Episode 75: Here’s why you need to stop chasing every land deal

clay hepler (00:12)
Hello and welcome to another episode of the Ground Game Podcast. This is your co host, Clay Hepler.

Justin Piche (00:20)
This is your other co-host, Justin Piche and we're here to show you how to win the ground game. Hey Clay, I see you're on a different camera today. Why is that?

clay hepler (00:29)
I just got back from the Low Country, as they call it, in South Carolina. I just got back from South Carolina. We have about six development projects going on down there. and I toured got a ton of content, dude. It was great. It was really fun. I just have not had the time to put it back on. I got back Sunday night late. It's been a heck of a week.

onboarding new people, raising a fund, finishing up the fund.

Life is good, man, but have not put camera back on.

Justin Piche (01:03)
Mm. What you were were you making content visiting properties? What were you exactly doing there?

clay hepler (01:10)
So making content, visiting properties in I have a property in Greenville, a development deal, Greenwood, Aiken, Marion, Florence, Dorchester, all these counties. and so I was walking them with our brokers. Some of them are listed,

Justin Piche (01:26)
Beautiful. Yeah.

clay hepler (01:28)
some of them are not. And then I also looked at some other deals, I walked some deals. and

Got it content along the way, because like look one thing that I kind of realized about the whole content thing is like, dude, so many people are sitting in their house and land is a physical thing. And it's always like, dude, I want to show people that I actually have deals going and going through the numbers and like all that

Justin Piche (01:50)
Yeah.

clay hepler (01:51)
stuff. And like you can say I'm doing all these subdivides, but like then you're like, well, where are they, dude? So we have all these projects going, and so

We walked a lot of the projects and did a lot of shorts and YouTube videos. We'll see how it ends up.

Justin Piche (02:05)
Yeah, that's awesome. I I have done gone multiple times to visit a bunch of properties. I haven't done it in like a year and a half. I visited some I

clay hepler (02:13)
Yeah.

Justin Piche (02:13)
mean I have some developments here in Texas that I've gone out to multiple times, but I haven't filmed anything. but I've taken like my kids and flown my drone, but I did not like shoot, you know, the I just sh sh did the bunch of drone flying of the properties themselves and walked it with the kids, which was really fun. but

clay hepler (02:29)
Dude, and when

I come out to I'm I'm coming to Dallas for Osha's event.

Justin Piche (02:35)
Okay, sweet. I think

I I'm planning on going. I haven't bought tickets or anything, but I am planning on going.

clay hepler (02:39)
We should go towards

some of your properties.

Justin Piche (02:42)
We have nothing close to Dallas.

clay hepler (02:45)
Yeah, okay.

Justin Piche (02:46)
It'd be a long drive. We got Burnett and Bassdrop. Those are both close to Austin. So if we were going to Austin, we could go see both of those. From Dallas, it's a bit of a drive, like three and a half, four hours.

clay hepler (02:58)
Easy money driving the whole state of South Carolina.

Justin Piche (02:59)
Ha ha ha.

clay hepler (03:01)
yeah, so that's cool. That's cool. So what what's in with you, man?

Justin Piche (03:04)
man. Well, you know, we had a last podcast we recorded was talking about kind of what we what we think the alpha is and in today's land business, which is personal relationships, that first conversation, building rapport with sellers, and also that mass marketing. I don't want to be like a doomerist and say it's dead, but I I think it's dead. I think mass marketing is not a good return on investment for.

For land investors right now. I think really specific direct invest direct marketing to the ex only the properties you want to buy is where where you need to be today, both to be efficient with your capital, but also it's it's a soft sales market.

it's not a a an efficient use of capital to spend money on a bunch of properties you probably aren't gonna want just for the in the interest of getting the marketing out. And, you know, I I kinda admitted last time, but I'll I'll re reaffirm that I was slow to stop it because we were still getting deals, you know, they weren't great. But it was more of like a loyalty to my team, you know, and like not wanting to make the hard decision to like lay fire people, you know.

clay hepler (04:09)
Yeah.

Justin Piche (04:10)
for not for cause, but just because the business has changed. But it's got to it got to a point a couple weeks ago where it was just time. And so I I spent two weeks in like a really significant effort of redesigning the business, our marketing strategy, the types of properties we're going after. And two Fridays ago I laid off seven people from the team, which was really hard to do, probably the hardest day I've had as a business owner.

Because that's, you know, a bunch of people's families. Some of them have worked for me for over four years. and I I did my best to make sure they land on their feet. I gave them intros to other job opportunities and I wrote them all resumes based on their experience here at Scout Land Group, kind of highlighting their accomplishments and the leads they've forwarded or the contracts we've gotten because of their efforts or you know, all that kind of stuff. So I I hope I've set them up well to you know, and they're all good. So that's maybe something. So if anybody

Is looking for quality VAs, quality cold callers. I have one that essentially could be a dispositions manager for somebody in Uruguay. I have some that are you know, ju were junior negotiators on my team, can handle texting, cold calling, RVMs, basically any outbound marketing. let me know. So shoot me an email. I would love to find a good home for these these folks who, you know, were more than just VAs. Obviously they were

Employees, long-term employees in some cases. So maybe some of them have already gotten jobs. I hope so. But if you're looking for VAs, let me know. Anyway, we restructured and we are just in kind of build mode right now of like what are the workflows? We have a new company org chart. We're doing things just a little bit differently, a little bit more efficiently. And it seems to be working pretty well. We're focused, you know, right now, really heavily focused on net cash back in the business.

Cash under contract to sell, like contracts and net cash

clay hepler (05:56)
Mm-hmm.

Justin Piche (05:57)
back to the company each week and then net receipts, because it's kind of a cash thing for for the short term. And you know, it one of the things that I've been reflecting on is that for a business that's kind of fresh, maybe does maybe focuses a lot on wholesales or double closes, doesn't have a lot of inventory, this could have been a really, really challenging, you know, shift for them because, you know.

They're only eating what they kill on a day-to-day, week to week basis. But our my business has been around for a while and we have millions of dollars of inventory, well over a million dollars of net cash back to the company just sitting in inventory at really discounted assumed sales prices from current lists and what mark the market seems to demand. It's like we're in a really good spot to ride out a little bit of a slower market and get some of these properties sold, get some cash back in while we focus purely on

high quality inbound leads and deals and those long term nurturing relationships that I think are what is required today.

clay hepler (06:55)
Do wanna walk through the people that you cut, why you cut them, your reasoning behind it?

Justin Piche (07:01)
Yeah, I mean I cut our in-house cool calling team. That was kind of the that

clay hepler (07:04)
Okay.

Justin Piche (07:04)
was the majority of of people. and the main reason was just because we had we had a a lot of them and it required a ton of data. And the fact right now is there just isn't that there aren't that many good markets to to justify that size of outbound marketing. As it was just simply to keep everyone busy, I was having to go into markets and find properties, you know, records that I didn't

Actually want at all. So that was the first thing is like, hey, we don't want to be in this markets. We don't want to send out this much marketing. There aren't enough good markets to go into for us to justify this level of outbound outreach. And so we we just don't have positions for them anymore. That was really all it was. that was the majority of it. And then a little bit of it was just tightening up. You know, if we're not gonna have that many properties, do we really need this large of a dispo team?

Do we really, you know, can we absorb these roles into other people's roles? Can we simplify our in-house dispos process so that we don't need as many people to run it? Like it's all and the other justification there is like, hey, if you're getting higher quality deals, higher dollar deals, you don't need much in-house dispo, right? You can go to realtors for the majority of those properties. The challenge for a lot of investors, and my business included, is when you have

More rural properties, a lot of owner finance properties. Realtors don't typically serve those properties as well as they could because it's like who what realtor wants a list you know, a twenty-five thousand dollar, five K down owner finance property? There aren't very many of them. And and in more rural re areas, it's really hard to find a quality realtor that will actually give it the time of day because they know their commission checks only gonna be like a thousand bucks. So, like, how much work are they really gonna do on your property? So there there is some justification for in-house dispo team and listing, but

Ideally, over time, the quality of properties goes up on average. And we have a ton of by the way, let me a quick aside, like we have we have like 130 properties in inventory. You know, it's a lot of inventory. There are some really high quality properties we have listed with realtors in there. There's just also a lot of smaller, more rural properties that we self-list in there. So as those get sell and go away and the new acquisitions are primarily focused on growth markets where realtors want to be and are we can find good people to list for properties.

more of our listings will go primarily to brokers and it'll really lighten the load on the dispo team.

clay hepler (09:23)
It's interesting. I was reflecting on my business and like what do I want to build here? Like what what type of business do I want to build? And I was researching some of the top land investors in rural America. Dude, there are guys that are doing 50, 100, 150 a million a year. and they have in-house dispo teams. But you know what their in-house dispo team it looks like? The structure is

I have a bunch of agents working for me, basically my own l internal listening team that are local

Justin Piche (09:51)
Brokerage. Yeah.

clay hepler (09:52)
to the area, that have people in the area. and we do these massive marketing pushes to get a bunch of people out to a specific subdivide that I'm doing. Radio, Facebook, TV, everything. Push, push, push.

To get people out to this for the selling of the property, which is something that we're actually considering doing, by the way, because we're doing more subdivides. But I can get in that later. and they have their in-house dispo team. So I was poo-pooing on in-house dispo team as you know a while ago. I'm like, this is the worst ideal ever. at least it failed for me, right? It it didn't fail for you, obviously. But what what I actually found out is it's just about sequencing.

And when de when you know, when you find better properties, bigger properties, you can afford that actual high level team. but you know, if you're using a realtor, you just need a professional babysitter.

Justin Piche (10:48)
Yeah. Right.

clay hepler (10:49)
That's it. Like are you guys like we check in with our brokers twice a week.

Justin Piche (10:54)
Yeah, exactly. Exactly.

clay hepler (10:57)
So that's what I'll say, man. So so I I like your reorg. I think it's really important to understand that you're focusing on the quality. Yes, yes, yes, yes. That's that's the next question. That's the next question. Yeah, what is their can you tell

Justin Piche (10:58)
Well Do you wanna know who stayed and why and what I mean not necessarily the people themselves, but the structure. Yeah.

clay hepler (11:09)
me their addresses too? So I'm just kidding. Phone numbers. Yeah, all the people that you thought

Justin Piche (11:12)
Yeah, their phone numbers. yeah.

clay hepler (11:15)
were good enough, let everyone know. yes, but keep going. Yeah.

Justin Piche (11:17)
Okay. So we can't

so w the the roles, the way the way the org is re kind of restructured is obviously it's still acquisitions, project management underwriting, transaction coordination, and dispo sales. Those are the kind of four departments of the company. We we still have one back office, admin, HR. It's like my you know, I hired as an executive assistant, but is essentially like back office for the company, handles all

She she handles our note portfolio that didn't really change, but also handles all of like the HR type stuff, ad hoc, closing documents, that type of stuff. So I'm not freaking running to the notary three times a week again, which always I'm still doing it. but they're coming to me for developments. Yeah, I mean, there are developments that I'm managing

clay hepler (11:55)
Same, same, same, same, same.

Justin Piche (11:59)
outside of Scoutland Group, right? They're managed by the funds that we've started for some of these large developments, and I'm still signing a bunch of I have a notary coming right after our call ends that I got it for for anyway.

That that still happens outs for deals outside of Scatland Group. But for the in in in Scatland Group deals, she handles all that type of stuff. on the acquisitions, I have my ac director of acquisitions, same same person. and then so she's primary negotiator, especially for larger high quality deals, but also manages the whole team. And then we still have our acquisitions manager, who's my long well, second longest serving employee. That's

They're the primary negotiator on flips, and you know, she's like the highest touch closer. and then we have we kept our co-calling, our cold outreach manager. She is now essentially like nurture, she's in charge of all of our nurture campaigns. Because the and I'll I'll explain why we have that.

clay hepler (12:53)
Okay.

Justin Piche (12:54)
you can call it lead management, but it's not really lead management, it's kind of more more than that. And then we kept one in-house cold outreach team member to work.

you know, a flow of in-house leads that we still want to generate. And then we outsourced cold calling per year recommendation. So that that is that's running right now. And it's been good. We've got some really high quality leads. No contracts in the last two weeks from it, but our new kind of the way we're working things is is it's just a lot more t a lot more relationship building before contracts get signed. So we've got maybe a dozen leads that are in negotiations, good conversations, working towards that, you know, that win win contract for everybody.

so that's the acquisition scheme. transaction coordination is fine. Just d we started with just two. Yeah,

clay hepler (13:33)
How many callers do you have by the way? I I'm I'm curious to hear how many co Okay.

Justin Piche (13:38)
we're we're doing two right now. And it's been good. It's like six, seven leads a day.

clay hepler (13:43)
Solid, really solid. And without the headache, dude, like I was saying, like no headache.

Justin Piche (13:48)
There's no headache. Exactly. It's like I think the the challenge with in-house callers, which I have been a huge proponent of,

clay hepler (13:53)
Okay.

Justin Piche (13:54)
right? I've talked about setting up your own team. It can be really cost effective. But when you have employees for a long time, like they expect to see salary growth, you know, and so it gets incrementally more expensive, right? and a lot of the the calling results have to do with the data, the i it data input. So I find with two callers, I just made sure the data that I was giving them was just

Real much higher quality on average than what I was giving my other callers. So like no knock to the calling performance of my team. It's just we're much more focused on a high quality property itself before it even goes to a caller. So any lead we we know with high confidence it's gonna be something we want to buy.

clay hepler (14:32)
All right, I gotta ask

you a couple of questions in here and jump in. So you're saying I have two callers, Alpha I know it called Alpha on what you're talking about. One lead manager, one closer.

Justin Piche (14:40)
Two closers. Director of acquisitions is a closer for any like large deal, JV deal, owner financing, like interesting structure type of deal. And then another main closer that is going to handle basically all the flips. Lead manager, nurture manager, she's not really a lead manager, but she's the one who makes her node lead ever falls through the cracks. So maybe you can call her a lead manager, but that's not her title. And then a co.

clay hepler (15:03)
So so

I'm sorry, go ahead. Go ahead.

Justin Piche (15:06)
And then and then one in

house like lead generator.

clay hepler (15:09)
Got it. So are your a are your AMs then taking the initial call with with the with the outbound leads?

Justin Piche (15:20)
They are taking the initial call with leads that come in. Yes. They I am is. Yeah. Yeah.

clay hepler (15:22)
The AM is. Cool. Cool. it's interesting. I've

actually heard more about this lately. I'd like to kind of talk to you about why you're why you think that's the right thing. I'll give you my opinion about it. But it's kind of a horror like I don't know. I got two questions. Why do you why do you do that? What does your lead nurturer do? Number one, number two, and number and then most importantly about that that front end, Justin, is if you're I I think your closer is

Global talent, if I remember correctly. Yeah. If

Justin Piche (15:53)
One one is and then one is US. Yeah.

clay hepler (15:55)
if the global talent closer was a US person, would you give them the same job?

Justin Piche (16:00)
Maybe ask that question in a different way. I'm not sure I I follow.

clay hepler (16:02)
Yeah, so so

a lot of times I find that people make decisions based on budget. Not not to say you do this, but based on budget and right. Yeah, yeah, right. If you're paying more money to

Justin Piche (16:11)
I see you're saying. Yeah, yes, I would. Right. Would I

replace her with a US closer? Do I think I would get meaningfully more performance out of them? Maybe. There's probab definitely people that are better closers, but but no, I would keep her in the same role. She's a legit legitimately exceptional closer. She's been responsible for ninety percent of the deals this company has ever done and generated millions in revenue for the company. Yes.

clay hepler (16:33)
What what?

Justin Piche (16:36)
Yeah, she's exceptional.

She really is. Yeah, I'm not getting I wouldn't get rid of her. I and even if she was US, I would I would have her in the same role.

clay hepler (16:44)
W when I when I s what I mean by this is you know yes.

Justin Piche (16:47)
Would you pay double for her, triple for her,

something something like that? Well, and the maybe that's a different co like an offline conversation we should have.

clay hepler (16:53)
Got got it, got it, got yeah, yeah,

Justin Piche (16:56)
But she's she's she she's compensated well for overseas overseas talent. She has a piece of upside for the company, and she's really good. And I would keep her in the role if she was US based.

clay hepler (17:05)
Okay.

Justin Piche (17:05)
So that's acquisitions.

So that's acquisitions. we have project management and underwriting. So that's a department that probably a lot of teams don't have, I would guess. I mean, I know you have some underwriting on your team, but a lot of teams probably don't have this. And this is two civil engineers, overseas talent out of Columbia. one is doing all of our flip comping, like you know, a deal comes in from cold outreach from cold outreach, either the call center or our own in-house cold outreach or a mailer or whatever it is.

Goes straight to him for comping and then straight to the AM for a call. He also

clay hepler (17:38)
Got it?

Justin Piche (17:38)
does market data analysis. he does like site civil plans for subdivides, things like that, because he's got all those tools and he's an engineer. And then project manager, underwriter, who's been on my team now for two years or so, and she manages all of our subdivides and underwrites all the subdivides. So a subdivide opportunity comes across, either via colder outreach or mail or

a sniper lead that we're working or an on market deal or whatever, or a partner deal that comes in, she takes it, she does initial due diligence, figures out utility type stuff, underwrites the project, and decides on a maximum allowable offer or you know, request feedback, and then manages all those manages all those projects throughout their life. Hires contractors, gets the bids, gets the quotes, manages them, gets the photo updates, makes sure all the invoices are paid on time,

clay hepler (18:27)
Amazing.

Justin Piche (18:28)
like all that type of stuff.

he's awesome, exceptional. and then on dispo, we still have sales manager Brian, who's on episode eight. and then he has one team member right now underneath him because sales and getting our property sold is the most important thing. So he's has support right now. But eventually that role will move up the over to acquisitions. His his assistant who we kept to move over to acquisitions as a second sniper sniper list, and I'll explain what that means, cold outreach person.

on the acquisitions team. Eventually Dispo will just be one person.

clay hepler (18:58)
I like that.

Justin Piche (18:59)
And then TC. We have our TC, who's still our TC. and that falls under sales now. but the one of the one of the hangups, you know, one of the things I noticed, I was analyzing kind of the data, our KPIs of how many contracts we get versus how many we actually close. And this is crazy. Listen to this data. So in 2022, when the company was essentially just me and a few few a few people, our contract.

To close rate was 87%. We closed 87% of the contracts we got or the properties we got under contract. In 2023, it was like 70%. In 2024, it was 60%. In 2025, it was 51%. And to year to date in 2026, it's like forty four percent of the contracts we actually get under contract. Do we bring all the way to the closing table?

Isn't that nuts? And the reason why, the main reason why is lower quality properties with less margin with title issues. That is like 75% of our cancelles cancellations is we get a property, it has a little bit of margin, double close or something like that, maybe 15 to 30 K of margin or something like that. And never worth it. No.

clay hepler (20:13)
Never worth it, dude. Never unless you're starting out. Unless

you're starting out.

Justin Piche (20:17)
Yeah, it's never worth it. And that's just kind of where the like the mass marketing approach has like led the company to is like we you get all these deals that have lower margin on them and they're they could be high quality double closes, but the second a title issue pops up where you've now you gotta pay six grand for a survey and you've gotta do all this crap to try to get it and the you know you've already anchored the seller at a price you can't pay because there's issues with the property you didn't know, and like

clay hepler (20:40)
Yep.

Justin Piche (20:41)
they most of them go to termination and and it's just so like the new rule is

There is a gate. I mean, we've always had a rule, but we've been so flexible on like what properties we, you know, get under contract based on, you know, the amount of margin we have on it. But now it's like hard-coded. It's like we are not gonna touch a deal without 30k margin. And the goal is 50. And we're not gonna touch a deal that has less than this percent return on cash. It's just, you know, the ones that fall below that, we'll like group them and we'll have, you know, we'll have them and we'll review them and we'll decide.

You know, if the sales market or the dispo market is strong enough to justify a lower margin deal, because that, you know, that can cure a lot of things. If you if you have a dispo market that's incredibly strong and you know you're gonna find a buyer like really quickly,

clay hepler (21:21)
Correct. Correct.

Justin Piche (21:23)
like it it can make sense to do a lower margin deal because it's gonna be pretty seamless. You're not gonna be worried if you're gonna find a buyer for it. You know there's gonna be a buyer for it. So like some of those deals might be worth doing, but but they have to be approved. Like we're not gonna just get them under contract. No wasting our time with this crap. I mean, I did a deal.

This is so stupid, man. This is so dumb. And everybody probably has this story. So like I know I'm not alone, but maybe I'm the only one that's willing to admit it on a freaking podcast.

clay hepler (21:47)
Ha ha ha

Justin Piche (21:49)
I did a deal in Motcom, Michigan. And it was a double close. Got under contract for like 152 or something like that. And our comping on it had it selling at like 195. It's like not a terrible double close.

clay hepler (22:04)
For sure.

Justin Piche (22:04)
May maybe thirty five K gross profit

clay hepler (22:06)
Yeah.

Justin Piche (22:07)
at the end of the day after closing fees, et cetera. Well, we were let's see. We didn't get a long enough contract on it. We cook got a few kind of lower offers and we're trying to get a higher offer, but then the end of time starts ticking away, and then you're like, Okay, well now I I only have like a month and a half left to close this thing. I've got to get an offer. So you dropped the price, dropped the price. So we dropped the price down, and now we're sitting at like a seventy-five thousand dollar offer, which

The buy and the buyers are bringing a realtor. So we gotta pay no, sorry, a one seventy five. I don't know if I said what I said, but one seventy five offer.

clay hepler (22:38)
Yeah, you said seven five.

Justin Piche (22:39)
Sorry, one seventy five offer on a one fifty something, you know, deal. So there's and the buyers are bringing a real estate agent, which they always want you to pay their dang commission. So now we're looking at like a 15K gross profit deal if we do a pass through double closing. Well, which is fine, you know, it's not terrible. Okay, it's not t it's I don't want to do those deals, but like

It was it wasn't that bad. It was like, whatever, it's easy. Let's let's do it. They were gonna do a pass through double closing. We had the same title company. Well, the seller doesn't reach out to the title company at all, doesn't reply to any of their emails at all. And then also tells us, I don't want to sell it anymore. I'm backing out of the contract. I'm like, Okay, well, we already have it under contract, man. We've already invested on it. Like we we've

clay hepler (23:20)
Yep.

Justin Piche (23:21)
we've paid money into this property, like you can't just back out. So I hire an attorney.

And I send a demand letter and it brings them back to the table, but there's like two grand, right? So now two grand of your margin, gone. Okay. So it brings them back to the table. Well, then the title company who's doing both sides of these transactions refuses to do it anymore. They say, I think this is fraud. We're not going to do it anymore. We won't do it. So now I have I have to bring the contract to a totally new con new title company who won't do, you know, I need to find someone fast. They won't do a pass through closing.

And I've got to like communicate with this buyer, communicate with the seller, try to get everybody back to the table. And now since they won't do the pass-through closing, I do end up doing transactional funding. and our friend Ben,

clay hepler (24:05)
Two percent.

Justin Piche (24:06)
yeah, two percent is what we did. And so now after all closing costs and everything, the margin was like forty five hundred dollars on this deal. I made four thousand dollars. And it was such a headache, dude. It was like and I told the team when we were doing this company reorgan, I'm like talking to them about how things are gonna work. I'm like,

We are never doing a deal like that again. Like what a waste of time. Sure. You could say, for and for some people listening, forty five hundred dollars may be, you know, that may be a great spread for you. Okay. It is not for for

clay hepler (24:36)
Yep.

Justin Piche (24:37)
for my company. It is all meaningless almost. It you know,

clay hepler (24:39)
Yeah.

Justin Piche (24:39)
it's like a that that g shows up in the bank account and you're like you don't even notice it. And and it doesn't it doesn't pay the bills, right? It's just it's just a pain in the you know what. I never want to do another deal like that ever again.

So that's the point of the new company, right? Or the new reorg is like we are not doing those types of deals. They will not come across our desk. We will discard them immediately.

clay hepler (25:00)
Yeah. you know, the the the one thing that I've been like really, really, really thinking about lately is all about like dude, the actual best way to to scale this business is to do three to five deals a month.

Lock in your minimum profit per deal. Let's say it's 25K. Next year you do 50% more, you do 37 and a half, right? Next year you do 50% more, you do 52 and a half. Next year you do 50% more, you do 70 something. You keep the same people, your row ads go up,

Justin Piche (25:37)
You scale the deal size.

clay hepler (25:39)
you scale your in and that is that's the that's the way to do this business.

Right, literally in in twenty twenty six and beyond, that is the way you do this business.

Justin Piche (25:50)
You do run into a challenge when you scale deal when you when you scale deal size is that the quantity of potential deals goes down and the the challenge of getting the amount of marketing you need to send to get something under contract also goes up. So there are there are competing factors. You can't obviously scale that way infinitely without just changing the type of deals. But it generally what will happen is your deal volume will go down too. But that can be okay, right? In a lot of cases.

That's good. If you're increasing your margin per deal and your deal volume is going down, but the margin is going up faster than the deal volume, so that you're still growing the company, your overhead can go down, the amount of marketing you send can go down, the n amount the team size you need to deal with that deal flow can go down. And it can be really challenging for a person who's kind of starting out who needs like really routine cash flow. But when you have inventory, you have things you can rely on to sell over a period of time, you have reserves in your business to run your operations.

The lumpiness of this business becomes less of a hindrance and it can become a competitive advantage for you to pursue those larger deals. Whereas a lot of people, they have to pursue those $10 to $15 to $20,000 flips because it keeps the lights on.

clay hepler (27:01)
To me, like, dude, the the best way to do this, like systematically, if I'm starting out, is I go find a really good funding person. Like, that's what I did, right? So, but what I didn't do along the way is I did not do like owner financing. And so I just flip, flip, flip, flip, flip. And so the best thing to do, like, have you ever heard the

house flipper guys, wholesalers talk about I flip three deals, I buy one house. I flip three deals, I buy one house. I flip three deals, I buy one house, right? So if you want to do this sustainably, you flip three properties, then you use the proceeds to buy one, maybe you subdivide it into two, or you just own or finance it. Okay, you flip three, you buy one. So you build that portfolio of notes that creates that recur recurring income that you keep compounding and building over time. And then you keep flipping. And so

As you can as you are scaling, you have that the ability to go after the bigger pitches, right? And you know, because the whole thing is as you scale, you also don't scale linearly, you scale the amount of cash that you need. But some dude, people have this really weird, like I I had this for the longest time. Like, I don't want to give up equity. I don't want to give up equity. I want to give up equity.

I'm raising a fund right now where I'm giving up a lot of equity. I know you've raised a fund, right? I'm raising a fund. And dude, it's like I'm giving up greater than 50% of the equity. And I'm okay with that because that allows me to buy deals that I wouldn't be able to buy. And I think that that's another thing that that definitely in the new kind of the new era of land investing, you need to be okay with like, dude, don't just scale with debt, scale with equity. And that's the best way to scale. when you're going after bigger transactions.

Justin Piche (28:43)
Exactly. Yeah, I agree. I agree, man.

clay hepler (28:46)
So now you so now

you reorged, you got a new structure of how you're doing things. What are you most excited about and what are you most concerned about?

Justin Piche (28:53)
most excited is reducing the monthly burn by forty to fifty percent. So that that's obviously a big a big thing, you know. When you're doing mass marketing, you have a lot of employees, you have a lot of skip tracing, you got a lot of outbound tools that you're utilizing. Like expenses are high and and when the market softens, sales market cash isn't flowing in as quickly as it maybe did in the year previous or multiple years previous, then

You can't afford to keep just like burning cash and not having revenue cover expenses. And that's kind of where we got to in the first half, you know, starting really in October last year. I should have done this. This is kind of like the big reflection. I should have done this in November, December time frame. After a couple of months of seeing what was happening. And I had honest conversations with my leadership team when we were doing our end of year planning or next year planning. I was like, you know, should we do this? Should we not? And I made the call to keep doing what we were doing.

with you know some revisions to keep our team employed. And the justification was kind of like, hey, look, if the flipping covers expenses, then this volume of lead of lead generation that we're what that we have, which was pretty heavy, will produce these subdivide opportunities and these deals that we really want that drive the profit. And it just didn't materialize the way, you know, we had we had hoped. And so I wish I could go back in time and make that call.

you know, eight, nine months ago to to reduce the expenses, lay off the team. I'd have an extra half a million dollars in my bank account, you know, right now if I if I had done that. But, you know, it is what it is. It is what it is. You you make mistakes, you learn. We're still in a great spot, honestly, though. I'm not I'm not concerned. I'm the most I so the I'm excited about that. I'm also excited about just a really dedicated sniper approach. So we've shifted the marketing model to high quality flips.

At a lower volume and lower scale than we have done previously. But each deal it should yield higher margin. Each deal is a property we want to buy. So we're going to be less bogged down in transactions with crappy deals, with title issues. Yeah, we'll have title issues because every land investor knows like half your deals that you get under contract are gonna have title issues. It's vacant land. It's just it's how it is. But those title issues will be much more worth solving, you know? Like there's more meaningful margin behind it.

And then the other is the sniper approach, which is a very small curated list of high value development deals that we want to pursue that we are that our AMs specifically are calling. We're not gonna have any outsourced or any lower level like cold outreach. It's all gonna be a very dedicated, high level first touch marketing campaign.

clay hepler (31:31)
Yeah, I I love that. I think that it's really important when you mentioned title issues because we were experiencing okay, so we got over the last month, let's say no, two weeks, we've had five deals that were small deals that were like not even worth our time that we spent money on, we perked and they didn't and we couldn't close them.

Justin Piche (31:52)
Yeah. yeah.

clay hepler (31:54)
And and those were all direct-to-seller deals, problematic, small margin deals. At the end of the day, we got one deal due. We got under contract. Buy for two fifteen, sell for four fifty. I need to do one of those a month. I'm good. You know what I mean?

Justin Piche (32:08)
Yeah, that's all

you need. Those are so hard to find though, man. They're so hard. I you know, and during this five, six years and I've only had a f handful of those.

clay hepler (32:16)
Well, I think that I I'm gonna just I I think that I think that that's because

Justin Piche (32:19)
And maybe maybe and maybe the better

clay hepler (32:21)
you were focusing more on probably smaller deals, man. I think that you'd find more if you focus your energy. You're a good enough entrepreneur, you know? I mean sure, you do it every other month or once a quarter, like fine.

Justin Piche (32:34)
Yeah. I and maybe the better way of saying that is they're not hard to find. There are tons of deals that can get you those margins. They're hard to negotiate to that price, right? You've got to find the right confluence of somebody with a valuable property who is willing to let it go for a discounted price of a substantially discounted price. And I say that and we've done two deals relatively similar to that with greater than a hundred K gross profit margin double closes this year.

So maybe I maybe one a quarter is an accurate statement of what we're kind of currently doing. But one a month I would be ha ha that would be the that would be the dream. That's all you need,

clay hepler (33:06)
Bah

Justin Piche (33:08)
man. You you really only need to do twelve deals a year. That's all you need.

clay hepler (33:12)
Right,

right. One a month that's like a you know, three quarters of a million dollar, million half dollar deal, flip, no big deal, right? That's all you need. Yeah. Right.

Justin Piche (33:20)
Yeah, everybody can do that. Don't worry about it. That's all you need. To take our advice, start a business, and just do deals

that net you two hundred grand every deal you do. Just do one a month. That's all you gotta do. We sound like gurus to talk of that.

clay hepler (33:29)
Yeah, yeah, yeah, yeah, yeah. yeah, yeah, yeah. Right, exactly.

Quit your job with one deal. I I I yeah, I think this is really important. I think it's a conversation that we need to have. You got vulnerable around like, hey, like I am cutting half my expenses to focus on the actual margin. It's very hard to prioritize that as an at like to know what you need to cut.

'Cause you feel like you're cutting opportunity. I'm sure that felt like you. So when did you know the exact moment that you were ready to do this? And what advice would you give? I feel like I'm interviewing you again, dude. w what it I'll

Justin Piche (34:08)
I know. Well yeah, I interview you.

clay hepler (34:10)
I'll take it. What advice would you give to someone that's maybe needing to do this? They need to rip the band-aid off, but they just don't know how?

Justin Piche (34:17)
I mean a lot of it it was before our last podcast episode for sure where I decided that it needed to happen. I was kinda already kind of alluding to it. We mentioned talked about like when what's the ideal team size? I think it was just looking at this you know, looking at the monthly spend, looking at the cash in the accounts, looking at the the sales that we had lined up and how much net cash was coming back to the business and just being like, Look, we can't sustain this for more than a couple more months before like the company runs out of money in our operating account. And like that's an untenable situation.

So it you know, monitoring your cash flow, thirteen week cash flow analysis, seeing where you're at, and also monitoring your KPIs is is really important because this that's the those are the things that tell you, hey, this is not working. So I mean, I would say about a month ago, I like ultimately decided like I have to do this. I'd been feeling it for a while, but then I did the you know, then I just did the analysis and I was like looking at all the numbers and being like, Yeah, this it's time.

clay hepler (35:12)
Yep. So it was a cash conversation. So because of the cash flow forecast, you're like, hey, I'm I'm basically ready to do it now.

Justin Piche (35:19)
Yeah, yeah, for sure.

clay hepler (35:20)
So you're going after quality deals. You said that what do you you did not mention what you're concerned about though. So what are you most concerned about going into this next evolution of the business?

Justin Piche (35:29)
I don't really feel very concerned. I don't know, man. That's a good, that's a good question, but I feel like we're in a good spot. Like I feel pretty excited about it. I'm excited about where the company's going. Yeah, I mean, I think the ability to get loans, you know, on larger projects, kind of talk to

clay hepler (35:43)
Yeah.

Justin Piche (35:44)
the team. I'm like, we need to we need to be handling a lot of these sub quarter million dollar purchase price properties. Like that's like we I I love the big deals.

But they're really hard. They take a lot of money and a lot of time. You've got to raise capital. You've got to get debt. And we have we have a bunch of those in the work, you know, that are active right now. But it's almost like I gotta get rid of some of those before I do more. You know, that's kinda that's probably the biggest kinda concern is is missing opportunities because it's hard to get another four million dollar loan. You know? Like which is they're they're really hard to get. Like they're really hard to get. So that's probably my biggest concern is that.

This sniper approach is gonna reveal really high quality deals. But I'm not that concerned about it because there's always the opportunity to J V. I mean, I'm a J V partner of a bunch of people who have brought deals to me and you know, we treat them really well and they make a lot of money and and we manage everything. so I'm not really that concerned because I know I've got a bunch of people that I can go out to and be hey, I'll J V with you. I'll be the minority partner in this. You know, if it's a really quality deal, there's operators out there that can handle this, those types of deals.

clay hepler (36:48)
Yeah, man, I yeah, I think that you're right. And I I at at this stage you you you just it's just a capital raising game now. Real estate is just a cash hog and you just need it

Justin Piche (36:58)
Yeah. It is a cathog.

clay hepler (37:01)
it just becomes a capital raising game, right? that's kind of what we're

Justin Piche (37:06)
Yeah.

clay hepler (37:06)
we're dealing with right now. We have too many ca we need more opportunities and I show people the the f because I'm currently raising a fund.

By the way, it's a five it's a five six

Justin Piche (37:16)
Did you did you go with Byron like

clay hepler (37:18)
C. It's a five six C. so I can't I c I I I

Justin Piche (37:20)
Yep. if I was a C interesting.

clay hepler (37:22)
can actively market.

Justin Piche (37:25)
I haven't

done a five six C. I've only done five six Bs.

clay hepler (37:29)
Yeah, it's for credit investors only. But if you are a credit investor, we are advertising right now and you could reach out to me directly on social media or Instagram, Twitter, whatever. But we I can tell you why I went to five of six C. but

Justin Piche (37:45)
Yeah, I'm curious.

I'm curious. Cause and I can explain why we haven't I mean mainly because we're doing SPVs for for individual deals, right? That's kind

clay hepler (37:53)
Yes.

Justin Piche (37:54)
of the main the main reason is like we're rate you know, we raise a three million dollar fund and that fund is supposed to invest in one deal and it's like the investors and the people that we're raising from, they don't want to be involved in a five six C. Like they want five six Bs, they kind of personal relationship funds. and you know, we have the investor base for that, and so we've been able to do that.

But I I I also have contemplated, you know, a five six C fund that is more of a general land flip, land development, smaller deal that you know, fund that can do a bunch of different deals and just recycle.

clay hepler (38:26)
Yeah, I know, and we've done a deal together, right? you and I have done that the development deal together, 270 acres. I guess it was Ethan and I. but but it's you and me. It's you and me. You you gave us a thumbs up. Yeah, right, right, right.

Justin Piche (38:33)
Yeah, yeah. Yeah. It it was Ethan and you. It's it's Yeah, yeah, yeah. I I am investing in your deal. I am investing in your deal.

clay hepler (38:41)
But the reason why we won 506C is because we we it's gonna be a three-year lockup period. four four three-year deployment, three, three and a half year deployment, four-year lockup. and then you can keep compounding, you can keep rolling the fund.

Which is kind of interesting. but I I think that for me, the reason why I did that is I don't have the investor base. And so I'm w I need to be able to actively market the fund on my social media, talk about it in public, and I can do that with a five six C, right? Versus a five six B, you need the pre-existing relationship, all that stuff, right? And so,

We are raising between three to four million dollars. We're about a quarter of the way what there, which is cool. but I

Justin Piche (39:22)
That's great.

clay hepler (39:23)
I've tapped the base and so now it's it's more difficult, right? And what's interesting is I was messaging someone who I talked with yesterday and she's has a good bit of amount of capital and she's like, These returns seem too good to be true.

So that's the that's a big problem. That's a big problem for me at least. That people are like, whoa, this is crazy. I'm getting a seventy percent IRR. I'm not advertising, I'm not guaranteeing returns, by the way. but but

Justin Piche (39:47)
yeah, yeah. There's yeah.

clay hepler (39:49)
but like you know, set fifty percent, sixty per it's crazy, right? So they're like, Whoa, this is this is super high, right? so that's definitely something that

Justin Piche (40:01)
I mean, maybe as a strategy, this is ad advice is like you've gotta market realistic returns and it's okay to outperform. And so maybe that's something that I would say to you is like maybe advertise lower returns, but target higher returns for investors.

It's it's definitely you always want to outperform. And it's easier. It it's you know, th the it's a fine line between getting too good to be true and true. And and I would f I think it's I find it easier to market to people twenty to thirty percent and you know, raise capital that way and then hit a forty or more than it is to market forty, you know, and still hit it.

clay hepler (40:39)
Well we're we're the way we're marketing is twenty five to thirty five percent Kager IRR over a three to five four year period, which by the way is insane. But we have a per deal IRR. So we have four deals and our prospectus.

Justin Piche (40:52)
Yeah, so you're at

you're yeah, yeah, yeah. So you're you're advertising like what the deals could return, which

clay hepler (40:57)
Yeah.

Justin Piche (40:58)
which I I do that and that's a huge you know, that this is this is a huge like challenge for people raising funds doing these types of developments because family offices, institutional investors, people who are experienced LPs that invest in a lot of funds are used to seeing smaller returns over a longer period of time with less revenue generation or less like the ability to like pull out cash or pull out capital.

And they get really thrown off by G what they might consider G P favorable splits and high IRRs. And it

clay hepler (41:29)
Correct. That's that's exactly

so that it's GP favorable splits for me plus fees, right? Because we are running it basically as the primary capital vehicle of our business.

Justin Piche (41:41)
Yeah, exactly. And it and it it's you know, it's just when you find a really good deal and I I'm working I'm struggling with this right now on our my purgatory development.

clay hepler (41:52)
Yep.

Justin Piche (41:52)
you know, building the model and getting the teaser ready to start sending out to investors because it it's gonna be a ten million dollar raise. And this is by the way, for anybody listening, this is not an advertisement because I this is not going to be a five six C. I cannot publicly

advertise. I'm not asking anyone for any money whatsoever. I'm just simply talking about what we're gonna do. But this this raise is pretty substantial capital raise. And I've got to really like I I've got to be cognizant of GP favorable splits, but also like we're buying a property for five million dollars that's gonna require twenty million dollars of improvements that is likely to sell in the eighty to a hundred million dollar total sales range.

For like all the lots over a 10 year period. So it's like there's like crazy amounts of money to be made on this deal. And so like I'm not gonna if I were to s even with a conservative underwriting, like incredibly conservative underwriting on the deal, like let's say instead of the max number of units we're trying to get, we get seventy percent of the units. And instead of the prices we expect, which I think are already relatively conservative for the market, we discount them thirty percent.

And I do a typical even with that split and I do a typical twenty eighty GPLP split, investors might see a sixty-five percent IRR, a nine X equity multiple over ten years, and that's just unbelievable for people. Like they're not gonna believe that. I can't I can't advertise that. And also, why would I give up that much equity in a deal that is like incredible?

It's nuts. Yeah, it's it's crazy.

clay hepler (43:24)
So so how have you

gotten around I mean, this is for other people, like what's the like how do pe how do you get around the the the split? Maybe this is an offline conversation, by the way.

Justin Piche (43:32)
So I mean what we yeah,

what we do what we've done with our kind of like s p v funds is target thirty plus percent IRRs. So a generous IR, but the equity multiple isn't as high.

And so it's it's G P favorable split on the backside, but the you know, the the way that it's pitched to investors and the truth of it is their capital's not gonna be locked up forever. Like on sp our Spokane deal, for example, it was a one point nine five million dollar raise and we created forty three lots. We closed the fund in October of last year.

It's now July and we've sold eleven of the lots and we've already done a six hundred thousand dollar capital distribution to investors, which is almost a third, thirty-ish, thirty-one percent of initial capital. So like IRR is going to be relatively high for these investors because we're they've only been invested for f seven, eight eight months, nine months, and they've already gotten a third of their capital back. Compare that to, you know, a multifamily fund or something like that, which

might have a twenty percent or twenty five percent IRR and a six percent, you know, pref or an eight percent pref or something like that. They're only getting pennies for the first four or five years before, you know, all the renovation work is done and then there's a refinance. And there are way better deals out there. I mean, that's I'm not I'm just speaking generally about most, you know, the way most syndicators set up set up their their multifamily funds. They're in like the fifteen to twenty percent IRR with a six to eight percent

clay hepler (45:01)
Yep.

Justin Piche (45:01)
pref return. And so that that's kind of like the it's a

What and the way I kinda talk to people about it is it's a different type of investment. These these aren't cash flowing assets. The cash comes back when properties sell. And the cash can come back quickly because the way we have it structured with partial releases from the bank is like, you know, we have a our loan cost basis is eight K an acre. We gotta pay the bank ten K an acre. We're selling for twenty two K an acre. That margin on each sale comes back as a distribution to investors until investors are made whole. We meet an IRR hurdle, then there's a GP catch up and then we have our GP favorable split at the end. But

LPs have already hit a fifteen percent or ten percent IRR hurdle and have all their capital returned. And then they're still getting a substantial percentage of profits, just not eighty percent.

clay hepler (45:45)
Yep. Yep.

Justin Piche (45:45)
So

it's it's just a different pitch, it's a different asset class, it's there's a different opportunity, there's different risks. You know, the other con the converse risk too and and challenge for raising capital on on real estate development funds where you're selling individual lots is that you are a dealer and there are you

clay hepler (46:00)
Yeah.

Justin Piche (46:01)
can't that that so that is challenge because people invest in their IRAs, they're gonna have UBTI or whatever, they're gonna you know, there's gonna be they're gonna have to pay taxes on those, even if it's in a tax advantaged account. So that's one challenge.

clay hepler (46:12)
Yeah, yeah.

Justin Piche (46:14)
And the other challenge is taxes are high on on those dealer sales because it's taxes regular, you know, regular inventory. And the only way I figured to can kind of get around that it revolves involves like refinancing out at a higher price with a new entity. So you have like an acquisitions fund that purchases and titles the property, and then you have a sales fund that r buys the entitled land at a higher basis from

the initial entity after, you know, over greater than 12 months, so you can get long-term capital gains on that initial pocket sale, but you have to refinance, you know, at a higher rate, bring those investors over into the new fund. And then the new fund makes regular income on each incremental sale, but it's not the full you know income. You've already realized some of that income from the entitlement, you know, and cost cost basis of just the raw land purchase and entitlement. And then you're stepping up your basis for the second fund.

to make less incremental regular income and a larger base of tax advantaged long term capital gains income. And on a lot of these

clay hepler (47:13)
Right, but that would but that

would only happen if you had an entitlement deal. If you were doing even a short term subdivide, right, in in within a year it wouldn't you wouldn't be able to do that, correct?

Justin Piche (47:24)
Right, exactly. That's only for a

clay hepler (47:24)
Exactly.

Justin Piche (47:25)
longer term deal.

clay hepler (47:26)
Well, guys, I think we've given you enough to chew on today. as always, you know, Justin and I do this out of the love of the game, right? And we hope you enjoy this. If you like it, rate reviews, subscribe, let us know. and hope you're have enjoying your summer. Justin, anything else before we sign off here?

Justin Piche (47:40)
That's

it. Appreciate everybody. We'll see you next time.