it was like, Hey, we're coming up against 60 days here. Things are about to change.

There ought to be some kind of communication and conversation about that. Just so that no one's in the dark.If we're coming up on, I think you said it was a year in your case, Chris, where it's like, Hey, now the funder keeps a hundred percent. Like people should be seeing that coming from miles away so that if it finally happens, it's not like, oh, we're yanking the rug off for money. You're not getting any money.

And that's, I would imagine that's probably how you safeguard your reputation in this business, right? Is just by being very transparent and clear with everybody. Is that accurate?

Chris: Yeah, absolutely. And yeah, it even becomes more granular than that because we're so busy day-to-day too. It's like across different deals. It's hard to pay. That's probably something we could build into our CRM, but like, yeah, okay. It's past like the 30-day mark and so forth.

And we do have that within one of our spreadsheet trackers, but with how much communication’s going on, usually the focus is on, hey, we just got this offer, just FYI, we're trying to counter to this. Let's see what comes back here. Here's a couple of the contingencies they're looking at. And so that'll just be our consistent follow-up there. And then, okay, yeah, this offer got accepted. Here's the anticipated closing date.

So we're always just trying to keep our operators in the loop accordingly. Some prefer more frequent updates than others. So it's a balancing game accordingly there. Some, if it's a very popular property, don't need to be mentioning every single offer. If it's really low ball that we're unlikely going to go after, then that's not worth remarking on oftentimes.

But anything that's real and we're positioning as strong consideration, that's always going to be a text follow-up.

And it's not always us maintaining that black box communication with the realtor. We have plenty of operators who might be in a group text thread with the broker in us or a group email thread, or again, they might be managing the communication themselves.

So we're not, we don't have hard and fast rules for those communication patterns. It really kind of depends on what the client prefers when they work with us.

Seth: In terms of that profit number, like say if you buy a property for 50 grand and sell it for 100 grand, how exactly is profit measured?

Because it's never that cut and dry. There's closing costs and there's holding costs, there's property taxes, there's insurance in some cases, if you're doing improvements or subdivides, there's all kinds of other stuff that comes into the fold.

So like, is there a simple equation you follow to say this minus this, that is the profit. And that is what we then use to split and disperse the money.

Chris: Yeah, precisely. So we follow more of the institutional paradigm of using waterfall documentation after the point of disposition.

So I partner Everett through along with some attorney help and just making sure that we're absolutely solid on all of our numbers. We'll make sure that the waterfall is conveyed properly within an Excel spreadsheet at the point that we're going to be wiring profits over to the operator that brought us the deal. And, you know, according to such and such amount of days, here's what the split's going to be.

And sometimes it might just be like a pure 50-50 too, like anything we do above 100,000 purchase price is usually going to start at 50-50 anyway. So depending on the risk of the deal and so forth, that's going to adjust accordingly.

But generally within the waterfall and any type of costs that we covered in the business are going to be paid back first. So that's going to be the purchase price of the property, any related costs, say marketing photos, like do we have to spend on anything on a drone or survey or perc test and so forth. All those costs are going to be funneled back to our firm first as having covered those.

We have a couple variable costs, rarely more than $1,000 per deal that might cover our due diligence that Omar does on the deal, really ensuring that all the numbers are aligning prior to us purchasing. If there's a little overhead covering some of the work that our VA does on the deal, for instance, or covering a little bit of the legal expertise that consult through Everett and a couple of our third-party attorneys that we work with to make sure all the JV docks and the waterfall is flowing properly, that would all get baked into the waterfall.

Again, we try to keep those costs as low as possible. From a reputational perspective, we don't want people reporting, hey, Serious Land charged me 10,000 in superfluous fees at the time of close. And that impacts our profits as well. So it's not like it's just coming purely from the profits that are allocated for the operator. That's just coming out of the total profit pool that we're both sharing.

So those are all going to be flowed out first. The realtor commission that's going to be taken care of, title company expenses, all of that gets paid out first as principal within the deal. And then after that is when the actual profit is calculated there.

So depending on what those splits look like, that's how we end up at that number.

Seth: So it sounds like you cover pretty much 100% of costs once the deal lands on your table in terms of due diligence, marketing to sell the thing, realtor commissions, all that stuff.

Who covers the costs on the front end with the acquisition? If somebody finds a deal with direct mail, you're not covering that, right? Is the operator paying for all that and you start covering costs once you enter the deal? Is that accurate? Or how's that work?

Chris: That's precisely right. Yeah, there are some funders who will engage in covering marketing costs for more of an exclusive relationship with an operator. Some folks have approached us about that. And we've looked at that. Ultimately it wasn't the best fit for us at that time that that's not necessarily saying it wouldn't be the best fit for us going forward.

But that's a whole another consideration. Because when we left the direct marketing space, that saves us a lot of variable costs and overhead within our business. But we're also taking a hit by having less profit margin on deals. So we have to do a higher volume as well as reduce overhead costs to account for the lower profit that we're taking on a deal-by-deal basis.

So that's something that we'd have to keep in mind before potentially funding, that doesn't necessarily have a guarantee of finding us more quality deals because there is no guarantee within in direct marketing there.

So it is an option, but I don't know that many funders who are handling the marketing side.

But if the originator or the operator, they might pay EMD on a property, or maybe they cover a couple other costs associated with the deal before we're brought in, then those would also get incorporated into the waterfall. So that would also get paid out back to their account prior to the profit split.

So ultimately, assuming the deal is profitable, which is not always the case, but we do everything we can to make it so everybody will get paid back first and then the profits will come into play.

Seth: So how often do these projects involve like subdividing or entitlements or improvements or like not just a straight flip, like there's extra costs in work required to do more to make the property worth more? What percentage of the time does that happen?

Chris: Not as often as we would like. We want to grow that part of our business more, but finding subdivides that really pencil out or entitlement deals, it's hard to find.

We are just in the midst of completing a minor subdivide project. I mean, this was very tiny. We were just splitting off one parcel of vacant land that was attached to another small parcel with a house on it. But I mean, we've been working on that deal since August of last year.

There was a partial lien release involved with mortgage on the property and dealing with the county and surveyors and having to get all their recorded documents done. Like that took a long time. And a lot of our costs are still baked into that. We probably have $6,000, almost $7,000 that's still been held at bay in that deal really since August, getting paid down before we even bought the property and have a chance to return funds on it.

So we're always a bit more cagey and conservative about going after deals that are going to have more inherent expenses and oftentimes longer sales timelines. Minor subdivides. Maybe you can move everything in six months, but oftentimes longer.

So we just have to bake all of that in accordingly. Same with entitlement deals.

Seth: And again, I don't know how many, if any, if you've ever done like an actual proper subdivide or like a platted subdivision or something like that. But when I think about those projects, they inherently require more work. Like somebody's got to find the surveyor and communicate with them and get stuff recorded and all this stuff.

Who handles that work? Is that the operator's job or is that that your job? Does Chris have to go and do that stuff?

Chris: Yeah. So that's where we can have some variance as well for some of those type of deals. Some folks who have brought subdivide opportunities are much more of the on-the-ground operators, they're out visiting the property. They might even be handling a lot of the dispo outside of realtors. They might be running Facebook ads or setting up a land buying expo, which can actually work well for subdivides. You just say, hey, we have a whole bunch of land to sell this weekend, come out here and you can sign some paperwork.

Works better for owner financing, but it's an option to offload some properties quickly, even before you close and survey out the child parcels. So you might have operators like that who are providing a lot more inherent value to the actual on-the-ground work.

Whereas some folks, yeah, they might bring the deal, but they're not necessarily local to the area, or the work required is just not as intensive. Even if you're finding a surveyor to head out there calling the water department to figure out what's the cost going to be to add a water line here, that's fine. And we encourage folks to help as much as possible on that end. But that's also something that we can handle in-house if needed.

So we're not necessarily going to be as inclined to give up more upside for circumstances like this, or like the latter case, where there's less expertise needed to both acquire, do the operational work and sell the property. So that might change up the terms on the final funding part of the deal.

And for these larger deals too, some of the operators, they might be looking to inject skin in the game into the property, which we always encourage for bigger properties where, yeah, there's going to be more of a trust and time requirement to sell this deal.

So yeah, if you can inject 50, a hundred grand, great. That helps us make sure that you're aligned more to see this project through and, you know, encourage more splits in your favor. But because of these various factors that might change the custom criteria in regard to what the final profit splits might be for those types of projects.

Seth: I'm sure you don't have a direct answer to this because it depends on so many different things, but like, say, say if I brought you a deal and I wanted you to fund it, it requires maybe 200 grand of funding to buy this thing, but I want to put my own a hundred thousand dollars into that too.

So like you put in a hundred grand, I put in a hundred grand. How would that change all of this stuff in terms of, who holds title? What's the profit split going to be? Who's in charge of what?

Like, I got to imagine you almost hit the reset button on everything, right? Because we both have our necks on the line in the same capacity. Have you ever dealt with that kind of thing?

Chris: Yeah, occasionally we get offers for that. And that $200,000 mark is right around where it gets interesting. You know, usually we'd only want to consider taking operator funds and skin in the game for those higher value deals where, yeah, we can spread the risk around for anything that's lower than right around that $200,000 mark.

And we have funded, self-funded deals north of $200,000 where we're the sole equity partner. So that's not the hard and fast distinction.

But the problem is, all of our documentation that we have currently is set up to where we're the sole equity in the business. So if we do something smaller than that, we're going to have to draft more documents. Probably some more attorney involvement there and costs associated with that, might have to set up a new LLC that's going to be serving as an SPV, special purpose vehicle, for that particular deal. So there are a lot more costs added on just to manage the basic operational groundwork of that deal.

So usually we try to refrain from pursuing those type of opportunities, again, unless they're larger deals where it makes sense to invest more money on the legal groundwork. Otherwise, yeah, it's just too much of a hassle to be splitting and having different roles and responsibilities and different types of title situations. Do we have to do like joint tenants and more complicated for the title company and everything?

So it's a whole another can of worms that you'd have to think carefully before engaging in.

Seth: I've gotten to about half of the questions I wanted to ask you, but I know we're going a long time here. I'm going to try to wrap this up relatively soon here.

But one of the questions, and this is something where I've heard conflict arise between operators and funders. And that is, who gets to decide what that listing and sales price is going to be. And at what point do we accept a lower offer versus not?

Maybe one party thinks, Hey, I think we can get higher if we hold out. The other part is like, no, we got to sell it now.

And also the issue of seller financing. Like, do you ever offer that as an option when you sell properties? And if so, how do people get paid? And when do they get paid?

I'm going to go out on a limb here and assume that you get to decide on all that stuff as a funder, since you're holding title. Correct me if I'm wrong, and then let me know, just elaborate on that. How does that get handled?

Chris: Yeah, certainly. So within our documents, ultimately, we have the final say-so on accepting an offer or not to sell a property. Again, this is where the alignment piece comes back in and where there could be potential reputational damage. Because the funder abuses that, takes an offer that they didn't consult the originator on or hadn't discussed prior. That's just gonna leave damage. You might lose a potential long-term JV partner on deals, or they might leave you a bad review in some of the various communities, or bad word of mouth. All those are disastrous to our business.

So I hammer in that point because, really, it’s the funders' advantage to be as open and communicative as possible in finding solutions and sales prices that best suit the needs of each partner in the deal.

That being said, prior to even listing a property or even before funding it, we're going to have a conversation with the operator. What we anticipate selling the property for and our anticipated strategy for price cuts and so forth, if we're not getting the interest that we're anticipating.

And we actually have built in within our documents, again, prior to even funding, a base clearing price indicating that if we get an offer that is at least this amount, and there's no crazy contingencies, you know, like a 90-day close or other random things some buyers might throw in as wrenches into a deal.

But let's just say, you know, kind of a standard 30-=day close, whatever this number, we're just going to accept that. So we're already have an understanding that, hey, that this is a threshold that's going to work for both of us here. Anything below that is going to be a discussion.

And while yeah, our firm is a title holder, we still ultimately could say, hey, no, like this is the best option to go for. It still gives us a an understanding of anything below this number, we're going to to be bringing to you, discussing it. Here's the pros and cons, why we think it'll be better to take this deal versus trying to stay on the market longer. Hey, wait, maybe we just misjudged this market entirely here.

This thing's been sitting for three months and secret, not so secret in the industry, but oftentimes you might get greedy off the bat where, you get an offer that's like not quite where you want right off the bat, but usually offers don't get better over time. They usually get worse, or at best, the same. So the market will tell you very quickly whether you're on track or not with your pricing.

And so, even if we get an offer that's a little bit below our clearing price threshold within the first couple days of listing the property, if it's a quick 30-day close, for instance, no crazy contingencies, usually we're going to take that, you know, we'll always try to counter. I know it goes against the Chris Foss Never Split the Difference. Splitting the difference is oftentimes just part of this industry.

And you don't oftentimes have that much negotiating power in a buyer's market here to just say, hey, I'm not going to accept this lower offer here. Usually I'll just throw out because buyers expect that anyway, and most of them will accept. So throw out your counter or maybe you want to counter on something within the document. Hey, I'm not going to cover your survey costs or I'll take like $1,000 off. So you cover the survey yourself. Or I want to cut down on the due diligence time period.

I'll always have something that you're going back to the buyer with and try to squeeze as much purchase prices as you can out of it. But that's always going to be our strategy. And if we can't extract anything more, yeah, we'll go back to the operator and say, yeah, this looks like it's going to be the best option for us. We did all we can here. And then we'll anticipate closing.

So again, it always comes back to the communication element.

And like you mentioned, in regard to possibly fielding seller financing offers. I mean, we're open to it for most funders, especially equity funders. It's not going to be a preference just because of the nature of our business. We need capital turnover.

And if we're growing, if we just have too many finance deals going on, we won't have the capital to put into more deals. So we are open to it, especially again, in this buyer's market where seller financing can bump up the buyer pool for particular properties.

But generally, we're going to be looking to sell the note after a short seasoning period, maybe three to six months at most. Ideally, you could table close the note as well. But we just have to keep that in mind is that if we're offering somebody to buy via seller financing, and we're going to be looking to offload the note, usually, you know, we're going to be taking 80 cents on the dollar. So that's going to be impacting our margin anyway.

That's not necessarily a terrible thing there. Because in this market, most of the properties that we're selling are probably at a 10% to 20% discount, even off our conservative listing price anyway. So, you could keep cutting from a cash perspective or potentially sell for a little bit higher finance, anticipating selling with a 20% discount after a period of time.

So, you just have to weigh that with your underwriting as well as what might be the best profit accordingly.

And usually for seller finance, in terms of profit splits, we'll get paid back all of our principal first and then 50-50 thereafter if it gets into payments, especially if a note buyer comes in there.

Seth: So this kind of going back to earlier with the due diligence side, like when you're doing deal intake, are there any ways that you've been able to screen out bad deals to avoid wasting your time with them?

What do you expect the operator to come to the table with to save you time on due diligence and ensure you're not looking at a junk deal? Are there certain things that you'll just automatically say no to and you say, hey, operator, before we even start talking, make sure you've answered these questions and check these boxes and then we'll start looking at it.

Or do people just dump all kinds of junk on your table and it's up to you to figure out if it's a good deal or not?

Chris: Yeah, unfortunately, it’s more of the latter than you would hope for in this industry.

And some folks learn that lesson quickly and realize, hey, yeah, this was bad criteria. I'm going to change that up. Some folks just don't learn and we might not prioritize trying to work with them as much going forward.

But yeah, I mean, it's so simple, right? For a lot of funders, you know, a lot of us have websites and basic FAQ or deal criteria. Just take 60 seconds to check that out really quickly. Yeah, it'll show you, hey, we're looking for, on average, between 50k to 500k purchase price, nothing below 20k. If you send us, you know, a $10,000 deal, that just tells me, hey, you probably weren't paying attention.

And even if you didn't check the website, oftentimes when I'm introducing myself to people or they ask criteria, hey, I'll just text over here some of our base stuff. So, usually that info is it's very easy to get a handle on.

But, yeah, even beyond that, I mean, if you're sending something over that's just landlocked or you haven't done the basic diligence, you send something over where you might have already spent like two hours on the deal, comping it all out. But then I pull it up on Land ID, and it's covered entirely in wetlands. And that's just kind of embarrassing on that side. And hopefully, they’ll learn the lesson afterward to do a little bit more upfront work.

But yeah, just making sure you know, those key red flags are dealt with.

And then the pricing side is more difficult. That's why I run that Land Daily Diligence Facebook group, because most of the errors made in underwriting is from a pricing perspective, not necessarily from a geography or terrain perspective, for instance.

So pricing, it's really, really hard to do well in land. It requires constant practice. There's an art to it. It's not just a pure science. Even me doing your underwriting, virtually every day or every business day, looking at hundreds, thousands of deals at this point, like I'm still learning new tactics to utilize in this space.

And especially when you're trying to invest nationally or across different geographies, like there's just almost an infinite amount of material that you can learn there. And again, kind of requires constant work. Even when I took a break over the holidays, Christmas, New Year's and so forth, I was rusty coming back to it.

So it's just something that requires hours and hours and hours of practice to find those right pricing mechanisms. And sometimes there's not a key answer. You might have to go to a local realtor and just kind of throw your hands up and say, you know, can you visit this or check out some of these key issues here? Because it's just impossible to tell based on the lack of comps or the aerials, what might be going on with the property.

So, you know, the pricing piece, yeah, you can send deals our way on that Land Daily Diligence. I'll try to provide as much info as I can help you become a better underwriter. But don't hang your head too much if you're off on that, because most investors in the land space, it takes years to get better at that particular piece.

And even though my like deal requirements might say, hey, like, I want 50% of market value, just like most funders, my 50% is probably going to be different than your 50%. So don't don't get too hung up on that precise pricing there. Just send some deals our way. We'll provide feedback and what will help you center in on how we evaluate deals more. So then you can bring us one that's going to be a better fit in the future.

Seth: For people to be featured on this Land Daily Diligence Facebook group, do they basically just go to Serious Land Capital and submit their property there? And is that how they end up with you reviewing it that way?

Chris: You can do that. Or you can just email directly to me or Facebook Messenger. Any of those paradigms is fine. You can text me a deal too with my direct business line number that's also on the website. So those are all options to do that.

Deals that come in, because the Land Daily Diligence is not necessarily just for deals submitted for funding. Even if you don't plan on working with us or you just want an extra pair of eyes or you haven't got a signed purchase contract yet, you're just trying to value the deal better before you interact with the seller. Because that's always a better option, right? Before settling in on a purchase agreement. Then it's easy for me as the funder to say, yeah, this is way overpriced. Now you have to go renegotiate. That's a really hard conversation.

So if you can settle in on your price prior to setting expectations with the seller, that's always going to be a preferred option as well. So you can definitely send any deal that way.

And even if you submit on our website for funding and so forth, I'm always going to be double checking with you before featuring the deal on the live Facebook. Because I know some people would prefer to keep their deals more private.

I provide as many safeguards as possible. I'll never mention what the precise purchase price you have it under contract for, trying to keep some of the key details back with the expectation, hey, we're trying to build a trusted industry here folks, don't go trying to poach deals and so forth from each other. That's always going to come back to bite you in the end.

But nevertheless, I try to provide those safeguards accordingly. So then you can still get the full value from the service being provided there. But yeah, rest assured, you won't be featured unless you've given explicit permission.

Seth: Well, Chris, totally appreciate your time and pulling back the curtain a little bit about how your business works. If people want to learn more or work with you, is it just seriousland.capital? Is there some other place they should go to connect with you?

Chris: Yeah, that's our base funding website. So yeah, you can reach out there, submit a deal there. My email, chris@seriousland.capital, is there, as well as my number. Or join the Land Daily Diligence group on Facebook. It’s free to join, free to get any help on that. That's always going to be a free resource.

And like we mentioned before, the landfunding.partners is also our community resource for providing all the other funders out there because there's almost an infinite number of deals. We can't fund them all. There are plenty of other high value funders out there who might be better at certain types of properties, or maybe they can provide splits that are a better fit for your company. Maybe they're debt lenders instead of equity lenders.

So take a stab at working with different funders. Find somebody who's a better fit or maybe work with multiple. Some folks are are a little bit tapped out at a certain time. And so you can rely on different funders depending on the time of year and what type of deal that you're looking at. That's really our intention of building out that resource.

And yeah, just looking forward to interacting with many of you going forward. I know we've been going on for a while here, Seth.

And like you mentioned, I feel like we could probably do another like two or three podcasts worth on additional underwriting questions here. But I just wanted to express my gratitude so much for the opportunity to be on here, my partners and I, even with the success we found in this space, we really owe you a debt of gratitude.

We wouldn't have been in this land space operating without all the expertise you provided across our REtipster and all your various resources. I mean, yeah, back in the day, getting started on this, just reading every single article you had posted, every single comment back when the comment section was still available on your site and everything, but buying the postcard templates and so forth. Just immense value provided to us.

And, you know, I’m so grateful to have gotten to know you more over the past several months as well.

Seth: That's awesome. Appreciate the kind words and really glad you've been able to find help there and be part of the community for so long. And it's really cool to see what you're doing for the land space today. So thanks again for the great conversation, Chris.

And all the listeners out there. If you want to connect with Chris, now you know where to go and how to do that. If you want to check out the show notes for this episode, it's retipster.com/187. This is episode 187. You'll find links to Chris's website and Land Daily Diligence and all this stuff that we mentioned.

Again, Chris, thanks a lot. And hopefully, we'll talk again soon.

Chris: Absolutely, Seth. All right.

Seth: Hey, how's it going? This is Seth Williams. You're listening to the REtipster podcast. This is episode 176.

And today I'm talking with a new friend of mine named David Hansen. So I met David through a mutual friend, Chris Duff. Chris runs Land Daily Diligence in Sirius Land Capital. And the first time I met Chris, it was at the Land Unconference Inner Circle, and I just overheard him talking about how he was working with this guy named David Hansen.

And he kept mentioning David Hansen this and David Hansen that, and I was like, who is this David Hansen guy? Am I supposed to know who he is? It sounds like he's like Mark Cuban or some huge name or something.

And so eventually, Chris put me in touch with David, and I got on a call with him, and just learned a lot more about who he was, and I started to see why this guy was kind of a big deal.

So, David Hansen is a civil engineer, planner, and land developer, and probably a lot of other things I don't even know about yet. And he has a wide breadth of experience in the world of land development, and today I'm gonna talk with him about how he's been able to take a lot of different properties and figure out how to set them up so that they're worth the most on the back end when the development is done.

And he's got a very interesting mix of experience and abilities that I think can be pretty valuable to learn from. So we're gonna learn right now.

So David, welcome to the show. How are you doing?

David: I'm doing great, Seth. Thanks for the overwhelmingly positive vibe you've set. I hope I can live up to what you just said.

Seth: Oh, yeah. I'm sure you will. No problem.

Other than what I just said about you in that intro, why don't you tell us your story? Who is David Hansen, and what have you done in the past, and what is it you do now?

David: So, let's see, I was born and raised in Pensacola, Florida, went off to college in Tennessee, went back to Pensacola. In 1985, I moved to the D.C. area. I sold paper and office products for three years, and I woke up one morning and said, “I can't do this any longer. I need to find something else.”

And I promise you, I pulled out one ad and I opened them to the civil engineering ads and I read a couple. I went, sounds interesting. I actually went on five interviews. I knew nothing about civil engineering; my degree’s in mathematics. But I went on five interviews.

And at the fifth interview, at the point in an interview when you think you're probably about halfway through, I looked at the guy across the table, stood up, and I said, “Everything sounds great, when do I start?” And I reached out to shake his hand and he stuttered. He shook my hand and said, “How about Monday?”

I said “Great!” So I was at that firm for 11 years.

And on my five-year anniversary, the VP of the company came in. When you were there for five years, they gave you a week's pay, and ten years, two weeks paid, just as a bonus. And I could feel—his name was Lou—I could feel him standing behind me.

I stopped and I said, “Yeah, Lou, what is it?” He goes, “Well, you've been here for five years,” we shook hands, and I went back to work, whatever I was working on at the time. And I could feel that he was still there.

So I turned around and I went, “What's up?” And he goes, “Don't take this the wrong way, but why did we hire you?”

And I said, “I don't know if there's a good way to take that, Lou.” I went through my story that I just told you, and he paused for a minute, and the guy that hired me—his name was Dick—and he goes, “You know, you might be the only good thing Dick ever did for this company.”

And as I said, I was there for almost 11 years.

Seth: One quick question, was I hearing you right in your interview? You basically hired them? It almost sounded like you made the decision that you were gonna work there, and they just kinda accepted that. Did I catch that right?

David: Yeah, you got it right.

Seth: Yeah. Is that a good tactic that new employees should take when they want a job? Just interview your employer and then say it.

David: I don't know. It hit me at that point that, A, I really knew nothing about the industry, I mean, other than you deal with it every day. You drive on roads every day, you pull into the shopping area, and you notice how traffic flows and things. And all of that just kind of hit me all at once, at a point where I was like, “Okay, it's gonna go one way or another. Either he's gonna say, no, we need to take this decision or whatever.”

But it just felt like the right moment. So yeah, you kind of hit it. I just said, “This all sounds great. When do I start?”

Seth: So you didn't need a degree in engineering or something to get there? You can just, like they just taught you, based on your math knowledge?

David: Actually, in high school, I've always wanted to be an architect. And we can do this again and I can tell you all the things I've restored: eight historic homes in Virginia with my own hands, done all the engineering, all the architecture. But when I found out it was a five-year program and I knew I was a four-year student, that wasn't gonna work.

Yeah, you don't need an engineering degree to learn how to practice. I can't seal and sign plans—I'm not an engineer—but I still get phone calls from firms that I've worked with and worked for. The engineers that I engage for my current projects, we sit down and confer on how I like things laid out, how I want to handle stormwater management, where I think the best location for, whether it's ponds, low-impact design, things of that nature.

Once I started, I immersed myself in it. One of the things that I did then, and I still do, and I recommend people do—I think you and I talked about last time—is to read the zoning ordinance and read the subdivision ordinance in a jurisdiction that you want to be working in.

Those are the Bible. It is what the bureaucrats in the jurisdiction use to counter anything you're trying to achieve. They always roll back to, what's the standard zoning ordinance? What's allowed in our subdivision ordinance? Those are the tools that they use. So my recommendation to everybody is that you should be well versed in in those tools. That is what is going to be, the end of the day, how all the decisions are taken.

Seth: Cool, and then after the civil engineering thing, so you said you had some other career after that? Or what was next?

David: I worked for one of the national builders for a couple of years, not in their engineering. I thought I was going into work in their engineering department, acquisitions and entitlements, where I ended up was in the field, developing land.

To be honest, I couldn't be more thankful. I learned a lot in two years. I'd seen a lot. I'd watched a number of my projects, whether it was big road design or things like that, I'd watched things get constructed. I've been in the field watching heavy equipment move, watching rock being blasted, and all that of excavations.

Two years of learning how to move dirt from one spot to another on the phone with the excavation contractor on one phone and my dirt hauling guy in the other, negotiating prices to have them come in with 400 trucks and how I had to pull permits from the city of Alexandria to ensure that.

But you learn a lot. I learned a ton about not only how to engineer it, how to plan it, but then how to develop it. And I continue utilizing those skills to this day.

And then after that, I went back to engineering. I was at another big national civil engineering firm for another six years, where I was the assistant director of planning. So I got out of the day-to-day civil engineering end of it and worked strictly on town and urban planning.

Seth: And when was that? What year?

David: 2004. In 2004, I stepped away from engineering and I went full-time doing owners’ representation. I had my own projects. I had three huge projects in West Virginia and got everything teed up just in time for the 2008 crash. That was a party.

Seth: Oh, I'm sure.

Now, that decision to leave your job and go out on your own, so what led up to that? Like, how did you know, okay, it's time to move on and do my own thing? Like, did you get people asking you to do some kind of consulting on the side?

David: That is a great question. In my time with the National Builder, I'd stayed in contact, of course, with engineering. As the development wing, I was in meetings with sellers and property owners as we were negotiating the acquisition of property, rezoning, and everything.

But I stayed in touch with people. I had my old clients, my development clients, I stayed in touch with them. And like anything else, I'd gotten immersed in land and land development, so I was still finding deals and sending deals to whether if my group didn't want it or to other people.

And when I went back into engineering, I was still kind of juggling those things. And finally, what hit me at some point was that I was really running the risk of a conflict. I had to sit down with the owner of this company, who's still a very good friend of mine. We had a conversation. I said, I can't run the risk of you guys risking somebody brings a deal into the office that I'm working on on the side.

I know about it, this guy. They come in and say, oh, well, your guy saw the deal, stole the deal, took it to somebody else. And so I felt it was time for me to put it aside, you couldn't do both. You can't serve clients and serve yourself at the same time.

Even though ethically, I don't think it was a problem. It was, ethically, it was a problem for me to run that risk. I couldn't, I didn't want to risk a relationship that I'd built up and so many other things, it wasn't worth it. So I decided to just do it on my own.

Seth: So these three big developments in West Virginia that you're doing, was this the kind of thing where you're putting your own money into it or people come to you with money and you just tell them what to do to make the development? What's your involvement in that?

David: Yep, a little bit of both. I was lucky to have been introduced to landowners who had the desire to develop their property. They had some of their own money to put toward the entitlement cost. They, for the most part, had very low basis in the land and I also had investors, guys that I knew would step in.

I had the relationships that I built up with all the national builders over almost 15-plus years in the engineering world. So it was fairly easy for me to take deals that I planned to builders that knew my reputation and set up the deals, the projects in West Virginia.

One of them was, it's built out today, it's called Archer's Rock. It finished out at 3,800 units. Another one called Morning Dove, it was almost 600 units. And they're both finished today. The third one never got built, but it's one that I wish it had. So this is one that's 3,800 units.

Seth: So like, tell me, what was that property originally? How many acres was it? How do you take a property like that and figure out, okay, this size property should be this number of units. Like, how do you know what to do with it?

David: It was a total of 1,400 acres, three owners. It was an old apple orchard. It was in Berkeley County, West Virginia. It was planned in, I think we had six or eight phases. The original land plan that I did was, you do it in big bubbles. They're big bubble diagrams. You lay out the main infrastructure, the main roads, the big divided roads, how you're getting the traffic in and out and distributing it throughout the site, and then created the pods of varying lot sizes.

Again, working with the builders, and I still do this today, I don't do a deal today, if I can't lock down a builder during my study period, I'll kick out of the project. If it's not interesting enough to the builders, there's really no need to proceed.

The other thing I do, and I'm going to steal a phrase from somebody else, I hate to bake a cake with the wrong ingredients. So, not having a builder and not knowing what product they're going to put on the project and what product lines, how many different product lines they want to use.

You know, you can go from a 45-foot lot to a 55 to a 65 to an 80, depending on product width and depth. And I like to work with the builders to make sure that what I'm specing, now you can run into a lot of problems if, say, you spec a 50-foot lot, but all the builder's product is with two 5-foot side yards, so you've got a 40-foot envelope, but everybody's product is 42 feet. Nobody's product fits on your lots. Or they have to step down to a smaller product, which is less expensive. They'll pay you less for your lots.

Had you designed all your lots at 55s or 53s, everybody's product fits, or the builder's product fits, and they can build what they want to build and you can sell at the number that you need to sell at.

So the big projects start out as big planning efforts. And once you create the framework and the grid, you work your way down into the individual blocks and lot sizes within those, then it gets passed on to the engineers and that's how they engineer it.

Seth: Man, tons of questions are coming up as you're talking. Just kind of like an off-the-cuff question. By the way, when you say units, you're talking the parcels, right? Like making lots? Is that what you mean when you say that?

David: Yeah, when I say unit, it's a building unit. So if the builder wants to do, say, three product lines, so you're dealing with NBR and they want to do three product lines. What they're gonna want is a 30- to 35-foot piece, a product.

And then a 40- to 48-foot product, and then they're going to want a big product that'll fit on an 80-foot lot. It's going to be 65, possibly 70 feet wide.

Seth: And when you say product, are you talking about like a type of residence or something? What does product mean?

David: So the builders program and they have product. Their program is how they're combining their product lines and sizes. But the product is the individual building that they're going to build.

Seth: How do you determine what that size is supposed to be? Is that after a long discussion with the builder to figure out what they want? Or do you just kind of know, no, this makes sense. I'm going to make it this way. I'll lay it all out and then I'll start talking to builders to see if they want it. Like, what comes first?

David: Two things. Yes, you kind of hit a couple of things that happen.

One is, once again, the zoning ordinance and the subdivision ordinance come into it.

A good example is my city of Augusta, Georgia. I have a project there. It's got three different zoning categories. It's got R3B, R1B, and R1A.

R3B is a multifamily townhouse. Minimum lot boundary is 2,500 square feet. The R1B is a minimum lot size of 7,500 square feet, and the R1A is a minimum lot size of 10,000 square feet.

That said, I dug deeper into their zoning code. They have an option called “open space conservation design.” If you give them 40% open space, they'll allow you to reduce your lot sizes by 40%. In the R1B, 7,500 square feet goes down to 4,500 square feet, and the 10,000 square feet goes down to 6,000.

I take all of those into consideration, then I start talking to the builders. First question to a builder is, do you have product that will fit on a 45-foot wide lot?

They all do. The question is, are you building it in this market? If you're not, what's your preference?

There, they've come back to me and everybody's got a product that will fit on the 45 and the 60.

And we've also got some 10,000 square feet that's either 80 to 100 feet wide depending on what we do for depth. So they can do three product lines on that particular job, possibly four, but they do have one that fits in those lot sizes.

Now they could have come back to me and said, “Look, in this particular market we don't have the bigger product. So we only do two. If you got to have 10,000 square different lots, we've got to put the only other product that we build, so we're not going to pay you more for those lots because we can't get any more out of the house just because it's on a bigger lot.”

Seth: Now, the first time we talked, you mentioned something about—maybe this is a good example of what you're talking about—a 149-acre development in South Carolina where the owner was going to do 70 single family lots, but you figured out how to do over 260 lots, which made the deal a lot more profitable. And I think at the same time, you also added more green space to that development.

And the first I was like, how does that work when you add more green space and get more lots like that? And that's probably what you're talking about right here, right?

David: Yeah, that's the same thing we're doing in Augusta. If you did it per the ordinance with the lot sizes that they had, you end up with significantly fewer lots, and you basically lot out the entire property by going in.

And the same thing in South Carolina, that was in Richland County. If you utilize their open space option and give them 40% open space, you can reduce your lot sizes down to… they didn't even have a minimum. I could have made them anything.

So on that one, we were actually working with the builders to lay out the lot size based on product that they wanted to build, because there was no absolute minimum in the lot sizing, as long as you came up with 40% open space.

And there were some bonus densities in there. If you gave them more contiguous open space, you got a 5% bonus. If you created parks and amenities, you got a 5% bonus. So, all of those add up to constantly increasing the yield.

The other interesting thing about that in South Carolina was that I didn't have public water or sewer. That's never scared me. I've done communal-based water systems and wastewater treatment with disposal. And that's what we were going to do on that particular project.

And again, as I said, unfortunately, the contract wasn't exactly right to make it work the best. So, the guys that I was helping out decided to kick out of the contract. It's funny, I actually reached out to the seller over Thanksgiving and he said he's under contract right now, but if they kick out, he'll call me back.

Seth: It sounds like, you know, say you find the piece of land, and maybe your first step is to read that zoning ordinance, understand maybe a few different scenarios of what's even possible. Then you have this discussion with a builder or two or three to figure out what they want.

And once you understand that, then you can go and actually start plotting it out and just saying, okay, well, given that this is what they want, we could put these things here and those things there. Is that the right order to think through this?

David: Kind of, yeah. One of the things that I do in between, I'll do a sketch almost. Before I speak to the builders, based on the ordinance, I'll do a sketch. A little bit more clean than rough. I can say, “I'll email you one of my hand sketches. They're to scale, they're detailed, show the open space, whatever preservation, I show wetlands.” I try to get all of that out of the way first, but I use that to entice the builders.

The one deal that I've got right now in South Carolina is funny. All the builders looked at it, we got it under contract. And when I sent my sketches out to three of the builders, three of the nationals, one of them called me back and he was laughing. He goes, “We looked at this and the engineer we took it to could only get 125 lots on it. How did you get 200?” And I explained to him how I'd configured everything and what I'd based everything on. That particular builder actually has that project under contract with us right now.

Seth: That right there, your ability to do a hand sketch… are you literally like putting pencil to paper or you have software or something? I have no idea how to do this kind of thing.

David: There it is right there. I do everything absolutely by hand.

Seth: In order to do that, though, don't you need topo surveys and wetland delineations to actually know for certain where all that stuff is?

David: Yeah, it's amazing how accurate it is; there's a ton of ways to find all of that. I utilize every available tool.

Local GIS is fantastic now. Jurisdictional GIS is unbelievable. Most jurisdictions that I'm working on, if they're developing right now, they're fairly sophisticated. All of their topography is LIDAR-based, and if you interpolate, even if it's at five-foot contours, most of them go down to two-foot contours. But even if it's four and five-foot contours, you can interpolate in between the two.

The National Wetland Database is great to work with. Once again, most jurisdictions that I'm working in are sophisticated enough to have at least a rudimentary wetland determined area. I normally stay a minimum of 50 feet off anything I plot.

One of the first things we do when we move in and are looking at a project, I find a local engineer and surveyor, I have boundary done. I send out a wetlands survey, or bare minimum, I'll have the wetland scientists do a desktop survey for me.

It's amazing. The wetland scientists, and I don't know if a lot of people know this, have a lot of really powerful tools now. Whether it's the LIDAR-based infrared. They know with probably 90% accuracy where the wetlands are on a piece before they leave their desks to go flag it. And most of them will give you a desktop version for maybe a thousand bucks.

Seth: Do you use Land ID for any of this stuff?

David: You know what? I looked at it briefly. I don't want to say whether I trust it or not. It's enough, combined with a couple of other things. Again, I've been doing it for a long time. I can look at aerial photographs and tell you from the color of the flora and fauna where the likely spots for the wetlands are.

But I trust the local wetland guy. Again, with a phone call and 10 or 15 minutes on the phone, if he knows you know what you're talking about, he'll generate a desktop version of what the potential wetlands are for you based on soils and his infrared LIDAR. He'll be about 90% correct.

Seth: I guess what I'm getting at with a lot of these questions is when I look at a huge deal like this, where you sink tons of money into it and put a lot of work into it, what questions need to be answered before you actually close on the thing and buy it? And what do you do to lock up the property in the meantime to get those questions answered?

David: Okay, well, now we're down to contract and then there's not a deal that I've done unless it was; we closed on part of a deal in Augusta, because it was too good not to close on, price-wise, it was ridiculous.

Generally speaking, you're looking at appropriately contracting things. Most of our contracts, 90- to 120-day study. We go hard after the 120 days. I try to contract as well as possible with an approval. Generally, final site plan, if at all possible.

If they're looking for more of a date certain, and most attorneys or counsel will ask you, you know, we need some kind of date certain. I'll start out at 18 months after the execution date of the contract, and the least that I'll do is 12 months.

Seth: And this is, you have that much time to get the property purchased, all of the entitlements, everything completely finished?

David: Yeah, and I usually base it on that, and I try to have fairly in-depth conversations with the jurisdiction. I talk with the engineers. For any deal or any new jurisdiction we're working in, I'll interview four or five engineering firms. And from that, part of that interview with me is asking, you know, what's the generalized processing time on a buy right, construction, and plats here?

And you'll hear a ton of different things. Generally, what they're going to give you as the processing time is six to nine months. And then you have to add in the ramp up time for the engineer to get the plans done and submitted, the engineer's time to respond to comments and scheduling.

And it runs, again, depending on the jurisdiction, it's nine to 12 months. I do a lot of work still in Northern Virginia. It could be 18 to 24 months.

Seth: Yeah. So talking about money, I guess a few different steps in this process, you got this initial earnest deposit that you're putting down for 90 to 120 days. Is this like a 5% or how much money do you put in it just to lock it up?

David: Nah, normally, and here's the way I negotiate that. Normally, depending on, I mean, it tracks back and forth with the value of the contract, because most of what we're doing exceeds a million, to two million, let's just say.

Seth: Just to buy it or to do all the development?

David: To buy. Just to give you an example, the piece we have in South Carolina, 105 acres, it's 1.85 million. $10,000 at contract for the first 120 days. If we decide to proceed after the 120 days, we put up another $40,000. So the at-risk deposit at that point is $50,000.

The reason that number is what it is, and I do a couple of other things too, and I'll allude to those and I'll actually disclose them, because we've run into issues where it's difficult to negotiate contracts because people have been misled by other folks in our industry. And I don't think it's malicious, I just don't think they understood what they were doing.

And what it does is it kind of sours the pool. So if somebody else came in and had a 120-day study and didn't do anything, then the seller is soured. And if I come in and ask for, yeah, the last guy didn't do anything.

So one of the things that we do is, during the study period, I stay in touch with the seller's counsel or the seller, at least monthly, I disclose all of our due diligence. And if we decide not to proceed, I do two things.

One, I release all of my due diligence and I do it with a written report as to why we're not going to proceed. I tell them why. “I can't make the numbers work. Here's what the builders are telling me. Here's what it's going to cost to extend sewer or water or whatever, whatever the issues are, that make it a deal that that's just not going to work for me.”

If we decide to proceed, one of the things in the contract is that I have my engineer either bi-weekly or monthly write a status report and he signs it and seals it. One thing to remember is an engineer's seal is a license, just like a lawyer's bar certificate. It's a license. If his veracity comes into question, he could lose his seal. He's not going to risk his seal over giving bad advice.

So I make sure that all my engineers will do that. They'll sign it and seal it. And we provide that to the seller and to his counsel monthly, because when I'm negotiating a contract, one of the things I tell them is about the project in South Carolina.

So we got 50,000 hard. We're going to spend probably close to 230 grand to entitle the property. And if at the end something goes wrong, we can't settle, guess who gets all that? The seller does. It's his. We release it. His only cause against us is the deposit and everything we've created while we had it under contract.

Seth: How often does that happen, where you do all this stuff, the due diligence, like you go the whole nine yards and then something falls apart, you spend 230 grand and then you lose it all? Has that ever happened? Or what would cause that to happen?

David: Yeah, not quite that much in engineering, but yeah, I had deals in, well, I lost a lot in West Virginia in 2008, and somebody got it all.

Yeah, I keep, to this day, copies. I had $9 million worth of worthless paper or selling finished lots to three national builders. It all fell apart, and it felt like overnight, but I think it was probably like a week, but it was pretty tough.

Seth: You kind of skipped over and got into the good stuff, but back in 2008 when you made these, or tried to make these three, and they kind of fell apart, was that your money into that, or was that somebody else's money? And how do you recover from something like that if it just goes so horribly wrong? How do you bounce back from that?

David: It was both because I'd rolled not only my own money, I'd left some in and I subordinated to a bank a couple of times to get settlements across the table. A lot of people lost a lot of money and it really happened overnight. How do you recover? It was a bloodbath.

Seth: Yeah, it was awful.

David: I mean, they went from selling, I mean, man, they were rolling through those two of the subdivisions. I can tell you very briefly. I attended a meeting at a bank with the guys from NBR, and we were sitting at the table, and the banker, a lovely woman, but she told the guys at NBR, and I was there with one of their VPs, and she said, well, we have your deposit, because we were trying to renegotiate the deal. They were going to keep working their way through the project.

At the time, we were selling finished lots for $72,500. They came in and said, we can't do $72,000 anymore, but we'll keep working through it. We'll buy lots from you at $55,000. And they were getting 70 at every closing—the bank was—to pay down their debt.

And the banker goes, “Well, who's going to pay the other 15?” And we're all looking, I'm there with the owner and the developer, myself, the guys from NBR. And we all went, “Nobody, you'll get 55,000. Nobody else is getting anything. You'll get the 55,000.”

And she's like, “No, we get 70.” It's like, “But there's not going to be 70, there's going to be 55.”

And she looked at the guys at NBR and she said, “Well, if you're going to walk away, you're going to walk away from the deposit.” it was like, 700-something thousand on that section. And she goes, “You're going to walk away from 700,000?”

And the guy from NBR, it was great. He goes, “Do you read the papers?”

She goes, “What do you mean?” He goes, “We just walked away from a $35 million deposit. Do you think we care about 700? We're trying to work this deal out and the place you are, you can't even see the forest for the trees.”

But that's how it was. She was so filled in the week before, where everything was great. Not even paying attention to what was going on in the world that day, and basically told NBR, no, we'll just take the land and sit on it, thinking that it was all just like a bad dream. And I think, well, and I think the bank would belly up, I don't even know.

But yeah, NBR would have stayed in the deal. They would have kept buying lots at their takedown at 55, and the deal would have worked, but the bank couldn't buy what was taking place.

So, yeah, it was tough, it was a weird time. I had to go and tell my wife we were losing the house, and it's hard, it was hard. You know?

Seth: Yeah, did you kind of just get out of the business for a few years, or like, what did you do at that point, when it's so catastrophic?

David: So, when I graduated from college in 1982, I learned how to build houses, and I worked for a couple of big builders in Northwest Florida, and then I worked for a couple of custom builders. I've always stayed in it. I would build decks and do additions for friends and stuff like that.

When the market crashed, there were still people that were still doing stuff. Not everybody got pummeled. It certainly wasn't as bad as when the S&Ls all failed in ‘89 and ‘90 because I was there for that too and survived all the layoffs as a civil engineer.

But I just started building things. I started restoring, like I said, I restored eight historic homes. I've got real older friends who are doing the fix-and-flip things. I would go in and roll through a house and roll it back out for them, anything to keep rolling.

I still kept dabbling in what I knew. I had a friend who owned his own small engineering firm. I would do all of his comment responses and land plans. If he had a client come in and ask for a land plan on a piece, I would do all the layouts and everything. And I kept that up and then rolled it down from there.

Seth: Does that make you gun-shy, I mean, going through that? I know I got into land in 2009, so like from the very beginning, I was also in banking at the same time, and like you said, it was just a bloodbath. It was terrible everywhere, and that was kind of the mentality that I got into the business with.

I never had really seen it any other way, and that kind of made it hard for me to go out on a limb with this stuff, because it's like, well, what if there's another 2008 after I do this, now what? But it sounds like you were able to overcome that. So was that hard? What did it take for you to be like, yeah, let's take another risk?

David: You got to remember, I watched 89 and 90, you know, when they all the S&Ls failed. And I watched just the community where I lived in Northern Virginia, countryside, like overnight, people were selling houses, new homes were going in, and they were like in the 390s.

And overnight, that fell apart so badly with the S&Ls, nobody knew where to send, there were people who didn't even know where to send their mortgage checks because the bank was gone. And, you know, people tried to get out of houses that one day were 390 and the next day were 150.

And I was at the engineering firm that I started with and I lasted through all the layoffs there and watched it all roll back up again. And then I saw what happened in 08. Now we are where we are right now.

But the one thing that I learned in both of those, in 89 and 90 and 08, you know, the national builders, you know what they did? They kept building because it's what they do.

So I even look at today and say we're in the 08 thing, which was catastrophic to the point that it put us in the housing deficit that we're in today because, you got to remember, everything slowed down and everybody was afraid from like 08 to 15 or 16. And that's a long time. I mean, the builders kept building, but historically, year after year, if you look at the number of building permits that are being pulled in any jurisdiction that's seeing growth and whatnot, and there's a number.

And then you look at what happened during that time frame, and you noticed you were in banking, so say you're at 5,000 permits, which is the norm. But then for five years, you're only pulling 3,000, so it's 2,000 behind. Then, even when you swing up and you think you're catching up, you're still behind.

I live in Northeast Florida now. When I first moved here, I hooked up, I met all the builders. I'm doing some stuff down here. One of the builders, super smart guy, nice, he's a great regional builder, he and I were out having drinks one night. He goes, “In 2018, in this area, we were 30,000 permits behind.” Even what happened from 18 to 21 or 22 with all this huge growth, he goes, “we are still 18 behind.”

Even with this, with what's going on in the markets today, yeah, there's going to be ebb and flow. I mean, I was lucky to live in Northern Virginia. You got the federal government there. It flows. But there's always something there. I feel for some of the areas that really get hard hit and shrivel up and die.

It's funny. I'm working on a deal, oddly enough, in Lackawanna, Pennsylvania, where there are no national builders. We're trying to figure out how to make this little deal work, which is really tough because… So it's right next to Scranton and, you know, essentially, when steel and that industry died, Scranton was just kind of bumping along. There's no big draw there. There's nothing happening. It's very funny to try and work in those.

And then, when you see the economic impacts of today, they kind of tighten back up a little bit, too. You know, there's not a builder that wants to go out on a limb. And that, looking down at what's going on in the Southeast, with industry moving out of the North and Northwest and Middle America, moving down to South Carolina and North Carolina, those areas are kind of thriving and moving. It's interesting to see those subtle shifts and changes.

But again, what I did notice was that the national builders are machines and they get to feed their machine, even when it slows down. Those guys are more innovative. I mean, right now, they're buying down points on 7% more. Whether it works or not I don't know. You said you were in the banking industry. I don't know whether those things work, but it's what they do.

The national builders don't have a fallback plan. What are they going to do? They don't wake up and go, “Hey, let's start making cars.”

Seth: Yeah. On that whole thing of talking about the Southeast U.S., what does a market need to look like for you to pursue these projects? Like, are you looking for something like certain demographics or growth trends? Like, what makes you spin the globe and be like, okay, we're going to go here and not there? Or when you see a big development opportunity, what would make you say, no, we're not gonna go there because there's not enough demand. Like, what are you looking at?

David: Yeah, that's another great question. For me, so I've spent my life essentially up and down the eastern seaboard, the southeast. I was in Chattanooga for a couple of years. I was just outside Nashville for a couple of years during college. And I grew up in northwest Florida, so I know the Gulf Coast, Alabama, doing some stuff.

I've got two or three projects in Alabama. I know the Mid-Atlantic from having been there. I know how the Mid-Atlantic functions. And I learned interesting trends on things, just me personally, where I think people are heading and why. I look at the right-to-work state and the opportunities there.

And then COVID. I mean, myself, we were in Northern Virginia. They shut Northern Virginia down. And I have teenagers, my daughter's a senior in high school, our son is at the Fire Academy of the South in college here in Jacksonville.

But when they shut everything down, my children didn't take to the electronic learning. They needed that peer push. And we sat down and had a long conversation, the entire family, and it was like, we have to go somewhere where A, school's in session, and B, preferably, if they lock down the globe again, I wanted to be somewhere where it was warm. So, Northeast Florida, so we're here.

And so what I noticed from that, just also being a student of people, I watched people streaming out of the Northeast, out of Middle America, South. And a couple of other things happened with that was we can work from anywhere. I mean, I do what I do here. I have projects anywhere from Texas to Virginia, Florida, Tennessee, Kentucky. I don't have to be there. I can go there and visit and look at things. I can have somebody put eyes on the ground and take photographs

It's the idea of being able to virtually accommodate what we do that has become unbelievably prevalent and a lot of ease in function with electronics and better access to information. Things that started out in engineering, when I started out, everything was done by hand. You were in a jurisdiction. I mean, there were computers, but it wasn't like it is today. Everything was paper copies of ordinances that you went through.

So I noticed those things. And to me, people are going places for a reason, whether it's to escape the cold, escape an over-aggressive regulatory arm, whether it be government or quasi-governmental, that was kind of where I look. And I gravitate toward areas that appeal to me, you know?

I mean, I'd love to do a deal in Colorado, because I think it's—to me, Colorado is where the people that flooded out of the east and came to a mountain range and basically said, I'm not crossing that, we're stopping here.

Seth: Yeah.

David: You know what I mean, they were like, “Man!” Yeah, think about it. If you left the Blue Ridge and you rode in a covered wagon and you saw the Rockies, I'd pitch my tent under where we are, I’m good.

Seth: I saw this video a while back explaining why California sort of operates like a different country. Like in its prices and its culture in a lot of different ways and a lot of it has to do with the Rocky Mountains, because it's so hard to, or for a long time, it was so hard to transport oil there and just travel there at all. You had to come around the other side of the country just to get there. So, it's interesting.

David: Yeah, well, until the Panama Canal. But I think that's a lot of people, Seth. I think a lot of people focus on… not necessarily what they know.

And actually I do, I see it in the industry that we're in. I see the guys who… I don't understand it. I appreciate it but I don't understand it. The guys that flip lots, one lot, 10 lots, but individual lots everywhere. I don't understand it because to me, 20 transactions criss-crossed everywhere, versus I find one piece and I can turn it into 20 lots and I can do it. The timeframe takes longer, but it's what I know.

For me, I see the added value of that operation. And that's not to discount the fact that there's been a lot of money made. I'm sure there's a lot more to be made in finding those one-off lots and finding the right buyer.

Seth: Can you tell me about a time that a development opportunity crossed your desk, and you just said, no, this is a terrible idea. The market's bad, the property's bad. Why did you say no? What went wrong with that?

David: Nine times out of 10, it's not right off the bat. I look at a ton of things. I’ll give you a great example.

I had somebody bring me something in Oklahoma. And for all the world it actually might have been a really cool opportunity. Eventually, it was east of Tulsa, almost at the Missouri border, can't think of the name of the city. Although I want to say Roger Maris's house was in the little town, Converse right above it. And it was really neat. And the gal that brought it, and I explained to her after I went through everything, like the little town is kind of coming back, Route 56 goes through there, and all these things.

And her big thing was that the American Heartland is about to do this park, you know, like Disney World in the middle of nowhere in Oklahoma. And her thing was, this would be great for housing and things.

And I paused for a minute, and one of the things that hit me was, and I sent this to this gal, was Orlando and Disney World. Go 30 miles, draw a circle, 30 miles around Orlando, and what are you going to find? It is still rural as hell. And this little town was like 45 or 50 miles from that core. And I went, it's not what you think it is. It won't work. I mean, it theoretically has a potential, but it's not going to work.

But I didn't walk away from it immediately. Anything that I look at, I embrace. I'll look at what it could be and what all the options are. I guess what I like to see myself as, I'm not a problem finder, I'd rather be a problem solver. If there are too many things to overcome, then I have to just say, you know, it's probably a deal for somebody, just it's not a deal for me. Does that make sense?

Seth: It does. And the next question is, when you find a deal that does make sense, how are you figuring out how much to offer for these things? Are you just paying full market value, whatever that is, or do you need to get it at a certain discount or something?

David: There are a couple of ways to look at it. I look at as many, people say, off-market. That always makes me laugh. It's off-market. Is it for sale? Yeah. Well, apparently it's on the market. If it's for sale, it's on the market. You stumbled upon it. I know guys have lucked out. A blind squirrel finds a nut kind of thing.

But yes, there's a negotiation. Once again, I open book them. I'll sit down with a seller and tell them exactly, “Okay, here's what you have. In my opinion, you've got this much wetlands. I think I can get this many lots out of this, the builders will pay me X for the lot, I need to be here.” They can either get down to that number or we go back and forth with a few things.

What I learned a long time ago is that I don't have to buy every deal. Many times, sellers are too stuck on a number that doesn't work. Have I put things under contract at a seller's number because I thought, yeah, we kicked out of two deals this year, maybe three, one north of Atlanta and one in Savannah.

What I do with those is the deal in Savannah. I told the builders what I wanted for it and I had a builder come back. And he gave me my number and I still couldn't get it over the line. I went back to the seller who was an elderly gentleman and I made him a great offer of a structure and he didn't want to do it.

But what I ended up doing in the end was I hooked my builder up with the seller because the builder, he'll entitle himself to develop. So basically, I didn't get there in time, I couldn't assign my contract and get a fee or anything, but it was a builder that I haven't worked with before. And by putting him in the deal, I built a relationship so I can go back to him.

We had this conversation and I said, “So okay on the next deal, you're gonna pay me a little bit more.” And he goes, “Yeah, if it works, we'll do that, definitely.” And actually, we're looking at a South Carolina deal that we'll probably do with him.

So I was able to post it with a builder, saved the deal, kept the seller happy because I know the seller's got some other stuff, and it created a relationship with a builder that I didn't have before.

Seth: So when you're coming up with an offer price, it sounds like you're kind of reverse engineering this, right? It's not like you're comparing other comps, if comps even exist, it's more of, okay, what's the end game and what's that gonna make and how do we back into our offer price number? Is that right?

David: Yeah, a comp to me is, it's useless. Because, I mean, I'm sure it's useful to someone. To me it is, it's useless.

Seth: No, I totally get that.

David: I don't care what somebody else paid or what they got. And I've heard that from sellers who, well, so-and-so across the street sold for this. And I'm like, yeah, they sold on a rezoned piece with construction plans done. You don't have that. You've got a raw piece of land, and I don't know how we're going to make that work.

Yeah, I do. I basically reverse engineer. And then figure from there what could go right and could go wrong.

Seth: I don't know if you've ever heard this, but I know when I first started learning about house flipping many, many years ago, which I did not end up doing, because I was not good at it, but I heard this idea that anything is a deal at the right price.

And when I think about what you do, and the fact that, you know, going back to this Oklahoma example, say if you got that land for free, and you put half a million dollars into developing, you know, a development that nobody's going to buy. Would you disagree with that statement, that anything is a deal at the right price?

David: I would disagree with that every day. But you made a great point. In that genre of a house flip or a lot flip, then that's 100% correct. If you can pick up a lot for a thousand bucks that has any intrinsic value and roll out of it for $2,500 or $3,000, that's a deal.

What I like to think that I'm doing is, and others do—I mean, this is no innovative thing that I just somehow managed to figure out—not every deal is a deal. There's a lot of things that… again, I've looked at a lot of things where I wanted to make the deal work and if you can't, you can't.

What I like to think of it as is leaving a deal where I don't sour the other side.

Seth: Yeah. So how are you finding these deals? Are you finding them yourself or do other land investors bring them to you? Where do these come from?

David: Yes and yes. I'm in a couple of deals where other people have come to me who couldn't figure it out and have asked for help. I'm in deals that I've found. I found the one in—the big one that we have in Augusta. A couple of South Carolina deals, realtors.

Seth: So you're kind of just always scanning the horizon and people know they can come to you with these kinds of opportunities?

David: I'd like to hope so, yeah.

Seth: And how many of these projects do you do per year?

David: It depends on the level of involvement.

And again, like we talked about earlier, I'm trying to get better and I can't keep doing everything for everyone for nothing. But I love it, so I kind of do it in my sleep.

But I think once you get to a certain point in the engineering process, once you get past the study period, the 120 days, because I think somewhere between eight and ten of these per year, there's a lot of work in it, but you got to be backfilling. You need them staggered and you got to backfill with things coming in. As long as you can't just have eight of them and stop and then scramble for eight more than that.

I think as they roll forward, juggling eight to ten, because again, not every deal is a deal. You're going to kick out of a few. Some will make sense, some don't. And some things get through the process faster.

Seth: I'm trying to figure out, how do you make money and how much money can you make from these deals? And which hats are you wearing in this process? Is it you doing literally everything? What are you not doing in this process?

David: Okay, well, it depends on how the structure is. I'll just focus on the deals that I'm working on with one partner.

So we're 50-50. He's the money guy, I run the show. Just a quick example, right now, the deal in South Carolina, 1.8 million. Our contract is for 3.9.

Seth: So that profit you guys split 50-50?

David: Yeah, and once everything is paid back, entitlement costs and things like that are netted out, yeah, 50-50 of the net.

Seth: And then being the money guy, so whoever this other person is, they're kicking in all the cash? Are you getting like a bank loan to float it while it's being developed and sold off? How does that financing work?

David: Right now, he's covering the entitlement costs, and then as we close deals, money will stay in to fund other deals.

Seth: And was I understanding the timing right? Like you get a property under contract for, say 120 days, in that time you're doing your due diligence like your topo survey, your wetland delineation, anything you need to know to get the thing figured out, and then the entitlements happen after you close or before you close?

David: You're not gonna close until it's fully entitled. So now after the 120 days, your deposit goes hard, then you start your entitlement work.

Seth: Okay, so after the 120 days, what is the time frame after that you have to get your entitlements done?

David: Depends on the contract. The least would be eight months, both probably 18, or depending on the jurisdiction, if they entitle quickly, it'll be less.

Seth: Okay, so like on that $1.8 million deal, say if it takes, I don't know, 12 months or something to do that, once the entitlements are done, then you buy it for $1.8 million, and then it's up to you to, are you putting in roads and utilities and all this stuff?

David: No, although I can, I don't like that. I'm not a fan, but we could. If you get that far in, it's debt and equity to finance.

Seth: So you're just doing the paper entitlements and then you're selling off everything to a builder and they come in and put in the roads and do all that stuff?

David: Yeah, or a third party developer. My preferred method is to contract directly with a builder developer or a third-party developer.

In Augusta, we're going right with a JV between a third-party developer and the builder. I've got a project in Alberta, Alabama. We are contracting with the third-party developer who has an agreement with the builder. I put the builder in, he brought the developer to the table. Now we're working with the developer who's got an agreement with the builder.

Seth: So, that builder is super important. How do you know that they're committed? And at what point did they come in and say, yes, we'll do it, and do they put money down or something? How do you know they're serious about it and they're not gonna flake out?

David: Yeah, my builders, my preference is to have a builder either under contract or right at that point before we go past our study period.

Seth: So, before you go past the 120-day due diligence period?

David: Yeah, to give you an example, on the South Carolina project, we had six LOIs from the national builders.

Seth: So six different builders were like, “Yeah, we'll take it.”

David: Yeah. And the builders post 10% of the contract value in a deposit.

Seth: And that happens before the 120-day, or whatever the research period is?

David: No, that'll happen after their study period, depending on what the terms of their contract are. Normally, 60 to 90 days.

Seth: And if something were to happen like what you were talking about in 2008 in West Virginia, maybe they would walk but you would get there 10% that you could keep?

David: Yeah.

Seth: Okay.

David: But hopefully they don't. What you do is you restructure.

Seth: So just like, ask for less money?

David: Well you know hopefully everybody sees the writing on the wall and you go back in maybe restructure a little bit with the seller, restructure with the builder you know, and just try and keep the deal like anything else to try and keep pace together.

I mean, we did everything everything we could to try and keep things pasted together, and it was just, as you and I spoke about earlier, everyone was in shock. You said you were in banking, right? The bankers were in shock.

Seth: Yeah, for sure.

David: They didn't believe it. It was like, “No, no, no, this will all change tomorrow.” Like, it ain't changing.

Seth: Yeah, that was a crazy time. I don't know if we'll ever live through something quite that bizarre again, but yeah, it was nuts.

David: Yeah, it was definitely different. And it's hard to explain to folks who missed it.

Seth: I know demand for new building and that kind of thing is super important for this kind of thing, because if you're creating all these new products for builders and that kind of thing, there needs to be sufficient demand.

So given this environment that we're in with rising interest rates and buildings kind of slowing down in a lot of places around the country, does that pose a serious risk to you? Say, if you started these projects back when interest rates were a lot lower, and now they're going higher, I don't know, does that ever happen where a builder's like, you know what, things have changed, we don't need this anymore, see ya.

Is that only the most catastrophic situation where that kind of thing would come up?

David: You know, it could, it did in no way. I'd like to hope we're a little more savvy about it now and that people are more realistic.

No, I mean, you certainly could, I mean, it's a risk. Anything we're doing's a risk. The question is, how do you minimize your risk? How much are you out, you know, can you afford the deposits? Can you afford how much entitlement you've spent?

It's the biggest reason to avoid closing on a property until you have something. I mean, imagine you spent a million eight on a piece and now you gotta sit on it for five years. It might be better to walk away from 70 or 80 grand than try to figure out how to juggle a million nine for a certain time frame.

Seth: If somebody's out there, they're listening to this, they're hearing you talk, and they're like, man, this David guy, he's awesome, what he's doing. Like, I want to do what he's doing.

And admittedly, it sounds like a big unfair advantage you have with your ability to look at a property and just intuitively know and sketch out, “This is what I think is the best thing. Here are a few scenarios.” I don't know how to do that. I have no clue where to even start with that.

So, is that because of your civil engineering background? Or if somebody wanted to become like you, what would you suggest they do in terms of their career path?

David: Again, well, career path, I mean, trustable engineering if you have an aptitude.

Without that in place, no, I'll tell you the same thing. I've said it a few times in this, read the things that matter. In this industry, to me, if you're looking to do this, you need to understand those things that matter, the zoning ordinance, the subdivision ordinance. It sucks to read them. They're technical manuals. But in those, there's little ClipArt pictures sometimes and some ordinances that show you what they're looking for.

And all that does is give you a basic understanding. The rest of this is, I guess, you could find the right engineer in. I don't know, but you're killing me. It's a tough question.

Once again, I use the tools that I've forged over 35 years to kind of do my end of it. There's a dozen ways to skin this cat, find an engineer, but then you're trusting someone else. My issue with these things, and I tell this to folks I help. It's not that I don't trust everybody, but here's one thing, it's why you need a lot of people looking at things.

If I had one piece of property and I gave it to ten engineers and I got ten of the same answers, I don't need nine of you. You want ten different answers, but you also want somebody who's looking.

I'm the most unconventional engineer I've ever met. I don't think in terms, in boxed terms. Given an opportunity to lay something out where somebody tells me that the minimum lot size is 15,000 square feet and the minimum frontage is a hundred square feet, I know that five out of ten engineers are going to give you a layout with lots that are a hundred by a hundred and fifty.

And I'll use an example. I had an engineer do that on my project in Alberta, Alabama and he gave me 75 lots and inside of an hour I've set in my layout with 95 lots. I've magically found 20 lots? No, all I cared about was, if my minimum lot size is 15,000, what's 111 by 130? It's 15,000.

Now, I just picked up 20 feet on three-size lots, that's 60 feet. I picked up another row of lots. I double-loaded a street he had single-loaded, but he thought inside of a box.

My first vision of things is not inside of a box. I have guys in our industry calling, going, what's your buy box? I'm like, I don't have a box, I'll look at anything you send me and we can take a decision from that. Because once you're in a box, it's hard to get out.

Seth: Maybe the box is the zoning ordinance, right? So whatever that says you can't do, that's essentially the box, right?

David: Yeah, yeah. But there's one thing, there's nuance in every zoning ordinance. And there is because they want to build in some flexibility while trying to contain you. But if you think in rigid terms, then you're stuck there.

But if you step back a second and go, “I can make 15,000 square feet look different a bunch of different ways,” that's when you start nailing the success.

Seth: And I hope people are catching what David's saying here in that taking a plan of 70 lots and turn it into 90, or however many he's able to do, effectively he's creating money out of thin air. And sometimes a lot of money, because you can sell it for a lot more. And when you have that kind of a brain that can think in those dimensions, it is surprisingly uncommon.

And in terms of finding a good engineer, I mean this is probably a huge discussion, do you have any pointers on how do you know when you've got a good engineer who knows how to think outside the box or just see things in different ways.

David:Here's one of the things, this is a good one, maybe we should do this again, Seth.

One of the things that I've learned is, in 35 years, see I can speak with you on your level, with your experiences, right? When I'm on the phone with a lawyer, I speak to a lawyer in ways that he can recognize that I'm educated, I know what I'm speaking about. When I'm on the phone with a bureaucrat, jurisdictional bureaucrat.

I've been dealing with them for 35 years. I speak to them the way they see things and I don't try and argue with them over their reading of the ordinance. I merely point out the way I read the ordinance and I don't ask them what can I do on this piece of property. I tell them what I've read in their ordinance so immediately they know that, “Wait a minute, this guy read the ordinance!”

And then when I'm having a conversation with an engineer, I speak to him using engineering terms and speak about it the way an engineer would.

And I think that can all be acquired and it doesn't have to be in those terms exactly. I mean, if you read enough, if you know enough about what you're seeking to find and you're asking the questions the right way, the answers you get are significantly different than the answers you get if you just ask someone, “What do you think I can do with this?”

Because then they're going to revert to a box. “Oh, well, you can do these five things.” And they're going to leave out the fact that we've got this other part of our ordinance that if you give us 40% open space, you can shrink everything down and do something completely different.

You'll never find that out if you don't say, “Oh, I noticed that you have this other section, and if I read it correctly, if I give you 40% open space, I can make my lot 6,000 square feet.” And a lot of times, whether they read it or not, then they're going, you hear the pages flipping. “Oh, yeah, I see that. That's interesting.”

So I think, if anyone wants to learn anything, it would be to focus on not necessarily asking an open-ended question, because you're not really gonna get the answer that you're seeking. Even if it's subtly educating yourself before you ask the questions, you're gonna get better answers.

Seth: That's a huge lesson right there that I can totally vouch for. Being able to dispense with any assumptions that a lot of us make when we ask and answer questions and really get clear on what you want to know.

Those open-ended questions, I can't stand them. I see them all the time in our forum and my answer is it depends on 500 different things. Get really clear about what you want to know and show me that you've actually thought through it yourself before you start asking questions and wasting everybody's time.

David: It's great because we talked about earlier, I met my one partner because he asked the question online and I read it and what I knew was that the question he really wanted to ask he didn't know how to ask. And so I responded to what I thought the question was they was and I wrote it out pretty detailed like, you're not asking it correct here. Is this what I think you're looking for and within three minutes I got a DM from going can we get on a call?

Seth: Yeah. Well, David, this has been awesome talking to you. So appreciate your time and sharing your wisdom with us.

If people wanna get ahold of you, do you have a website or something that someone else can learn more about what you do or anything like that?

David: Yeah, our website is openlandcommunities.com. If you got a deal or something that you're not sure of, reach out, man. I'm happy to give it a look, give you an honest opinion. I tell people I got enough of my own. I'm certainly not gonna steal anything from somebody. I've never done anything like that in my life.

I’ll also sign NDAs or non-competes, I have no ill will. I'd rather give somebody free advice and help them structure a deal right than run into a deal that somebody has just soured or clouded the water and then you got to unwind it. Besides, I like this community and I think we should all help each other.

Seth: Yeah, I'm with you, man.

Well, thanks again. Thanks to the listeners out there. If you want to stay up to date on everything going on with REtipster, you can text the word free, F-R-E-E, to the number 33777, stamp it in, all the stuff that's going on.

Thanks again for listening, and we'll talk to you next time.