Real Estate Brokering to Fund Fastlane

[Paul Weese]

It’s taken me a long time to figure out how to compound my time and energy after being squashed by the Recession. I first read TFM in 2011 and have been referring back to it ever since. The years of 2010-2016 were unusually difficult - I can’t even put a finger on why other than my crappy mindset from being distracted by health and family issues.

Two books that got me out of my funk were You Are A Badass and Ninja Selling (Ninja Selling can be found here in the Fastlane bookstore). From these books, I executed two strategies: one to get my mindset right and the other to get business in the door. Within 60 days, things turned around for me.

When the Recession hit, I didn’t believe real estate would come back. If I hadn’t moved to a new town with greater population and industry, I’d probably still think that way. Real estate brokering is something I really enjoy and find I’m good at it. Many people have increased their quality of life and/or their incomes from the help they found in my work.

I don’t consider real estate brokering itself Fastlane. What I find Fastlane about it is the opportunities that come from accessing a community of smart, wealthy, and happy people. From being persistent and keeping connections flowing between myself and others, plus connecting those who have resources that can help each other, I’ve found myself with a cash flow and in the midst of two real estate developers who need help.

One developer is liquidating his portfolio of 50+ parcels over 400ish acres. The other had a good idea for affordable housing for a handful of people and my work increased this to hundreds of units. Finding opportunities like these to grow my real estate business and create Fastlane opportunities is what I’m mostly journalling here.

Having been around the block, I've become a minor master of swing trading and small business marketing/development. (I really, really want an online cash flow machine! But this is a distraction right now.) I use real estate as a venue for creating cash flow to feed stock trading and small business growth. So far, it's worked in my favor. Cheers to that!

 

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[Paul Weese]

My first development deal in my area came from talking to a person I was just meeting.

It was an odd encounter where, after a tense conversation relating to HOA’s, led to a coffee meeting. At this meeting, I found this person was starting a small development in a town near me. The town is a bedroom community to Steamboat Springs and real estate is relatively inexpensive. The development currently is for six tiny homes.

This immediately intrigued me. The guy I’m working with, M, had done more than half of the work required to submit a development application to the County. The project filled a need that is well-documented locally: workforce housing.

What I saw was an initial project that was laying the groundwork for further projects. M, now my friend, had only thought of just the first project. M is very passionate about tiny homes and has come up with a project that eliminates the problems associated with wheels and axels. The solution is essentially built on site homes without axels, however the homeowner could add them later if they chose.

Secondly, the homes would be developed on space that would normally have two larger homes on it. This seemed like a problem until the County Planning Director gave guidance. The Director suggested trying a PUD (Planned Urban Development) instead of using traditional subdivision processes. The problem this solves is that the homeowner isn’t renting, they will own the ground the home sits on.

With these concepts in place, I found that the need and solution was greater than six homes. Without going into deep calculations of demand, I found it safe to suggest that the need and demand could be as high as 200 homes in my local area.

With this in mind, and an understanding of Colorado growth, my local area was found to be an initial testing ground for building small tiny home communities around the state and southwest Wyoming.

As a real estate broker with a knowledge of development and investment property, I have been able to provide M an expansion of his idea, plus how to capture property for low out-of-pocket monies, partners to build multiple projects, and a concept on how to do pre-sales and eliminate most brokerage costs.

More on this later.

 

[Paul Weese]

The past week was cumbersome. Typical in development, we had a large delay come up, and also a great new partner join the team.

Our project was set for Planning Commission review on May 3rd. Our General Manager asked for another three weeks before closing. The owners of our lot, now in their early 80’s, who have an lawyer about the same age, said no way. Not only did they say no way, they personally went down to the Planning Department and made sure our application was pulled.

That alone is a set back of two months. After having made it to a meeting date, we were pretty positive. Now, we’re still with a good attitude, but funding was awry.

Funding the project, we are $185,000 short of our needed amount to buy and develop.

Real estate has a powerful aspect to it - people. I haven’t been in my new hometown for but three short years and I have met people with numerous different bank account values. For this project, which the total value is less than $1m, many people won’t take on a project this small. I had to find someone who wanted a starter project.

In less than a week I had two sets of people ready to take on the project after they saw our cash flow projections, as well as demographics related to demand. What a good day!

At this point, a syndication is started and partners get comfortable with each other. One set of partners wants to be silent, while the others want to be included to a degree with the General Manager running the project. At this time, we have all green lights to move ahead.

Now back to buying the land. The price is $140,000. The listing broker said they would reject anything below this number. We offered $120,000, close in 2 weeks. A couple days later, the rejection came back. In my experience, $120,000 with no contingencies and all cash would make me think that I had a pay day coming, if I were a seller. Today, we’re rallying around another offer, and due to a set of partners being out of country, a bit of waiting is going on.

For me, this looks good. Even if this property is unavailable when we move forward again, there are many open lots available for our model. The deal of a lifetime comes by once a week. If we can get our first choice, it will save time and lots of money from having to start over in some ways.

 

[Paul Weese]

Wow, I can't believe it's been more than two weeks since I updated this thread.

It's been up and down with acquiring the land. Money hasn't seemed to be the biggest problem, land has. My market has been on an upswing for a few years now and property owners are wanting the most money for their asset, which I think they should get. However, they are unwilling to allow a developer (us) to put our project initial approvals without a promise to buy.

In my experience, an option to buy property is a low risk way for a developer to get a project going towards final approval without having to put out all the monies a seller is asking for. And the seller gets the option money no matter what. Seems like a winner for them either way.

Not so right now. Twice sellers turned down our offer for options. One just took the property off the market, period. We were even willing to buy this outright in with cash. They didn't want to even hear an offer. This seller is an older couple with a long history in the community and doesn't need the money. They considered selling a headache and stopped.

The second just wanted their money now. We weren't willing to commit on this location without approvals from Planning. We offered $1000 for the right to move forward for 8 weeks, another $1000 for 4 weeks, close on the property 4 weeks after this. The seller said no. They wanted $5000. That was too risky for me. So, the seller is putting it on the market this week with a broker.

This being said, the last lots on the market in this community took over a year to sell. Maybe it will sell before we are ready to try again, or in four to five months we'll ask again and see if they are ready to work with us.

That being said, we have four properties we are working on - hoping one will work out and the other three we'll keep in the pipeline.

 

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[Paul Weese]

The past week was uneventful. Development is often slow, especially when the market for property is so strong. We aren’t worried about finding a good deal, just one that has a property with sewer. I didn’t think it would be so difficult. So now, we have four properties we are trying to get an option on.

Having a pipeline is great. What I really want is an ongoing project.

What I did find last week is an opportunity to do a Shark Tank like pitch in February. Our project is based on the tiny home trend. This is a very progressive idea matching minimalist living and affordable housing. The profit margin is reasonable, 20-30%. (The spread comes from possible unknowns mostly do to site preparation and Planning Commission curveballs.)

The group I met with are based on tech as well as brick and mortar. Our idea is progressive enough, and being done as an ongoing opportunity, so the investment group agreed to have us in for the February pitchiest. Pretty exciting!

Now as we enter this new week, we had a breakthrough on our original location. Being in a small town, the General Manager of the development group ran into the attorney of the land owners. They were getting hot dogs. A brief conversation led to the opportunity to once again move forward. (Big sigh of relief!)

This is ideal to me because we already have numerous pieces done on this land. This saves time and money. Hopefully we will be in front of the Planning Commission in just a few weeks.

 

[Paul Weese]

There has not been much going on in the tiny home subdivision project. Being Summer in a resort town, I have been busy with basic activities of real estate brokering. As well, my partner has been busy in his business as well. It has been difficult to meet, let alone move a project forward from square one.

During the past couple months, I have been watching closely to our market and reading relevant articles from national news sites. What I immediately noticed, and confirmed with other smart people out of my area, is the real estate market has been slowing down.

I’m not surprised. In my little market, values went up 18% due to a merger and acquisition of our local ski resort. That drove a lot of speculation as well as ‘get it now before it’s too expensive’ buying. Today, I don’t see much change in valuation. What I am seeing is sellers who priced to sell when the market catches up to the price, dropping their price. More importantly, most of those properties are still priced high and do not sell.

Irrespective, this real estate slowing will not be what we have seen with the recession. Maybe it will last several months, or a few years. Affordability has changed across the nation and wages have not kept up with it. With interest rates gradually moving up, this too will erode affordability.

This being said, I have analyzed my development projects with a different perspective. Perhaps building costs will go down because construction slows. Perhaps I will have to sell my homes a for a little less, doing my best to provide a house a price that is attainable.

My plans for the next month is to find another suitable site for a small development and keep the pipeline filling.

 

[LGILL]

Hey Paul, how are things going?

 

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