[00:00.11] Mattias Clymer: Welcome back to The REI Agent. My guest today is Justin Piché, CEO and founder of the Scout Land Group in Houston, Texas. A former Navy submarine officer and ExxonMobil engineer who walked away from a traditional engineering career to build a land subdivision business and has now completed over 400 deals. Justin buys raw land, subdivides it into smaller parcels and sells those parcels to everyday buyers who want to own a piece of real estate without the price tag of a finished home. It is one of the most overlooked and underestimated strategies in real estate and Justin runs it with a small team and the operational discipline you would expect from somebody who has spent years aboard a submarine. Justin, welcome to the REI Agent podcast.

[00:44.75] Justin Piché: Thank you, Mattias. I appreciate it.

[00:47.35] Mattias Clymer: Absolutely. So, yeah, I mean like looking over the intro, your resume, if you will, like you had careers that are good and I would imagine engineers, with ExxonMobil was a well-paying career that have not made people leave. Is that accurate?

[01:07.34] Justin Piché: Yeah, I mean, yes, it was solid. It was kind of like, so I grew up in Houston and I went to Louisiana State University, go Tigers, and it’s like oil and gas, chemicals, that’s kind of the path people take when you go engineering track. So, I was a chemical engineer, but my career took, you know, an interesting turn in college when I decided to join the Navy.

[01:30.54] Mattias Clymer: But, yeah. Did you do that? And how long were you doing that?

[01:35.29] Justin Piché: I mean, I don’t know. I think in college, okay, I remember specifically, sophomore year, statics class, which is a civil engineering class that’s kind of cross-discipline. Everybody who’s doing an engineering track likely takes statics. The Navy gave this presentation on being a nuclear submarine officer or a nuclear kind of engineer in the Navy. And nuclear had always fascinated me. I love this country. And, you know, I never had extreme motivations to serve in the past, but I kind of was just at a point in my life where I felt like it was the right thing to do. It was exciting. And so I applied. I kind of got in. There’s a whole crazy interview process. And if you research the nuclear Navy application process, anybody looks it up, you can see kind of the traditions of what happens. And so I got accepted in my sophomore year. And when I graduated, commissioned and went, started going to training. And a couple of years later, I reported to my submarine in the USS Maine up in Banger, Washington, kind of on the other side of the Strait of Juan de Fuca from Seattle. And I was there for five years before moving back to Houston in 2017.

[02:49.27] Mattias Clymer: So how many years, months of your life have you been underwater?

[02:55.28] Justin Piché: Total time, actually, physically underwater, about a year. Okay.

[03:01.60] Mattias Clymer: About a year. What was like the longest stint of being on a submarine that you had?

[03:08.10] Justin Piché: My long, yeah, I mean, it’s hard to remember exactly, but roughly 96 days was my longest deployment, about 60 of which were continuously underwater, like in a row, which that gets a little, I

[03:19.11] Mattias Clymer: was going to say, it’s got to be like claustrophobic.

[03:23.02] Justin Piché: Groundhog day, man. It’s groundhog day. Every day is the same thing. You wake up whenever you look for drills or you do training. On a submarine, it’s like you have your operational job, like your day-to-day, kind of what are you doing every single day? That’s standing watch. So you’re either in charge, as an officer, a junior officer, you’re either in charge of the engine room, so all the 20-plus people that are working there, running the nuclear reactor, all the machinery, doing routine maintenance, evolutions, operations, different random things that you need to do. And then, or your officer of the deck, which is the captain’s representative on the ship. You’re executing the captain’s orders, the mission orders. Where are you driving, sailing, whatever you want to call it, the submarine to, what depth are you at, what major ship evolutions do you need to do, when do you have to come up and get comms from satellites or whatever, all that type of stuff. Those are the two main operational jobs, and then there’s your divisional job. So you have a team of people, you know, smallest divisions are three to four sailors, and the largest ones are like 25, and it’s more of just kind of personnel, their maintenance, training for them, that type of stuff.

[04:34.91] Mattias Clymer: Wow, yeah, I mean, that’s, I can’t imagine, it seems like it would be, it sounds like you get kept busy, so at least there’s things to be distracted by then, other than, you know, being in this tin can or the water. Yeah, yeah, I know.

[04:53.46] Justin Piché: I mean, thankfully, it’s not made of tin, it’s stainless steel, the hole is like pretty thick, it’s like four, five, six inches thick, you know, stainless steel. So, and it’s bigger than you think, people are like, oh, so claustrophobic, and it is tight, I mean, it’s tight inside in some places, but the submarine that I was on, Ohio class, was 560-ish feet long, and four decks inside, so like the bottom story is, you know, you get multiple floors above you to go, to walk up and all kinds of machinery and stuff on all those floors. There’s about a crew, typically, typical operating crews, like 200 sailors on the boat, on board. So it’s not as tight and small as you might think it is. I don’t know if that gives you any, makes it easier to imagine. It is hard

[05:41.97] Mattias Clymer: to imagine, but yeah, thank you for your service. When you were done with that, then you went on to Exxon?

[05:49.57] Justin Piché: That’s right, yeah, so I was married during the whole time, I am married, the same, that’s my wife, but we were married before I started deploying, and we didn’t have kids at the time. She was working offshore oil and gas, and I was going on deployments, and so she would go out for two weeks on a drilling ship in the Gulf, or something like that, and I would go on deployment for three, four months, and then in between, when I was home, you know, she would come and visit for two weeks, and then go back to work, and kind of back and forth, and then a few months later, I’d go back on a deployment. So the first five years of marriage was a little tough, we didn’t see each other all that much, and so we were just kind of done with that. We wanted to have kids, start a family, and so the decision to get out, you know, I really enjoyed my time in the Navy. I really liked it. I would have stayed in, were it not for a much stronger desire to have children and have kind of a normal family life and be there for them. So that was the kind of genesis of the decision to get out, and then Exxon Mobil was, we moved back to Houston because our family was there, just kind of made sense, and Exxon Mobil was, you know, kind of like a big name company. Getting out of the Navy, all I have is military on my resume, and it was interesting. Applying for jobs is, you know, at least in 2017 when I was, and probably even now, it is hard to get a job. There are so many online resume, you know, you submit your resume, you don’t know who to contact, you don’t know what to do, and then being at Exxon when we were seeking out new candidates, it’s pretty easy to see that people just pick the people that come referred by somebody they know. Like, that’s who gets all the jobs.

[07:28.88] Mattias Clymer: So that was the

[07:28.99] Justin Piché: big challenge, was finding some connection somewhere to someone who could put my resume in front of the person who’s actually making the decision rather than going through some automated process. But lucked out, got a job there, and it was great. It was a solid job. I mean, I enjoyed it. It’s just, yeah.

[07:46.12] Mattias Clymer: Yeah. Well, yeah, what made you, what got you into real estate? What got those gears turning, and what made you actually, like, jump?

[07:55.32] Justin Piché: I have, I started having an interest in the FIRE movement, you know, I’m sure everybody who does real estate that knows what that is, or most people do.

[08:02.81] Mattias Clymer: Well, explain, explain it. Yeah. Yeah, financial

[08:05.53] Justin Piché: independence, retire early. That’s, that’s what the acronym stands for. And I, I just was trying to find ways to produce income for myself and my family outside of my W-2 job. Something that was not tied directly to the time and hours that I’m working, but was tied to an asset that I owned that would appreciate, potentially, that mortgages would get paid down, that some amount of cash flow would come in. And so in 2018, or so, time frame, I started buying rental properties. So I buy about three or four kind of fix and flips. I hung on to a couple of them. I tried wholesaling, you know, a couple of properties and made a little bit of money doing that. All remotely. And I lived in Houston. Texas is a hard, Houston specifically is a hard place to buy, buy and hold rentals just because property taxes are so high and interest rates are high now, obviously. And property values have gone up substantially and the rental market is low. I mean, it’s way cheaper to rent a house than to own a house right now in almost all markets of Houston. So I didn’t target here. I targeted places like Oklahoma, Kansas City, places where you could buy a house for a hundred grand and rent it for, you know, 1100, 1200. $1,300, 1500, 1700, whatever, a month. A lot more cash flow opportunity. And then in 2021,

[09:24.98] Mattias Clymer: yeah, 2021, I bought a short-term rental

[09:30.34] Justin Piché: in North Carolina. A 10-bedroom, large 10-bedroom house. And the thesis there was COVID, we’re printing money, interest rates are low. How could it not inflate? You know, let’s get some low fixed rate debt at the highest amount we possibly can with our current incomes and try to get as big a house as we could. And I still own that rental. It’s actually, it’s been, it’s been solid. And also right about that time, you know, as I was doing this wholesaling fix and flip, I had a friend who at my church and he was doing real estate investing as well, but he was flipping land. And I was like, okay, what do you, we’re kind of doing the same thing. We’re sending mail, we’re like talking out to, talking to people, trying to find, you know, off-market deals. And he’s like, yeah, but I buy a property for $20,000 and then I sell it for $40,000. You buy a property for $150,000 and you sell it for $175,000 or $170,000 or $165,000. It’s like the amount of margin that I make per dollar invested is so much higher. And at the time in 2021, it was, the market was not nearly as saturated as it, as it is today in terms of land flipping. And, you know, I saw that, wow. And in the mailer response, you know, I get a response per every, I don’t know, 500,000 letters, something like that. He’d get like a hundred responses for 5,000 letters, you know, a lot more people to talk to and negotiate with. And then the other thing about land versus kind of houses was houses have some, in a lot of cases, have some kind of sentimental value to them.

[11:03.94] Mattias Clymer: You know, there’s an advantage

[11:05.23] Justin Piché: to houses in the fact that a lot of people have debt. And so there’s way more motivation when people really want to get rid of things. But with land, it’s cheap to hold, but there’s not nearly as much sentimental attachment. So when people want to get rid of it, they’re like, yeah, okay, if you can give me an offer that I think is fair, like I will, I will take that offer. It wasn’t my grandma’s house that she passed down to my mom that now I own type of a thing. That baggage, you know, it does exist in some places, this is family land, but not nearly as frequently as with houses. And so I decided to like jump all in and land. That was September of 2021.

[11:41.51] Mattias Clymer: Okay, wow. So yeah, then so then you started getting into the subdivision side as well, not just like turning it over, but you’re wanting to actually divide the land out. What was your first project like for that? What made you kind of go that direction?

[11:56.93] Justin Piché: Yeah, I mean, I just kept getting all these deals where I was like, man, I could probably make more money if I did something to it. If I developed it, I subdivided it, you know, a 50 acre track might go for, I don’t know, it depends on where you are, but a lot of places, 5,000 an acre, let’s just say. So you pay a quarter million dollars for this piece of land, you can put in some trails, you can put in a driveway or culvert access permit type stuff that, you know, maybe it’s just barren land. You can lay out a home site and then you can mark it up 50, 60, 70 grand and make a profit there. And that’s great. But 10 acre lots are selling for 10,000 acre.

[12:34.88] Mattias Clymer: So you take

[12:34.99] Justin Piché: that same 50 acres and now you have a half a million dollars worth of value instead of 250,000. It’s more work, but not that much. And depending on what the subdivision regulations are, how receptive the county is to you doing splits, how much road frontage you have, what the minimum lot size and road frontage requirements are. There’s a lot of deals out there. And this is probably like, you know, if we’re talking to agents right now, this is probably where you can see this, especially if you’re an agent who wants to invest. Obviously, you have a license and you are supposed to, you need to do the right thing by your seller. But if they don’t want to do anything to improve their property and you see an opportunity for development or subdivision, that’s a great property to buy. If the subdivision regulations allow for something like an exempt split or a minor split. I’m saying things that a lot of people probably don’t know. An exempt split is something where the county has designated maybe a minimum criteria for a lot to be split. It could be something like most of the language in most counties that allow this say something like five acres or greater with X amount of road frontage that don’t involve the laying out of any public streets or easements or right of ways or utilities or anything. So if you’ve got a county road with a hundred acre piece on it long ways or the long ways touching the road and the road frontage requirement is 200 feet, you know, you could very easily just say, oh, well, I can cut 200 feet strips in this property. And it’s all it is, is a survey or a meets and bounds description. You just get a surveyor, you survey out and write description, legal descriptions for all the lots. And now you have an exempt subdivision that you can just sell lots off at a much higher value because it’s a lot smaller acreage.

[14:16.84] Mattias Clymer: That’s interesting. Yeah, yeah, that makes sense. And I think, you know, obviously if you are marketing in your own backyard, obviously the, an agent would be able to understand kind of what the, the site guys, what, what the county is doing. Also, you know, I mean, you can do this in any place, I’m sure, but you can go and look for the, now I’m blanking on the term where they, they like kind of map out what the, what the desired area is, what the zoning is supposed to be, et cetera,

[14:44.90] Justin Piché: where they want to happen.

[14:46.89] Mattias Clymer: And, and get a better idea for what the subdivision is going to be.

[14:50.54] Justin Piché: Yeah. The like development plan or the county land use plan for looking at a hundred percent. And that’s, you know, that one’s tough a little bit just because one of the, especially for like larger major subdivisions, think what DR Horton or Lenar and these home builders want to do, right. They want to put in roads and cut in quarter acre, third acre lots in order to entitle that, in order to get all the engineering over the line to where you can actually start construction on the infrastructure. So that’s a huge lift in a lot of money. And if the property isn’t already zoned for what it should be in order to do that, a lot of times it’s these outskirts areas that are zoned rural agricultural. They have like one or two acre minimum lot, you know, minimum lot sizes in order to get that higher density. You’ve got to do not only a zone, not only like the full entitlements proved to the county, but you also did a zoning change. And that’s where most people like me, I typically don’t do those. If there’s not already, it’s not already zoned by right to do the type of development I want to do. I’m typically not taking the risk unless the landowner is willing to kind of come along or sign, you know, a contract that is all contingent on these things. And even then it’s a lot of capital to commit to something without knowing for sure you can actually do what

[16:03.39] Mattias Clymer: you want to do. Yeah, a hundred percent. And I guess to that point, like in our, in our county, I believe, I don’t know if this is all the zoning types, but a lot of the ones that might fit kind of what you’re describing, I think you can’t subdivide unless you’ve owned it for seven years.

[16:20.04] Justin Piché: Oh, wow. Where are you at?

[16:22.94] Mattias Clymer: We’re in a two hours south of DC and it’s, you know, we’re in a more rural area, tertiary market, if you will. But, um, it, it does, you know, we do have some of those restrictions and I think like part of it has been to, uh, restrict some of the, to keep, maintain the farmland, right. To keep the, the rural areas that way. And so I think, um, they have designated areas where they, they want, they are allowing subdivisions to happen and those kinds of things, but, uh, they’re trying to slow it down. It used to be that it was, it was based on the last subdivision that you, what, what, what would restrict it from happening again? And now it’s even on the sale, like it has that restriction. So, um, again, like, I think it like having that knowledge about, um, your area can be helpful. I imagine you’re looking in a lot of areas that you’re sending mailers and everything to a lot of different places. So what kind of helps you determine what areas to, to, to start, uh, marketing towards? Cause I’ve imagined some of these, like being able to do some of these things has a, you know, a reason that that would be a reason to, to market to that, to that area. Is that, yeah, that’s

[17:29.44] Justin Piché: very accurate. The, the number one thing I’m looking for before anything else, cause it’s kind of like top line data into the funnel is the demand and sell through rate of potential child parcels. So if, if I, you know, what is, what, in what, so if I, let’s say, let’s say I want to cut into five acre tracks, that’s the product I want to create. I want to find areas where five acre tracks are moving, where if there’s a hundred properties listed in a year, ideally a hundred of them sell. They’re moving off the shelf or, or like as close to that, you know, a hundred percent sell through rate in 12 months metric as I can get. And, and transaction volume, you know, you can have a hundred percent sell through rate in an, in an area of a county where two lots sold, you know, in the last year. Right. But the more transaction volume and the faster listed properties sell of in that acreage band, that’s kind of the first thing. And then the second thing is arbitrage, a price differential between larger tracks and smaller tracks. For an exempt subdivision, typically it needs to be double. So if I’m going to buy a hundred acres, I want 5,000 an acre. I want the 10 acres to be at least 10,000 an acre. So when I use debt and capital and whatever improvements I have to get, I can still make the return on capital that I need to make to, for, for, for the risk that I’m taking by, by trying to execute this development. When there’s infrastructure involved, kind of that multiple goes up. We’re working on, I’m working on a project in right now in Bastrop, Texas, which is growing. Uh, you know, Elon Musk is building a bunch of data. Like that’s where his boring company is. He bought a bunch of land. So it’s a good, it’s a good area to be in. And

[19:07.16] Mattias Clymer: we bought, I, me and some

[19:08.67] Justin Piché: partners, I have another investment entity called, uh, Triune Capital Partners. We bought 56 acres, uh, and we were in, we’ve, we’re in construction now. So we’ve got our preliminary engineering totally done. We’re doing 77 half acre lots, septic. So it’s, there’s no sewer lines out there. So it has to be septic. That’s why half acre, that’s the smallest we could go, uh, asphalt roads, water lines, power, um, detention, et cetera. And the price breaker we purchased that was right around 30 K or so like $30,000 an acre. And the price we’re selling it at will be somewhere between $250 and $300,000 an acre. So the price differential between that larger track of 56 and that half acre track built ready, you know, with utilities except for septic fully installed. It’s like 10 X and, and, and the deal barely, you know, like it made a buy by not a huge margin in terms of, uh, us being willing to do the deal just because the cost of doing

[20:08.66] Mattias Clymer: of construction is so high.

[20:10.81] Justin Piché: And the, you know, the cost of debt and the cost of equity and these, these larger projects, they’re just, they are bears. They’re still tough. You need to have that margin. So a lot of places don’t work because of that alone. That, that, that, that, the, the arbitrage ratio between smaller lots and larger lots, you just can’t do it because it costs too much to do the infrastructure to turn it into the end product.

[20:29.45] Mattias Clymer: Makes sense. Yeah.

[20:30.44] Justin Piché: So that disqualifies a lot. Um, and then the third is the regulations. They’re all kind of equally important, but I kind of go through them in that, in that, uh, in that round, uh, the regulations, the more favorable regulations for developments and subdivide the better. There’s a lot of States. I just kind of stay out. Virginia honestly is, is a state I don’t typically go in because the, it’s the main issue with Virginia is the roads V dot and connections to the roads. It’s this so hard to connect to a public road, even rural country roads with, I mean, I worked on a project. I don’t remember the County now, uh, but it

[21:04.19] Mattias Clymer: was beautiful.

[21:05.06] Justin Piché: I mean, it was like 3000 feet of road frontage, like rolling Hills, just breathtaking, probably close to Lake Anna area, just this gorgeous, beautiful property. And negotiated a great deal with, uh, a seller owner financing too. So he was going to hold the note. He didn’t have to go to the bank. I was going to bring the development capital and split into six lots. Each lot had a ton of road frontage. They were like 10 plus acres. They’re all huge. And we went through the process to get, you know, start our, our site planning. We had a meeting with the County that connected us to V dot or Virginia department of transportation. And they said, we cannot connect more than one time to the public road on this whole property. So we can have one single connection, even though it’s split on two sides by, by this public road. We have thousands of feet of road frontage, one driveway. And then we would have had to build asphalt roads, like adjacent to the public road, just to connect a couple other driveways. And I was just like, why we couldn’t get around it. So we had to terminate the deal. You know, obviously a loss of money and due diligence and whatnot, but there’s just that type of thing you learn over time. It’s like, I got to stay away from, it doesn’t mean all of Virginia is bad, but it’s just that particular area of Virginia. You know, I couldn’t, I couldn’t get it done. Yeah.

[22:19.04] Mattias Clymer: No, it’s fascinating to hear from a, from a resident.

[22:21.99] Justin Piché: Yeah. A lot of, a lot of places though, the best places have these rules on exemptions. Tennessee has a statewide five acre exemption. So if you’re, if you have, you have a lot of road frontage, you meet all the minimum requirements and you’re splitting something into five acre lots. Typically you just need a survey and that’s it. Texas has a 10 acre exemption, but local municipalities. So towns or cities, the closer it is into a city, the more likely you are to have added on regulations from the city or the municipality. And there’s a whole bunch of other proper states that have these, these exemptions that are great. And counties can have their local ones too. So the first, and I’m talking a lot, but there’s a lot of information probably to cover. Yeah. Fascinating. You asked, you asked me the first one I did. The first one I did was in Charlton County, Georgia, South East corner, kind of near Jacksonville rural property. It was initially underwritten as a flip. My team looked at it and like, it was 10 acres and they negotiated a contract for like $40,000. So then it came to me, I look at the deal and I’m like, you know, I don’t think this is worth much more than 45, 50 K as is. So there’s no margin. We, we, we should terminate this deal, but I’d started looking at subdivisions. So I thought, Hey, you know what? I’m just going to look at the county subdivision regulations and figure out like, what is it required here? Cause I had road frontage on two sides. It was square with two sides, two sides of road frontage. So it was pretty easy to split off the road, look in their county subdivision regulations. You can split into three acre lots with nothing, but a plot. I was like, ah, well, I have 10 acres. I could do three lots. So I call up the county. I explain what my position, what I’m thinking. And they’re like, yeah, all you need to do is hire a surveyor and that’s it. So then I call a surveyor, you know, 20, $2,800 to survey it and get it all cut up. Pay him, does it. I’ve got it. I list it with an agent. We sell three lots in like, I don’t know, two weeks.

[24:10.40] Mattias Clymer: And instead of making 50K, you

[24:11.69] Justin Piché: know, we sold it for 80K. So we doubled the money on that project on a throwaway deal. And that’s kind of like when it really clicked. It’s like, I’m getting all these leads. I’m looking at all these properties. Everything’s a nail. All I got is a hammer. It’s a flip.

[24:26.72] Mattias Clymer: Yeah. Well, now I got something, another

[24:29.19] Justin Piché: tool that I can use to make more deals work and make every dollar of marketing I’m spending obviously go a lot further than

[24:35.43] Mattias Clymer: only having one

[24:36.25] Justin Piché: tool in the tool belt. So that was kind of the initial moment. And it just took off from there, really.

[24:42.06] Mattias Clymer: Yeah, that’s fascinating. I was going to ask what like kind of typical turnaround time do you need? If you’re not putting like infrastructure in, if you’re really just doing that kind of being able to survey and split it up that way, how much time does it typically take you from, you know, like starting that to be able to list them? Yeah.

[25:02.86] Justin Piché: It can be really fast. It can be really fast. It can be in order of weeks if you have a surveyor lined up and you meet all the exemption criteria. Typically, it’s like a couple of months. You’ve got to prove a lot of things. Like when we negotiate a contract with a seller, we typically ask for 90 days of due diligence. And a lot of people don’t like that. It’s long, but it’s vacant land. And there’s a lot of things we don’t know. Things, the biggest issue with developments that kills deals for me personally is utilities. So water, water availability. A lot of listings that agents will list, they have this large property and they say water at the road, which is true. There is water at the road. But a lot of times it’s sized as a one inch or a two inch or something that can serve one home. So if you go to split, that two inch line can’t support multiple lots. So now you have to factor in offsite water improvements. How far do you have to go? How far do you have to extend a four inch or a six inch water line? And then how much does that cost? And how can you make it work in your deal? And that’s typically what kills deals. So I want to find that out early. So I’ve got to call the water company. Typically they send me off to some third party engineering service that they use to underwrite their capacity and provide capacity letters to people. So I’ve got to pay that fee. I’ve got to wait the month or whatever for that to come back. And I try to structure it where I’m not losing a bunch of due diligence money all at once. So there’s a ton of things I could do and I could start them all day one.

[26:26.62] Mattias Clymer: And it

[26:26.67] Justin Piché: might cost me five or six or $10,000 to find all these things out. But if any one of them fails, then I lose all the money for all of those things. So I try to sequence it where I wait for the title commitment to come back. That’s the first thing. If they can’t sell it to me, I don’t want to waste any money. And then I get the drone pilots out there. So if it’s a remote thing, if I can’t drive to it, so I can see the lay of land, make sure it’s all set up. And at the same time, we initiate what we think is the very first deal breaker. So we call the county with subdivision regulations. We send them a mock-up site plan and we get their feedback on it. And if everything looks good there, then we call the surveyor and get their lead time. We call utilities.

[27:04.90] Mattias Clymer: We call an

[27:05.01] Justin Piché: engineer. We call soil scientists. And we get all those activities kind of lined up. And it typically takes 90 to 120 days to get all that stuff done. And I just don’t want to lose my earnest money. I’ve lost so much earnest money. Like probably an average of like $70,000 a year goes out the drain for earnest money on deals that we thought what we could do. We just can’t. So I try to protect that now a little bit harder than I used to. Just lessons you learn as

[27:29.59] Mattias Clymer: you do. Yeah, it makes sense too that you’d want to stagger all the money you’re spending on the due diligence as well. I mean, do you have like an average you could say that you would spend on due diligence typically?

[27:42.87] Justin Piché: Yeah, they can average across all size deals, probably in like the $3,000 to $5,000 range,

[27:48.13] Mattias Clymer: somewhere in there.

[27:49.64] Justin Piché: Soil test, it depends on where you are. But those can be as expensive as $1,300, $1,400, $1,500 a lot to as cheap as like $200 a lot, depending on where you are. Surveying typically is pretty expensive now. It used to be a lot cheaper, but all the quotes I’m getting now are in the $5,000 to $10,000 range for some of these larger tracks, even boundary surveys. It’s just expensive now.

[28:15.02] Mattias Clymer: So if I can avoid doing

[28:15.13] Justin Piché: those things, I’ll wait to do them until the end. But soil is another one, especially in your rural areas, that will kill a lot of deals. I have a deal right now in North Carolina that looks great on paper. It’s a nicely shaped property. We can do four lots on it. The seller had plans to build a house, but they decided not to. They didn’t disclose why. They didn’t decide not to. So we started going down the route of soil analysis. We got in touch with the soil scientists that they use, and they sent us their soil map. And it’s because the site doesn’t perk. And not only does it not perk, but there’s no engineering designs that the county has approved that could even be put on any of the perk sites they tried to do. And it’s a 20-something acre property. So there’s possibly other perk sites. But now we have to make a decision. Are we going to pay another $2,000, $2,500 to dig a bunch of other holes in the property to see if there’s possibly septic areas? Or are we just going to get our earnest money back, cut our losses on our drone work and initial title work, $1,000, whatever, out the door, and not do the deal? Or are we going to try to renegotiate that deal with the seller based on these things and say, hey, we can only sell this as recreational land. It’s significantly less valuable, and try to approach it as a flip, which I don’t love doing because that’s a lot of retrading. But sometimes it’s necessary. You go into a deal assuming one thing, underwrite it, assuming one thing, and things change. And that’s probably the hardest conversation to have because most sellers are like, you offered me $200,000. Now you’re saying you can pay $93,000? I’m not going to do that. And it’s like, I totally understand. I’m not trying to pull one over on you. I’m just telling you what I found out and why I can’t pay this price anymore.

[29:50.14] Mattias Clymer: Yeah. No, that makes sense. And yeah, I’m sure it’s difficult. But it is what it is. At the end of the day, they have to understand that it’s a business for you. And I’m sure you explain it that way as well. You’re not going out to buy things out of charity. I think you’re highlighting how complicated this can be and how many unknowns there can be for subdivisions, et cetera. I think one thing that it made me think of was how often the nimbyism, the developing, and we’re talking more within cities and that kind of stuff, where people don’t want that to happen in their area or they don’t really understand how much goes into putting a development together. And I think often even like city council may not understand some of these things as well and how much money can be put forth to try to get something even off the ground. And if we’re looking at things like affordable housing and if we’re looking at that kind of stuff and it’s just really difficult and expensive for anybody to get a project going, let alone have it pencil out with all the increased costs and interest rates, et cetera, that are on us now. It’s just really hard for developers to really make headway. Obviously, it can be profitable, so there is still motivation there, but it can be challenging and frustrating for people to get this out and get it started.

[31:30.22] Justin Piché: I 100% agree. And I think there’s a lot of brokers that probably listen to this show. One of the things that helps is having a broker that’s knowledgeable of the process. Because when I’m submitting, a lot of my best deals are on-market deals where we use realtors to, I mean, we get a lot of off-market deals, but the best ones and the biggest ones are the sellers who’ve already raised their hand, hired their own agent or their own broker, and they have it listed and they want to sell it. And this isn’t ubiquitous. This isn’t like everybody does this. But the vast majority of those deals, especially when the realtor or broker says something like, hey, this has development potential in the listing description, investment potential type of stuff, they’re priced as if the land were already subdivided or the entitlements were already complete. And there’s a huge markup given because it does have potential for development that usually we can’t overcome. And the reason is because it’s so expensive for some of these deals just to get it to the point where it could be approved to sell. And if all that margin is taken out because the price got inflated because it has this potential, then no developer can do it. And that’s where we run into a lot of challenges. We make offers that seem to the owner incredibly low, but I’m honestly literally trying to pay market. I’m trying to assess what is the market condition price for the deal as it is today and offering based on that market price because I’m screening these areas for arbitrage. So I already know how much additional value I can add by doing the development within some margin of error. I want to pay what the property is worth today. I don’t want to get a lowball them anymore. Flipping, you’ve got to because there’s nothing you’re doing to it. You’ve got to extract the value on the front end. You’ve got to buy right. And yeah, it’s better to buy at a bigger discount because that means more profit. But I don’t have to. And so we don’t try to. We don’t try to really push people down. We try to run the numbers, we underwrite, and then we give them the number that our underwriting says we can pay for it. It just happens to be so much lower than what is being asked a lot of times. And the question of, hey, can you show me the comps that support this value? Typically, they aren’t there. They’re not there because it’s an aspirational price. But brokers who understand the process and understand how expensive it is and how much work goes into getting this thing over the line can help set expectations correctly for sellers. And if they want that higher price, and they have the wherewithal to figure this process out, they can add the value by spending that money and taking on that risk and doing what they need to do to their property to get that higher price.

[34:04.99] Mattias Clymer: Well, yeah, it’s kind of similar to maybe somebody trying to sell a larger apartment complex that based on pro forma value, right? Like, you know, this is what the rents could be. And this is what it could be. So, like, you know, this is what it’s worth because this is what the potential is. But, you know, like most investors will approach it as, you know, hey, it’s not that. This is what it actually is right now. Obviously, that’s a lot. It can be a lot easier to get rents up depending on the size of the property, et cetera, than to go through the whole process of rezoning and everything or whatever’s needed. But yeah, that’s super fascinating. I mean, it’s definitely an interesting investment strategy. Like, obviously, if you’re doing this, there’s, you know, you’re not dealing with as many. I mean, you wouldn’t be dealing with maybe some tenants, like other investment strategies, you know, not having to deal with toilets and all that kind of fun stuff.

[35:05.10] Justin Piché: No, none of that stuff. I mean, there are its own. It has its own unique challenges and issues. But I think one of the, there’s a couple, like, big differences that make it less attractive and then a couple that make it more attractive. Like, one example of a way that land development and land sales is less attractive to me than owning a home or an apartment complex or a multifamily unit or something like that is taxes. Like, when I sell a property, I, it’s all regular income.

[35:32.78] Mattias Clymer: There is no possibility for

[35:34.07] Justin Piché: me to do some 1031. I don’t know. Sorry. Excuse me. I misspoke. Obviously, I could do 1031. Cost seg study. There’s no depreciation on land itself. So, you can’t get kind of tax savings by doing some sort of forced depreciation or advanced depreciation, which kind of stinks. And then the other issue, this is mainly for developments, is when you purchase a piece of property with the intent to develop and sell lots, you become what the IRS calls a dealer. And the lots are your inventory. And when you sell that inventory, even if you met long-term capital gains timeline, it doesn’t matter. It’s still regular income. Whereas if you buy an apartment complex or something like that and you, you know, and you improve it, whatever, and then you sell it a couple of years later, you can get long-term capital gains for that sale as opposed to just regular income for that sale. That cuts against another thing is like a lot of times we sell owner financing. We’ll sell on notes. And that’s kind of the cash flow side of land development and land sales. But if you’re selling notes or if you’re selling property on notes and originating mortgages on a development where it’s inventory, you also run into a tax issue

[36:43.41] Mattias Clymer: where 100%

[36:44.84] Justin Piché: of the sale price of that lot is counted towards your income in the year you sell it. Even though you might only have recovered 20% of your initial investment.

[36:56.90] Mattias Clymer: And so you sell,

[36:57.01] Justin Piché: let’s say you’re selling something for $200,000 and somebody puts $20,000 down, but it costs you 50 grand in cost to get that.

[37:05.42] Mattias Clymer: You know, on

[37:05.53] Justin Piché: paper, the IRS says, oh, you’re making $150,000 profit. So you’re paying taxes on $150,000, but in reality, you still have 30 grand invested into that deal and you only got 20K back towards your original 50 and that can be really challenging. So, you know, you got to figure out a way to sell notes or find a market for that. Anyway, there’s a lot of levels.

[37:26.58] Mattias Clymer: Well, yeah, I was going to say too, like one of the things that I’ve, you know, I’ve done mostly flips, burrs, that kind of thing. And one of the advantages to, and one of the big goals for me is to kind of increase the overall net worth, increase the overall, like, you know, like cash flow, et cetera. And so one of the benefits of real estate, you know, the structure kind is that you can, obviously, if you want to keep it as a long-term thing, you can get, you can have it pay for itself. You can have it, you know, rental income come in to offset the expenses of it. And obviously, hopefully bring in some cash flow if you’re doing it right. But that’s obviously a lot harder on, you mentioned notes as an opportunity, but you obviously couldn’t just hold a piece of land and run it out to a farmer or whatever and be able to get, you know, a cash flow on it. I would imagine. Yeah, it’d be

[38:21.18] Justin Piché: really rare to find a piece of land where you could make any significant cash flow by leasing to a farmer. You know, typically, those are the people that lease to farmers or people who have owned these large tracts or are going to own these large tracts for a long period of time. And then they lease it and they make some residual income and it counts towards their ag, you know, exemptions. So their taxes are way lower. And so they’re holding costs. You know, they could be holding a $5 million piece of land and pay $100 a year in taxes. It’s like, okay, well, it doesn’t really cost me much to own it. I have this, it’s fine. Not so much for us. There are like really small subsets of land in advantageous areas where solar might be able to be put or things like that can create lease income. And you might own land where you own the minerals. And so you can, you know, you can sell a portion or lease your mineral rights. And like, those are kind of the ways people can make money and cash flow on land. But for the most part, you’re not going to be able to, unless it’s a commercial property and you have a ground lease, that’s a totally different product. But for rural land, it’s not really going to happen. So, but note, I mean, there are some advantages to notes. There are disadvantages in the sense that you’re not covering your expenses and building equity in something. The note balance is going down over time. But if you’re buying a property and you’re able to sell it for more and you’re able to sell it on a note, your cost basis for that, the note you originate, can be pretty low. And I’ve sold properties where I bought it for less than the down payment on the note when I sold it for. So I buy a rural crappy property with an access issue. You solve the access issue. You’ve made it worth way more. You sell it to somebody on terms and their down payment covers your all in cost and then you have this 10 years of future cash flow with no expenses unless they, unless they don’t, unless they don’t pay. And then you can foreclose and take it back and resell it. And there’s a,

[40:09.83] Mattias Clymer: there’s a, I mean,

[40:11.41] Justin Piché: you can purchase these notes too. I mean, people sell, I sell them all the time. Sell these notes. You can own the note, own the paper. You get the monthly cash flow. You can pay a management company to manage it just like you might pay a management company to manage your rental. And it’s just like mailbox money with a balance that slowly goes down where if they pay it off or pay most of it off and foreclose, you can recapture, you can foreclose and recapture that value and sell it again. Or you can take those cash flows and buy more notes. I mean, in the rural land market notes are typically trading in like the 15 to 20% yield range. So you can expect an annualized return of about 15% on the cash at the low end, you know, maybe 17, 18, sometimes 20, depending on the quality of the land, the quality of the note, the quality of the borrower. And I mean, that’s pretty powerful compounding. If you want some passive income, those

[40:59.26] Mattias Clymer: notes go away over time.

[41:00.92] Justin Piché: But if you keep buying more with your cash flows, then you will keep growing your note portfolio and your monthly cash flow.

[41:07.13] Mattias Clymer: I love real estate for that. Those reasons is just there’s so many opportunities in so many ways. And I think like you talked about earlier, like, you know, having multiple tools in your tool belt for different deals and understanding that there’s different way, different approaches, different, you know, ways of doing, solving a problem, which is really what you’re typically doing in investing in real estate. It’s just powerful because you can, you know, as an agent, as an investor, whatever you go into a situation. And if you are aware of a different strategy than the one maybe you typically are looking for, you could find that, well, this actually works way better here. And like you did with that first deal. So I think it’s, I think it’s pretty awesome to know about all these different opportunities and note investing, land investing are both definitely awesome strategies to be able to keep in the tool belt. Justin, I’m curious about your golden nuggets for our listeners.

[42:08.46] Justin Piché: Yeah. How many should I give?

[42:11.60] Mattias Clymer: If you’ve given a lot already, we typically ask for three.

[42:16.63] Justin Piché: Oh, man, I think the first one would be, it’s really hard to run a business by yourself, especially as you scale.

[42:26.86] Mattias Clymer: And this is

[42:26.92] Justin Piché: going to be a later question, but I’m going to answer it now, if that’s okay. One of my, one of the most impactful books I ever read, well, business books for this business was Buy Back Your Time by Dan Martel.

[42:41.43] Mattias Clymer: And

[42:41.52] Justin Piché: it lays out a whole bunch of really incredible ways to think about your time, what you’re spending it on, and how to scale using people to buy more of your time to work on bigger and more complex problems. And so I think anybody who’s scaling a business, a real estate brokerage, whatever it might be, finding the right people and getting some of the responsibilities that are on you down to them so that you can free yourself up to focus on bigger and more impactful revenue driving decisions. That is really, I think, really important. You need to think about that. And if you’re not good at it, read some books because not everybody’s good at it. I mean, there’s so many ways that I fail as a leader and somebody who can find talent. But somehow I’ve managed to do it despite all my, you know, failures. I think another one is just being a sales business. I mean, I think, I think real, I mean, real estate, a lot of real estate is sales and marketing, right? It’s obviously asset, it’s, it’s, it’s capital discipline. There’s a whole bunch of other things, but, but sales and marketing is probably the core of all of it. And you’ve got to be someone who does what you say you’re going to do when you say you’re going to do it. Your reputation and the way you treat your customers, your clients, your sellers, your buyers, your title companies, your, your contractors, whatever, like they’re going to remember it. And, and it’s going to be a lot harder time if people remember that you don’t do what you say you’re going to do when you’re going to do it. You’re not a person of their word, of your word. So yeah, that’s maybe nugget number two. And then along with that is just, it’s so important to be honest with people. I mean, I know, obviously we know like real estate can be a slimy place. There’s a lot of, I’m not talking bad about all of them because I’ve, I’ve wholesale, I’ve wholesale, right? This is not a knock against people who are wholesaling, but lying to people or trying to like sneak in an extra, you know, little bit of profit by misrepresenting something. Like there’s a lot of temptation there, especially with uneducated or less educated buyers or sellers. And you know, that stuff just follows you, that stuff follows you. And I, I don’t think it’s worth living with that kind of on your conscious. And maybe an example of that is pretty early on in my investing career. One of my, one of my agents got a lead, great lead. And they negotiated the contract and got it signed and we started moving towards closing. And then we got an email from this gentleman’s daughter and the email essentially was like, my father has dementia and can’t, you know, isn’t in his right mind is not able to, to sign this. So like immediately they were like, yeah, okay. We’re going to like terminate this contract, obviously. And then I had a big talk with my team. It was like, did anything seem off? She was, you know, she, she’s overseas. And she’s like, not, I mean, not really. He would, he kind of forget my name a little bit sometimes. And we’re like, Hey, you, we cannot take, you cannot take advantage of people. And she never intended to like, she’s still one longest, one of my longest serving employees never wanted to hurt somebody like, you know, like that or take advantage of somebody. But it’s really important because some people might like have sued for that contract and like prove it, you know, like, or, or there’s all kinds of sleazy stuff going on, but just don’t let it touch you. You know, you got to be beyond reproach, your reputation, your, your, your heart, your honesty.

[46:03.64] Mattias Clymer: I think, I think that, um, you know, a lot of agents might have, uh, you know, think about wholesaling as like predatory and, and, you know, taking advantage of people if they, if they even know what it is. And I think that, you know, it, it, there’s definitely examples probably of people not being above bar and, and, you know, but I think that’s true for realtors as well. I think that realtors can have a, you know, a sleazy kind of, um, image if, if they’re, if they’re, there are some that, that are, they, they don’t really have a great relationship with the truth. And, and they will, uh, kind of say whatever, uh, is needed to kind of get the deal done. So I think, you know, it really, it does, it applies to both, um, both worlds. And I think it’s really important to, yeah, your, your trustworthiness, doing what’s right for the other person is, you know, going to come through. It’s going to show. And I think people are going to, your, your business is going to grow because of it for sure. Yeah. Well said. Um, so we got the book then as well. Um, that it’s a, definitely a great one, um, to, to read. I love that book as well. Um, then what, what about where people can, uh, uh, can find you if they want to follow you on social media or any websites or anything like that?

[47:22.37] Justin Piché: Yeah. I, maybe, can I say one thing maybe before I go into that? Absolutely. Yeah. Uh, cause we, we have started an effort in our business of reaching out to real estate agents and real estate brokers in the markets where we’ve identified like these opportunities exist. Uh, because most people who own these larger tracks or these more developable or more valuable tracks, they’re, they don’t need to sell. And they’re, when they want to sell, they find a great broker. And a lot of times they just want to sell out, right. They just want to sell it and kind of be done with it. And a lot of these folks, especially the wealthier folks that own these large tracks, uh, they’re in no real hurry, but they’ve just decided they don’t want this asset anymore. Uh, we have started in earnest, a much, like a much bigger kind of effort and emphasis to partner with both agents and owners as an option. And a perfect kind of example is we were, we’re negotiating a deal right now near Waco, Texas, and it’s a market that is not moving very fast. I have a couple of developments that I’ve worked on there, uh, and maybe like 10 lots left and kind of cross the county that I’m trying to sell right now. And it’s just slow. It’s slow. We’re dropping price. You know, we’re, we’re, we’re, we want to sell, but it’s just moving slow. This track is like 300 acres. It’s really big. They want a couple million dollars for it in order for me to buy this track and sell it. I might have to hold it for four or five years. And it just doesn’t, it just doesn’t make sense. I can’t buy it because that I can’t tie up capital for that long on such a slow moving deal. But what we can do is bring on an agent who maybe they’re going to find their own agent. And this agent ends up selling partner with our company, uh, to not, not necessarily joint venture. They own the land, but maybe sort of, maybe a novation is like a better way of saying it, where we have an option contract to purchase the property at a specific price per acre. And we then invest our capital into the property to cut the lines or put in driveway approaches. And then every lot that sells, we can set, we can give them their dollar amount and, and probably some upside, some negotiated upside to the seller. So they can make more money than they could if they just sold it outright and we can make money and everybody wins. And it’s kind of an interesting way to partner with landowners, but most people don’t know that it even exists. Uh, and so we’re, we’re, we’re just trying to partner with agents, agents that have these large deals that either want to be involved in the development side or want to bring deals. Uh, we compensate our agents very well and it just can, it can be a win-win. So that’s, that’s kind of like just a quick plug. And then you can find, you can find me at justinpache.com. That’s kind of like my partnership pitch website. So if you go there, it’ll just kind of explain some of the deals we’ve done and how we work together. Uh, my sales company is scoutlandgroup.com. It’s kind of more of just like a place we put all the listings that we have. Um, I have a land specific kind of business podcast called the ground game podcast. Uh, you can find us kind of everywhere you find, uh, the REI agent podcast probably. And I do that with a partner, Clay. And then my investment firm is triune capital partners. That’s triune cp.com. And that’s kind of the entity that puts together these, these funds, these offerings for these larger development deals where we need to, you know, coordinate a lot of different, uh, different pieces.

[50:34.52] Mattias Clymer: Um, and

[50:34.63] Justin Piché: then I have one more land legacy partners. That’s the other website. That’s kind of like the, the, the seller facing brand and company. It’s a lot of different random websites. I don’t do a ton of social media. Yeah. Yeah. In the show notes. I don’t do a ton of social media. I peruse X. I have a Facebook. I have a LinkedIn. I have kind of these things, but I find myself incredibly busy and not really spending a ton of time on any of them.

[50:59.32] Mattias Clymer: Yeah. You’re busy actually doing the work, right. Instead of talking about it. Sometimes, sometimes it’s a bit risky, I think, to get involved with people that are only talking or only talking about the work. Um, but no, anyway, uh, you all, you all heard that. Definitely go check out, um, the podcast, his podcast, uh, hit subscribe and, and write him a review. And while you’re at it, do the same for us. We’d really appreciate it. Um, go to the reiagent.com to, uh, subscribe to a weekly newsletter that summarizes the, uh, week that the two podcasts that come out every week. Um, and then also there will be blog, a blog for this episode. Those there’s blogs for every episodes that are there. So if you’d rather get your content that way, uh, definitely check that out as well. So, um, Justin, again, thank you so much for being on the show. It’s been an honor talking to you. Thank you so

[51:45.45] Justin Piché: much for the time. I really appreciate it.

[51:51.79] Mattias Clymer: Thank you.