Navigating the Detroit Land Bank Authority: Duke it Out w/ DeShawn Wilson

Welcome to our brand new mini-series called Duke it Out with DeShawn Wilson of Duke Investments where we sit down with our Development Associate, DeShawn! This series is dedicated to expanding on conversations DeShawn runs into through meeting with Detroit contractors, investors, and innovators. In this first installment, we are diving into the process of developing on Detroit Land Bank Authority (DLBA) properties. 

We cover the complete development process from initial property selection through final certificate of occupancy, including key challenges like high property taxes, first right of lien requirements, and the importance of Neighborhood Enterprise Zones for tax benefits. We also explain why the role of architects is so important in the development process.

Episode Highlights:

• Purchasing parcels from the DLBA.
• Neighborhood Enterprise Zones (NEZ).
• Navigating Detroit property taxes.
• Important due diligence steps. 
• Specific considerations for Veterans.

View the full Show Notes for episode 80.

To learn more about Duke Investments, head over to their website, and connect with DeShawn on Instagram.

Ready to move forward with your project? Contact us here and we will put you in contact with the right member of our team.

Make sure to follow us on Instagram, Facebook, and LinkedIn to stay up to date on new project releases, trainings, and more. 

Transcript

SPEAKER_01 0:00

I don't want a hard surgeon working on my brain. The paperwork wasn't right. Those things will chew you up and spit you out. A lot of people are very skeptical about hiring an architect. Why? How do I start? What do I do with the Detroit Land Bank Authority parcel? Welcome back to another episode of the Innovative Real Estate Podcast. But today we're doing a short version episode. Uh, this will be the first installment of our mini-series called Duke It Out with Deshaun Wilson of Duke Investments.

SPEAKER_00 0:34

Say what up. What's going on, people? How y'all doing today? Glad to be uh sitting here with my brother and my colleague Breck. Thanks for inviting me. I'm looking forward to our conversation.

SPEAKER_01 0:45

One of many conversations. So uh Deshaun is a man who is out and about. He is shaking hands and he is meeting folks all throughout Detroit, um, from contractors to investors to innovators to people who are practicing uh energy recovery and doing some of that HVAC work as well. So he's a man who wears many hats. Um, this segment is dedicated to conversations that Deshaun runs into um through meeting all these various people. And he comes back to the office uh as as an associate for us, and he says, Hey, here's here's what people are getting stuck on. And one of those recurring conversations has been, and Deshaun, I'm gonna let you ask the question your own way, but like, how do I start? What do I do with the Detroit Land Bank Authority parcel? Right? This is something you run into all the time. So set the stage. We're gonna play role-playing today, and you're gonna be somebody who's trying to develop on land bank land, and you're gonna come to me with a bunch of questions and we're gonna go through the process. Absolutely.

SPEAKER_00 1:47

So, yeah, um, you know, as a as a client, uh, thanks for uh speaking with me. Uh, what I wanted to know was um as far as the land bank process, what is the first step? Who do I contact? Um, is there is it a long process? But starting out, um, I've seen a couple of parcels from my understanding that um you can buy two if there's an empty lot or a home, you can buy two lots to the left, two lots to the right, and three to the back. Is that still current? Is it or is the land bank um a little bit more strict now?

SPEAKER_01 2:18

Woo! Coming in hot with all the questions. All right. So, first things first, you're looking at DLBA parcels. I'm assuming you're looking at the DLBA website. Is that a correct assumption?

SPEAKER_00 2:30

That is correct.

SPEAKER_01 2:31

Okay, all right. Well, it's a good thing and a bad thing. Let's unpack it. It's a good thing that you're looking at DLBA owned parcels. However, there are some differences of their marketed parcels versus their non-marketed parcels. Let's start there. Marketed parcels means that they have actually attached that parcel to a real estate agent, and that parcel is available by contacting that real estate agent, and then it triggers the bigger conversation around your purchase agreement ultimately with the land bank. If you're just looking at land on their website that is owned by the DLBA, then that is a conversation that you need to have with the Detroit Land Bank Authority first and foremost. And the question is, is this parcel available? Question mark. Because you will find out that a lot of the property that they own are not currently available. And they don't have those filtered or distinguished differently on their website. So that's a good place to start is if you are ready to rock and roll on a project and you're looking at DLBI opportunities, start with the marketed properties. Those are going to be popping up on Redfin, on Zillow, like they're going to be on your normal listing websites, and uh, and you'll be able to contact an agent and then initiate that process from there. That's the first half of your question. So you can see how how long this conversation can get going once you get started here. It won't be a short segment today, but hey, we're trying here. Uh, the second half of your question is uh parcels to the left and right of you. Okay, so this adjacent parcel conversation has long time been a tool of the DLBA. The DLBA, I will say, is rooted in the efforts to they took over ownership of 60,000 properties plus in the city of Detroit, right? It's the biggest land bank of its kind in existence in the United States. And so their goal is ultimately to find a good owner for all of these 65,000 parcels, right? Okay, that's that's it in theory. In practice, it's way more complicated. You'll find out that a lot of those parcels work as political leverage for the people who are in power, namely the mayor's office in the city of Detroit. That means that a lot of these parcels are say flagged for a future development. That means that they're not available for people, individuals playing Monopoly with small figures. You know what I mean? Like these are these are these are parcels that are meant for people who uh whose uh name ends in Illich or Gilbert or Maroon, right? Okay, it's a different tier, right? And so you're trying to weed out what properties are even available for me to look at first and foremost. I know you're confused, and now you got some questions. I'm gonna throw back to you now.

SPEAKER_00 5:13

So as far as so from what I'm understanding, is that if I read it correctly, a lot of developers are coming to Detroit because of the landscape and what we have to offer right now. Um, we're Detroit is a gold mine right now, as far as the land and development is concerned, but a lot of outside investors are coming in and they're actually buying these parcels and they're either putting trees on them or they're just letting them send it. So, you know, my my question is when I'm looking for a parcel um throughout the city, for one, um whether the question is what do we do as far as someone having a big plot of land next to you and you would like to purchase something close to that land, but it's not being developed, if that makes sense. So basically what I'm saying is that if I wanted to buy a park property and I'm looking in the zone, basically what I'm saying is green zones, like green zones, development zones. How do I go about looking at parcels that I may be able to get some type of tax credits for development of that land?

SPEAKER_01 6:17

Uh okay. Well, so there's there's the real essence of the question, right? Because you've touched on not just DLBA opportunities, you've opened it up to okay, what are the opportunities here? Detroit is still the Wild West for a lot of intents and purposes, like for what people are used to in developing, like you know, major urban zones, Detroit is gonna feel like a cakewalk because you really can propose what you want to do. And the city is is in support of most any development that comes their way, as long as there's a good plan of execution attached to it. Um, so that you're gonna have support if you're coming in here to develop, whether that's for yourself or for an opportunity, like you're not gonna get pushback against that. Where you get stuck in Detroit immediately out the gate is taxes. Okay. Detroit taxes will eat you alive. And so while we're talking about looking for DLBA parcels, because I do want to keep this a land bank-centric conversation for today, um, we need to establish that the problem out the gate is gonna be Detroit property taxes. Brief history why are property taxes high in the city of Detroit? Well, because when they say a million people left the city, they they mean it like a million people left the city of Detroit. They're everywhere, like you have all met someone from Detroit somewhere in your life, and it wasn't in Detroit, and it's because they spread out, okay?

SPEAKER_00 7:47

Yeah, they usually migrate down south, absolutely.

SPEAKER_01 7:50

100%. So they're they're everywhere. We built a city that could support up to four million people, and now we've got less than a million people living in it. That means that our infrastructure is way oversized and it sprawls way farther than it needs to right now. We have oversized infrastructure that is crumbling because not enough people are using it, which means the tax base that's paying in to keep those systems managed and upkept and maintained is not it's not there. So they're stretching it thin and they're charging high taxes as a result. So we need to have a plan out the gate. First things first. I would suggest if you're looking for a development opportunity in the city of Detroit, whether you're trying to build yourself there or whether you're trying to develop it there as a as a play, you uh you should look at neighborhood enterprise zones. So this is actually a state-level program run through Lansing, and um they have blessings to to create these zones in the city of Detroit. They are economic breaks, which translates into roughly a 75 up to 75 percent break on your taxes for up to 15 years. Pretty good. So uh when they look at a single family house uh that we're developing in Detroit, and they say, uh it's a half a million dollar house, so the state equalized value of half of that is 250,000. Multiply that by our millage rate in Detroit, which is like 0.69 and some change, you get roughly $20,000 in property taxes per year on a new construction single family residence. It's a no-fly zone. You can't you can't develop. You talk to a bank, and the bank will tell you your mortgage is less than your tax bill, which is just it's it's crazy. It's crazy. Okay, so we need to understand that taxes are the problem at the end of the project. So before we start the project, we gotta have a plan. So right now, there's really two routes in the city of Detroit that I'm currently aware of, and that's the neighborhood enterprise zone or NEZ, and then there's the pilot payment in lieu of taxes, depending on what you're trying to build and what you're trying to develop. Either of those are conversations you want to start. NEZs are little bubbles all over the city of Detroit. So you can go to the Detroit website, look up neighborhood enterprise zone map, and it'll show you where all of those zones are. And you could start by looking for parcels in those zones because you know that you can apply for the tax break if you bought a parcel that's in that zone. Absolutely. You are not in that zone. You can apply to make a new NEZ. That is a time-consuming, uh fairly expensive process. Yeah. And you need at least 10 lots to trigger that.

SPEAKER_00 10:50

So basically you're rezoning.

SPEAKER_01 10:53

It's not, it's not a rezoning, it's uh it's an establishment of a new tax overlay on the zoning that's there. So if you're a developer coming in and you're developing 20, 30 lots at once to create uh a mid-rise multifamily or you're doing condominiums or something of that nature, then it would be worth your time and energy to create a neighborhood enterprise zone before engaging in the project.

SPEAKER_00 11:21

So before we dig too far into the weeds, um help me understand what the first right of refusal, because I've heard, and this is just speculation, what I've heard is if you buy a parcel and you send in your preliminary plan review and it gets approved, and then the next thing you know, you're developing it, and then you run out of money and you can't finish development, but you've given the city a timeline to when you're you think your uh construction or rehab is going to be done. What happens? Because a lot of banks will not take on that loan because they want most banks want first right refusal on that partial. So if the land bank has it, a lot of times people are running into loan, they can't get a loan because they the bank wants first right refusal for that property, meaning basically they can take it if you don't finish the the project and it goes back to the land bank.

SPEAKER_01 12:15

Well, Deshaun, you have certainly been doing your homework and reading these uh these purchase agreement contracts because that is exactly where this language comes from. Okay, so for those that are following along, right now we have established that the property that we want is available, number one, and number two, I've got a plan for my taxes. So let's say the property that I'm looking at is both confirmed available by the land bank and it is in a neighborhood enterprise zone. So I can apply for that to have a tax reduction on this property. Next thing's next. I'm gonna go back to the land bank and I'm gonna say, all right, I'm ready to go. Let's make an offer. And that's where you can actually haggle. I'm not gonna lie. You could you can you can actually, you know, have a conversation with the land bank and make an offer. My rule, my suggestion for people who are trying to buy with the land bank is whatever they say, give them $500 extra. Just make that make that conversation disappear, you know, kind of kind of feel it out. But it is contingent on the neighborhood that you're in, right? Like I bought a parcel in North Corktown. I paid premium dollar for that, even though it was less than market price. It was premium dollar for the for the land bank, right? If you're looking at property that's like over on the fringes of like McDougal Hunt, or we're getting up to the Dexter Lynwood, like Brightmore. Yeah, like you can you you can kind of feel out like how many projects are under construction in the neighborhood. That's a pretty good indicator of like, all right, am I what about that?

SPEAKER_00 13:47

The median housing market. Do you take that into cons consideration too?

SPEAKER_01 13:50

When you're being you you can, but like I'll be honest, your personal vibes can probably get a better idea of property values in Detroit than trying to track down median incomes. I just think the data doesn't give you a good example. Like, if I'm walking through a neighborhood and people are on their bikes and you hear like dogs barking and saws and hammers, like, all right, this is an active neighborhood and it's coming along. If you're out there and you don't hear anything for a half hour, like okay, I'm gonna offer you, I'm gonna offer you a hundred bucks for each of these songs.

SPEAKER_00 14:25

For real, because yeah, absolutely it's not conducive to my living, my living style.

SPEAKER_01 14:29

Right, okay. So now we say, All right, Lamb Bank, I'm ready to go. Send me a purchase agreement. Okay, they say, our heads on fire, we have so many things going on, we might get back to you, we might not. Keep emailing them, stay on their case. Okay, they might forget about you, you can't forget about them. So do be annoying, keep pushing on the conversation. Eventually, you'll get them to respond. What you're after is a purchase agreement. Um, they will trigger their first wall of defense, or uh, I guess listen, this was all put. Let me let me pause here and go back to a comment that you made like investors buying land and doing something with it, planting trees, or just like biding their time. Yeah, the rules that we're about to unpack with the land bank exist because of that issue, because people were buying swaths of neighborhoods, and then they were just sitting on it, letting the buildings decay until they could get their payday eventually. And uh it was a disgusting practice, and uh, we see it time and time again. It's still happening, but we're trying to weed it out. Okay, so all of this comes from a place of good intention, okay? So let's start there. Okay, okay, so the the first wall of defense, and the reason these these exist is uh so first things first, land bank is going to punt you to the planning and design department of Detroit. And this is where things start to get tricky because they say, show us a design for this property, and you're like, Well, I don't even know if I'm allowed to get this property yet or not. I haven't paid you any money for it, so I don't really want to pay an architect to do a design right now. That's the first point that people get caught up. Okay. So there's like you can you can use AI and make a rendering, like that. You know, these guys do this for a living, they're gonna look at it and be like, you need to hire somebody to look at it. Now, I'll admit this process is a little backwards. I I wish that I didn't have to get PDD approval to get the purchase agreement from the land bank, but so be it. Okay. When you say PDD, what does that mean? Planning and design department of Detroit. Yep. So they're they're the guys who um basically like how your house looks and feels from the outside. Like, does it match the character of the neighborhood? Are these like you know, very correct materials on the outside? Does it look like an alien spaceship that an architect dropped here on planet Earth? You know, like those are the guys that basically guys and and girls that deal with that.

SPEAKER_00 16:53

They gotta be conducive to the neighborhood aesthetics, um, basically. I mean, that really makes sense.

SPEAKER_01 16:59

Planning and design. Yeah, yeah. So that's so they're looking at that. So if you get an approval from PDD, the design guys, they will then give permission back to the land bank to start the purchase agreement process. Cool. Thumbs up. Yeah. In the event that this takes you a while, you can have what they called a hold maintenance agreement on your property. So you could go to the land bank and say, I want to buy this property, I'm willing to offer this. You can have your your discussion about dollars and cents. They say, All right, that sounds good. You need PDD approval. You say, Can I get a hold maintenance agreement so that I'm the only person who's allowed to bid on this property and continue this conversation? Oh, sweet. So they'll they'll usually grant that and they'll say, All right, you gotta mow the lawn, you gotta shovel the box, you know, you gotta keep it prim and proper while we have this discussion, but then that buys you some time. Absolutely. Okay, all right. There's there's timelines all over this conversation, largely great. As long as you're still human and alive and doing your thing, you're gonna meet the timelines. Don't worry about them. Don't even let them be uh a hurdle in the back of your mind. Okay, so now we're moving on. Uh, now you get a purchase agreement from the land bank because PDD said, thumbs up, looks good. I like your rendering and your plan sketch. So now you're in the purchase agreement phase and you read that purchase agreement, and now here's where the bank conversation comes in. Because now real money is about to be transacted, even if it's a small amount because you're getting a deal on a land bank property. Here's the major flag land bank owns that property alongside you until you are done with the project and receive a magical ticket called your certificate of occupancy. Once you receive your CFO, they release their uh mystical chains on the project, and you are now free of their commitment. Um, that holds them, you are correct, in first right of lien. What does that mean? What does that mean? Uh so first right of lien means if the world ends and I I don't make it, but my uh but part of my house or development remains um unfinished. Whoever's in first right of lien who is loaning money on that project and has taken the most risk, hypothetically, gets to claim that project as their own. They would absorb it. So what it is is it's a rug pull. They have the opportunity at any point in this process, if you're not abiding by their rules of engagement, that they could take the project back from you. And if they do so, the nasty truth is that you don't get any of your money back. Wow. So if I've dug a hole, if I've poured foundations and I didn't meet their rules and they pull the rug, that's their foundation. That's that's their land again. And uh, I don't get my purchase agreement money back, I don't get my hold maintenance agreement back, you know. That's so so you do you do want to keep in constant communication. Now, I say this because that is a tool that has been used, and we're not gonna get into whether it's whether it's good or evil, but what I will say is that I don't think the intention is that that rule is there to block development of projects. I don't think it's there as a threat. I think it is there as an unfortunate ripcord scenario that they had to pull because of some bad interactions. Again, I want to believe that this all comes from a place of good intention. But I'm just here laying out the rules as somebody who's gone through this process a multitude of times for myself as a developer and working with clients, both as an architect and as a co-developer. So uh so I'm just trying to bring some experience to the table when we go through this. Okay. So that means this is bank that might be lending on this project. People who are financially backing your project, your bank has to go, wait. So if I loan money on this project, the land bank gets to keep everything. Yeah, that makes zero sense. I'm out. Most banks will say this.

SPEAKER_02 21:06

Absolutely.

SPEAKER_01 21:07

Right. Okay, there's a few banks who are used to working with the land bank. Um, there are groups around here, and um, if people reach out to you, um, to Deshaun at Duke Investments, so they reach out to me, Brett Crandall, director of design at Three Squared. Uh, we're gonna tell you who those who those opportunities are and who the connections we have made are, but they have processed with lawyers back and forth what they call a subordination agreement, which says we'll make a couple of deals and okay, we'll let you have this right of lien so that we can loan on this project. We're comfortable with this, we've done enough of these developments before. I will say not every bank's gonna do this. Most banks won't do this. Banks that have been in Detroit, have ties to the DLBA and have a history of working with them are gonna be your best route. So if you Are you serious about land bank property because it's in the right location, it's in the right price range, then you need to check on taxes, and then you need to talk to a bank before you start dealing with the land bank? That would be my suggestion. I would ask your bank, I would say, can you subordinate with the Detroit Land Bank Authority and get through their document? You can find copies of their purchase agreement language all over the internet. So I think it'd be easy to circumvent that process if you started talking with the bank early.

SPEAKER_00 22:32

So question if uh now, do we have to uh make sure that the title was clear or does the land bank already do that as far as the land? Because I've heard horror stories about people purchasing land, but it was um as far as the deed, fake deeds and titles, and it was in another person's name and they ended up getting a quick claim deed, and then it ends up um, you know, they pretty much end up losing their money because they uh the paperwork wasn't right, and the title is not clear and to for the purchase of that parcel or whatever struck.

SPEAKER_01 23:04

Yeah, no, that's a fantastic question. So uh so so clearing uh title is part of the transaction process, but but it is a it is a it is a human thing dealing with you know 60,000 parcels plus and they're understaffed, they're overworked, mistakes get made frequently. So you uh on the buyer side, listen, I was dealing with the land bank, you bet I worked with an agent. I brought in a buyer's agent, and I had my agent run all of that so that I didn't have to ask those questions because I'm not a title expert, I'm not an expert on what to ask, you know. And that that my my particular agent, um, you know, he's he's a good friend of mine, and he's helped me, you know, buy and sell homes in the past. Uh and and so he he really pushed them on he needs a clear title, not a quick claim. And when we had red flags pop up, we had title check on that. They suggest a title company, you don't have to use their title company. You can you, as the buyer, can dictate who the title company is, I'm pretty sure. And and so, like, know the title company you're working with, because because some of them are used to working with the land bank, and if they run into an issue like that, then they're fully prepared to like make right on it, right? Like, nobody's trying to leave you with an issue. Now, getting your deed, uh good luck. I'll talk to you, I'll talk to you in a year or two. Um, and then a year after that, I'll talk to you about your tax estimate that eventually will come from the city of Detroit, because the first year or so they're like, You guess, no, that was wrong. I'm like, okay, okay, nobody knows what's going on. All right, um, so we're at the point in the process where uh your bank has said, All right, we've signed the subordination agreement, you have your purchase agreement in hand, you're heading to the closing table. Closing day comes, they get you your clear title, title agency is giving you all your documents, you're signing a thousand things. This land now belongs to you. Absolutely.

SPEAKER_00 25:14

All right, what are you doing next? So, once that so this is what I think a lot of people and I want to ask this question, a lot of people are afraid or they want don't want to they have an idea of what they want to put on that land unless it's a a structure already, and they want to do because the land bank offers rehab and ready homes that they've worked on and partial, and then you pretty much have to pay that portion off. Um that uh just to finish the rehab. You pay them if I'm correct, you pay them what the money they put into the property to partially rehab it, you buy it, and then you finish out the rehab. So those are rehab and ready.

SPEAKER_01 25:50

Um so rehab versus just a blank slate, right? Okay. Um so if you're an aspiring developer who's looking at DLBA land and you've made it this far in the conversation, then good. This this short little episode has turned into like a full-blown exercise in the land bank, which I'm all for. This is how things naturally play out. So I love it. Um, I would say, largely speaking, here, unless you are a home builder who has a ton of experience in flipping costing, and unless you've got like buyers' lines of credit with with builders' networks and and and you know what you're doing. Like if everything that I just said made sense to you, then rehab ready is your lane. Go. I you don't even need me. Don't talk to me. I gave you everything you need up to now to acquire those properties. Go be well. For everyone else listening, that is not your game. Do not get sucked into that as a shiny spoon, those things will chew you up and spit you out. Like, it's not worth it. You want a clean slate. Absolutely. So I'm gonna I'm gonna stop there because uh that that term is carrying a uh a lot of weight right now. Clean slate. Let me be clear the Detroit Land Bank Authority is not selling you building ready properties. What they are giving you is what it is as it stands. Absolutely. Rest is on you. So in addition to checking the tax status, is it in a zone? Um, in addition to finding my bank that is willing to work with the DLBA, in addition to getting this through PDD, because I've already like given them a rendering, an idea of what I'm planning to do on this property. Yeah, now I need to do my due diligence. Due diligence is on the buyer, that's on you, Deshaun. So, what you're gonna do now is you're going to start your pre-development funds, and you're spending more money immediately out the gate. You thought the land was the end of it? No, no, no. Now it needs a power cord, you gotta plug that thing in. No, so it's like yeah, batteries not included. So the batteries for buying land from the DLBA is you better hire a uh surveyor to give you a proper survey of the property. Absolutely. Do not do not trust any other data than the surveyor you have paid money to, and they have provided your survey. Okay, there's there's a couple different types of survey. What I would suggest you are looking for is a boundary and topographic survey. Topography generally applies to like change in slope, but topographic information also includes locations of high points, low points. It tells me where my sewer is, it tells me where electrical lines are gonna be. All of that data is really heights and elevations, stuff like that, setbacks, heights, and elevations, which most properties in Detroit are gonna be flat and no, no surprises, but there might be a little bit of change.

SPEAKER_00 28:46

I got a question. So going through this process, um, and I think you ran into this when you purchased your property. A lot of the homes here in Detroit are usually like 30 foot by 100, 120 feet long, but a lot of them had structures already on them. A lot of people don't know that those homes are torn down and then put into the ground because most of our homes have basements here. So they pretty much implode the house and put it in the basement. How important is that for the purchaser to know that under there it's a whole bunch of debris? Plus, we ran into the um problem with the backfield dirt, the contaminated backfield dirt. So I know I'm opening up a can of whoop whoopee, but yeah, you know, um, these are things that people need to know when they're purchasing these lots. Because if you purchase one of these lots that has this contaminated dirt and it hasn't been um taken out and refilled, you can run into a lot of trouble. Because once you per, like you said, once you purchase it, it's yours. So is that the survey's job, so surveyor's job, or is that the purchaser's job?

SPEAKER_01 29:52

No, that is that's your mess now, man. And this is this is where I start getting pretty frustrated with the land bank, right? Because all right, you weren't open and honest about the parcels that were actually available to me out the gate. I had to call you and ask which ones are available. You didn't tell me about the tax issue. I had to find that out myself. And for a lot of people, the hard way, late in the process. Here's the other little flag on neighborhood enterprise zones, just so everybody's aware. You have to get into the NEZ program before you build the property. You cannot do it in the other order. So if you built it and you're hoping to get a tax break afterwards, yeah, I'm so sorry to be the one to tell you you're not in that program. You're gonna have to find another way to try to get some tax breaks. So everyone be warned. If you need into that, okay, so so here's the thing: like at this point, all right, I had to find the property, I had to figure out the bank. I had to like basically take second place to you and your rules because of some history with bad developers and stuff. Delay, delay, delay, delay. They're beating me up pretty bad at this point, and then I find out oh, there's a house buried on the site you you gave me, and my sewer was built in 1830, and it's made of bricks. What I didn't even think that was possible. I didn't I thought that was a joke, and then you find out that this stuff is real, and then your soil is contaminated, and you also have 37 trees growing out of the fence row that have been there for 20 years, and they're dangerous, they're falling over on people. I bought a lot, I was a windstorm, a tree fell down, it hit my neighbor's house. Guess what? That's my fault now that I bought that land from a land bag. Lucky for me, I got good neighbors. Can't choose your family, and you can't choose your neighbors. I've been very lucky on both accounts, but wow, but you you get you get the point. Like it is your responsibility at this point. So let's back it up. Uh, let's let's start with foundations. Okay, uh, back to the history lessons pre-1985. Just okay, so like for a good uh nearly 20 years, uh after after Detroit's kind of downfall, um, there was a lot of abandoned buildings and there was a lot of arson and splunking and everything you can imagine. So these houses decayed in place, right? So they would go down and they would drill a couple holes in the basement slab so water could drain through it, and they would literally bulldoze the house in on itself and just cover it with a layer of dirt. So for a lot of unfortunate people, you probably got sold land with a buried house on it. I was one of those people. You can look at the uh the there was a a series of fire insurance maps called the Sanborne maps, um, that were generated way back yonder. I'm not even gonna pretend to know what year that was, but those maps are probably the best um capture of Detroit's footprint and like a figure ground study. So like the footprints of every building. And you can look at all the parcel maps and you could see if there was a house at one point in Detroit on your property. Uh, it's a pretty quick check on that. Um, how do I know for sure what's under the ground? Back to batteries not included. Get yourself a survey. Yep. And then I would suggest for anybody serious about developing on land bank property, ground penetrating radar. What that is is you know, it's a stand, you put it on the ground, and it shoots into the ground and it bounces back and it tells you how soft the things are underneath you, so it can identify. Uh, if I would have done that on my property, I would have seen all of the chunks of brick wall and foundations that are right underneath me. Because when we started digging, even though I did a shallow house to kind of rest it on top of the land, even going in a few feet into my soil, I was still hitting chunks of concrete. If I did ground penetrating radar, which is which is relatively cheap, we're talking like you know, 500 bucks-ish for a typical lot in Detroit, like that is worth it for me to have an x-ray view of what's underneath me, you know. So I know what I'm getting into. Um, and then you got to be aware that that that uh you're on the hook to take down trees that are on the property. So if you've got a ton of you know, issue trees and trees in Detroit usually not great, and most of them are like weed trees, what people would refer to. Um, they're gonna be the tree of paradise and mulberry trees, which they look pretty, but the problem is is that wood grows very quickly, so it's a very spongy cell structure, and so you get gusts of wind, and those things are prone to snap, and then they're really quite dangerous. So, um, so while they look like you've got this beautiful like tree line on your site, like most of that does have to be cut back or cut down, so that we could have like uh, you know, more more native species, more plantings that are supposed to be here that can survive through hardy winters and things like that.

SPEAKER_00 34:51

I wanted to touch base on what something that you said earlier, um, because a lot of people are very skeptical about hiring an architect. Right. And at the end of the day, you know, before I got into this um profession and and you know, learning from you and the team here about developing, a lot of times um they don't want people don't want to, you know, because it's extra money, you know, and architects are expensive, everybody knows that. But when just like you said, what's worth it and what is not worth it, um, because a lot of people will go online and they'll grab a sketch offline, you know, um, they'll build something through Canva or something and they'll say, hey, they'll take that for their uh preliminary um their their review, their PPR, and then um the PP PDD they'll they'll say, okay, yeah, you're good to go. Um but what is the importance of you know, your your your when you you you're buying a a parcel and you're gonna build maybe a dream homework, maybe it's an investment. What is the importance of an architect and why is it worth hiring an architect to actually give you your schematic designs and your 3D imaging and then going through that process? You know, we here in Three Squared, I know we we hand walk everybody through every process because that's just how we operate. But a lot of people do not want to hire an architect um to get their design. Um I've never seen a more smoother process than we offer here, but at the end of the day, um why give me your opinion on why you think it people are skeptical about hiring an architect?

unknown 36:31

Why?

SPEAKER_01 36:32

Because we cost money and nobody wants to spend money. Everybody thinks they could do everything themselves, but there's a reason why there's profession behind what I do. It's a it's a lot of it's a lot of work, it's a lot of education, like it's very well-rounded, balanced understanding of this complicated uh puzzle pieces. But I mean, at the end of the day, like a small scale, uh a single family house, something like that, like there's with the parameters in place, with the restrictions in place, there's only so many ways you can put it together. I'm not gonna say that like you need an architect in order to design your own house. If you find the right architect, it could be a much, much better house if you work with somebody, if that's your goal. Now, if you're a developer and you're here trying to make a profit, well, then an architect to me as a developer is is pertinent. Like if I if I'm in a development mindset and I'm serious about making money, I have two friends on speed dial. I have a lawyer on speed dial, and I've got an architect on speed dial, which probably have a doctor for myself too. But, anyways, I need to know who those who those characters are because I need somebody who can support me and answer questions on a pinch. Like things that I don't know about that I can't speak professionally to. I need somebody who can and who's at the ready to to you know to jump into these conversations and support me. Um, so from a development standpoint, my architect is not like only here to make things look pretty, right? Like my architect carries a lot of weight. My architect tells me what is possible, he helps me with my zoning, he guess and checks my numbers so that my pro forma matches what I what I need to make out of this. Like he gives me like rough approximations of like what I can and can't do so that I can make the decisions on what I should and will do. Yeah, like my architect is feeding me all of that. We are constantly going through like iterations of how this development can structure and what the rules of engagement are. That is a delicate dance. That is a delicate dance that needs to be played in partnership with people who build things and with the developers themselves. Like that is the trio right there. It is an architect, a developer, and your general contractor. Exactly. Like that is the team you need to be a successful developer, and you need to be able to trust all those people as well. And so at that point, my architect is not only giving me confidence in every step that I make, but also doing the grind, the research on actual construction types. Is the way we are thinking we are about to do this the best way of doing this, or are there better ways out there? So there are a million ways to build a building that all arrive at the same conclusions. Does it meet code? Yes, it has to meet code, or we can't build it. Code is the bare minimum. It is not something to be proud of. It is a box to check in the process. Okay, so you can build with all sorts of different materials. We're working with panels, we're working with traditional framing, we're working with masonry, we're working with steel, so on and so forth. Like each project requires that particular uh you know, unique touch to address all these things and pull it together. That's what my architect's doing. My architect's taking this every complicated thing and reining it in so that I know that we can afford it, we could design what works, we could think in systems, and we can produce a building that will make me a profit at the end of the day. That's why I'm hiring an architect. If I'm designing my dream house, I'm hiring an architect for probably a very different reason. Someone that I trust, someone that I understand has gone through this process, and someone who can make a better outcome by designing the built volume around them with meaning and character. I know there's there's a thought process to this, and it's it's not as simple as like 2D drawings. Like plan is a terrible way to draw a house, like in floor plan. Because you're not experiencing space, you're not thinking about 3D volume, you should be thinking in section the whole time. I speak a different language as an architect, as a designer, that like a lot of other people do, like, and reading drawings is one small piece of that. But you know, if if you're hiring somebody who's gone to school for this and cares deeply about this, but it's finding the right architect, right? I've I've told you this before, we've talked about this before. Like, I don't want a heart surgeon working on my brain, and vice versa.

SPEAKER_00 40:44

Absolutely.

SPEAKER_01 40:45

There are architects who specialize in certain things. Our team here happens to focus in unique construction types and housing solutions. That's our thing, right? Like, I wouldn't necessarily come to Three Squared Inc. and ask us to design uh a hospital tower, right? Like, there are firms that specialize in that and do specifically that, so that is why I would hire an architect. Hopefully, that touched on some of your question.

SPEAKER_00 41:11

No, that pretty much answered the whole question.

SPEAKER_01 41:13

So, anyways, we talked about why I personally, as an architect, think you need an architect, but it hey, I'm I'm biased, and that's why I have a career. But, anyways, back to the land bank thing. Okay, so the next thing people need to know about the land bank, you thought we were done. Ha! Yeah, no, no, no, no, no. All right, so the next thing you need to know about the land bank is that they don't just make their money off of the purchase of the properties, they also collect money through your taxes. So at this point in the stage, you've probably either heard or you will hear 550 thrown around. 550. That stands for five years, they're going to capture 50% of your taxes. That's part of your purchase agreement. That's what you're gonna buy. You know, and so we're helping, we're helping the land bank. That's a good thing, right, Detroit? Ugh. Okay. So we're gonna do the 550 tax capture. Um, however, I got this thing called the neighborhood enterprise zone that I'm trying to get into, right? I've made my case to Lansing of why I should be approved to this. Uh, I applied to city council. There's there's a whole like you just Google it and it'll tell you the sheets to fill out in order to go through that, right? But okay, um, well, uh, in in order to allow me into the neighborhood enterprise zone, Land Bank says, Hey, remember that 50% of that first five years were the taxes you were gonna give us? We want the full amount, not the amount that you would pay after your 75% tax break. Wow. So you're gonna work with the Detroit Economic Growth Corporation. More acronyms for you if your head's not already spinning. The DEGC. The DEGC is going to calculate out what your 550 tax capture would approximately be. And then you're gonna negotiate with the land bank once again on paper, and you're going to cut them a check that will allow you to say, All right, I've I've met my requirements of your tax capture. Now, can you fully let me go so that I can get into the NEZ once I'm into the NEZ, then I'm going to work with my architects and engineers. At this point, why do I have to hire them? Because you need those drawings in order to get through the city approval process, they do have to be stamped and sealed by a licensed professional. Oh, but houses over under 3,000 square feet don't need it. Uh, yeah, okay, sometimes maybe not in the city of Detroit and not on a land bank parcel, I'll tell you that much. So at this point, you will have to hire an architect uh to at least seal the drawings if you've made them yourself. Not recommended, but it's it's kind of like representing yourself as your own, you know, defense attorney. It's just like like most people are like, that's not that's not a good idea. Yeah, yeah. If you're like, I don't need a An architect, it's like that's it. I'm like, okay, good luck, good luck. Like I don't know if I'll see you again, but uh okay. So now I have hired my architects, we've got the drawings, we've got the engineering. I gotta submit these to now. B seed. B seed is the boss, and that's building safety and engineering. So they're the ones who actually review your plans. So they're looking at um, you know, everything from your your fire requirements, um, structural, electrical, mechanical. Uh um, and then separate to that, but on the same timeline, when I submit to B seed for my building permit, I'm also going to be submitting to Detroit Water and Sewer, um, and that is the DWSD department. Yeah, the DWSD, it's worse than they say. I'll leave it at that.

SPEAKER_00 44:57

Yeah. Um, well, what happened? Remember, because there was a big development over here in North Corktown where they built a lot of nice looking different types of modular homes, but they didn't contact DTE, and the land sat there for a long time with no electricity, so they couldn't purchase the homes.

SPEAKER_01 45:17

Oh, you want electricity too? Oh, that's different. Now you got to call DTE and you got to get on their radar because they're probably out uh six months, maybe a year. I don't know. It depends. Depends on what mood they're in on the day that you call them. Uh, but they are they're your boss. Like you don't you don't get an option, you don't get to go anywhere else. Oh, you'd like to go off the grid with solar panels? Good for you. DTE's lobbying against you and Lansing, and they won't allow you to. So, all right, we we have to deal with the the the power grid here. So, yes, that's a good point. Once I'm in control of my property, add that to my batteries not included. Somebody's got to call Miss Dig. Somebody's got to know what's under the ground and flag all those resources. I need to know where my gas line comes from. I need to know where my sewer line goes, I need to know where my water line comes from. Most properties in Detroit are gonna have their water lines in the street and their sewer line in the alleyway. That's how most of the grid was developed. Um, so that's a safe assumption. But the Detroit Water and Sewer Department are gonna have those documents and be able to provide you some of that information. You have to work with them to get your other permits. You need two building permits in the city of Detroit. One is with B Seed, the other one is with the water and sewer department. And I am sorry to be the one to tell you our permit fees for the right-of-way permits in the city of Detroit for both your water and your sewer taps are high. Like stupid high. Like, like I I think I think I paid 18 for my sewer and 16,000 for my water tap, which means that I'm like 32 and 34 and before I even like start putting a shovel in the ground. And they and these are just matter-of-fact fees, these are not fees you can argue with. This is just what it costs to get the permit to do the work. So there are some there's some additional fees within the city of Detroit process that are not are not typical. Like, you know, your fees in like a rural zone would probably be like 5,000 is a good assumption for your water and sewer fees. Um, this is this is not that. And again, infrastructure, back to the whole conversation. That's where that comes from. So okay, well, now you're ready. You're ready to go. You got B seed approval, you've got DWSD approval, start construction. Bank is flowing, you figured out your draw schedule, your contractor signed their sworn statement, which is basically their budget, but it's their budget along with the information of who's getting paid and how much they're getting paid when. That's what it that's what that that sworn statement is. That's what approves the bank draws. Bank draws go, everything gets built, it's coming up throughout that process. You're gonna have a number of stages where you're gonna check in with the land bank, a couple of photos, field report. Hey, here's where we're out of the progress. If you're running behind schedule, give them a heads up. Yeah, heads up. Hey, I'm running behind schedule, but here's exactly why, here's what happened. As long as they've got documentation of it, you're gonna be all right. Again, they're not here to you know stop you from doing this, but transparency is key. Transparency and your end is key. Uh, I wish that they could say the same, but again, good intentions gone wrong. It's a hope for the best. You do your part so that if anything ever goes wonky, he can always point back to it and say, I upheld my end of the deal, and that's important, right? Because by this point in the process, if you do get into it with somebody, you're arguing over I've got foundations in the ground. This is no longer hypothetical, this is no longer land that I'm mowing, you know, from the other week. This is like, hey, we are we are arguing about my investment in this property, and this is real to me. I have blood, sweat, and tears on this property. Like, you have some weight, like people are paying attention now at this point in the game. I would say you're largely safe, but you need to execute, and you need to execute all the way until all of your inspectors have done their field inspections, signed off on all of your approvals, and the magical day has now come. You have received your certificate of occupancy, which now the land bank has has fizzled away, and it is now your property, and you have successfully built on DLBA property. Now, here's where it gets fun. You've done it. Land bank likes you. Land bank knows you can develop, you can circumvent most of those steps from here on out, and you can start direct conversations because now you're you're in for lack of a better term. You understand this. And yeah, once you own property back to, I think probably the first question we started today. Now you can buy adjacent lots. You've developed a property and you own it entirely through the land bank, and now you can buy their adjacent parcels. Guess what? Those adjacent parcel agreements do not come with the first right of lien strings attached. Oh wow, it's please please you just buy them outright. Now, I I don't the prices are always fluctuating. It was like a hundred dollars a lot for a long time. It was a thousand dollars a lot, and then they open it up to the neighborhood, and then you know that it's gone through different phases over time. I'm not sure where they're at right now. I do know that if you own land bank property, yeah, land bank right next to you, you can have a conversation with them about that. And you probably have like you know, first rate of refusal or whatever equivalent to uh to you know to to acquire that property, and they'll ask you for some additional steps, but that that becomes yours, and you can choose to develop on it, you could choose to fence it in and sit on it for a few years. Yeah, you can plant an apple orchard, but I I believe that that is yours, so that is a great strategy um from this point forward. So and that in a nutshell is what it takes to develop on uh on a plot of of raw DLBA property in the city of Detroit. Now you can start to understand why when people come to me out the gate and they're like, I want to develop in Detroit, I say go go look for a for-sale by owner lot that's in a neighborhood enterprise zone. That's where I would start personally, um, having gone through that process. Now, there's a lot of good land bank property, there's a lot of good strategic locations for these. Um, but I uh you know I've kind of tried to explain the process to you coming and asking these questions, uh, boots on the ground, real people that are trying to figure out how to accomplish this. Yeah, there's not much of a roadmap for you out there. Uh, I think that what we are generating right now in this conversation is probably the closest anybody's gonna get to a roadmap of how to build on a DLBA parcel. Because somebody else might write it for you, but uh they probably didn't do it, and I did do it. You did it, and I'm an architect who did it, and if I had a hard time doing it and it took years of effort and negotiations, yeah, how do they expect regular people to come in and do this? So back to why would I hire an architect? Yeah. You tell me, okay. All right. So I'm thinking that's yeah, you get you got you got one more.

SPEAKER_00 52:18

Yeah, yeah, one more. Um, so because of course, 21 years in the military, um, and I pretty much, you know, I catered um trying to help out veterans with their benefits, there is a what they consider uh I consider it the best loan in the world. Um because if you want to do new construction with land bank, people need to understand, especially or what from a veteran perspective, especially if you're a hundred percent disabled veteran, you don't pay property taxes here in Detroit on your primary residence. Now, with uh um purchase of your one-time construction loan, you can build up to a four-plex, right? So you can build up to a four-plex, you can live in one and you can rent out the other three units. But people have to understand, and I've ran into this last week, that you only get uh the property uh exclusion for the primary unit, not the other units. So you will be paying property taxes on the other three units. Most of the time they will have separate meters. So that will be different, you know, uh uh bills that are coming in. So that's very important. Veterans, um the beautiful thing about the the VA loan is no money down, no PMI. Um, and then you will be you will have to pay taxes on that property until you get that keyword certificate of occupancy. And once you get that certificate of occupancy, then your tax break kicks in. You have to go down to the city and you have to put your paperwork in that hey, um this is my primary residence. So um the one-time construction um loan is very, very important to veterans here, um, especially if you're 100%, if you don't have to be a hundred percent, it's just a uh if you are a hundred percent disabled veteran, then it's just a break for you. I just wanted to touch on that for the audience because um if you're gonna do or purchase land bank and then you're gonna actually build new construction and you're a veteran, please contact us here at Three Square. Please let, you know, so I can be your liaison and walk you through that process because it can be kind of daunting. So but it is a great loan. Um you can um go to the land bank, all the processes that we discussed today, you can still purchase the land and you'll just put that in with your the purchase of your new construction loan. So you'll just add the land into the the uh bill of the new construction. So I just wanted to touch on that real quick for my veterans out there. Um this is the greatest loan in the world. You can do it here in Detroit, no property tax for um uh for 100% disabled veterans, and you can build up to a four or fourplex. But if you wanted to build a uh single family duplex, triplex, whatever the case may be, we do here offer build already plans that um you can come and purchase from her us here at Three Square. Um and then you can take that to um to get approved by the city. We have a relationship with the city um so they know the work through that we have proven performance. And I want to throw in that we are uh award-winning architectural fund and built the first container home here in Detroit, uh located right here on Tramwell and Pine where I'm sitting at right now. So, you know, Brick, you're the subject matter expert, man. Um you your your brain operates on overdrive with all the things that you have going on. I just thank you for having me on here and letting me sit here and uh partner with you to educate the people of Detroit about this land bank because it can be daunting, it can be confusing. But if you have someone like yourself who has been through the process and through the ups and the downs, a lot of downs, but you always you came up. Um you have you built an award-winning home and um proud of you. I was there from the time it was trees on the land to to the point to where you're sitting in your home right now. Um, kudos to you, man. Thank you for uh having me and all the the knowledge that you share um with us um here for the city and this land bank. Like you said, there's not going to be a more in-depth um conversation about this and step by step. Thank you so much, bro.

SPEAKER_01 56:24

Uh thank you, Deshaun. It takes a village, as we know. It's a complicated process, and uh these buildings are the product of an army, man. Everybody's everybody's involved in this, and uh, I had the support of a great team here. Well, this has been uh this has been our first installment of Duke It Out with Deshaun Wilson. Uh we really got into it there. That was a doozy. Uh hopefully we could chop up some bits of this, but uh we'll see you next time in the Innovative Real Estate Podcast. I'm Brett Crandall. That's Deshaun. Thank you for joining us today. We'll see you guys later. See you later. Peace.