Structuring Creative Equity for High-Margin DFW Land Plays

[John Eric Balentoza]

Hey everyone,

When it comes to creative financing, most conversations lean toward seller financing or sub-to for residential. But we've been applying unique capital structures to our commercial vacant land and light industrial (IOS) pipeline in DFW, and the dynamics are fascinating.

Backed by local commercial comps and BPOs, our projected exit margins are sitting nicely in that 50% to 80% ROI window on short 3 to 9-month horizons (raw land flips vs. shovel-ready entitlements).

The real puzzle is structuring short-term capital windows creatively without losing momentum. For those utilizing creative equity arrangements for land or commercial assets, how do you set up your terms? We're actively looking to connect with aligned capital partners—let's swap notes below or via DM!

[Jay Hinrichs]

Quote from @Stuart Udis:

Why not just use a sales agreement with an entitlement contingency? There’s plenty of ways to sweeten the purchase terms and still be more favorable than having to settle on the land before the entitlements are completed. Capital for un-entitled land is one of the highest cost of capital in the marketplace and the ability to settle with entitlements already completed is a favorable position to be in. Furthermore before selling land at those supposed margins after 3-9 months have you consulted with tax professionals to see if there’s an opportunity to benefit from preferential Long Term Capital Gains tax treatment or have they concluded there’s no way around dealer property rules?

Stuart exactly correct.  unsecured capital for entitlements is usually a JV equity share play or can be structured for a set return which generally is a double your money or more type of investment for the investor taking the risk with the promoter who does not have the funds to do these things on their own. I do this type of funding personally having done 3 in VA were the exit was/is to Lennar  and Toll Brothers..  The promoter/developer in all cases gets into equitable ownership through a purchase and sale agreement with a 6 figure non refundable deposit... And then entitlements at least for these deals  are 400k to 1 mil each and take about 18 months to 24 months to go full cycle.. But the return for all parties is and can be life changing on the financial side. Although for me the promoter / developer has to be very very experinced in the space ( which my VA guy is being a Civil engineer) And then we use our funds to hire the top professionals in the space.