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The Ground Game Podcast
Welcome to The Ground Game Podcast, where land investing meets real talk! Join your hosts, Justin and Clay, both 7-figure land investors and seasoned entrepreneurs, as they dive deep into the world of land investing, team building, and personal growth.
The Ground Game Podcast
Episode 48: How We’re Building Cashflow Outside our Land Businesses
🎙️ Welcome Back to The Ground Game Podcast! 🎙️
In this episode, hosts Clay Hepler and Justin Piche engage in a candid conversation about building wealth beyond land flipping. They share personal updates, insights on the challenges of land investing, and the importance of strategic decision-making in the ever-evolving real estate landscape.
Key Highlights
Personal Updates:
Clay and Justin kick off the episode with light-hearted banter about their recent travels. Justin shares his excitement about visiting Seattle and reconnecting with friends, while Clay discusses his upcoming trips and the joys of balancing family life with business.
Scaling Challenges:
The hosts delve into the complexities of managing multiple projects in land investing. They discuss the treadmill effect of relying solely on land flipping and the need to diversify income streams to ensure long-term sustainability.
Market Insights:
Clayton and Justin reflect on the current market conditions, sharing their observations on sales trends and the importance of adapting to changing environments. They emphasize the need for strategic planning to maintain business growth amidst market fluctuations.
The Importance of Feedback Loops:
The episode highlights the critical role of feedback loops in entrepreneurship. Clay and Justin stress the necessity of constant self-evaluation and data analysis to align their actions with business goals, sharing their experiences with tracking key performance indicators (KPIs).
Navigating County Regulations:
Justin reveals insights from a significant development project in Texas, discussing the unexpected challenges he faced with county regulations. He emphasizes the importance of partnerships in overcoming these obstacles and navigating complex regulatory environments effectively.
Data Management and Decision-Making:
The episode wraps up with a discussion on the significance of data in land investing. Clay and Justin encourage listeners to leverage technology for informed decision-making, sharing their experiences with various systems and the importance of a cohesive tech stack.
If you're navigating the complexities of land investing and looking to build wealth beyond flipping, this episode is packed with valuable insights and actionable strategies! Don't forget to subscribe for more innovative topics
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Clay Hepler (00:01)
Hello and welcome to another episode of the Ground Game Podcast. This is your co-host, Clay Hepler.
Justin Piche (00:09)
And this is your other co-host, Justin Piche, and we're here to show you how to win the ground game.
All right. I have a different background this week. I feel like every week I've had a different background, but it's because I'm traveling right now. I'm in the great city of Seattle.
Clay Hepler (00:38)
Nice man. ⁓ You've spent a lot of time up there, You were on the naval base, there's like a naval base west of Seattle, right?
Justin Piche (00:49)
Yeah, I was stationed up in a place called Banger, Banger, B-A-N-G-O-R, Banger, Washington, Banger Sub Base for a while. And then at the end of my kind of first tour, I was at Bremerton Naval Shipyard. so while I mean, I was here from 2014 to 2017, lived, wife and I lived here. And so we, you we went to church up here, built a really amazing community of friends. so whenever we come back, we just have so many friends to see and spend time with. it's actually, it's been amazing.
seeing our friends' kids grown up and I feel like every time we come back our incredible friends just throw all these parties. So we have like cocktail parties and pool parties and it's just everybody's gathering and we get to be with just a bunch of people we care about and it's amazing.
Clay Hepler (01:39)
like it, man. That's incredible. ⁓ Is this the only traveling you're gonna be doing soon or do you have some other things on the horizon?
Justin Piche (01:46)
yeah,
I mean we, let's see, earlier this summer we went to Colorado for a few weeks, which was fantastic. ⁓
We moved into our house, so we've been at home for a while. We've had a bunch of like little weekend trips, but this is our last like big summer trip because we get back on Sunday and then my daughter starts school next week at a kind of a new school. So we got to be back for that. And other than that, now just the Mill Pond mastermind thing. I'm going to Florida to hang out with some guys and then go to Ajay's land scaling summit at the end of September. ⁓
Clay Hepler (02:09)
Okay.
Justin Piche (02:23)
And then think the next thing I'm doing is I'm going to Savannah, Georgia in November for another event, Land Operators Alliance event. And then February.
Clay Hepler (02:33)
And February, you and I are to talk about that. ⁓
So dude, that's pretty cool. One thing that I love about you guys is everyone's like, Clay, once you have kids, you can't travel. Everyone, even business owners tell me this that I respect. Really, really accomplished businesses. I'm like, how is that true? And you have three kids, right? And another one on the way.
Justin Piche (02:58)
Yeah,
exactly.
Clay Hepler (03:00)
And so I love how you defy that man.
I respect that about you and I really admire that you guys have been able to continue to do that. Obviously there's a financial component to this. But that's really cool that you guys are able to do that. we're, Right.
Justin Piche (03:11)
True. Flights are a lot more expensive when your kids get over two years old. They really are. Like our flights
up to Seattle, my gosh. I mean we booked them kind of last minute, but I think it was like 2,400 bucks for four tickets and then we had the youngest one as a lap infant. So I mean it's expensive to travel with kids. But you can still do it. I know.
Clay Hepler (03:31)
Yeah. Well, dude, that's why you got points, You got points.
Justin Piche (03:35)
I do, I actually have so many freaking points. The problem is, this is something interesting maybe for the listeners. I've always used kind of longer term zero interest credit cards. Like I get them and then I like put a bunch of charges on them and I rack up all the points and then I pay them all off. ⁓
And so I have like two million chase points or something. The problem, I know it's insane. The problem is that when you have those basic business credit cards, you can't transfer them to like airlines and partners.
Clay Hepler (03:59)
my gosh, dude.
Justin Piche (04:09)
So the hack is you can use those zero interest credit cards, can rack up a ton of points, and then once you've paid them off, once you're kind of done with using them, then you upgrade to like a high end business credit card that allows you to do points transfers, and you can move all your points to that new credit card, and then you can transfer them to all the partners, and you can really use them for travel perks.
Clay Hepler (04:31)
So then why aren't you doing that? Okay, it's like two million points and the guy spends money on the air. Like dude, that's insane. That's crazy. I thought you were gonna say like, I'm not paying it because every time I go on a trip, it's for business. And I wanna get the right off. And I wouldn't understand that.
Justin Piche (04:33)
I am, I am. That's the kind of the next step. I'm on like...
I know, I know, it's nuts.
Well, I yeah,
this one is this is not a business trip. But, know, I try to be pretty kosher with the tech, like with what's actually a write off and what's not.
Clay Hepler (04:56)
Well, dude, I'm yeah. Yeah. Yeah. Yeah.
For sure. I get that completely. ⁓ so this next week, ⁓ I was going to the mill pond, ⁓ unfortunately, but I double booked. And so I'm going to hang out with some dear, dear friends, but I'm traveling that weekend. Next week, I'm actually going to Cincinnati, ⁓ to spend some time with the Appki brothers. ⁓ yeah. Yeah. Yeah.
Justin Piche (05:22)
That's awesome again never met them
would love to meet the Aki brothers. I've never met those guys
Clay Hepler (05:29)
Yep. I'll be out there with those guys for two days ish. And then the following week is, you know, land scaling summit and I'm going to Phoenix. I'm to be on ⁓ two podcasts in Phoenix, like in-person podcasts. So I'll be in Phoenix for a couple of days. anyone, any land investors out there, hit me up. Like would love to, any big land investors would love to get together. I'll be there on the 16th, 17th and
morning of the 18th and I'm flying to Dallas, then you you and I are doing the land scaling summit together. And then the next week, my mother sold her business, which she's super pumped about. And so she's paying for a trip for us to go up to Chautauqua, which is in New York. It's like a really beautiful art artist community and an amazing lake. ⁓ And it's just there's like no cars in the center of the community. It's like a lot of famous
Singers and in art like art general artists and painters always always go up there. It's just gorgeous So we're gonna be there in September, so dude. It's like every week. I'm gonna be gone from my house at least three days Three to four days for the entire month of September, so I'll be gone like 35 % of the time. It's gonna be crazy but yeah, I mean ⁓
Justin Piche (06:44)
Jeez. It'll be nice to
break up the monotony of working from home.
Clay Hepler (06:54)
That's right. That's right. That's a good point. That's a really good point. Um, well, man, I think I'd love to kind of get into this topic today. think listeners really benefit from this. And it's really about right, like, we're talking about all the things that we're enjoying, like traveling, and some of this is for business for me and you as well this month. But, you know, the lamb business to me is this like really amazing cash generating machine doesn't really have a lot of enterprise value, right?
⁓ and so, right.
Justin Piche (07:24)
I'd argue none.
Clay Hepler (07:29)
I was being, right, no enterprise value whatsoever. what
that means is like you're on this treadmill, right? And treadmills are good, they generate a lot of cash, but you are on a treadmill that you have to continue to feed into. And so effectively you can build wealth, and this is the playbook that people have done for what, 100 years, 150 years, 200 years in America?
Get a business that generates a lot of cash, allocate that to something else that's more recurring and passive. And so today we're gonna talk about building wealth outside of dirt, building wealth outside of your land business. I mean, I'd love to hear your thoughts. I I kind of talked about the problem with only flipping land, just focusing solely on it. But dude, some people, I was talking to guy the other day, I'd love to hear your thoughts on this. It was like, I get such high returns in my land business, which is true, that it doesn't make sense for me to pull money out of it.
Justin Piche (08:27)
Yeah, I I feel that way a lot of the time. I evaluate deals to fund. mean, people, you know, ask me, hey, can you fund this deal or can you do this? And I look at the available cash that I have and I'm like, I could, but funding that deal gets me a 20 % return, 30 % return, whatever it might be. then, but investing in this next flip or this development might get me a hundred percent or 120 % return. It's hard to kind of take a break from
the hit of fantastic, you know, fantastic return. But like you said, it's a treadmill, right? If you're not doing deals, you're not bringing in cash. And so it definitely makes sense, especially as you start to scale to build up passive, I mean, and even not passive, but just recurring, reliable income that isn't dependent on you finding a lead, negotiating a contract, marketing a property, finding a buyer, selling the property.
Clay Hepler (09:26)
So I like to, love the generalities kind of frame the conversation, you know, cause this is classic and the house flipping worlds, it's like, you're flipping a ton of houses and everyone's like, I wish I bought more rentals, but like maybe that could have taken them away from their land, their, their house flipping business. But how do you personally think about like not what you say, but what you do, right? It's like the hedge fund guy that says, you know, what's, know, in the interview, what's in your personal portfolio?
Right. ⁓ and, tell me why, right? So what is in your personal portfolio of how you've kind of diversified? Maybe you haven't, right? But I'm sure the listeners would love to hear that. And then I could talk about mine.
Justin Piche (10:09)
Yeah, well, I'm obviously very real estate heavy. I mean, we have a pretty decent stock portfolio from retirement accounts because my wife and I both worked in the corporate world. ⁓ But.
The main outside of land business investment that I have is I have a large short-term rental, a bed and breakfast that we renovated and it brings in gross rents of 160 to 180K a year, 25 % management fee, maybe 30 to 45K a year of free cashflow above kind of expenses, maintenance, et cetera. So mean, that's really the only kind of cash flowing asset that I have outside of mortgages.
And the way that I've kind of at least as my business has scaled thought about getting outside of the purely land flipping that my business has to generate these leads and has to do these deals to make money is funds. So larger scale deals that are still, they're still development deals, but rather than using all my own cash or using one funder to fund for this one deal, there are these large scale developments that produce cashflow over multiple years. And then as the GP, can.
and
money and fees for actually finding the deal, for developing the deal. So there's some income coming from fees and then there's obviously a return on whatever capital I put into that deal. And then there's a promote for whatever I'm able to make for my investors above a certain threshold that I can get a piece of.
there's the fund that I have just kind of in my flipping business. I've talked about this before. When I started the flipping business, I just funded everything with my own cash and that cash grew and I just kept putting it back and back and back into properties, more and more properties. And eventually I got to the point where I just felt uncomfortable just using my own cash for every single flip. And I pulled all the capital that I was using in the business out and I put it into a fund. I raised additional money in that fund from friends, from family.
Clay Hepler (11:48)
Mm-hmm.
Justin Piche (12:09)
and now that fund is a funder for all of my deals and for some other investors deals as well. And so the money that I had working in my business, now I'm earning a return as a deal funder for my own business. So that produces cash. It's kind of tied to my business, but not the same way, right? It's not tied to the business the exact same way ⁓ as just the business itself.
Clay Hepler (12:33)
Yeah. ⁓ I'm doing it when you were thinking about this, I was just kind of like, ⁓ listen, listening and running it through my, you know, sometimes you listen, you're like, huh, how does that apply to my, ⁓ what, what I'm currently doing? And, ⁓ you know, obviously you're super land heavy, right? And I was thinking about, dude, I own a lot of rental properties and. know, I think that there was a, a, a period of time in which.
They were good, but I bought these rental properties. There's these old units and I have a lot of rental properties. I mean, relative to, you know, the time period that I bought and they barely cashflow like all these units, they don't cashflow. It's crazy. so, you know, ⁓ I was sold and I've talked about this very openly. Like I was sold the, the bill of, Hey, you know, buy, some rental real estate, you know, cashflow.
package it up 1031. It has been nothing short of like a cash suck from my main business. Right. And so then the argument is like, ⁓ you know, invest in real estate. You get the get the tax benefits. But if you actually look, if you break it down, sure, you've done this, right. And you have an active ⁓ business that's generating the type of alpha that we have. Versus even the tax benefits.
It's not even like remotely close in terms of like building and generating wealth, right? So if we're talking about purely from a, want to get to building more wealth. ⁓ I think that like it's clear that landflipping is just going to get you there much, much faster. But if you're trying to diversify along the way, obviously there's the investing routes, but I've never found them to be as passive as people say they are. I think you need to be like a full-time operator in the space to actually
Because we have 85 units at this point, maybe. We're selling quite a few of them, so we might have like 65, 60. ⁓ But that's a lot of units to manage. ⁓ And I haven't been in that side of the business and operating it is just so time intensive and so difficult.
Justin Piche (14:48)
It is.
And property management takes a huge amount of margin, right? Even for long-term rentals where your property management is usually 10%, 15%, that could be all of the free cash flow you have for your entire business. I think about that all the time with our short-term rental. I it's too big and too far away for us to manage, But...
Over we were just staying at a friend's what my friends Airbnb over in Lake Bay, Washington And it's a cute little three-bedroom house on six acres. It's at the top of the hill very isolated very Secluded it's got some water views. It's I mean, it's really nice and They I think he bought it for about 400 something K is a 3 % mortgage on it and it grosses about 55 60 K a year and so he cash flows
well
but he manages it himself. has everything automated in Airbnb, know all like the messages and or VRBO whatever they use. His wife, it's only 10 minutes from his house, so his wife goes and cleans it afterwards and so they actually they can make some money on it, put some equity into the house and it's not a huge impact on their lives because it's just one rental. It's just it's pretty simple, easy, easy house.
Clay Hepler (15:45)
Mm-hmm.
Justin Piche (16:06)
But it's still not passive. mean, it's not like he can set it and forget it. If he were to hire a management company to do it all for him, it would eat all of his margin. He'd be at net zero, essentially.
Hey guys, this is Justin interrupting your podcast here to say thanks for listening. Clay and I are talking about ways to build wealth outside of dirt. And no matter where you are in your business, early on or super advanced, ⁓
running on the treadmill can get tiring and eventually you may not want to keep adjusting to the market and chasing the next deal. So listen to this podcast. If you guys have any other ideas for ways to generate wealth and cash flow outside of land business, put in the comments. We'd love to hear now back to your regularly scheduled programming.
Clay Hepler (16:59)
Yeah, I just like as I've gotten more and more into this business, I realized like every business has a, like if you're going to get into real estate, like, I don't know, it's just such a business, right? It's residential real estate. I have not really experienced commercial real estate like self storage or triple net leases. I think those are much more passive on a relative basis. Like you still have to operate them, but like contractor garages.
Justin Piche (17:16)
Triple net leases, yeah.
Clay Hepler (17:27)
or industrial, like there's a reason why it's so hot right now. It's because people first of all, we're chasing alpha, but also it's much more managerially easy. ⁓ But I mean, I think it always just comes down to know your goal, right? And for for Justin, I can't speak for you. But for me, it's like I'm on a tear to compound my my money is as fast as possible. ⁓ And so I allocate everything back into the business. Now I do pull cash out for just personal cash reserves.
and, but I'm like completely land heavy. Like I have everything in land. ⁓ and so.
Justin Piche (18:03)
Yeah, have
to every time I do a big deal or where I have to get a personal financial statement together for a bank.
I look at the balance sheet or the net worth, you know, you can do a statement of your net worth and yeah, I'm very, very heavy in land. Probably like 60 % is land I own. And then maybe like 35 % is, well, let's take a step back. 50 % is land, maybe 30-ish % is like personal properties. And then the rest is kind of stocks and cash.
Clay Hepler (18:36)
Yeah. Yeah.
Justin Piche (18:37)
So it's like
80 something percent land or like real estate.
Clay Hepler (18:43)
Yeah. But like, what is your goal? what's your with your wealth building? Like what is your true goal for what you're trying to do? you like, I want to compound as fast as possible. I like I want to keep playing this game, you know, because someone would say, hey, depending on where you are, you got a million dollars of stock portfolio, you just keep putting a percentage of your total income into the stock portfolio.
Justin Piche (19:06)
Yeah,
I read this book. ⁓
a long time ago called killing sacred cows and there's some stuff in there that I think is really good and there's some stuff that I'm like kind of not completely subscribed to but it was a really good perspective on wealth and what the purpose of it is and how to actually build it and one of the big basically these sacred cows are myths or fallacies that we all take as truth so the one of the sacred cows and there'd be if somebody's listening and you disagree
It's totally okay. I don't feel passionately about this. I don't want to argue with anybody But one of the sacred cows is is retirement accounts 401ks IRAs, etc We have been told by everybody that the smartest financial thing to do is to put your money away into a you know a tax-advantaged account that you then access later in life so you have money to live off of and I think for the vast majority of people that's probably true the challenge with that is that money becomes
practically inaccessible for most people, right? The fear of a 10 % penalty, the fear of paying taxes or early withdrawal fees and taxes, et cetera, keeps people to leave that money locked up. And so...
when you get to be my age, mid 30s, kids, you a million plus dollars and a 401k, awesome, that's great. But I can't use it to live my life. I can't use it to generate other cashflow. I can invest it in stocks. can buy dividend stocks, whatever that I can keep growing that retirement account, but I can't actually use it in my life.
Clay Hepler (20:43)
Mm-hmm, right.
Justin Piche (20:44)
My goal is more to have assets that produce cash flow, but also that I can use. I want to be able to live and have fun. That's why I bought the Airbnb at a good time. I have a low interest rate. It was a good time to buy. It's a unique and large house, so it's still cash flow. know a of people have horror stories about buying, especially buying properties in the Smokies at the peak of the market and then selling them for a huge loss a couple years later because the rentals have dried up and the markets dried up and the property values are not what they are.
or what they were with interest rates two to three times as high as they were. We got pretty lucky, I think, with ours, or we were maybe more diligent with our research than other people when we bought ours. But still, I want to be able to use that. I want to be able to go on vacation with my family to an asset that I own that also produces some cash flow, or at least has a net even benefit, right? Maybe it doesn't produce positive cash flow, but it doesn't cost me much to own it. And it's putting equity and building that worth into the, obviously, just paying
down the mortgage. My goal is to be able to travel, be able to spend time with my kids in all kinds of places. I think the number one thing for me is having the flexibility to work wherever I want to work.
Like this trip has been great. I've still been working 80 % of the time that I normally would be working. I take off some time to go on a hike with the kids or go to the beach or whatever it might be. But things are still moving. Things are still happening in the business. Nothing is shut down. It's more of a lifestyle choice of being an entrepreneur and having something that you're in control of rather than being beholden to somebody else's schedule for you. And so, I don't know, man. I don't really focus on some big number
some like net worth or something that I have to have at the end of the day. It's more about can I have the lifestyle that I want? Can I give my kids the experiences that I want them to have all the while building wealth so that when I get tired of this, if I ever do, I have the nest egg I need to be able to do the next thing that I want to do.
Clay Hepler (22:40)
Mm-hmm.
Right, right. think the friction always is when you're flipping a lot, right, you don't set aside like I understand the killing sacred cows thing. I've read the book many times, ⁓ almost was in the life insurance thing as well ended up ended up not pulling the
Justin Piche (23:05)
Yeah.
Yeah, I
went down that rabbit hole too and pulled the plug on it. I have a term policy, it's all I need.
Clay Hepler (23:15)
Yeah. Yeah. And when people get really offended. Yeah, we're not going to talk about life insurance on this call. But, but you know, do your own research. That's all we'll say. But it didn't make sense for me. And I was even licensed in life insurance. So, you know, I think for a lot of investors, it kind of comes down to like, get clear on your goal. But there is a
Justin Piche (23:18)
We don't need to talk about life ins... People, we don't need to talk about life insurance.
Clay Hepler (23:43)
Percentage of the income I think if we're just talking about like level one, dude, it's like pay yourself Right a good book for that is profit first for real estate investors or just profit first Mike McCallewitz Just you know, like scaling without paying yourself is You don't have a business you do not have a business, right? And so that also allows you to properly allocate your capital as you're scaling but paying yourself 10 15 20 percent profit
Justin Piche (23:50)
profit first.
Clay Hepler (24:11)
really makes it really, if this is your full time gig, that's a great way to go. Of that, could theoretically ship off another 5, 10 % and start to allocate to something that's a little bit more passive or putting it into like T-bills at 5%, T-bill stacking, treasury bill stacking, things like that. So you can start to have a little bit more of a nest egg in general.
But nothing's really going to beat the alpha of the land investment business. And I think it's more particularly unique in that, if I'm in a house wholesaler, right? I'm flipping houses. I'm going to look at a rental property in a very similar way. I'm going to operate my business in a very similar way. And I have all the connections in that space. Imagine if there was an equivalent of that. The equivalent of that in our space would be like there's you could say notes, but notes eventually, they get paid off.
But you buy farmland and you lease it like a ground lease like that would be the equivalent because you might have someone else right exactly exactly
Justin Piche (25:14)
or timber by a timber property that you can cut
at some frequency.
Clay Hepler (25:22)
Right. So that would be sort of it'd be the adjacent equivalent. So if you're thinking about building recurring revenue, I think that's a really good way to do it within the land context. But ⁓ the way I think about it is the majority of my my ⁓ income goes into continue to grow the business developing the business and I pull out ⁓ business that basically I have a percentage of the income that I make that I take off the table for myself and my family.
that then I allocate towards, you know, paying down debts or savings, know, T-bills, things like that. And then I have a percentage of the profit of deals that I just put into basically, I could think about it as the investment pot, right? The investment pot is deals that I just use it to reinvest in deals, right? So, you know, say you have 100K one year, you want to grow that, you want to double that to 200K the next year, that just stays in the investment pot. You're not
pulling that out. So every deal, you kind of have your principal investment pot, right? And then you have your 10 % that you're pulling off the table, or 15%. So you do you make 100k on a deal 10 to 15 % that goes goes back to your capital pot that you can keep using to reinvest in your own deals, if you choose but that at this point, at my maturity, that's kind how I think about it.
Justin Piche (26:43)
Yeah, I do something obviously very, very similar.
Clay Hepler (26:47)
Yeah, I think I think dude, in general, it's like this is a not a one size fits all. But it's important to know that this is a means to the end. Not everyone wants to be a flipper their whole life. A transactional person. It does get tiring, right? Like you hear the guys that have been in development for 30 or 40 years. They're like, ⁓ man, like, I've just been doing this for so long. ⁓ You might be at the stage in your business like we are, which we're like,
Now let's keep going. This is incredible. I can't ever imagine a world in which I don't want to be doing this developing land. ⁓ But no back of mind that that 10 1520 years, it comes faster. And so setting up those recurring ⁓ income streams is strategic, maybe not at this point, but strategic for you to do and we hope that this kind of gave you the context around how we think about it.
Justin Piche (27:38)
Yeah, I think one kind of natural progression as you scale is funding. ⁓
notes, debt, income funds, that type of a thing, because it gets you, it's still somewhat transactional where you need to be involved in the skills that you've learned through building this business, comping properties, understanding good markets, evaluating buyers and borrowers and being able to provide advice to other folks who are hungry to do transactions that are kind of in your shoes several years ago. ⁓ And then funding for a smaller but more reliable cut. That's a natural place that a lot of people go. I can definitely see myself
doing kind of transitioning into that type of a space eventually ⁓ or just building that business up alongside kind of the flipping business. I do love notes. I mean, really do. I mean, right now, you know, we're doing a lot of deals that we need to cash back. So we're liquidating most of the notes that we originate. ⁓ But
it'd be great to be in a position where we're just piling them up and taking the principal, know, taking the interest payments as income and taking the principal payments to buy additional notes.
Clay Hepler (28:49)
Yeah, man, I, ⁓ I was talking to a buddy the other day that he potentially will be going, going to work for one of these massive rural, ⁓ private equity funds that just buys like 8,000, 10,000 acres and cuts them up and sells, you know, 800 lots, right? ⁓ and they're a lot of their model man is, providing the financing, right? ⁓
Justin Piche (29:16)
Yeah, yeah.
Clay Hepler (29:18)
They just do it at a much higher level.
Justin Piche (29:18)
We have, I mean, yeah, we have a, I have a deal that I'm working on right now with some, with some partners in Texas that is that very, I mean, it's much smaller. It's like 60 acres, but it looks like we will be able to sell all the properties for somewhere close to 10 million. And I think half of those properties will be notes.
I mean, that's five million in notes that you originate. so along with that, with those notes, like where's the liquidity coming from? Because if you have a, this is something I'm thinking about a lot and working actively working on, which is if you have a, you have a deal, you have a fund, let's say you have your investors in this fund, you're developing this property. If you were to sell them all bank financed or sell them all cash, no big deal. The cash comes in, you get your return as the GP, you pay your LPs their capital back, you pay them their return, you get to promote, you close out the deal.
But if the best way to move these properties is to owner finance, then you can originate ⁓ a massive amount of notes. But if you're using debt, which we do on most of our projects, then you've got to pay the bank loan down. So there's a partial release criteria. You to pay some amount to the bank. So where do you come up with the liquidity? If you're going to sell half your properties via notes, where do you come up with the liquidity to pay those banks off? So having a companion liquidity pool, a debt fund that has capital in it to purchase the notes that your fund originates and then move the notes into there.
you have another stream of income and another fund that's paying your investors where you can make money in as well. But also the primary purpose would be to have the liquidity pool to pay the fund itself and pay the bank off. Those go hand in hand pretty well. So that's something that I'm working on kind of right now as we ramp up to close this deal in the next couple of months.
Clay Hepler (31:01)
Dude, I'm super excited for you on that one. ⁓ The note fund and that big deal. I think that's the one that you've been working on with Ben, right?
Justin Piche (31:09)
Yeah,
there's a few with Ben. Yeah, but that one in particular is, I think, primarily notes. Because we got a couple of deals. have one in Burnett that we are working on the road now that I don't think is going to be primary notes. They're kind of higher dollar properties, 170 to 300K in the Hill Country. of higher end nicer homes are going to go in. I doubt many of those folks are going to hit us up for owner financing. And then we have one in Spokane that we should be closing here in a couple of weeks. That one is also kind of higher dollar, ⁓ $100.
50 to 350k per lot that probably also won't be a ton of owner financing but the other one in Texas I think will be a lot more owner financing. Kind of lower dollar 130 to 160 per lot half acre lots.
Clay Hepler (31:54)
Okay. Okay. Um, yeah, man. mean, I think that this gives our listeners a pretty good view of like, how do you go from generating the chunks of cash? How do you allocate your capital? Uh, to building out some recurring, uh, income streams, you know, what happens when you get to the level that, know, you want to stay in land. Um, maybe that's JV funding other people's deals. Maybe that's focusing more on acquiring notes. Maybe that's, um, you know,
going into and becoming a passive investor in a larger syndication for land or any other real estate asset class. know a lot of guys are like, I'm to put my money in a, in a private equity, big syndication for a multifamily class a property in order to generate some of that passive income.
Justin Piche (32:42)
Yeah, mean, like, debt funds are, I feel like, are credit funds, whatever you want to call them, I feel like are great avenues when you've built up substantial amounts of wealth. Because you've got, let's just say you have, you know, a million dollars in liquid cash that you want to place and you want to earn a solid return. I mean, you can easily find a credit fund that is going to pay you something between 10 and 12, 10 and 13 percent.
There's lots of them out there. And that's not a bad amount of income every year, right? Getting $120K a year in free cash flow on your investment for the life of the fund. And then you get all your principal back and you reinvest. I mean, it's not so bad. It sounds pretty nice, honestly. They have this recurring six figures from the money that you've earned. Anyway, and then you've hedged.
Clay Hepler (33:27)
Yeah, yeah, yeah.
is better than
5 % with t bills.
Justin Piche (33:35)
Yeah, obviously a little more risk, but not substantially, especially if it's like spread out across enough borrowers and enough mortgages. ⁓ I wouldn't want to invest in one single mortgage, you know, for that much family, but about 100 mortgages, 200 mortgages. That's enough diversified. That's enough diversification for me in a fund.
Clay Hepler (33:57)
Yeah, I agree with that man. agree with
Justin Piche (34:00)
mean, you've got to think about this at some point or another.
All right, and maybe you're not at the point in your business where you can focus on these wealth building outside of dirt or even inside, recurring payments inside of dirt ⁓ items, but it's something that you're gonna have to think about at some point or another. ⁓
The market changes so much. mean, that's, something that maybe I didn't realize when I first started this business four years ago was that of how frequently things would shift and how frequently tactics that we use to do deals would become obsolete and replaced with other tactics. And the treadmill, while I really enjoy running on it right now, I can see eventually not wanting to continue to run and shift and adjust and have these ups and these downs and these lefts and these rights and, want to be able
to focus on other things. And the only way you're going to be able to do that with confidence as an entrepreneur is to establish methods of income that are not tied directly to your effort. So you've got to start thinking about this stuff. Maybe it's notes, maybe it's a rental portfolio, maybe it's a debt fund, maybe it's syndication, maybe it's dividend stocks. I don't know what it is for you, but it's definitely something you need to think about. at some point you need to make it a priority to pull money out of the business
Take it off the table and put it into something else that can that can diversify you and give you consistent income
Clay Hepler (35:30)
Love it, man. That's a great way to finish it up. For the long time listeners, guys, if you want to keep learning how to build a land ⁓ business, a land empire, something that's just beyond flipping and just another course, keep subscribing and listening to the Ground Game Podcast. We'll keep coming with new, innovative topics every single week, but your comments on our YouTube and in our podcast really help us generate new topic ideas and help us continue to be encouraged.
that we got some people out there that are really getting benefit from this. Justin, anything else before we pop out here?
Justin Piche (36:05)
That's it, we'll see you guys next week.
Clay Hepler (36:08)
I'm in.