The Ground Game Podcast

Episode 54: Land Investing Stories: When Real Deals Get Messy (and Profitable)

• Justin Piche and Clay Hepler • Season 1 • Episode 54

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🎙️ Welcome to The Ground Game Podcast! 🎙️
Join hosts Clay Hepler and Justin Piche in this exciting episode of The Ground Game Podcast, your ultimate guide to mastering the art of land investing, team building, and land development. If you're interested in a raw, transparent look into what it takes to build a seven-figure land investment business, this podcast is for you!
In this episode, Clay and Justin dive deep into:

  • Real-Time Land Investing Stories: Clay shares a recent experience with an underperforming transaction coordinator, discussing the tough decisions that come with leadership and the importance of accountability in a growing business. Justin reflects on a challenging deal in Florida, highlighting the critical need for clear communication and effective processes in land development.
  • Navigating Team Dynamics: The hosts discuss the complexities of managing a growing team and the challenges that arise when transaction volumes increase. They emphasize the importance of having robust systems in place to ensure nothing falls through the cracks.
  • Lessons Learned from the Field: Clay and Justin share valuable insights from their experiences, including the necessity of proactive problem-solving and the importance of maintaining strong relationships with buyers and realtors to avoid misunderstandings.
  • Persistence in Closing Deals: Clay recounts a dramatic story of a deal that almost fell through due to a seller's erratic behavior, illustrating the importance of not giving up when there’s a significant opportunity on the line. Justin adds his perspective on the emotional rollercoaster of navigating complex deals and the lessons learned along the way.
  • Building a Sustainable Business: The episode wraps up with a discussion on the importance of creating a business that supports your lifestyle, not the other way around, and how effective leadership and team building can drive success in the land investing space.

This episode is packed with valuable insights and actionable advice that you won't find anywhere else. So, if you're ready to take your land investing game to the next level, hit play and join us on this exciting journey!

Hosts:

  • Clay Hepler: A seasoned real estate entrepreneur driven to build an eight-figure land flipping and development business.
  • Justin Piche:

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Clay Hepler (00:00)
Hello and welcome to another episode of the Ground Game Podcast. This is your co-host, Clay Hepler.

Justin Piche (00:06)
And this is your other co-host, Justin Piche and we're here to teach you how to win the ground game.

What's up, Clay? We are now back in our respective studios, AKA our offices at home. No longer are we in person in Dallas.

Clay Hepler (00:35)
Yeah, dude. I actually, for those listeners who watch, for those people who watch, actually, I had a standing desk incident. My standing desk just fell down and so I had to like move. I'm in a totally different location in my office. I had to move, but all good. We're here, ready to rock.

Justin Piche (00:58)
Yeah, so the topic of this podcast is land investing stories. There you go. These are real things that are happening to us right now. So I'm curious, what's going on with you?

Clay Hepler (01:08)
Well, a couple of things, man. So yesterday I, uh, I had a transaction coordinator who was underperforming, right? And so we gave her a very generous off boarding, um, opportunity package, right? But she just wasn't performing up to expectations. What that looked like for us was not updating files that we had notion. What that looked like is not communicating during business hours.

and not ever calling sellers, not really calling title companies and saying that you'll call someone and then never doing it. And so, you know, after a period of time, like I love to coach people, right? I want to coach people up to excellence. And if you can't coach someone up to excellence, you got to transition them out. And so I had that conversation with her yesterday morning and I have not heard from her since that conversation. So she said, I will do this. I will log out. will honor my commitment to

transition out and we give her a really good package and she's completely ghosted us. So, you know, it's not that I didn't expect this to be honest with you. I think that it was not a surprise to me that she's doing this. Obviously, it's that, you know, she had the character traits of someone that did this. But it's, you know, it's unfortunate, man. It's really unfortunate. But this is just the reality that happens as a CEO. I can tell you a little bit about

just so listeners can benefit like how we were thinking about transitioning her out. So we already had picked a transaction coordinator. We had warned her multiple times. We go through a performance improvement plan process, which is, hey, you're slacking here. Let's coach you up. Let's make sure that you are hitting the expectations. And really we're coaching around accountability through KPIs, right? There is a inbuilt accountability through our core values, which is like total ownership, adaptability, unquestionable standards, things that

We expect everyone to embody and then this coaching around KPIs. Are you getting the you know, for example transaction coordination? It's making sure that all files are updated within 24 hours Making sure that sellers are communicated with within 24 hours making sure we submit When we get a property in a contract to title company within 24 hours These are kind of standard things that you know speed is the name of the game and detailed is also the name of the game So we have some

push metrics as well, I guess pull metrics as well. And those pull metrics are, hey, making sure that when we submit a deal to ⁓ close, you're checking all the HUD, all the ⁓ exemptions, things like that to make sure if there's any problems with the potentially title insurance or what title is insuring. And we might need to renegotiate or something along those lines, including but not limited to uploading

per test, surveys, all expenses. She just wasn't doing any of that, right? And so those were the grounds of firing ⁓ a transaction coordinator. And this is a critical position, especially with the amount of volume that we're doing. ⁓ was all the problems in our business could be attributed to poor transaction coordination. And so we needed to make the change. And unfortunately, some people just aren't team players. And ⁓ you know.

she decided that she wanted to, I don't know, we haven't heard back from her. So it's unfortunate.

Justin Piche (04:37)
Man, you know, this is actually a really good topic just to dive in too deep. We did an episode about the importance of transaction coordination or like we at least we touched on it a few a little while ago. And this is one of the pieces of the business that when you're starting out, you you start to have all these tasks that you need to do and you need to do all these follow ups and it starts to get busy and you start to think, okay, I want somebody to do this for me, but it's not a full time job. And then you start to have the transaction volume where it becomes a full time job.

And then you have the transaction volume like what Clay and I have where the job grows. Right? The job grows and there's so many things that a transaction coordinator needs to do every day that it's very easy for balls to get dropped. We have struggled ourselves with transaction coordination and not because my transaction coordinator is not a team player or is not good or whatever. She is good and she is a team player and she is incredible.

But that's when the transaction volume grows to a certain level, you need to have better systems, better process. It cannot just be one person following up with a bunch of sellers, title companies, buyers ⁓ via email, via phone call, and manually tracking this type of stuff. It's gotta be automations, it's gotta be clear task lists that are triggered when projects get moved into certain stages, ⁓ clear visibility.

So we're in the process, we've been in the process for the last couple of months of like dissecting our entire transaction coordination process, where it ties into acquisitions, where it ties into sales, where it ties into project management, how are we communicating with our title companies, et cetera. And it's exacerbated by the fact that we went to a national title company and got really high level of service for the first couple of weeks. And then like I always do, referred other people to the same title company.

because when I like something, refer people to it. The title company got overwhelmed, didn't communicate that with us, and the level of service went from getting title agreements back in like a week to like over a month and just lost in communication. And they may be working it, but the communication, the level of communication has gone, like just, it's horrible. And so now it's been really hard for us in our business to determine what is a process issue and what is a title company level of service issue.

because both of those things are issues. And we're trying to sort it all out kind of right now. I feel your pain. I have identified with my leadership team, if we were to lose our transaction coordinator, like that's such a critical role, like it would be really, really, really hard. that's one place where we don't really have strong backfill. If we lose a cold collar or we lose a sales assistant or something like that, like there are other people that can...

absorb those roles in the meantime while we bring somebody else in. Transactions coordination, it would be a team effort to try to fill that gap while we search for somebody, but it would be rough and be rough, which is why we need, obviously the process is better outlined.

Clay Hepler (07:41)
Dude, and it always feels like the least important thing, right? Because you're always focusing on, how do we get more deals in our contract? How do I improve marketing? How do I improve sales on the back end, Dispo? ⁓ It's the most important thing, or the least important thing until it's the most important thing. And it's been, you we have five deals closing, six deals closing this week, like over the next two days. ⁓ And now, you know,

I have to jump in, right? We're bringing on a new TC tomorrow, but I have to jump in. so, you know, unfortunately we don't yet have back backup owners, which I'll talk about in a second. We're bringing, we brought on a COO. So I'm really excited about that, but ⁓ he is charged with making sure that every team, every position has backup owners in the event that something terrible happens. Someone goes on vacation, et cetera. We can at least keep BAU business as usual going so that we don't have any

⁓ gridlock in our process. What's something new with you man? that's kind of little, little, little, I got some other fun stories, but I hope that that was helpful for our listeners.

Justin Piche (08:44)
Yeah.

Yeah.

Yeah. Yeah. Let's see. What's one issue that I'm dealing with now or just story I could tell. OK. So as you know, I partner on subdivides with with investors. People bring me deals or look at them and try to figure out a way we can work together on it. Well, I have I have one deal that that somebody brought me earlier this year. It's in Florida. It was a nice property, bought it for like four twenty subdivided to ten lots.

So small acreage along the road frontage and then some flag lots in the back. And we're only a few months into the deal and we've sold two of the flag lots, the larger parcels and essentially paid off the bank loan. So we had a $320,000 bank loan. It's almost all paid off. If not all paid off, I think we may own a couple more grand or something like that. But the first two lots of the 10 kind of took care of the bank loan. The next sale will start to pay back investor capital and then we'll be in the money after like another few lots. So well.

We had a development plan for this. It was a raw land farmland. So we bought it. We mowed it or like, you know, kind of not really clearing it was it was pasture land. So we just kind of mowed it, cleaned it up. There was some cross fencing. So we took out all the cross fencing and then we were putting in driveways like a four inch base clay kind of clay dirt. You know, this is rural Florida clay dirt, four inch base, 12 foot wide driveways, especially down the flags. Well, our project got delayed.

Like we had contracted to do this work back in August and like it was supposed to happen early September and some rain happened or some other delay, whatever. It got like kept getting delayed and we got one of the lots on a contract and it, the seller or the buyers wanted to move it up, which is great. We moved it up, well, we moved it up before the dirt got delivered. And this is the start, this is one of the key issues here. So the second problem is we,

the cause of this issue that I'm about to explain to you is that we, our realtor never communicated our development plan to the buyer. So we had told them right at the beginning, hey, we're putting in driveways, we're doing this clearing, we're doing these things. you need to, you know, we didn't necessarily say explicitly, you need to let every buyer know that this work is happening on these properties. But we told them our development plan and then we just proceeded under the assumption that everybody who's buying our lot has already been communicated this.

Because we're not dealing with them. We're not dealing with the realtors. We have a realtor on this. We're not communicating directly with any buyers. So these buyers buy the lot. They closed on the 23rd. And we had quite a bit. They had the longest flag. We had quite a bit of material delivered, dumped on their flag all the way down the flag to make a driveway. And they didn't want it. And so they started sending us emails.

titled illegal dumping, like using all kinds of legal language, you we're gonna not necessarily explicitly threatening, hey, we're gonna hire our attorney and sue you, it's like, but the challenge is they wouldn't talk to us. We were trying to call them and be like, hey, because we obviously we spent money on this dirt. We spent money on the work. We're trying to improve this property. The first kind of conversation was like, hey, like we can spread this to create the driveway or we can remove the property or remove the material.

And they didn't reply. They wouldn't talk to us. They've only been willing, are willing to correspond via email. So there's like a written record of every single thing. And it's just being, it's been really challenging because we had an opportunity to remove this material immediately for a pretty low cost and have a minimum impact to their land. And now it's been sitting for two weeks and they've, they finally, well, hasn't, don't know if it's right, but it's just, it's a lot harder now and they keep writing us these emails of like,

Clay Hepler (12:30)
brain. Yeah.

Justin Piche (12:38)
You have to do full remediation of the damaged pasture land. It's kind of like a crazy, it's just crazy. It seems like a crazy misunderstanding that we should have been able to resolve in a day. But I'm not really sure how it all broke down. I don't know if it's just they didn't want to talk and that's why, because I wasn't, I'm not like running this project per se. I'm kind of funding it. My project manager is leading the charge, but the partner is taking a very high level of operational role in this. And it's just, it's insane. It's insane. I mean,

Clay Hepler (12:48)
Mm-hmm.

Justin Piche (13:08)
We're doing everything we can to get on there and remove the material. Well, the first thing is, yeah, I I told my project manager this, and this is always true of every single deal. If you sell a lot and you haven't done the work to it, like make sure the person wants it because you don't have to spend that money if like they're not expecting it.

Clay Hepler (13:09)
What could you have done differently, Justin? Is there anything that you learned? Like, like...

Justin Piche (13:28)
So like we were wasting a bunch of money on dirt that we dumped like quality driveway based material dirt that we're throwing away that we then have to pay to remove and then we then have to pay to remediate the their pasture land probably like they're requesting we do a full remediation of any place where there was dirt. It's a lot of dirt. It's a long it's a long it's a very long ⁓ flag. They want us to remediate the pasture to be a full mature pasture. So

I think the type of dirt we're using is designed, it's clay. It's like designed to be a solid driveway base. So we're going to have to pull it out and probably remove some of the topsoil and then bring in new soil and then reseed. If we want to really truly like make it, yeah, it's possible we could just remove it, take a little topsoil and like let it grow again. But, you we want to make it right by them. Obviously we had no intention of messing anything up for them. It's really a breakdown. It's really our realtor. I mean, if I, I'll take some ownership, right? But

Clay Hepler (14:10)
my gosh, dude.

Justin Piche (14:28)
But if I really want to pin it on somebody and say like, wow, this could have been prevented if you had just communicated our development plans to the buyer or to the buyer's agent or put it in the listing or done anything with the information we gave you.

Clay Hepler (14:38)
Yeah.

Justin Piche (14:41)
It's just one of those things that gets missed. Like what an honestly, like it's truly an honest mistake. If it hadn't been delayed, we would have delivered the material well before closing and then we would have owned it. And then the sellers could have said, I don't want that material on there. I won't close until you remove it. And then we would have just removed it. It would have been, you know, it would have been so much easier, but now it's they, they saying we criminally trespassed, we illegally dumped material and they're kind of framing it in this way that did that. We're just trying to play nice, but the challenge is it's just, we can't get on the phone with them.

Clay Hepler (14:41)
Man, that's tough.

Ciao GPT man.

Justin Piche (15:12)
called them, left them a bunch of voicemails, emailed them, please, can we just get on the phone, like call so we can resolve this, you know, you can record it. And they literally just emailed back and said, we will not be getting on a phone call. All communications need to be recorded via email written communications for clarity sake. I'm like, oh my gosh, guys, come on, is silly.

Clay Hepler (15:31)
Love it, love it, love it. So basically,

what would you add to your process? I mean, obviously there's a broker component and maybe there's nothing, dude, but I'm just trying to figure out like how do our listeners benefit from this? Like what do you add to your process so that you can make sure that doesn't happen again? Maybe it's impossible. Maybe this is like, man, honest mistakes like.

Justin Piche (15:38)
I know, right?

Yeah, I know.

No, I think

this is an honest mistake for sure. But I think it's like the, mean, I can see why this happened. We have a partner who's kind of leading the realtor relationship. we have an LLC that we're both a part of that owns the property. We have my transaction coordinator, which is kind of has some input on things, but, not the main person involved with title and closing.

We have my project manager who is trying to coordinate this work and so it's like these disparate parties ⁓ If it was an internal deal this this probably wouldn't have happened because we would have had that conversation We would have talked to them about it. They would have said we don't want this driveway or whatever. It would have been fine But it's just because it was I don't really know man I I told my project manager like one surefire way is if we are closing on a property and work has not been completed like we can't do any work unless we have like written permission from the buyer because it's their property now and So we can't dump stuff. We can't do anything

Clay Hepler (16:40)
Yep.

Justin Piche (16:44)
If they, talked to them in the day, they say, yes, I want this driveway completed. Yes. Bring the material. They, you know, they send an email with it. That's one thing, but I, yeah, I think when you have a bunch of deals going on, especially a bunch of projects, it's just things get lost. Things get lost stuff. So it's not in the end, it's not going to be like, it's, it's kind of frustrating. It's frustrating to get these emails from these folks because they feel very unreasonable. Like they're not willing to even have a conversation to try to solve this. ⁓

Clay Hepler (17:01)
Yeah. Yep.

Justin Piche (17:14)
You know, that lack of communication has prevented us from solving this problem earlier. Their immediate jump to litigious language and like posturing for a lawsuit really inhibited our ability to like just be honest and reply and try to work through this. Cause now we have to start thinking about protecting ourselves from a lawsuit or something like that. It's just kind of crazy. It's just insane.

Clay Hepler (17:36)
Yeah, speaking about lawsuits,

I got a situation for lawsuit. Okay, so we're buying a property that is a really good buy. Buy for 100, sell for 500, Sell for, yeah, maybe 400 at the lowest, but.

Justin Piche (17:43)
Yeah, all right.

Wow, that's really good.

Tell me how to get one of those deals,

Clay Hepler (17:58)
I know, I know, I know,

trust me, they don't come around that much, brother. They don't come around that much. And it's a standard flip, so we got it. There's more complexity, okay, but let me tell you the whole spiel. I might have, I don't think I said this on a podcast. So, about a month ago, Justin, month and a half, I get a call from my surveyor, surveying this property. This is a subdivide, we're cutting this up, okay? And the surveyor said to me, hey, Clay,

Hey man, almost done with the survey. I just want you to know that there is a home on the parcel, right? There's an actual house here on the parcel. It's 80 acres. There's a house here and it looks like there's someone living here. I saw a dog, but I'm not really sure, but the property is so like mangled that I don't know if really there's anyone living here. I'm like, okay, that's fine. Like I got it. You know, the seller said that there was a trailer on the land, but I

I don't think anyone's living there. The next day he goes out to the property and he's like, dude, no, like I literally walked to this guy up to this guy because he was finishing the survey, right? I walked up to this guy's trailer, what I perceived to be a vacant trailer and there was someone there. And I was like, wait, what? So.

We, the seller, never disclosed to my acquisition manager. He said that there was a trailer on the land. That's what he told me. I said, well you just said a trailer on the land. The assumption is it was a vacant trailer, right? Because you did not say that there was anyone living in a trailer. In fact, there was a guy living in the trailer for 20 years. And so, I try to get ahold of this guy. Wait, wait, wait, wait. I got so much more. So I try to get ahold of this guy, right? He does not, he has a government ⁓ phone.

Justin Piche (19:41)
20 years.

⁓

Clay Hepler (19:50)
Right? Because he is on unemployment, he's a wounded vet, ⁓ he doesn't have electricity basically. He has a, ⁓ basically doesn't have a leach field on his property. And ⁓ I had to call his sister and his brother to get a hold of him, to talk to him. Right? So I'm super concerned. I'm like, what's this guy's deal? And I finally get a hold of him.

He's a really nice guy. And I said, hey man, he tells me I actually already paid this seller to live on this land. I'm like, it doesn't say that in the deed. You don't actually have access. He might have taken a down payment from you, but he never transferred the property over to you. And so you're gonna have to pay for this land, because I'm buying it from this seller, and you're gonna have to pay for portion of this land.

He takes it like a good sport and I'm like, dude, I'll help you. I don't want this to be, you've been living here for a long time. You gotta pay for the land. It has to be fair, but I'll work with you. I will work with you. That delays closing about two weeks. So I try to get ahold of this. It's impossible I have to call the brother, sister, whatever. At this point, I'm in Phoenix, I'm in Dallas. That was during that period of time. Trying to get ahold of this guy. Finally get ahold of him. And then we exchange a couple more calls. Then I've...

kick the closing because I'm like, I'm not closing without talking to this guy. Zero percent chance, right? Because you never disclosed, the seller never disclosed to us that we're actually closing. So then we get to the closing day and the day of the closing, the seller goes absolutely AWOL, right? First of all, he doesn't answer our calls. Then he takes a cocktail of rum and prescription pain medications and goes ballistic on myself.

and on the title company. He calls the title company.

Justin Piche (21:46)
How do you know

he was using substances just out curiosity?

Clay Hepler (21:51)
I literally just talked to him. I talked to him today. He apologizes to me. But we get to that level. We get there, we get there, we get there. So he's crazy. He says we're a scam. He cusses me out, he cusses the notary out, he cusses the title company out. The title company gets angry at me because they say this seller is unruly. He calls the title company 35, 40 times in the span of four hours calling everyone.

Justin Piche (21:54)
Mmm. Mmm. Mmm. We'll get there, we'll get there. Okay, okay, okay, so he's ranting at you,

Clay Hepler (22:20)
very inappropriate language, calling me, calling me a scam, calling me into the night, into the night, like 10 o'clock at night, my time. And then calling me the whole next day and calling me the whole following day. This is a big deal, right? We're adding a lot of value to some interesting stuff we're doing with the property and we're forcing value. We're giving the seller a really fair price for the value of the property, but I'm not gonna lose this deal, right? And so that night that the seller refuses to close,

I'm frantically calling attorneys in this state. I'm frantically saying, man, we gotta put a demand letter out there. We're gonna file a lien. This is too big of a deal. So I call three or four attorneys. It blows my entire afternoon all the way into the evening. I'm calling the cell phones of the attorneys. I finally find an attorney, right? Takes the attorney about half a week, three to four days to get a demand letter out with a retainer of 1,500 bucks just to send a demand letter.

Justin Piche (23:17)
Of course,

Clay Hepler (23:18)
Right? Yeah.

Justin Piche (23:18)
that's quick, honestly, by the way. That feels fast for an attorney. mean, okay, keep going.

Clay Hepler (23:23)
So

he sends out the demand letter, this is last week, and then the seller says, hey, call me. He calls the attorney, right, because you get the letterhead, first class mail, it's no BS, right? And I eventually call the seller, right, and I talk to the seller and he's like, hey man, I'm super sorry, right? ⁓ I was on pain medication and I was drinking rum and my daughter won't even talk to me, I had such a crazy week.

Most people would give up. They would say, I'm putting the towel in, I'm not doing this.

Whenever there is a fish on the line, you do not give up. That is a lesson. People give up when there's a fish on the line. They say, my hand's getting tired. My arm's getting tired. I'm pulling this big shark. This is a whale, man. We're pulling a whale in. I'm not giving up that line. So I was calling everyone. I had my team calling everyone. We sent this demand letter out, and we're good. We're gonna get the deal on our contract. We're talking to a notary. I'm probably gonna close on it today or tomorrow.

But the lesson learned here is when you have that fish on the line, do not give up. And the difference between an extra deal every month or quarter is not always about being better at sales or marketing or dispo. A lot of times it's about making, you know, those little nuances, little three to five millimeter shifts of I'm gonna make that call, I'm gonna reel this fish in no matter what. I'm gonna hold my transaction coordinator accountable to fixing problems no matter what.

And that was a lesson I learned this week, man. So, you know, that added an additional 200, 300K, 400K to the bottom line. I don't know. We'll see. You know, who knows in this market, right? Probably gonna be about 300 or 400 to the bottom line just because I was unwilling to let that fish off the hook.

Justin Piche (25:20)
Hey guys, this is Justin interrupting your podcast to say thanks for listening. Today, Clay and I are sharing some stories, updates, crazy things that are happening in our land business. If y'all are getting value, please leave a comment, rate, review, subscribe. Now back to your regularly scheduled programming.

What a good story, man.

Clay Hepler (25:38)
Crazy!

Justin Piche (25:38)
I love hearing stories

like that. We've shared our fair share of crazy ones, but that's pretty, that's a good one. That is a good one. I agree with that real quick. Like just the lesson learned. I think that's so true. there are hard things in business and there are especially hard things in this business. And it's one of the reasons we started the podcast is to talk about the things that are hard that people don't understand when they're getting in.

Clay Hepler (25:47)
So, so,

Justin Piche (26:06)
And so if you're starting this business or you're in this business and you went in thinking it was going to be easy and you give up when you have that kind of reaction from a seller. I mean, and let's be clear, like there are times to give up if that was a $10,000 profit deal or a $20,000 profit deal and like you probably wouldn't have done quite as much, you know, but a 400K, 350, whatever K profit deal you can't get those up.

Clay Hepler (26:34)
Yeah, think dude, I think there's just extra gear. Right? So you know in sports cars, right? You know, in regular cars there's, I don't know, I'm not a car guy, but there's like five gears. You know? Five gears, four gears, five gears, something like that. But in the super high performance cars there are six gears.

Justin Piche (26:52)
You get a sixth.

Clay Hepler (26:54)
So if you want to build this business, man, like to a level that we're building, like you got to have that six year, you got to have that aggression of like when...

when you're tested, right? The buck stops with you. And I think people wanna delegate the final decision. They wanna delegate bringing the hammer down. They wanna delegate the hard conversations. But you're the CEO, man, this is your business. delegate it.

So that's just a lesson learned. Again, it's like, know, action cures all, speed cures all. I cleared my whole afternoon. had other people, other responsibilities. I'm like, guys, it's my responsibility as a CEO to do this. I cleared my schedule. I handled it. I closed the deal. Because that's a big profit deal.

Justin Piche (27:48)
Yeah. And that's a good story. I got I have an update on on some deal I'm working on that was has been maybe maybe the biggest emotional roller coaster of like we're going to get this deal done. We're not going to get this deal done with money at risk that I've had. So I think I've talked about a little bit before the Spokane the Spokane deal two properties 152 acres. The other one's 313.

where me and some partners are splitting the property up into 43 lots, so 43 lots. And maybe the quick rundown of the story is got this property under contract back in like April timeframe. So it's October now, by the way. And earnest money, hard earnest money, extensions built in, et cetera. So the deal requires very little capital improvement. it's an exempt subdivision.

Certificate of exemption in Spokane County. So we don't have to do any like long county process. So in my mind, I mean, it was a big deal though. 4.45 million purchase price for both parcels. One was 1.05, the other was 3.4. So my mind is like, okay, well, we need, the bank loan is gonna be tough. We're gonna have to get this bank loan. We're gonna have to raise two million plus dollars for this deal. So this is how we're, but on paper, it's a simple deal. It's a simple deal. A lot of inventory, three plus years sales timeline, but simple.

to execute on. So you get the, you know, get the marketing package together for investors, get the deck, start raising, get some initial interest. And so we're starting to get some interest, bring money's coming in. Commitments are coming in. So applying for loans, get tonight, get turned down, get denied, get turned down, get denied six lenders, turn us down. Not because of our ability to be, to get lending. have the partners collectively have a strong balance sheet and cashflow so like we can

get this loan and guarantee it, but the property type, the type of development, they weren't willing to lend on a land development project. So finally we find a bank that is willing to do it and it's a Texas bank, private bank. However, they assign no value, collateral value to the land. So we got to get an appraisal. The properties come back at our purchase price. So the appraisal comes back good.

But from a loan perspective, you know, you think you want to be at 75 % loan to value. Well, we're starting at 0 % loan to value on the purchase price of the property. They won't. What I mean? I'm sorry. Uh, yeah. They won't give any value to that land. like we're trying, we needed to get a 3.5, 3.3 million dollar loan against 4.5, 4, 4.5 million dollars for the property.

But instead of saying, well, the property is worth 4.5, we'll give you this three point something million dollar loan because it meets our loan to value thresholds. The value of the land is zero. So now you have to collateralize this $3.3 million debt with something else, not the land.

We're like, okay, what do we have to do? You have to use to collateralize this loan with liquid ancillary collateral. What that means is cash stocks securities in a brokerage account, not retirement that where the brokerage or the custodian or whatever is willing to enter into a control agreement with the bank. And what that basically means is if we were to default on the loan, the bank

will first go and sell the land and recover whatever they can from it. But if that process is taking too long and I don't know who defines well taking too long or they don't be able to recover their full the full debt obligation by through the sale of land. The next thing they do is go after that liquid collateral that's sitting in that account that cannot be moved out and it has to remain at 110 percent of the unpaid principal balance. So I'm like man. So then you know we got that information we're like okay this can be really tough.

Let's talk to the sellers about owner financing. So we pitched to the sellers, both sellers were willing to do owner financing. It was like, what? This is incredible. Not only were they willing to do owner financing, one of them was willing to do 20 % down, 9%, 15 year term, which was fine. It all worked in the underwriter, a two year balloon. The other one was willing to do 20 or 25 % down. We were just kind of negotiating over like the balloon.

the amortization timeline, et cetera. So we get the amendment on one, the smaller lot, the 1.05 million for 20 % owner financing down. Okay, great. The other one, they needed to consult with their attorney. So they consulted with their attorney and they're doing a 1031 exchange. And when you do a 1031 exchange, you can't sell or finance anything at all. And for them, the sellers are in their late 80s, 90s.

And so they know they're not going to be around that much longer. Their son is going to inherit. And if they were to sell this without a 1031 exchange, they'd incur about a $700,000 tax bill from the sale of the property. And so they're not willing to do that because obviously, you know, put it do 1031 and then it's a step up basis at their death. I mean, 700 grand that the son would get an additional inheritance. Right. So they're not willing to do that. So now we're back to the bank. We. I started frantically, I'm like,

all this time like I'm going to lose my money and I have about 150 K 150 K of money hard into this deal that that if I don't close, I'm going to lose it period. Like it's gone. I've no no like it is what it is and like maybe for the listeners obviously you don't like like don't love doing that but sometimes like that's what it takes to get a big deal done. It sucks and there's a lot of people you know just a quick side note like there's a lot of people in this business that have kind of killed the golden goose of flipping gone after some bigger deals.

Clay Hepler (33:39)
Yep.

Justin Piche (33:48)
had a couple lined up kind of like this and they didn't work out and they lost all that money and it can ruin people. And yeah, it would freaking hurt. It would have not ruined me to lose $150,000, but it would hurt pretty bad. mean, that's just operating cash, right? It's not like it's some like retirement account or whatever that I'm not planning on touching. mean, like that's the money that I'm using in my business to do business. So that would be a big hit. Anyway, it did not fail. We actually closed the first deal on our financing. We bought it.

We listed it's listed right now. We did our capital call from our investors. So we've got a bunch of money sitting in the bank account that we're starting to develop that first property. We got an extension out on the second property, continued extensions. Every extension has cost me $10,000. So maybe I more than that now because I've done another extension, but another 10 grand into it. ⁓ I had to find investors who were willing to pledge collateral.

to meet our ancillary collateral requirement.

Clay Hepler (34:46)
That's got to

be an expensive conversation, my man.

Justin Piche (34:50)
So here's the pit. mean, here's the thing for the investment for the investors. Okay, you have an account of money that you have that equals we need a 2.805 million total ancillary collateral. One of the partners, credible. He's covering about a million of it. Just, I mean, he's just amazing. So he's got a million in an account that is being pledged as collateral, liquid collateral. He's gonna have it in securities or maybe stocks or, you know, but it has to remain 110 % in total.

So we needed 1.8 million additional. So I started calling like all kinds of people, friends, like my buddy, his dad, you know, just whatever, sending out the E S I created a term sheet. You know, I kind of like tried to research what, cause this is a weird investment. You're essentially pledging money that you have that you have full control over that you benefit completely from that can stay invested. So

If you've got $2 million in cash and you're not planning on touching it for the next two years and you want to just hold it in US treasuries for two years, this would be perfect because what we needed is that money pledged in that account that they don't withdraw from. They still get all the benefit from their investments, whatever it's invested in, and we'll pay them on top of that, but they have to pledge it in the case. And then on top of that pledge, we are guaranteeing them and indemnifying them against any losses.

So it's a zero risk investment in one sense for the person who's actually making it because not only, yeah, go ahead. In the end, we ended up for 1.8 million, we ended up paying $200,000.

Clay Hepler (36:14)
What did you pay over, Justin? I'm just curious.

you gave them a check, wrote them a check for 200k.

Justin Piche (36:23)
So not yet.

No, no, no. We did it in the form of a hundred thousand dollar fee that the fund is paying in month 13 to 24. So monthly eight thousand something dollars, whatever it is. And then a percentage of GP interest to equal a hundred thousand dollars.

Clay Hepler (36:45)
That's a really good deal for you guys.

Justin Piche (36:49)
I think it's a good deal for the investor because he has no.

Clay Hepler (36:52)
What is

that IRR equal to? Yeah.

Justin Piche (36:55)
For him?

Well, it's money that he would, it's an opportunity cost. He can't move that cash into other investments. So the IRR is that he's not actually investing any money in the deal. His investments are still outside of the deal and earning. He doesn't have to send it anywhere. It's his account that he controls. He just can't move it out of that. So he's not putting the money in the deal or anything. for the act of him keeping the money in the account for the life of the deal.

Well, as we paid on principle that that requirement the dollar requirement drops. So for him for the investor, we're saying, okay, your money is third in line. First in line is the land to recover the bank's money. Second in line is our general our other GP's cash. Third in line is your cash. So if the bank were to sell the land and recover zero dollars and they would liquidate all of the other partners money, then they would start to liquidate yours in the event of default.

Clay Hepler (37:45)
Sweet deal.

Justin Piche (37:53)
That's how it would work. And then on top of that, we indemnify you against all losses. We all three personally guarantee you against any losses. my partner pledged about $7 million of additional assets to cover that $1.8 million investment in case it was lost, like something he could recover. It's no risk. And in exchange for that, paying him 100 grand plus some percentage of the GP. The thing is,

It's like crazy, like you just have to figure out how to get stuff done.

Clay Hepler (38:26)
Yeah, dude, that's a six gear moment. That's a six gear moment.

Justin Piche (38:30)
It's like you just get like there's there's a solution. You just have to be willing to not let it die. ⁓ And yeah, do I think that price is a little high? I do. But but at the same time, the deal still works. I'm happy to make that deal because it works. We still make money. Our investors still make money. The numbers check out. We get to give this investor who's a solid investor, who's actually his firm is an LP in the deal as well. ⁓ You know, a little bit extra, which when we perform is going to be something that

Clay Hepler (38:43)
Yeah. Yep.

Justin Piche (39:00)
he'll remember and want to do more.

Clay Hepler (39:01)
He's going to make an extra

200K, right?

Justin Piche (39:04)
And as you do bigger deals, as we do bigger deals too, that relationship or the relationship with people that have a ton of excess liquidity, it's gonna become even more important. On a couple million dollar deal, you need maybe one person worth 15 or 20 million and you're probably fine. But if you're doing a 20 million dollar deal, 30 million dollar deal, you need a lot more.

Clay Hepler (39:26)
Yeah,

yep.

Dude, that's terrific. mean, that's really awesome. Super impressed. Wait, so when's that baby closing?

Justin Piche (39:37)
So we're scheduled to close the 17th where I don't know if we're going to make it. We're probably going to need another extension. It's kind of a complex deal because now what needs to happen is so we've done that. We've got the bank, all the income verification stuff. The bank needs to draw up the loan documents. They're going to cost about seven grand just to draw up. We have to hire an attorney to do them because it's a complex loan requiring these control agreements and all this extra stuff. And they're not their policy is they don't start on the

loan documents until all the accounts are verified. But we have like the terms of the agreement with this investor. We've had our attorneys draft them up. sitting with, think they just got delivered to him, but he's a busy guy. I mean, he's a busy, busy guy. So it's not like he's just waiting around for our documents. know, he's like, he runs a, yeah, he runs an entire like investment firm. it's, it's hard. It's hard. And so what we need now is we need the accounts, essentially just account statements and the custodian of those accounts and their information.

Clay Hepler (40:19)
Yeah, right, right, right, right, right, right, right.

Justin Piche (40:32)
and we need to provide that to the bank and as soon as we provide that to the bank, the bank says, we got some of it, we're waiting on one more account. The bank will say, okay, this is good or you need to make these changes and then we can start on the loan documents. I just sent an email today to the bank actually just to be like, hey look, can we please get started on these loan documents? I feel like we can work these two things concurrently so that we don't have to keep pushing out. Because the other added complication, this is the last thing I'll say about this deal. We'll move on to some of this awesome story. The seller.

fell, one of the sellers fell, I think the wife or the husband, I don't know which one. And they're going into surgery on the 17th and they're like 90 years old. Like, so if we don't close or they're to say 18th, so we don't close by the 17th, we have to wait for them to get out of surgery and like recover enough to sign paperwork. So like there's really a clock on this. I mean, I don't, it's 10 days. I don't know if we can. So I told the bank, I'm like, can we like expedite the heck out of this?

Clay Hepler (41:26)
Yeah, yeah.

Yeah. Yeah.

Justin Piche (41:31)
So I don't know,

it's not out of the woods yet, you know, it's six gear. What else you got? What other story you got?

Clay Hepler (41:34)
Six gear, brother, six gear, I love that. I love that.

Yeah, so I mean, this can be our last one as we wrap up here, but brought on our, my COO, which is really great. Yeah, so Nick, Nick, yeah. Yeah, man, I mean, you know, two days is too soon to tell, but I mean, you know, I see the energy, I see the attitude, I see the skill set, so I'm really, really excited about it, right? And this is a true integrator.

Justin Piche (41:42)
Yeah.

Yeah, I wanted to hear an update on that. want to hear an update on that. What's his name? Nick. All right.

Clay Hepler (42:09)
visionary role, like so, know, how I'm thinking about it in my organization is this guy is a true integrator, right? I actually signed a document, visionary integrator document, an agreement, this is what we do, these are our responsibilities. And he's running the biz, man, he is running the biz as an integrator, everything, right? We're starting to get really high performing team members on our team. We've gotten some really good team members and so, ⁓

He's walking into a pre-baked machine and we're doing really well. We locked up a lot last month and our team is really crushing it and our back end is starting to really, our disposition team is really starting to rock and roll but he has a couple of mandates in his first 90 days of getting our cash conversion cycle down, getting our KPIs accountability and organizational accountability dialed in so that

our systems, our processes, our people are all up to the expectations of the type of company that we want to build so that we can get going, right? It's about building the foundation. The way I think about it is the first 90 days for him is about building the foundation for a skyscraper, right? So I want him to look at everything. You know, our foundation right now maybe can support a 10-story building, but I want to build a foundation for a 100-story building. So his mandate.

He's building that foundation for a hundred story building. And so I'll give you some updates on that, but man, super excited to have another really, really high level guy on the team. ⁓ I think he's going to absolutely murder and super excited to have him.

Justin Piche (43:47)
Yeah, I'm excited.

you mind sharing initial compensation thoughts? Is that too much info?

Clay Hepler (43:55)
⁓ Let's give it maybe in like a couple weeks. I'm happy to do that. Yeah, well as

Justin Piche (43:58)
Yeah, yeah. All right. I'm super curious.

We can also talk privately. We don't need to share everything with our grad. No, just kidding.

Clay Hepler (44:03)
Yeah, yeah, yeah, yeah,

I'm happy to discuss that, ⁓ but I think it would be better to just wait a little bit until it's fully baked. It's like trying to give me the ingredients to a banana cake ⁓ without you having tried it yet. You know what I mean? I don't want to give you the ingredients without you trying it.

Justin Piche (44:13)
Yeah, no, I agree.

Yeah, yeah.

I hear you. I hear you. Well, sweet, man. I appreciate your time today. I know we're both busy, so it's been tough to get time in the schedule. But I'm glad we were able to get in here and share some stories.

Clay Hepler (44:34)
Yeah, always good to see you. And for those listeners, you know the gentleman's agreement, right? If you got any benefits from the podcast, please rate, review, and subscribe. Justin and I do this every single week for value, right? For helping you guys kind of take your business, your land business to the next level. Give you a little bit of insight into the trials and tribulations and the success of our businesses. And we hope it's valuable. So if you get value from it, please rate, review, and subscribe. Justin, anything to add?

Justin Piche (45:02)
Yeah, last last comments. We were at the the land scaling summit with Ajay Sharma a couple of weeks ago. We actually recorded the last two podcasts there. So if you listen to those, you probably heard us talk about it. But I was just overwhelmed with how many people, how many friends and land investors kind of came up to me, came up to Clay and were just like, hey, we really like the ground podcast. Like you guys are putting out great information. It's awesome. It's real. You talk about real problems and real issues and

Really appreciate it and many of those people did not rate or review which is totally cool, but it but it maybe it means we have a ⁓ I'm a much more forgiving person than the clay is but you know, I just want to say to all those listeners Thank you, you know, it means a lot honestly like it just means a ton to me and I know to clay to Hear that guys are actually getting and got and gals are getting actually getting value out of the stuff. We're talking about so That's it

Clay Hepler (45:35)
It's not okay. It's not cool. It's not okay.

Appreciate that man,

absolutely man. Well we'll see you next week.

Justin Piche (46:00)
Next week.