All Forum Posts by: Shane Ryan

I'm still new to biggerpockets so please forgive if I'm posting in the wrong area or to often. 

I made a post the other day about "sweat equity" scenario. I've slowly been making progress on figuring out how make this work. 

Current situation is that I'm a small excavation company looking to use my skill set and knowledge(some money) to get myself more involved in the investing side of things. 
I have 2 situations I'm currently working thru so I'm going to make 2 separate post. I don't want to lose or cloud up information when people read this and switch gears from 1 to the next.

I found property owned by an investment company from out of state (several actually). The invesent company I'm assuming bought it for the timber value. Now that it's been cleared are selling it off. It's been on the market for the last year at least. It needs a significant amount of work to clean up and be ready for a house, pasture, farm etc. I'm wanting to approach this company to see about doing this work that needs to be done in exchange for a percentage of the profit. (Minus my fees for clearing.) 5 tracts total. A realistic estimate on the arv I would bring to the table in this market would be around 40k per tract. How should I approach the owner? How could I structure this deal to insure I wouldn't be cut out after putting weeks of work into the property? Ideally If I could purchase 1 of the smaller tracts, get it ready to build on, put it on the market and make the profit for myself. But I don't have that kind of money right now. IF I did, I'd risk losing the other tracts during this process. So I'd like to approach land owner on a deal for all the tracts available. The property owner/investment company has very little risk (I believe) with me doing this work. It's costing them nothing up front. And only makes their profits that much higher. 

I'm extremely new to the R.E.I world and want to be able to talk smart when I approach them. Would like to be matter of fact when I purpose my offer. I'm OK with not landing the first deal I go at. I'll learn. And it will only help on the 2nd one I go after. But on this first deal I want to be as educated as possible before I make the jump.. So feedback is much appreciated. 

2nd scenario coming soon. 

@Joseph Hummel thank you for kind words and feedback.

I'm not sure my value would be what it is here at the moment. Moving dirt to most is just moving dirt. But there's a lot more involved than just moving dirt. Knowing what works where, what types of soils and rock work best together. When certain things are needed and when they are not. I'm sure in time I could figure everything out. But there most definitely would be a steep learning curve.

I'm a transplant to Tennessee. So I dont have roots here. I do however have a business with some great employees to make my team. That was an expensive journey in itself. If I were to discover an opportunity that made sense for myself and family, I'd move. But it would take a lot for it to be worth it.

@Jack Orthman I'll add to my previous response to your comment. You are absolutely correct. I don't know the other side of the table as much as I should. The math, risk, experience to develope real-estate. But I'm no dummy. And even a dummy can see what's going on right now if they look or were paying attention.

I do understand supply and demand. When the supply is low and the demand is high the price will reflect this. And vice versa. When the supply is already low and the infrastructure is already in place to raise the demand even more, seems like the risk would make more sense.

If they were $2 million into building an amusement park into the middle of nowhere. The risk of building a hotel a half mile away wouldn't be as risky as it would have been when you were just hearing rumors about the amusement park.

I may not know as much as you or a seasoned developer but I do pay attention. I do learn quick. Can understand supply and demand. Honestly. I think anybody in a position to bring me on as a partner would be foolish. EXSPECIALLY IF THEY WERENT FROM MY AREA.

@Justin Anderson I've only been on here a couple days. Have never heard anyone talk about sweat equity. I like the term for sure. That's exactly what it is. My idea was based on what I've been seeing in my local area. How can I get in now vs waiting for thing to get even higher and go at it on my own. Which is the ultimate goal. But at the same time. Even if I'm doing my own projects and find another deal. Why not bring in a partner for the money I have tied up already. Why not grow the excavating business while growing the request investing side as well. My daddy always taught me. It's better to make a dollar than not make one at all. Even if making that dollar means your making someone else 2.

@Justin Anderson exactly the type of feedback that makes me think that maybe I'm not wasting time. Thank you sir.

Our area is very unique. I don't think a lot of people can wrap their heads around how big of a deal the excavating side of projects can't run.

Add that to a majority of people doing what I do are going to find a way to maximize their personal profits. (The road needs to run over here, not there. But that's going to cost you! All while knowing it could go the other way and save some time and money on the landowner. Because time is money. And the contractor wants to make the most they can on each job. NOT ALL CONTRACTORS THINK THAT WAY BUT A GOOD MAJORITY DO). As an equatible partner they would be looking at the bigger picture.

Thank you for your input sir.

@Jack Orthman Why? A couple scenarios. Let's say you have 100k to invest. You find 2 pieces of land. 50k each. Not cleared. Not improved. Simular lots in the area are selling for 100k cleared and ready to build on. My side of the job is going to cost you 25k. You'll have 75k wrapped up in 1 property. You can't buy the 2nd. You don't have the money. You could just buy both and try to flip them for 60k each. Put 20k in your pocket. MAYBE. Or you could partner up with someone like me. Buy both properties. I come in and clear. The properties both sell for 100k. You pay me my 50k for the clearing. Then a percentage of the profit for me willing to invest my skillet, time and money in this property. Say I get an extra 10k for that. You now walk with 40k instead of 20k and the property will probably sell faster now that a buyer can see what they are buying.

As a partner in the deal. If the market crashes, the project doesn't move as quickly as planned or any other reason. The "investor" isn't out the 50k they'd pay me up front. As a partner in the deal I'd have to roll with the punches just like the "investor" (the guy with more money because I'd be an investor at this point too)

I'm not a real-estate investor per say. But I am a businessman. If I had to take on a partner temporarily to double my roi I'd jump all over it if that's what it required. EXCECIALLY if it weren't tying up my capital or requiring me to empty my bank account in the process.

2nd scenario. Someone just inherited a large piece of land. They do t have the money to develop it. Their land is worth 7k per acre uncleared or upgraded while other properties in the area are bring 20-25k. I come in a 8k for my work. They sell for 20k. I get an extra 2k for my investment.. Now they put 10k in their pocket vs 7k.

This won't appeal to all but it has to appeal to some. I'll make it happen. Just needi g feedback like I'm getting to figure out how to make it make the most sense for all parties involved.

@Christopher B. I was a little worried that most people wouldn't understand the area. Not sure where a majority of biggerpockets members were based out of. Coming from south Florida 15 years ago, I could have never dreamed of land and terrain like this.

As I mentioned in the post prior to yours. I'm really just a wholesaler at this point. But a wholesaler with a different skill set than the average bear.

Larger developments are the only ones that make sense in this area right now. All the smaller parcels have been bought by out of state buyers at double their actual value (and most of it that I've heard of was site unseen.)

I'm working on a park right now. Just the rock on the roads without my bill was $25k, the septic system I'm installing in almost $100k. We put in $12000 worth of waterline last week and still have another mile to go. On this particular site. My services will equal probably a 3rd of the entire project. Now it may be because I'm not as wealthy as others but $100-$150k with no up front cost is not a minimal amount of money on a project.

I'm not as close to the tourist areas as you are so I don't see cabins going real well here unless it's focused on motorcycle riders. It wouldn't work out as well as Gatlinburg or pigeon forge. But being as this is the number 1 motorcycle destination on the planet it could still work if it were cost effective for everyone from the investor to the STR biker.

So I'm guessing my bigger question would be how to go about structuring the deal? If I'm only bringing 10% to the deal, I wouldn't expect 50% of the final value. But at the same time if I'm bringing 10% I shouldn't just get the 10% I put in at the end.

I'm going to.go talk to a few old customers this week. People sitting on 50-100 acres that were inherited. See if I can strike a deal with them. See if I can't talk to them about clearing and preparing 2-5 acre parcels to sell. It will cost them nothing so they can only gain from my inexperience. Worse that can happen is that I spend a few weeks and walk away empty handed. Best is that the land will sell quick, I'll make some money and the client will want to divide the rest of the land up and continue doing the same.

I appreciate your input. And welcome it.

I run my dumptruck(I don't but my drivers do) from Lenoir city to Etowah, Tellico to spring city. If your interested in working in those areas I'll keep.you in mind if I find anything.

Thanks again.

So to clear things up a little. My comment about knowing these back roads wasn't meaning I could out sell or do anything another investor couldn't do. EXCEPT find the properties. I'm in the mountains. I drive past little hand written signs of land for sale on a daily basis. Land that's never been listed and maybe a handful of people drive by a day. So any "investor" could do the same thing I can IF they knew about some of these properties. 

2. Land clearing and excavating in this area may not be as big as the build but it's not uncommon to have to level a ridge to have enough area to build on. Leveling a ridge is not cheap. When a piece of land is 30k and it cost another 15-20k to get it ready to build on. If I were an investor.(which I am not yet but will be soon enough) I'd look at it like, what someone like me.could save up front could be put toward another property to do the same thing to. Securing the next "flip" without having to wait for the first one to be done. 

3. The housing and rental market here are sad. Coming from south Florida where there are tons of houses for rent at any given time. Property management companies in this area have waiting list. Adding 3000 decent paying jobs  to the area may not affect the market value much but will affect the rental market significantly. (Right now 2 bedroom singlewide trailers are going for $800 a month where they were $400 2 years ago)

If it were as simple as buying 1 lot or a couple acres I would have already jumped on it. The problem there is that all the smaller parcels are taken or just simply WAY over priced already. The only way to be profitable and make it work would be on larger deals. 50 plus acres. (Side note. A friend of mine just sold a 250 acre farm for 1.6 million last year. A realtor client of mine told me yesterday she just closed on a 50 acre deal for 700k. Properties were simular in terrain. And about 20 miles apart.) 

Due to all of the people from new York, California and Florida moving here, land has gone thru the roof. 

Where I've messed up. Is that I've spent all my time, energy and money building my business. Not thinking about real-estate investing. (I have thought about it but needed to build my company to afford me the opportunities to invest.), not being prepared for this boom. 

I don't see myself as just a contractor in this scenario. I'll continue making money doing what I do for people moving to the area. (I pays pretty good) My value is simular to a wholesaler. I see things that a majority of the population dont know exist. I talk to people daily that don't have internet. Cell phones. See forest that have been cleared in areas that open amazing views. Know the surrounding areas and know where or what would be worth doing and not doing. I guess I'm kinda looking to wholesale property but from a different angle. I'm bringing not only the properties to an investor but I'm also bringing years of experience, 100 plus thousand dollars worth of equipment, weeks to month of labor to the table. 

I'm not discounting any of the feedback given. I just don't think my idea was clear enough in my original post. 

@Andy Yong What part of Knoxville? I'm just south of there about 30 minutes. I'm not new new to the area but am a transplant as well (these locals aren't the friendliest to "yankees"). I've spent the last 10 years networking, finding reliable people, honest people, to work with. If you invest down my way and need contractors, landscapers etc. Let me know and I'll do best to point you in the right direction.

@Juan Erick Rico Avalos 15-20 year tenants that you are evicting? Is your plan to renovate and raise rental prices? Or are you just looking to start fresh with new tenants and upgraded units? I'm not in your situation nor have I been but my 2 cents. If I bought a property for a rental that had long term tenants. I'd keep the tenants. A tenant that has that long of a history in the same place would just make your life that much easier. But I'm a busy person. I'd rather not make the extra $1000-2000 a year knowing that it wasn't going to cost me more in the long run. I bill for $100 an hour with my current business. If I had to pull off a job for a day or 2 to deal with a tenant over something simple then it would cost me money to have not kept the old faithful tenants in place.

My comment may be completely ludacris(and I apologize if it is) but it may be something to really think about. Peace of mind in some situations is priceless.