GI344: Creating Massive Value Through Land Entitlements with Brandon Cobb

GI344: Creating Massive Value Through Land Entitlements with Brandon Cobb

Brandon Cobb was a former medical device sales rep before becoming a fund manager and land development coach. His firm, HBG Capital, manages over $20 million of annual land development.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Brandon Cobb. Brandon was a former medical device sales rep before becoming a fund manager and land development coach. His firm, HBG Capital, manages over $20 million of annual land development. Thank you so much for being on the show!

Brandon:
Hey, thanks for allowing me to be here. The pleasure’s all mine. So

Charles:
You are in land development. We don’t have too many people that come on talking about land development. But before we get into kind of how that works and what you’re doing there, give us a little bit more of a background on how you actually got into land development or real estate investing and then land development. Yeah,

Brandon:
So medical device rep turned real estate entrepreneur, is it in one sentence. Right. But I, I am not what you would call a natural entrepreneur. I’m what you would call an accidental entrepreneur. I don’t have some story where I worked a corporate career for decades. I have some dream of quitting and doing it now. My dream job was medical device cells and it took me years to break into that industry. The allure of being able to rub shoulders with successful orthopedic surgeons, actually sell a product that I believed in that was making a difference in patients’ lives. Like that was what really motivated me. So when I was really young and I was just getting outta school, just like all the young bucks out there, the only thing I wanted to do was make a lot of money and make my parents proud. You know, like that was it.

Brandon:
And so I went down this path of go get a nice debut tube. Did exactly what my parents said, you know, save my money, you know, invested and just had my nose at the grindstone. And then one sunny Friday afternoon, my boss says, Hey, meet me over at the Starbucks and Westin, you know, five o’clock when you get off. And I was pumped to meet this guy. My boss for reference was a mentor of mine. I considered him a father figure. It took me years to break into medical device sales. And like he was the guy that gave me a shot. So I had a tremendous amount of respect for this man. And again, like father figure, and I was having a phenomenal day as a rep. Best day you could possibly happen. And I remember pulling up to the Starbucks. It was Friday it was in June. So summer was in full swing. You could smell the coffee, you know, sun was going down. And before I could tell him how much money I’d made him that day, he fires me.

Brandon:
And it took a few hours for the shock to really cook in. I’m like, my gosh, did I really just get fired like this? This is my dream job. This is my my passion. This is what I wanna do the rest of my life. And it’s gone. And you know, for whatever reason, you know, it was the best thing to let me go that day. And I learned a very, very valuable lesson, which is nobody was gonna look out for my financial wellbeing but me. You can be as loyal as you want to a company, climb the corporate ladder. You’re just one restructuring or one acquisition away from being let go. And so that was a very important lesson that I learned. Nobody was gonna look out for my financial wellbeing but me. So luckily I had, you know, saved a little bit of money and was living well below my means.

Brandon:
I wasn’t married, didn’t have any kids. And I said, you know, let’s give this answer. Remember thing a shot. So I said, well, what am I good at? Well, I’ve got a lot of people that reached out to me about breaking in medical device cells. Maybe I trained people how to do that. So I created a course, launched it, all that failed. I was like, well, you know, I’m really into the motivational stuff. I’ll sort on my online blog about motivation and that kind of stuff failed. I was like, well, you know, I really like Tony Robbins. I’m into that and you know, I wanna be a life coach. So I’ve tried the life coach thing, Charles, you’re not gonna believe this. Nobody wants to take life advice from a 27-year-old <laugh>. So that fell. Then I discovered this vehicle called real estate and that was the first venture that I actually made money in.

Brandon:
And I literally just cut off everything else. And I poured my heart and soul into that. I sold all my retirement accounts to buy my first flip. I started flipping houses. By the way, if you’re listening to this, don’t do that. Do not do that. Do not sell all your retirement accounts and do that. I was young, didn’t know any better. Very stupid. But that’s the catalyst that started my entrepreneur journey and my business. I gave myself a six month ultimatum to make some money. I beat that ultimatum by about seven days. I made about $30,000 on this house that I flipped. And I took that money, I just dumped it back into the business. If anybody’s seen the scene off of Batman where the joker slides down the big pile of money and like lights it on fire in front of the mafia, that’s what I was doing with marketing dollars.

Brandon:
And so that money led to me doing, you know, five or six more deals. And then I took that money and I dumped it right back into the business in form of marketing and hiring. And that produced like 10, 15 deals. And then I just kept dumping money back into the business until I had built up a house flipping business that was doing about 35, 40 deals per year. You know, we in, we vertically integrated, we had the construction company ’cause we couldn’t find any good GCs out there. You know, we started raising private money ’cause hard money was too expensive. We’re like, we’re never gonna be able to grow this business when over half of our monthly payments are hard money interest. So we started HBG capital and started raising capital from investors. And then we had one opportunity where the home was fire damaged.

Brandon:
The whole second floor was crispy, but the first floor was in pretty good shape. And I knew the foundation worked and we could buy it for less than what the land was worth. And we’re like, this has gotta be a good deal. And it, by this point, we’d done some full gut rehabs and, you know, weren’t scared of some really deep rehab. And and we bought that deal and we consider that our first new build. And we rebuilt that home and made three times the amount of money as a rehab we were doing around the street. And we did it in less time. That was the light bulb moment. We’re like, why are we flipping houses? We need to go into new builds. And being a gc, we didn’t have to hire that out. Like we were able to make deals out of stuff that other people couldn’t because we were our vertically integrated firm.

Brandon:
So we started building lots of houses and that’s real expensive. We started scaling HBG capital. We started syndicating, which that was like a, that when I discovered syndication, like the, the, the light bulb went off, right? I was really able to crowdfund a lot of capital together and start building all these homes. And that, that went went really well for a while. And we said, wow, we need to really grow this company. How do we do this? We are tired of chasing these little bitty, itty bitty new builds where you tear one house and you put two in its place. We need to go after parcels of land that we can do 30, 40, 50, a hundred homes. And that’s what we started doing. And we, we started developing all this land and all of a sudden we get boom, boom, boom, a knock on the door, Hey, who is it?

Brandon:
Well it’s a national home builder. We wanna buy your land. Sorry, not for sale. Get lost. Well what if we offered you this for it? And my partner and I looked at each other, looked at the offer, looked at each other, looked at the offer and go, this is for sale. You can have it. And we were gonna do the one across the street. Do you want that one as well? And we learned that Wall Street has to buy land in order to grow. They’re a publicly traded company. They don’t have any plan B. It is just to buy more, build more and grow stock price must go up and if stock price don’t go up, that’s a problem. And they’re building for 30, 40% less than what it costs us. ’cause They have these massive, massive purchasing power and they can pass that purchasing power onto us in the land. In other words, they can buy the land for a lot more than we can because of their purchasing power. And so that equity, they just pass it along to us. So we started taking land, getting entitled and selling it, getting land developed and selling it to national home builders. And so today here at HBG Capital, we focus on inventing new housing neighborhoods for first time home buyers.

Charles:
Oh yeah. And the other thing too with that is they don’t wanna waste the time of doing what you’re doing. They want something that’s pretty much, for lack of a better word, turnkey. You know what I mean? Where they can come in and they can start putting up houses right away. And then even if they pay more for it, I don’t think they really care if that situation, if they’re gonna be able to sell ’em at the end. You know what I mean? Yeah.

Brandon:
They want to build, they’re not in the development game. They have to do development right now because there’s not enough developers out there. And again, they have to do it. So they’re sort of forced to do a lot of self-development. But it’s created a huge opportunity for those that do understand this niche can execute on it and can actually deliver, finish ready to sell lots to ’em or take it through the entire approval process and deliver them ready to develop land.

Charles:
Nice. Okay. So let’s break down a little bit further of kind of what you guys do in your investment strategy. Like let’s start from the beginning of where you’re identifying these land parcels that can benefit from entry level housing, which I imagine is what the goal is of what you’re building here. They’re not really custom houses ’cause you’re selling ’em to nationwide builders.

Brandon:
Yep, that’s exactly right. So there’s three phases. Phase one is called the entitlement phase. You’re just getting the paper approved and you’re selling it to an end buyer. The second phase is we’re actually gonna do construction. This is where we grade the site out, we install the roads, we put the infrastructure in, right? You make a neighborhood without any homes on it. That’s phase two. And then phase three is actually building the homes. Now we came in it from a builder. That’s how we got into this industry. Right now we are just flipping paper and we are developing and selling lots. Those are the two things that we are doing right now. And the reason why, you know, I personally love development is because I have multiple exit strategies and I have multiple opportunities to force appreciate the value of the property. You know if you are, you know, flipping house, you have to buy it, put the money into it, and the value’s created after it’s fixed up.

Brandon:
You know, if it’s a multifamily unit, you know, similar, you gotta renovate the units force, increase the rents, get the NOI up, then you force and increase it after you’ve purchased it. What I love about this is we put the property under contract, we line up our buyer during our due diligence period, and then we take it through the process and it’s under contract the entire time. Meaning we don’t have to buy the land. The reason we do that, it removes the risk. We only buy that thing once. All the approvals are in place. So we get it to a point where we’ve mitigated the risk. The city said, yes, we want this, and then we take it through, we line up our buyer and then we double close on it at the sale of the transaction. So that’s strategy A. Strategy B is where we actually acquire the land.

Brandon:
And this is where we’ve got, again, an end buyer lined up. We don’t stick any shovel in the ground until we have our builder contract in place. And that builder is giving us a significant deposit, free money released to help with the development costs. It gets our loan to value and loan to costs very low. ’cause These are, they’ll they’ll give you up to 20% of the purchase price of the land. Not many people know that to help with some of those development costs. Free interest rate, no money no money to get it. And that’s a, that’s a huge value add. And then we’ll develop those lots and we’ll sell the ready to build lots to the builder. Okay? And that also increases the value. So like both, in both of those times, like when you, when you exit, when you’ve got the approval in place, farmland to new housing community, it’s worth a lot more.

Brandon:
And then when you put the roads infrastructure, and it’s worth a lot more at that stage as well, how do you normally source your deals? Everything we do is direct to seller. So we start in the areas that the national home builders are already building. So we’re in Nashville, Tennessee. That’s where the majority of our deals are done. We know the areas that they’re building and we target those specific areas. Now what do we look for? If anybody’s pulled up a GIS map before, or a parcel viewer looks like a bunch of puzzle pieces that all fit together, right? You can see the boundaries of all the individual owners lots. And we’re looking for the developments. Developments are pretty easy to pick out. It’s a bunch of tiny little lots around roads, right? We want to go after those big puzzle pieces that are in and around those highly dense, smaller puzzle pieces.

Brandon:
So we’re going after land that is already around the development. Now, one of the keys to being able to get the density is sewer access. So we’re pulling sewer maps for certain areas to make sure that our parcel can access the sewer. ’cause The sewer is what allows us to do a lot of density. If you don’t have sewer access, you have to do a step system or a septic system. And that means that the, the parcel needs to be much larger. ’cause You gotta have the field lines to disperse the waste from the septic system. So, you know, we’re typically not doing that though. We’ve done deals like that in areas where homes with septic systems are selling. So again, it’s all about the National Home Builders product. If they’re building a product that has a step system or a septic system and it’s selling and that’s what they want, we will deliver that product.

Brandon:
But most of the time you want sewer access. This is how you create those like 6,000 square foot lots, which gives you density. This enables us to force appreciate the value of the property significantly, especially with the homeowners that we’re dealing with, right? I don’t have to do a spray and pray method because our value proposition is so compelling. You know, I, Hey Mr. Seller, what do you want for your land? Great, if I could pay you twice, that would be, you’d be interested in doing a deal with me. You interested in learning more? Great. Here’s how I will pay you twice what you’re asking, but I need you to go under contract with me for 18 months and I need to get the approvals in place first.

Charles:
And when you’re buying that, what type of earnest money deposit, whatever you might say is you’re utilizing for a contract like that

Brandon:
As little as humanly possible. <Laugh> the conversation that I’m having with the seller is we are going to spend a significant amount of money on traffic studies, geotech reports, you know, phase one environmental, we’re gonna have to do the civil drawings on the site. Like, I, I can’t afford to pay you $50,000 earnest money deposit Mr. Seller because I’m, and I’m gonna give you all these studies that we paid for and that’ll be part of the deposit that you’ll get with this. So you know, I try to get away with 2000, $5,000, $10,000 earnest money. But you know, like the goal is as little as possible by ba painting that picture. Of course, you know, you, you can go like I I probably wouldn’t put any more than, you know, $50,000 down, right?

Charles:
No, that makes perfect sense. It’s something you can do too in like a seller financing type deal. That maybe the property needs a lot of work and you can kind of negotiate down that initial down payment to the seller. If you’re telling them you’re putting so much money into the property over this set period of time and just makes their paper better and the deal more secure. And then, you know, showing them everything you’re gonna do is that’s one way of really. So I see exactly that can work this way too, where you’re showing them all this different value you’re adding and money you’re putting into the property so they know you actually have funds and you’re actually gonna move forward with what you’re

Brandon:
Doing. Yep, that’s exactly right.

Charles:
So during this process there, it seems, it seems very, so you’re, you’re finding infill lots pretty much, right? That’s what we’re doing. And then we’re with that that we have national home buyers that are buying around it, right? And then we’re gonna go into contract with them. We’re gonna go direct the seller direct to owner, let’s say at this point. ’cause They’re probably not even knowing their sellers yet during this process. I mean, how do you mitigate the risk during land entitlement? So like, my thing is that, you know, what happens if you cannot get the land approved for a new housing community? Which I think you already said that because it’s binding your contracts binding on that your purchase sale agreement. But my other part is what happens if you can’t sell the land after it’s entitled to that builder? I imagine do you only deal with national home builders or do you dealing with other like more regional developers as well? We deal with

Brandon:
Both. We prefer to work with nationals ’cause they’re very well capitalized. If you’re working with local builders, you’re gonna probably run into a financing issue sooner or later with them. We’ve had that issue. So we prefer to work with national builders. Why? ’cause it’s Wall Street. Wall Street has to make stock price go up. The only way to make stock price go up is to buy and build more. So there’s a a very, very compelling motivation to perform. And we’re getting very significant deposits as well, right? Like this is Wall Street we’re dealing with. So we do it for that. As far as the risks, so you know, we’ve got a community that we run called the Land Development Accelerator. We’re, you know, we teach students the number one problem I see students who come into our program that have tried to do this is they bought a piece of land thinking they could do development with it and they couldn’t.

Brandon:
They went and talked to the city. The city’s like, yeah, you know, we’ll support this, buy it, go ahead. And then they don’t get the approval and they lose a lot of money. That is rule number one. Do not buy anything unless you have all the approvals in place. That’s why we structure our contracts like that. So here’s how we mitigate the risks. That’s risk number one. Is the city not approving it? You know, risk number two is like your builder buyer backing out. So when we put a property under contract, the first thing we do is we create a concept plan and we’ve got a pretty good idea on how to calculate, you know, the number of units in the project. We take that concept plan and we go and we meet with the city. We usually go to the planning director.

Brandon:
Or it will probably be a council person if it’s a larger city. And larger cities have different like council people that are in charge of the different, you know, zip code, the different areas. If it’s a smaller suburb, you can probably just go directly to the planning director and they have like a whole council committee that will vote on these things. The, the planning director is usually the liaison between the council and what the city wants and the developers. So you usually deal with the planning director. There’s usually somebody else. We take that concept plan to ’em, we go, Hey, do you want this? Is this something that gets excited? Can the council give us, you know, some feedback on this? And while the council’s not allowed to be like, yeah, if you submit this, we’ll definitely vote on it. But they can say yes, this is worth your time to submit.

Brandon:
You know, actually we’d like to see a dog park here or we wanna see some more green space, or we don’t want town homes. We don’t like that. We want this. And they can give you some feedback. And if you get a warm and fuzzy, you take that concept plan to your list of national home builders who you’ve met with and you know what product they wanna build and say, look at what I got. Do you want it? And if you’ve done your homework, you know that want it ’cause they’re in your area and they say, yeah, we’ll give you a great price for it. And if you like the spread between what you have it in a contract with and your offer, that’s your okay to take the next step. Your big hurdle that you’re trying to get to. I don’t wanna spend I wanna spend as little money on this as possible to make sure it’s something the city wants and to line up my end buyer.

Brandon:
Now at this point, I’m ready to get a contract in place with the builder and get a deposit that’s going to cover my costs if they back out. So if the builder last minute run eggs, I get their deposit, it covers my costs, that’s how I mitigate the risk. But what you’re getting at is a preliminary plat approval, also called a tentative map. So a concept plan is just a piece of paper with some scribbles on it that shows like what the community might look like. You wanna get that to a preliminary plat approval. And what that says is the city has approved the development contingent on seeing the design for it. It’s very similar to a city going and saying, Hey we will issue you a permit to build this house. We just need to see the architectural plans first. In other words, like you will, you 100% can build a house on this piece of land.

Brandon:
We just need to prove the architectural plans, make sure it’s safe. That’s the same thing. Once you have that preliminary applied approval, the city has said, we will approve this now a lot of your risk is gone because there is, they’re not gonna, they can’t just change their mind and be like, you know what? Just kidding, we changed our mind and you can’t do this. Like they’ve approved it now they want to see what the civil drawings look like. And all those civil drawings are is it just shows how like the mechanics of the development, so much like architectural plans show what the house is gonna look like and how to build the house. The civil drawings are the architectural plans of the ground. You know, how how deep the pipe’s gonna go. You know where the storm water’s gonna drain too. And so that, that’s where you start spending some money at that point is on the civil drawing design. But that, that’s our goal is to get it to a point where we get the preliminary plat approval and at that point, you know, we can engage investors and move forward. How

Charles:
Much work do you do physically at the property before it’s sold to the builder are, what are you taking care of? A certain amount of infrastructure before it’s sold to that end buyer. The builder.

Brandon:
When we are just getting it entitled and selling it, we don’t do any construction work. Zero. We’re just selling the paper approved development. Now if we go to phase B where we’re delivering lots, that’s a different story. But the three studies every developer needs to do after they have their builder contract and they’ve got the okay from the city and you’re trying to get a preliminary plot approval, you wanna make sure the land is safe. So what would cause the land not to be safe? Well, number one is you need to get an endangered species report, right? Make sure there’s no bald eagle nests in the trees that are gonna cause any problems. Florida has a lot of endangered species on the land. Tennessee kind of we’re kind of lucky and blessed. I’m gonna knock on wood ’cause I say that and I never had an issue.

Brandon:
And then tomorrow I’m gonna find out there’s something on one of our parcels. The second is a geotech report. This studies the soils to make sure the soils are good, right? Bad soils. Imagine if you had nothing but sand. Kind of hard to build on sand, right? Make sure the soils are good to build on. And it shows you how much rock there is underneath and if there’s any sink holes. The third is a phase one environmental. We wanna make sure there’s no nuclear barrels buried in the land that can get people sick, right? So that, those are your three big reports that you want to have during your DD period.

Charles:
Yeah, I think when we talk or when I, when I coach people, I’m always saying it’s everybody’s always getting a phase one. I mean there should be no, whatever you’re buying, you should always have a phase one. Even if you’re doing like a seller financing deal, most banks are gonna require it. If there’s no lender involved. It’s something that you should always do because you have no idea what was there before. You don’t know what’s over there and when you go to refinance it or work through a traditional lender, or when you have a buyer that’s gonna work through traditional lender, that’s gonna be one of the first things that they do on your property. So you know, it’s one of those things that who’s ever owning it at that point is now responsible for cleaning up, which can be very expensive in in most such nations. So with that being said, can you tell us a little bit, I know you’re, you have a gc if you’re going to like plan B, phase B and you’re like doing work on the property, but for someone that’s just doing land entitlement, can you talk a little bit about what a land development team really consists of, of completing successful land ENT title one

Brandon:
Deals? Yeah, that’s a great question. You know, the funny thing is I don’t think I’ve ever been asked that question before. You’re going to need the people to do those three reports. And if you are, a lot of the times if you pick the right civil engineering firm, they might do that in house or they already have those relations. So your civil engineering firm is the most important party in all of this. I picked the bad civil engineering firm one time. They were off by about six inches of dirt removal on six acres. So if you can imagine six inches dirt or six acres, that’s a seven figure mistake. So your engineering firm is crucial. How do you pick the right civil engineering firm? Go to the city, ask them who they recommend, who do they work with a lot? They know the engineers that created plans that are screwed up and having problems.

Brandon:
And the ones that are good. So just go to the city. Civil engineering is very localized by the way, very localized. ’cause Every area is different. How they do it in New York and California and Tennessee are all different. So pick a localized engineer. They’re, they’re number one. You’ll, you’ll need those studies, right? Your phase one environmental, your geotech and your endangered species. So you’ll need those guys. And then it’s important to have a good contractor that understands development, that can work with the civil engineer to help design stuff. The civil engineer is gonna make something that’s super, super pretty and well dressed up like he’s proud of it. And when you look at those plans and you don’t know what you’re looking at, he might have retaining walls to make some of the areas perfectly flat When you don’t even need a retaining wall, you can just slope it down.

Brandon:
So having a good contractor that understands grading and, and utilities, you know, they can work with the civil engineer to make sure that what he designs is cost efficient, not just really pretty. That’s going to be very important as well. And we bring the national builder into the design process. They have to have a say so because they are the ones buying it. And what you don’t want is to design something and get to the end of it and be like, oh, you know, sorry, this doesn’t work for us. I’ll tell you a quick story. I had a, i I got a a deal a few weeks ago that was sent to me and it was a 56 unit town home and the guy was so excited, it was his first deal, you know, he spent six figures to get it approved.

Brandon:
Like I know how much he spent. And he was a successful world sitting event. Like he obviously had money and had done really well, was just new to development. And I’m looking at it going, hey, these town homes are 15 feet wide who has a 15 foot wide townhome product that they can build. And he wasn’t able to sell it. He’s, you know, stuck with it. And I think he’s having to go get it redesigned. So he is gonna lose some units. You have to design it with the end product in mind. None of these nationals have a 15 foot wide product. They have an 18 foot 20 and 22 preferably a 24 foot. And right now 24 foot’s the most popular. Why? Everybody wants two car garages. So you gotta design it with the end in mind. So that build that built with the all to say this is that builder is important, they’re a key part of your end buyer is a key part of your design team.

Charles:
How does the transaction take place? Are you actually closing on the property? And then it’s like a double close type thing. So once it’s all approved, you’re actually closing on it from the land seller and then you’re just same day kind of just bringing it over to, and it’s getting sold to the builder.

Brandon:
Yeah, we do a double close. It’s very simple. When we go to close you know, we, we have an investor that puts the money up for the A to B transaction. So us buying it from the seller and then walk into a different room. We do the BC transaction where we sell it to the builder.

Charles:
Yeah, sounds like a transactional funding, which okay. Yeah. Very normal. Especially sometimes with some wholesale deals that have larger spreads. People like doing the double close on. It’s a little cleaner than getting some sort of a wholesale deal. Well

Brandon:
You have to, you have to. With these national builders, they’ve got a lot of regulations they have to abide by with, you know, being a publicly traded company, everything’s gotta be very clean. Yeah.

Charles:
So you kind of glossed over, but you’re telling us about your six inches of soil over so many different acres. Is that how you lost a million dollars on the land deal? Can you kinda go into that a little bit more?

Brandon:
No, I only lost a couple hundred thousand on that one. No. So my big seven figure loss came from a deal we did where we did not wait to get all the approvals before we bought it. That’s why I can’t stress that enough. You know, I’ve got these cars to, you know, so you don’t have to essentially, but yeah, we, we bought a site we thought we could do something with it again. Oh yeah, we’ll support that. We hear from the city and you know, civil engineer. Oh yeah. I don’t think that’s gonna cost, you know, a whole lot. You know, this is simple design. No we end up getting into something that we couldn’t do. Construction costs we’re just absolutely bonkers. ’cause You know, we, we, we threw something against, so we thought that we were going to be able to do it for a certain price. We could and we didn’t get what we wanted. And as a result of that, yeah it was a, it was a hefty loss. So do not buy anything until you have all the approvals. You have your CDs and you have your budget. Okay.

Charles:
So you mentioned a couple mistakes about you know, you had a student that had a 15 foot wide townhouses. What are some other common mistakes you see land investors make, whether it’s in let’s say the entitlement phase? I imagine that’s kind of really what we’re focusing on talking about or in any other phase really of the product before it goes out to a builder. Yeah,

Brandon:
Those are the big two. The, the two biggest risks are don’t buy it until you have the approvals and you have budget. If you do that, you’ve eliminated the majority of the risks that can happen. And then the second is not designing something with the end buyer in mind. If you have your builder locked up and their deposit covers your costs to get it entitled, where if they walk away last minute at the closing table and you know, you have to reneg with your seller and not perform and so you lose your earnest money and investment you, you get the builder’s deposit and that’s released to you. So that covers it. If you do that, that’s going to eliminate quite a bit of the risk in, in this. Now there’s, you know, anything can happen, you is real estate. But those are the two biggest things, you know, that I see.

Brandon:
If you are developing property, you know, you could develop it and again, you know, the builder could walk away, you get their deposit and you might have to sit on it for a while, right? ’cause There’s not quite as many buyers that are buying lots like these national home builders do. So that’s why it’s important to have an iron tight contract, hire an attorney that specializes in land use and development to go back and forth. You know, we had a lawsuit where we had to sue a builder that didn’t perform that wasn’t fun. That was a, that was a local builder, wasn’t a national. And that was kind of like, hey, do business with nationals, not local guys. And you know, I, we spend eight weeks going back and forth on contracts now with my attorney, their attorney. So having an ironite contract in place with the builder that’s been approved by an attorney is very important. That’ll also mitigate a lot of your risk.

Charles:
Yeah, I have a partner who he he does a little similar, a little bit of a hybrid approach to what you’re doing. So he’ll find the land him, his partners, they will sell a majority of it off to a national home builder and they will keep a small portion of it to develop their own properties. And so it’s one way of really mitigating their risk by taking a lot of, you know, kind of the chips off the table, let’s just say. And so they’re kind of playing almost with house money on the lots that they’re working on. But it’s also one of those things too, same thing, selling to that national home builder to be able to you know, have them do their own thing while they can build up their own, where they’re really gonna make their money, which is on building up those, those spec houses.

Brandon:
Yeah. And you can slice it and dice it however you want. You can do some pretty unique things with how you structure it with

Charles:
‘Em. Interesting, interesting. One thing that we were talking about before we wrap up, and it was about sourcing deals, and I know you’re going direct to seller, and this is interesting because with people especially in market cycle times, I guess like how you’d say now, where there’s a lot of people looking for creative financing, they’re going direct to sellers, whether it’s for land or whether it’s for buying properties. Tell us a little bit about that process. So we identified the property, we have a list of people that we’d want to purchase their property from their land. What, what, what methods are you utilizing? I mean, kind of how, is there any software that you’re utilizing to help you? I mean, how does this work? How do you do the reach out? Is it by phone? Is it by mail? Is it by anything else? You

Brandon:
Know, we’re very old school and I’ve been on both sides of it. You know, when we’re flipping houses, we were spending 20, $30,000 a month on marketing. It was spray and pray. We had a whole boiler room of people answering phones and, and sales reps going out. And they’re like, we’ve done that too. So we’re very familiar with marketing, but this is a sniper approach, right? There is no magic software that exists where you can click a couple filter buttons and boom, voila, A magic list of land that is ripe for rezoning and development just pops out. It just doesn’t exist ’cause it’s, it’s pretty localized. So we hand build all of our lists. We’re in the areas, we know where the sewer maps are, we know where we wanna be, like along those main arteries. We know what the builders want and we just handpick the lists. We skip trace the phone number and we call ’em. Or we’ll go and put a sticky note on their door, a little packet about us say, Hey, call me. You know, we’ll show up. So like door knocking and cold calling is currently our main source of deal flow and I can’t stress enough going and meeting with all the land brokers that are out there that are sourcing these, these types of deals. They’re always, you know, they want buyers they can perform. That’s important as well. Thanks.

Charles:
You know, when we’re doing direct mailing for smaller multifamily deals, it’s one thing that we’ll have when we build the list out from the assessor’s office with everything. It’s one of those things where it’s, you kinda like look into every property and be like, this is one I’d wanna own. You know what I mean? Because then you’re obviously, like you said, the sniper approach where it’s like, okay, we’re just gonna mail every property that’s x over this many units, you know what I mean? Or whatever it might be that you’re using for your filtering process. So yeah, I like that sniper approach where you’re like really hand making those lists, you know what I mean? And you’re really focusing to find the properties that are really fitting exactly what your business plan is gonna be. Yeah,

Brandon:
It’s a, it’s a double-edged sword ’cause it is work, but it’s a bar that a lot of people don’t want. You’d be a my, if I told somebody, yeah, you could be a multimillionaire, all you had to do is make 10,000 phone calls. The problem is nobody wants to do that.

Charles:
Yeah, no, it’s it’s just kind of how it is. You know what I mean? You show everybody, you can bring ’em to ’em, but you know, for them doing the work, it’s a whole different ball game, which is kind of really the most frustrating thing of coaching people. <Laugh> found out

Brandon:
Yeah. That there’s a lot of people. It’s amazes, it amazes to me how many people will you know, sign up for a program and put a few weeks of work and then stop. And I’m like, and, and, and when I’m on my discovery calls with any potential students, I, I’m, we’re very careful about who we allow in the program. We wanna make sure they got the right foundation. This is, we do not allow people in this is your first real estate deal. Or, you know, even if you got like a W2 job, we’re very hesitant. It’s usually successful real estate entrepreneurs that have done a variety of real estate investments, they’ve been successful and they wanna move into development. We got a lot of land flippers that you just wanna do larger land deals. And the conversation that I have with ’em on these calls is, did you go to college?

Brandon:
Most people did. All right, great. You know, what’d you major in? Great. How many years? Four. did you get a master’s? Yeah. Yeah, I did. That was another three years. Great. What did you spend on college? Oh my god. Between room, board, food, over a hundred thousand dollars. Great. And did you make any money from your college degree in the four years while you were getting your bachelor’s? Did it pay you anything? No, no, no. I, that was after I got a job. Great. If you treat this program like you treated college, you got up every single day. You went to class, you didn’t make any money for you’ll make more, you’ll make money in less than four years, but you didn’t make any money in four years in college. If you have that approach where you have a, you know, a four year goal and you show up in consistently do it every day, you’ll be successful.

Brandon:
Right? So I’m like, if you, if you come into this with the college mentality and say, I’m gonna devote X number of years to this, I’m not gonna give up and it’s gonna cost a fraction of what college costs you will be successful. That’s the mindset that it takes to be successful in development because you’ve, you’ve gotta have a certain foundation built, you know, it’s gonna take me six months probably for you to get your first deal under contract if you’re just starting out. A lot of people who join already have deals and they just wanna make sure they don’t screw ’em up. So they join, you know, we underwrite and we look at all the deals people got for ’em, but six months if you’ve never done it to get your first deal, and then it’s gonna be another probably year to 15 months to get that that that land entitled, you know, we’re gonna handhold you through it. So a lot of people can’t work that long without a big payday. Right. And that’s what separates people who are successful versus the ones they don’t. It’s, you know, Hey, can you go a year and a half without getting paid to be able to do a deal?

Charles:
Interesting. Interesting. As we’re wrapping up here, what would you say some of the main factors are contributing to your success over the years from being a medical device, sales to having a couple failed ventures to what you’re doing now? People

Brandon:
Underestimate what they can do in a year and they overestimate what they can do in a day. Consistency in this business is key and it takes time. Doing the same thing for five, 10 years is what’s allowed you going to it’s gonna compound your success. So when you’re setting out to build something, you really need to set a 10 year goal with it, because 10 years is really where I see people just absolutely take off and have built something that’s absolutely amazing. So, and, and, and through the process, it doesn’t look like you’ve you’re changing that much. I compare it to a book already talks about putting a a a, a blue drop in a five gallon bucket every day. Like you put that little blue drop in it and you don’t really see much change in the bucket, but you do it every day and over the year, like the bucket’s just, just bright blue, right? But you don’t see the changes every single day. So consistency is probably the main thing I would say the consistency and discipline to keep doing it. Right.

Charles:
Okay. Well Brendan, thank you so much for coming on the show today. How can our listeners learn more about HBG Capital and then also your, your training program?

Brandon:
Yeah, you know, we serve two people. If you are an investor that wants to invest in this type of stuff, you can go to hbg capital dot net. There’s a free book we’ve got called 100 Questions. Business Owners Ask Before Investing. If you wanna watch a video on what we do, you can go to hbg capital.net/waitlist. You can grab all the free stuff there. And then if you wanna learn how to do these, if you are someone who wants to get into development, whether that’s building houses or land development or land entitlement and you know, you’re not really sure where to start, go to learn land development.com. We have a free course called Land Development 1 0 1, go grab it. It teaches you how to go and find the stuff that we’re talking about today, land that’s right for development potential and then also how to raise the money for it is also built into that course. So it’s completely free. You can go there and you can grab it. Okay,

Charles:
Well thank you so much for all that information. We’ll put those links into the show notes and looking forward to connecting with you here in the near future. Thanks,

Brandon:
Man. Appreciate it.

 

Links and Contact Information Mentioned In The Episode:

About Brandon Cobb

Brandon was a former medical device sales rep before becoming a fund manager and land development coach. His firm, HBG Capital, manages over $20 million of annual land development.

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