Ep 557: Leases In Real Estate

Chapter 1: Introduction to Leases and Seller Financing Alternatives.)
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all right so today today welcome to today how's hope every had a good week um I told you I was going to cover this
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couple weeks ago but um kind of have some stuff ready and we'll cover a little bit into leases and master leases
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today it's not really per pertinent to what we do specifically just more information about real estate if you're
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a nerd for Real
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Estate I'm going to jump a little bit into like triple net leases and master leases
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so I hope you all got some questions for me today um I do have a book that covers
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this I think let me see if that's I do have a book homework for you all so I guess I'll drop the book right now I
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think this uh book is called wealth without risk guide for Real Estate Investors by Jack Miller if you guys are
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readers um it is available on Amazon all right so that's little side side quest homework all right we're going to jump
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into it so I did have some uh research as well for everybody here all right so
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um I do want to cover leases um cover a couple different things with leases but
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um should be interesting for some people all right so why leases so a lease is
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just an arrangement between a party um to operate that property or land parcel
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so some people Farmers lease their land to uh land owners lease to Farmers some people leas land ranchers and stuff like
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that people grow people um rent out or sub lease it um there's a lot of
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different things here but um number one why I like leases is it's another way to
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ask for seller financing um so if you operate if you ask for a lease with an option to buy
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it's essentially sell financing so let's say I had I wanted to buy $100,000
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property and they said no to seller financing well another thing I I
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switched that is I might ask for a lease with the option to buy it's it's a it's
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pretty much equivalent your payment all your payments go towards the principle and it's essentially sell financing just
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different words so one thing about real estate is you can reword or switch up
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sentences to make the same meaning um and it's really really cool you can do
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it a certain way so number one relases is at least with the option to buy is equipment toeller financing so we've had
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opportunities to negotiate it we don't also deal with leasing 100% on ours but
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um I know I know we've had made some offers with leasing uh farmer or the seller had a
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farmer leasing the property and they're paying X so part of my negotiations this
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part of what your active lening is in negotiations is you need to understand their underlying motivation but you need
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to understand their underlying familiarity so sometimes if they are leasing their their far their their
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property to a farmer hey could I lease it as well I want to I want to lease with the option to buy and that's a way
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to get into a transaction without um buying it outright or
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um you get control through the lease now what's cool about leases is at
Chapter 2: Master Leases and Value-Adding Strategies.)
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least with the option to buy it gives you the ability to Value add without actually
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purchasing um what I mean by that is let's say hypothetically
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um and I I kind of bring the hypothetical scenarios uh very Loosely because you can do you can do real
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estate and this is the this conversation is kind of based off of like different different random
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scenarios like I said this is really a land call to day but some at Lees so let's say hypothetically um you found a
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warehouse 10,000 square feet and seller is motivated maybe it's not 100% rented
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or leased out and they don't want to deal with anymore and they don't necessarily want to sell or they do want to sell I don't I don't motivation you
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got to piece it out however you want but um you offer them a Master Lease hey
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maybe rent it out they make $10,000 a month on their lease hey what if I gave
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you 4,000 a month and I master relase this whether it's rented out or not you
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get a flat payment and it is what it is you can negotiate your own uh lease
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payments which we're going to cover lease payments here in a minute with commercial tenants but you kind of negotiate your own
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terms now the terms of your lease are to your benefit you know we're getting the weeds there 27 people on here you can
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get stuck in the weeds um but the terms are to your benefit or to your detriment uh whatever terms are negotiated on a
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lease because just like a PSA purch sale agreement on a contract is important a
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lease is sometimes just as important if not more important so your lease terms
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can benefit you as a lease e or benefit you as a lease e with the option to buy it can benefit you in a lot of different
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ways so um you can let's say hypothetically
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10,000 foot making maybe it makes 10,000 a month uh you offer a Master Lease with
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that seller at 4,000 a month and it's guaranteed by you he might already have tenants in there that maybe bring 4500 a
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month so it's like yeah for 500 bucks a month I'll let him deal with it with your option to buy you can negotiate a
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price which all your payments go to the X purchase price whatever that is but it gives you the opportunity to Value add
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what do I mean by that if there's vacant space or there's room for negotiation
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inside the current leases that are there a you can rent current fill the space that's unavail that's currently
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available to increase rents you may have negotiated a partial release to the seller on that or maybe
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it's flat rate but you can essentially create cash flow on a property you don't own through a Master Lease really cool
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um but you can also value add so commercial property is valued by its noi
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which is its income Min of expenses if you can increase the value of that property with your option through a
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lease you now essentially creating value out of thin air without actually purchasing the property which is really
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cool so there's a there's a a guy follow online that's his whole strategy he he gets Master leases on property because
Chapter 3: Understanding Commercial and Triple Net Leases.)
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um there's a I don't I know who says it it's a quote that's probably been passed around and around for years but it's uh
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it's own nothing control everything this is one of those things where you can
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essentially control a asset without actually owning
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it so it's it's uh different scenarios so um Side Story is I'm U some family
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friend of mine um he had like he had like a small business where he needed like a a flex space of warehousing like
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1,500 square feet 2,000 square feet so he ended up negotiating a Master Lease on accident with the seller and
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the seller agreed to it um he negotiated a really good terms now he needed the flex space for his personal business so
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he's running the business running the business he's like man this is getting crazy so his
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uh he ended up uh his business actually ended up going under so he vacated the
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space and found a new renter with the new rental rates on that space he was able to make more money on the lease
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than he was in his business operating in the space um and he negotiated a really good
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Master Lease so he essentially gets the cash flow spread off of all the tenants on that property and he keeps the cash
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flow so he's making more money off of all the tenants in that property than running his own business on that
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property it's a really cool interesting story but that that's that's that's a
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perfect example but it's uh it's very interesting what Lis can do we're going to jump into Comm leases if you guys
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have any questions put in the chat I moning the chat but I'm going to show you some commercial leases because um as you do in the land space you do come
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across it every once in a while and um as you doing commercial land you you see
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it a lot of times so who hear a scene uh a double n or trip or 3n thing in a
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commercial listing or anything like that on Loop net or anything like that does anybody know what that means double net
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triple net leases Edward we
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go all right Al 20 all right all right so um double trip net leases have
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different terminology you can Google it essentially they carry different weights for the leasi and the and the the Lor I
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think it's the two terms Lor and Lease essentially the owner and the and the and the Tenant or whoever's has the
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lease so they have they carry different weights of responsibility so um these big corporations that do uh trip on at
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leases um the advantages they get by doing trip on at leases is they don't have to carry the ownership of the land
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so imagine you're in a hight traffic corner on um in a really good high
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traffic Corner um there's a lot of uh vehicle visibility you drive you drive by those locations every day if you
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drive drive for dollars you drive to the grocery store that that way to the grocery store wherever that grocery
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store is a high traffic and area high traffic Zone um so
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there's uh essentially big anything of like your Walmart HB Tractor Supply um
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they own they might be on a on a big section and then they'll be like restaurants or Starbucks or a little uh
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strip mall right in front of it there's going to be all the stuff in front of it right so what happens is that anchor tenant brings a lot of traffic and then
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they essentially have all this front part that is accessible in other restaurants and um ice cream places they
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all want to be barber shops they all want to be in front of that because they're already getting foot traffic going to that HGB or that Lowe's or that
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Tractor Supply whatever that is so what happens is is that these big
Chapter 4: Real-World Examples and Lease Term Negotiations.)
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corporations they have to buy that land or hypothetically have to buy that land that land might be worth $10 million
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it's really really expensive and then the building might be $20 million and then uh the annual maintenance on that
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building might be another million dollars a year so it adds it really quickly not that they can't afford it
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but think of as a corporation they want more locations because their business is selling goods and services whether it's
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a low selling construction equipment or tra Supply selling farm equipment they they want to sell X whatever their Niche
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is so they need good locations and they're not necessarily in the real estate business so if you guys ever seen
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uh if you guys haven't seen the founder uh it's about McDonald's go check it out it's another side quest
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movie uh For Your Entertainment but the founder kind of talks about this as well um McDonald's realized it wasn't a
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burger business they were a real estate business so what happens is these big corporations is they instead of
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purchasing the land outright they will sign a a double trip at least on the property and they will pay rent to
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whoever the land owner is so for context every
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commercial property a lot of them there is a renter which might be the h be the
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Tractor Supply the Starbucks the McDonald's the Burger Kings the slot skis uh tire supply Chase Bank they're
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renting the land and there's somebody that actually owns the land that is getting paid
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rent now who wants to get paid rent from a Chase Bank every month that' be a pretty good check right we're not doing
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anything this is why land is dope so and the reason why these big corporations do that is because I talked
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about the lows it it costs a lot of money to build and Main maintain these things that to hold it they can get five
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more locations hypothetically versus keeping this one's location in one spot
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so they rather have more locations sell to more people versus owning that dirt in one spot so they do a triple net
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lease so we're jump into some triple net leases um the good the bad the ugly and remember the least terms affect the
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price because depending what what's in the lease it can go either way for uh
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the lease owner uh let me go require this question have you guys ever heard
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commercial land leasing for storage near ports industrial sites airports yes uh
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secured land reports and yep yep there's a lot of cool things okay so here here's
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another cool thing uh I know I'm really into the weeds I hope you all if if you're learning something today give me a thumbs up this this is I I love land
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and I'm I'm learning I learned a lot about this over the years and it's just interesting to me um I enjoy the stuff
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so um I actually learned that uh like you think of my miam uh marinas where
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boats stock up somebody owns that land and they lease the land I actually learn
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this from Frank who's not here but Frank said that um they'll do like 99 year leases for the waterfront property and
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they'll just collect rent and some family owned that land where the marina is and they just rent it out rent it out
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they just received cash flow off this land so whoever built the marina owns not owns but they operate
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the marina and collect rent from all the boats but they have to pay rent to whoever owns land for the boats so it's
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really cool so really cool space with leases all right we're going to jump into let me share screen so I went
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surfing uh I went uh surfing on loopnet for commercial leases just to kind of show different examples of stuff and
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what can be good or bad about them and just the general stuff um Marvin says
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we're going to RV park with Marina so you can buy it if there's no lease in place put a lease in place and
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then sell it and you can still own and collect off that lease Food For Thought food for thought all right so I I picked
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out five locations this is a Walgreens uh seven and a half cap rate
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and then it's selling for $7 million it's crazy all right so the way we do
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cap rate is it's your noi divided by the cap rate which is 7 and a half
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and you get this $7.5 million so they're paying $565 a
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year to do the math on that 565 divided by 12 that is $47,000 a
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month Walgreens is paying $47,000 a month to sit at this
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location that's cash flow it's crazy all right so $47,000 a
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month and then there's something here that they caught my eye let me see if I find it
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um so what happens after the lease is up let me cover some of this too so there's
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this is a 10-year triple net Walgreens this is in Jud Road wherever this is
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Atlanta this is uh Georgia all right um there's something that stuck out of me
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that's why I pulled it so um after the leasees up essentially whoever owns land keeps the
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building that's another key thing so they actually get the whoever leases that space for a certain amount of time
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if they build a building any type of value ad you actually get to keep whatever's on it which is really
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cool um there's something on this one that stood out to me that's why I have to find it on why stood out to me
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um skip on this one uh 50 50,000 cars per day so visibility high high traffic
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Corner oh oh this is it preferred fiveyear option structure so remember
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the terms are written into the lease so you'll see this a lot in commercial preferred five-year option structure so
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essentially I think they have one one fiveyear option they don't really say but they should these other ones say it
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so essentially they have 10 years left and then they have opt they have extra they have option to exercise for another five years they may or may have not
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negotiated that fiveyear option into that lease and it could be to Walgreens
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benefit and to the detriment of whoever the owner is and whoever created the least so what happens sometimes with
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commercial land especially stuff like this is sometimes uh these commercial tenants like Walgreens I think I got a
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Hardies Dollar General we'll C over those in a second but what they'll do is these these tenants they're sharks you
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they got good attorneys they got good lawyers they got good uh high paid attorneys so what they'll do is anybody
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that has doesn't know what they're doing they'll try and work them over on their
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Buy price or their lease terms and it could be to the detriment of the owner that uh they get screwed so
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I have another Side Story with this this is off Twitter and then I'll jump to the other examples um a guy owned a gas
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station his name is gas biz on Twitter if you want to look him up uh you can search up the story just search F under
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his account but he's talking about a story that he owned a gas station in a great location so one thing I always iterate is that the land business
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everybody that invests in real estate is in the land business they might not understand it but they're in the land business perfect example is this story
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and it has to do with leases as well so um guy owns a gas station he owned it
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for years uh Chick-fil-A approached him hey we want we want your location uh since you have a good high visibility
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Corner whatever X they wanted um so they start negotiating out the lease
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but they want to lease it once you have a lease you can sell that lease because it's um not guaranteed income but it's income
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that has value hence the loot net Stu it has uh it has value in the lease so uh
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Chick-fil-A shot him a price and he's like H that sounds kind of low they shot him offer like $3
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million um he went and talked to a commercial broker but that does leas his with Chick-fil-A on the rep presentation
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side and they shot him a 50 cents on the dollar offer essentially if he would agreed to those first initial lease
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terms it would have been worth 3 million dollars but based off of what was happening in the area and other people
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were getting um he could have um the terms he ended up negotiating with were like 5 half million
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do that's what he actually ended up getting and then end up selling the lease on that property but they converted his gas station into a
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Chick-fil-A and he ended up selling his lease for like5 half million dollar um but the initial offer they offered them
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was three so you always got to think about the the lease terms that they that those entities create aren't always in
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your favor they're always usually in in the tenants favor all right so we're going to jump
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into another one um so this one a five-year option so fiveyear options
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those are really good one I found a while back but I couldn't find it but I think I found some more all right here we go this one
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is uh this is the hardies in Ohio Dayton
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it's a 20year triple net lease with zero land or responsibility
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begin with esc's close um and a 6.25 cap rate so if we
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do noi divided by the cap rate you get 1.7 right this this is why this one Str
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out to me strong hedge against inflation with 6 and a half% rent increases every
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five years what does that mean what does that mean uh this this will
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stood out to me because this is funny because essentially is they have I think
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that I don't know if this one extensions too uh this one it means that they have a certain rent they have a certain rent
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rate in their which is let's say 110 a year because that's what it is right now so 110 a year it's 11,000 a month right
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they're paying 11,000 a month uh six and a half rent increases
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over five years so after five years or after five years the rent goes up six and a half% in tranches but if you
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divide that by five years it's 1.1% rent
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increase which is crazy like inflation is 3% so whoever holds this this uh land
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lease essentially loses value the longer they hold it if that makes
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sense quick little one let's jump to Hardies here's another Hardies this might be the same one uh um there's
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another one in here that was a good one um I think it's the same one all right
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let's jump to doll General all right here's a Dollar General uh Georgia triple net leaf in
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Georgia let's kind of run through it um 7.2 strength cap rate list price
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is 1 one noi is 83,000
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um so Rob this is I'm gonna answer Rob's question how can Brokers be not
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embarrassed to post this people buy this there's so much dumb money out here that people buy this this is this is this is
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hilarious to us um all right so this is a good one okay there's there's 11 years
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remaining on the primary term corporate guaranteed so these are corporately guaranteed by Dollar General uh which
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holds the credit rating of BBB which classified uh there's a good one four
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fiveyear options to renew each with a 10% rate increase so
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there's 11 years left so whoever bought this and creaded it they've held it for four years or retr it but now there's 11 years left right four or five year
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options so essentially they control this site hypothetically for 31 years 31
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years um and then this is the other one each
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with a 10% rental increase so 10% divided by 5 is a 2% annual rate
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increase crazy is another good one but five fiveyear
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options well I found a discrepancy so five fiveyear options and it says four
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fiveyear options over here so which is it who knows but it's still bad it's still bad um this is crazy so
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essentially they're buying at a at a 72 72% interest rate but uh if inflation
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goes up higher than 2% they're losing money every year they hold this hypothetically all right here we go
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Kansas we got a Jimmy Johns 5.5 cap rate 994
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purchase um 10% rent bums every five years so that's 2% year um and then there's another good
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one here on this one two fiveyear option periods right there so as you can see it
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happens a lot um but I guarantee you if you really want to get dangerous in the
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lease space get one of their contracts what's the what's the term is
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uh great uh Artist Artist Artist great
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but good artist steel I don't know if you want if you really want to get some strong lease contracts so you can get a
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hold of one of their contracts um that's crazy those contracts are
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probably like super thick so uh I do have some side note stories with this um
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commercial is it's it's a commercial land in general or commercial in general is is just it's a crazy animal um in the
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real estate space um we're dealing we have a we actually have a commercial project we're working right now um
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that's 15 acres in San Antonio that we're negotiating with
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Lowe's um and Lowe's they said their current site requirements for
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land um so they can buy they can buy the land in different stages so they can buy it raw un just untouched they can buy it
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site ready or they can buy it uh what's the third one
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um essentially the foundation ready uh they have three different ways and I was
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on a meeting with them like a week and a half ago I think it was last week actually and they said their site plan
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uh requirements is 500 pages
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long 500 pages long um so they can get really into the weeds but
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um these these leases have their benefits especially for corporations and franchises that do stuff like this because essentially they can grow into
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multiple locations uh you got to think of like Toys R R Us blackbuster I'm sure
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was on triping at least has went out of business uh Walgreens shutting down Stores um what another business hit
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right now that's going that's losing locations um I think Chipotle s down some
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locations so you got think they have long-term leases in these in these things that they ESS have to do a buyout agreement or they have to pay that rent
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till the term the term ends so commercial leases are a different animal
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um they have a different animal um one thing I mentioned a couple weeks ago is
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that there's different ways to like cheat the value of leases because
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rememberers based off the income so what some people will do I heard this one on Twitter like I said I
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I'm just a sponge stuff it's very interesting to me but um there was a guy he said that essentially let say you can
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rent a commercial space for $5 a square foot a year or $12 square foot a year it's $1 square foot a month right
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essentially what they'll do is they'll like hey nope no I I need you to lock in this lease for X but I'm not going to
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charge you rent for six months oh that sounds amazing that means I can do whatever I need to do for this property
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not pay any rent yeah but whenever the rent's due I need you to pay $13 a
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square foot per year or $4 foot a year they'll raise the rent on them so increases their noi on the lease because
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whoever the owner is that's creating the lease on their side they have higher than current rents in their lease that
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way they already know their Exit Plan as soon as they have uh payments of that lease coming in they can sell it at a
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higher valuation to the next person and kind of Stick it to somebody because those aren't Uh current rent rates in
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the area they're higher than rent rates but they gave somebody some type of concessions to get the higher rent
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rates so it gets it gets very interesting into commercial spacing and
Chapter 5: Zoning Changes, Entitlements, and Expanding Real Estate Ventures.)
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leases um yeah so that's a little least thing let me see what else I got I have
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some more stuff all right
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um uh would love to see a case study kind of presented
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to in the maybe three here uh would this apply to residential if you offer lease
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with the option to buy on lar Ag and a take a lot subed out and sold to a buyer to build homes and
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trailers um yes so everything's negotiable so let me ask there's like three different
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question there if we offer a lease to the option to buy on our Gage gridge yes you can 100% do that on a
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subdivide we've made offers to that uh we had a deal come in and they were a
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farmer and they're renting out they're leasing the land to a farmer so uh they said no to creative financing
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so one of the offers we pitched was a lease with the option to buy um and essentially we' pay them more than the
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what the farmer was doing it for uh what the we're going to pay them more than what the farmer was paying um and that
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was part of our lease with option to buy um yes you can 100% value out with the
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lease as long as you have the option to buy with your lease yes it's the same as financing um you can understand do this
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with houses too um there was a during Co I talked to a big Airbnb guy and if you
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don't do this right you can get in trouble because I think somebody else got in trouble from this recently essentially they're leasing they're
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doing corporate leases with houses and with a corporate lease they
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would get pay them more than rent rate and then they'd put it on Airbnb after they furnished it so they would leverage
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let's say the house was paying a $1,000 a month in rent they'd give them 12,500 a month in rent furnish the house and
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then uh put on Airbnb for and probably make two three grand a month off of it
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so it was a way to Arbitrage the the home ownership without owning the owning the house the land the the landlord
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owner received a higher payment than rent rate and the Master Lease person
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who's doing the Airbnb uh dealt with all the issues of Airbnb so it's like a win-win scenario
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um so yes you can do this with houses um
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would they own their home outright or contribute towards a buyout of the lease
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um I think I mean as long as you have as long as you have the option to buy and
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your payments go towards the principal um I think it's 100% possible some people do this with like wraps they'll
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sell their house on a on a lease with option to buy it's another way of doing a WP without recording the
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deed so there's a lot of ways to
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go circles around stuff that have different regulations because I know you can't do contract for deed in
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Texas but um I don't know if you can do at least with option to buy or an option
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or just a second position mortgage second position mortgage Pi is the cleanest but there's a lot of different
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benefits to doing different strategies um with leases but leases are very very
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cool um if you're in the commercial space or just come across it it's very interesting mess with but any have any
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other questions kind of went through my little
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lease any other questions yeah we we've been using them
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we've been using them Loosely um but we haven't got any least contracts yet one
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day we'll get one eventually the right person will come around that I'll say yes to it but um
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uh contract for deed is essentially uh it's an
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unrecorded paperwork it's like an unrecorded note so let's say you have
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you want to sell your house for 100 you want to sell your property for 100,000 with his house or land and you have
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somebody put $10,000 down and you have them sign a contract and they make payments just like a mortgage and note
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but what it is is that uh you don't record the the paperwork hey the you have the paperwork as the seller and the
31:30
buyer has the paperwork as a buyer but till they pay it off they don't receive title so you essentially pay taxes
31:36
you're on title as the owner and they have a contract essentially in placees
31:42
as a deed and that is their ownership till they paid
31:49
off so that's
31:55
contct so yep no problem no problem
32:01
yeah anybody has any questions about anything Anthony said he couldn't make it today we got 20 minutes left go ahead
32:08
build build build n yes Sir Daniel but I guess as far as the question does no a exam kind of kill a deal I know
32:14
dependent on whether we do the subdivide exit or if we're holding longterm it would affect it right if if there is no
32:19
egg exemp so some properties have deed restrictions this is why we like the roll stuff the rooll stuff is going to
32:25
be a exempt in some way shape or form but um if you buy stuff close to the city that's where you're going to come across uh deed restrictions and
32:32
oversight zoning uh for instance we had a property we're working um that we still have in a
32:39
contract it has it's technically agricultural but it's has sfr single
32:46
family subset zoning so technically it it's in the and some what some
32:52
municipalities will do is it's in the path of growth they'll subset that zoning multif family or commercial or
32:58
industrial or um even single family but it could be agricultural at the moment but it has subset zoning of whatever the
33:05
city wants it to be to push land owners and developers to come in and turn this
33:10
area into industrial or single family or housing but it is it does have agricultural
33:18
zoning okay that makes sense appreciate it yeah so there's there's like under
33:24
there could be like underlining zoning or or deed restrictions on the property that prevent certain things to come up
33:30
unless you get unless you file for a um variance which this this is why I love
33:37
land man land is is is a clean slate and you can kind of create whatever you want on any parcel you just have to go
33:44
through the paperwork process of it and the approval process of it so let's say hypothetically you found um this this is
33:51
really good stuff right here so let's say you found uh a property next to an
33:57
industrial place but it's zoned agricultural right you contract the seller hey you
34:03
have this you have this agricultural land for 10,000 an acre let me buy these
34:08
50 acres for half a million but I need six months or 12 months whatever that is
34:13
right during your due diligence process you go through the county and change it to
34:19
Commercial and you do a variance you go f through the paperwork you go to the commercial paperwork to turn it into
34:25
commercial uh if they approve you and they change your current zoning from agricultural
34:30
to commercial or industrial whatever that is you just up zoned your property
34:36
and now your property might be worth 30,000 an acre without doing anything but filing paperwork um and it's called
34:42
the up Zone um so it's just simp simple ways to value value ad land without
34:48
necessarily you don't have to build anything you just change the zoning which is a possibility we're doing on a deal right now we have some agricultural
34:55
single family but multi family has a single family zoning it's just higher density so we're looking to change that
35:02
agricultural parcel up into a higher single family density and then sell the
35:08
land um which is a project we're working on um is marketing for large acreage
35:13
similar to Market from small acreage no they're completely different and here's the reason why uh small acreage you have
35:21
the only way to make money on a small deal is to find a good price that's the
35:28
only way to make money uh they won't take seller financing it's hard to get seller financing long due diligence
35:33
periods like it's hard to do all the things we do on small land which is why you kind of have to do a a version of
35:39
what we teach on small land small land you have to get a price overcharge there's no other way to monetize it with
35:44
big land um you have you can change zoning you can um subdivide it you can
35:51
build a house put a bubble home on it like you have a lot of different opportunities um with small land you
35:57
kind of stuck on on that price Arbitrage and that's it you're kind of stuck there um you can I've I've heard people that
36:03
will get like a small info lot uh have engineered plans for a single family
36:09
house follow that with the county as single family and then s it to a builder it's already approved housing with
36:16
plans and I've heard people of value adding smaller Lots but um it gets a
36:22
little harder with small Lots how much to change zoning and what return can I give back A lender if they pay for
36:27
change or zoning or engineering um I think it's individual to where where you're targeting so like uh the zoning
36:35
thing and any type of entitlement it's going to take six to 12 months give or take on
36:41
those type of projects just because they uh yep if any type of variance or zoning
36:48
change or uh Community um housing project you usually have to go through a
36:54
committee uh local development committee you have to do notific through uh they
36:59
have some have different requirements they might have to notify through mail for the people that live within one to
37:04
five miles from you or from your project and you have to notify them of the hearing that you want to change this
37:10
parcel into 200 units there are certain municipalities because I'm in San Diego
37:17
uh I learned this I didn't know this but I'm I'm learning a little bit more about land everywhere and people people have to deal with but in San Diego the state
37:25
passed a law that if Mal if they're building multif family in San Diego
37:34
County they don't have to go through a hearing they can just build it they have
37:41
to go through uh they have to do it properly through engineering through uh the city but they don't have to do a
37:46
hearing with the neighbors because you always hear about hey we don't want more cars on our road you know we don't want
37:53
more density and they the neighbors all show up and you see those City Council meetings with the people yelling at the
37:59
developers and all that stuff essentially in certain counties that have certain things they can pass laws
38:04
to totally omit that process out of it and they just build so depending on what
38:10
the need is and the state deems deems what's necessary and this is why I tell people if you're G to be land specific
38:19
be land specific because you can you you can have uh inherent knowledge to your local submarket that no one else knows
38:26
like us that we operate all over the place um in random towns that we'll never probably sell a deal there for a
38:33
year or two like we're all over the place on our side but if you drill down and Niche down into land uh subset laws
38:40
into certain areas San Antonio or certain counties you can really get into
38:46
have the upper hand over even people like us because you know the ordinances and what changes
38:53
um and this this is the crazy thing I was talking to a land developer out of
38:59
Canada uh last week and he didn't even know about the 10 acre subdivide rule had no clue no clue about it he's been
39:06
developing land in Texas for years had no clue about tener soide rues so us being having local knowledge gives us
39:14
upper hand and this is why knowing the rules makes you dangerous all right let me go through uh what return can I get
39:20
backer it depends on how long what municipality it takes uh stuff like San Diego takes like 3 to four years Arizona
39:26
could take three 2 4 years Texas can take 12 24 months um I know North Carolina is probably 12 24 months but it
39:33
depends on where you're doing it I don't know what you depend you negotiate uh how do you transition into asking for
39:38
more time and lower down if you're only willing to sell Finance with larger down
39:45
um uh I usually raise the purchase price I usually raise the purchase price
39:52
it's a good question uh let me read it again so everybody this ISS how do you trans
39:58
into asking for more time and lower down if they're only willing to sell our finance with a larger down so you have
40:05
different levers to push and I I talk about this all the time in our negotiation whenever we talk about negotiations but you have price you have
40:12
terms you have interest you have down payment you have um EMD you have due
40:20
diligence period you all these different levers to push so when they pull on one lever you raise up the other lever
40:28
it's like the uh my kids have the little blocks where they hit it and it pops up the other side and they hit it pops the
40:33
other side you you have to Bal you have to find those Balance in negotiations when you're negotiating on different
40:38
things so Kyle who's here um we're negotiating a deal right now and
40:44
uh they like the terms but they didn't like our time period they wanted to
40:49
close in 45 days versus 6 months that we initially agreed upon so I'm like well
40:55
if if they didn't uh they're pulling that lever of time
41:01
let me pull the lever of down payment so we initially going to put $100,000 down
41:07
and Kyle pulled that leverage to 30,000 I'll close on 45 days or less if
41:12
the down payment is 30,000 so you gotta push and it's push and pull on different parts of
41:18
negotiation um and sometimes we'll put larger EMD to get more
41:24
time so it's just pushing and pulling on different things to get uh to get
41:29
different things that you want versus what they want uh can we do a zone change virtually or do we have to hire
41:34
someone to do it for us um it depends on the county it's going to be very County
41:41
specific um every county has their regulations you can look up their
41:47
subdivide regulations their zoning variance regulations you can look up their uh uh mobile home park variations
41:55
like uh you can look up all that stuff online and they'll tell you the steps you can even call them uh can we get
42:01
this recording yes I will release this as a podcast in a week or two um in this
42:08
case uh we'd rather take title with less down and then do more EMD uh there's a
42:14
tenant in place with a house and this one is a four lot deal with a house and there's a house on one lot so uh I think
42:20
they just want to close so if they want to close we can close we're just putting less down so we pull different levers
42:26
BAS whatever the meet is um what are your thoughts on 100 land deal I sent
42:32
you uh C just mess back so there's there's a lot of cool things that you could do but
42:39
um push and pull man um when I tell people about that are in our space about
42:46
the negotiations that we get on our contracts they do not get them because they do not ask for them that is the
42:52
number one rule of uh creative Finance real estate is if you do not ask you will not receive so people that are used
42:59
to buying cash and closing quick they will never get a creative Finance till they start asking for it and that's just
43:05
a bottom line um so depending on the transaction
43:10
sometimes I'll push the purchase price up to get 0% interest sometimes I'll put more EMD to get more time like you gotta
43:19
push on certain parts to get uh things released
43:24
to you in your favor and in their fa it's all
43:30
negotiation any other questions I hope youall learned something today I got a question for you
43:36
Daniel so like as far as when you're targeting certain properties I know it really comes down to whether the the demand is in there and then the kind of
43:42
the comps right because I know when I was talking with James I thought I had a good deal you know good down payment stuff like that terms but like I said
43:48
there just wasn't enough activity and then the exit wasn't as good cuz like I said the poti shape and not not being
43:53
the best cuz like said one of them actually had like a a road in the property so like as you know splitting it makes it harder or stuff like that so
43:59
like as far as how far can we go out that one was still like 40 minutes from wake up which is still quite rural than
44:05
the hourish radius that we like to stay within um I would say get a second
44:11
opinion um there's things that we've learned that we may have changed our
44:17
opinion since then so say get a second opinion um we break our own rules sometimes like we say we buy stuff 45
44:25
minutes within a ra a major major metropolitan area right yeah we got a deal in middle of nowhere we got a bunch
44:31
of deals in the middle of nowhere it's just our preference our preference is to be closer to the city but we do break ground rules if if the terms or Price
44:39
calls for it you know so you gotta like we've been doing a deal in Orange grow for like a year and a
44:45
half we just paid off the lender now we're in the money but it's just a deal we working on in the background that
44:51
just took us this long to monetize right that because it was still money there to be made we just knew that it was going
44:56
to Extended timeline so if there's stuff rural land that makes sense we still
45:02
might take it on just because it might make sense it might make there might be enough margin there that it makes sense
45:08
uh to take it on um so each each individual projects differently um we
45:13
might have some land coming up in Colorado soon uh we got some deals coming in Florida possibly Georgia so
45:20
we're opening up our our opportunity buy box to different
45:26
markets just because the methodology is the same it's just are you willing to wait for that result
45:33
yeah and like I said state regulations and ordinates this stuff yep okay makes sense but but I guess if let's say for
45:39
example the one I had if there's no comps that just that kind of hurts it right because that means just not the man let's say for example this one when
45:45
James and I were running it most of the properties in the area were big Parcels not many very small Parcels like skinny
45:50
stuff so that's why it was just kind of I guess different than a traditional like more dense uh City area
45:57
yeah um generally what I look at is I look for solds and I look at what's available I look at both so um if I can
46:05
undercut the current available pricing of what's available and I have a good enough
46:11
margin or like even if worst case in Arrow they say stuff selling for 15,000 an acre and I get this thing for five I
46:18
can probably sell this thing for 10 but if I need to I can sell this thing for eight and it will fly for eight but I
46:24
know I have enough margin that I can sell this thing low enough and somebody will come buy it because they know it's undervalued so it's it's uh the
46:32
wholesale model works like I need to buy this house 7 cents in the dollar minus
46:37
repairs we might do it I need to buy this landal 30 cents in the dollar so I can sell it for 60 cents a dollar
46:43
somebody else you know yeah and the 60 Cent buyer like yeah I gotta I got a
46:49
killer deal on this property but like no I got a killer deal on this property yeah so it's it's a it's a cat and mouse
46:57
game and if the if the numbers make sense the numbers make sense and it is what it is okay gotcha yeah like the
47:03
speed pretty much that's it appreciate it goe Marvin I was ask about um North Carolina
47:11
I got this developer with like 11 Lots um 11 I think like four of them
47:19
have been sold already they're about 40K each and they're hour from Charlotte
47:24
well look at it we're looking at deals all over the place um we just uh the event was like a week and a half ago I
47:30
had like 30 messages in my inbox from all over the place so we're looking at deals all over the place right now um we
47:37
have a deal closing in Florida hopefully in the next few weeks and I haven't done
47:42
a Florida deal in over a year like it just came up there money there and we're jumping on it so there's there's
47:49
opportunities everywhere uh and like I said we're we're we're opening up like I said six months ago we're like Texas
47:55
only Texas only Texas only now now I'm like I look at anything right now if it makes sense we'll jump on it we'll make
48:00
it happen but we're kind of opening up our our our we're not going to jump into like let's do 10 deals in Florida next
48:07
week like we're not gonna do that we're kind of picking off here really good opportunities that we notice our opportunities um and we're hoping we're
48:14
hoping to open up our experience into other states because like I said we know Texas and we know how it operates but as
48:19
we do more and more different states we're learning little nuances already um for stuff in Georgia stuff in Florida so
48:26
we're just building up our experience all right any last question
48:33
I'll forever hold your peace till next
48:41
week kids are bothering all right time to go we'll see you next week if you have any questions let us know uh hit us
48:47
up if you got anything on the hook if you need any help let us know we'll see you next time thanks guys thank you bye
48:54
hey if you have any deal you'd like to submit to The Hive mine and our team go to Hive bc. it's actually The Hive
49:01
Buyers Club submit your deals and we can hopefully dispo your deal for you have a great day