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From Land to Community and Affordable Housing with Brandon Cobb Part II · The Academy Presents podcast

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You're already taking the first step. Just by
1:00
joining us here today. OK, so I want to kind
1:05
of deep dive into like our next step because
1:08
we're going to get approved. I'm speaking it.
1:10
We're going to get approved. It's going to happen
1:12
on October 6th when the next meeting is. But
1:16
once we get approved and we start building the
1:18
infrastructure. So like I know we're going to
1:21
trench so that we can have as much as we can
1:25
underground. Is that something that you all do
1:28
and or do you recommend, like how do you recommend
1:31
deciding whether you're going to do like power
1:33
poles or whether you're going to trench? So a
1:37
lot of that is on the shoulders of the civil
1:39
engineer and the civil engineer is making sure
1:43
that your community is designed most efficiently
1:46
now if you're new You probably can't look at
1:48
a plan and make sure that it is properly engineered
1:51
So like that's one of the things that we do in
1:53
like our community is like we've got some we
1:55
got people in our community that have been doing
1:56
civil engineering for 38 years and They can look
1:59
at a plan to go. Oh they've got retaining walls
2:01
here. Get rid of those. Let's just do a 3 -1
2:03
slope right there or, you know, you can do this
2:06
and that one. So they look at a plan and they
2:07
can save six figures, multiple six figures, just
2:10
by looking at it in engineering. Being able to
2:12
do that is important, but if you don't know how
2:14
to do that and you're looking at it, it's a good
2:17
idea to get a second opinion. So taking one civil
2:19
engineer's plan is getting a second opinion on
2:21
another one's. Don't marry the two because one
2:24
engineer will get super offended at comments
2:26
on his plans from another engineer, but you as
2:29
the owner can take those comments, come back
2:32
to the engineer and be like, Hey, I noticed that
2:33
we might be able to save some money here, here,
2:35
here. Like, what do you, what do you think about
2:37
this? So that's something that you can do without
2:40
having the knowledge yourself and learning how
2:42
to value engineer the plans that you can pull
2:45
out of your back pocket and probably, you know,
2:47
save some money. But typically the city will
2:49
dictate whether or not the electricity needs
2:52
to be run in through power poles or it's got
2:55
to be run in through underground. And so the
2:57
civil engineer is going to work within the framework
3:01
that the city gives them. Okay. So then now I'm
3:06
back to the first part. We have the drawings.
3:10
The civil engineer was talking to the city. The
3:12
city was dictating how the drawings needed to
3:14
be changed. How could that not be approved? So
3:19
the step -by -step process is this. When we get
3:24
something under contract, we have a 120 -day
3:28
due diligence period. During that period, the
3:31
first thing we do is we get a concept plan done.
3:34
It is just a sketch of what we want to do. Nothing
3:36
more, nothing less. You don't want to spend a
3:38
bunch of money or time on something that the
3:40
city isn't going to like. We take it to the municipality.
3:43
and we go talk to the planning developer or planning
3:47
director whoever it is and we pitch it to them
3:49
and if they go heck yeah like we're excited about
3:52
this this is something that you should present
3:55
then we take that to our list of national home
3:59
builders that's our buyer and if they get excited
4:01
about it and say here's a contract here's a deposit
4:04
we then start taking it through the first thing
4:08
that you have to go through is a preliminary
4:11
plat approval it is basically a concept plan
4:15
done that you've already done with some light
4:18
engineering so the city might be like hey we
4:21
like this idea but is it feasible we need to
4:24
see a little bit of engineering to understand
4:27
how safe this could potentially be if there's
4:29
any big issues so that concept plan now will
4:32
show How's the water going to drain around it?
4:34
Where are you going to tap into? Where is the
4:37
sewer going to come from somewhere else or up
4:39
the road? And you give them this preliminary
4:42
plat and they vote on it. And once they approve
4:47
that preliminary plat, congratulations, your
4:50
development is approved contingent on them approving
4:54
the civil drawings. So what does that mean? It
4:58
means if you've got a vacant lot that's zoned
5:01
let's call it residential. You can build a house
5:04
there. Like it is approved to build a home. The
5:07
city can't tell you can't build a home. But before
5:10
they give you the building permit, you have to
5:13
submit the architectural plans because the city
5:17
has to make sure that those architectural plans
5:20
have a five foot of egress in the windows for
5:23
the fire department to get in and save somebody.
5:26
They have to make sure that the home isn't too
5:29
close to the power lines, that the home is the
5:32
proper setback from the street. So once they
5:35
analyze your architectural plans and go, okay,
5:37
this is a safe home, they give you a building
5:40
permit and you can now go and build it. That's
5:44
what creates these wonderful homes and communities
5:46
we're in. We have an approval process. The civil
5:49
drawings are the architectural plans of the home.
5:53
They're the same thing except for the ground.
5:56
Those civil drawings show how deep the sewer
5:58
is going to go. Where's the sewer going to go?
6:00
What's the slope of the road? How much cut and
6:03
fill are you going to have on the site? And your
6:06
civil engineer works with the city's civil engineer
6:09
to make sure that the development is designed
6:11
safely. And once it is, then they will give you
6:15
a grading permit and off you go. It sounds to
6:18
me like you didn't even get a preliminary plat
6:21
approval. So you haven't even passed the first
6:24
step to get an approval. But if you have got
6:27
a preliminary plat approval, well, then all you
6:31
got to do is design the civil drawings and they'll
6:34
approve it. They have to because they've already
6:36
approved it. So do you know where you're at?
6:39
So the civil engineer in the city, this is our
6:42
civil engineer, was going back and forth to the
6:44
city. Because at first they were saying like
6:46
the sewer wasn't dropped down far enough because
6:48
the sewers already run into the back of the property
6:50
So we've already got do you have a preliminary
6:54
plot approval? I Don't even know at this point
6:59
Something was rubber stamped through and that's
7:02
their argument is that I know we rubber stamped
7:05
it, but that's a rubber stamp It's not a real
7:06
signature Yeah, so you need to figure out if
7:10
you have a preliminary plot approval Because
7:12
if you do, that means the city has already approved
7:15
the development and all you got to do is engineer
7:18
it and they have to approve it. There's no getting
7:21
around that. And in which case your land use
7:23
attorney is going to come in really handy for
7:25
you because they've already approved it, right?
7:27
They can't go back. The city's engineer and our
7:31
civil engineer went back and forth until the
7:32
city engineer was like, yes, this is, this can
7:35
work now. Yeah. So it sounds like every drawing
7:39
was like a whole nother $10 ,000. It was so,
7:41
I was like. Yeah, it sounds to me like you probably
7:45
already have your preliminary plat approval and
7:47
they're designing CDs. I hope so. I hope you're
7:51
not spending money on civil drawings if you don't
7:53
have a preliminary plat approval because there's
7:56
no need for you to spend the money and design
7:58
anything if they haven't approved, again, the
8:01
preliminary plat. So you need to go find that
8:04
out. That's important. I believe they have, but
8:07
what they're saying is that they were approving
8:10
the sewer and I guess whatever else in the drain
8:13
and the retention ponds. But they want us to
8:19
plat every single pad. Instead of it just being
8:24
one mobile home community, they want each pad
8:26
to have its own plat. It's that's something that
8:31
they can ask for just depending on what it is.
8:34
But yeah, that's that's again It I don't know
8:37
where you're at in what's already been done But
8:39
that's why you want to follow the right steps
8:41
because I see people end up spending tons of
8:43
money on these things and they didn't have to
8:45
and they just for literally hundreds I like I
8:50
probably get one guy every six weeks since me
8:55
a A development that's approved Approved it's
8:59
not like the city stamped it and I got one the
9:03
other day and it's all it's always the same issue
9:05
like they sent 55 town homes and the town homes
9:09
were only 11 no, no, I think it was 13 feet wide
9:15
and I was like who's gonna build a 13 foot wide
9:18
town of product who has that The answer is nobody
9:22
What people don't realize is that when you're
9:25
designing communities, you design them with the
9:27
in -buyer in mind for what we do, not necessarily
9:29
for what you do with mobile homes. So if you
9:31
don't design it for a 13 -foot townhome buyer,
9:40
there's no buyers for it. Builders have a specific
9:43
home they want to build. They have products.
9:45
They don't just go, okay, let's go figure out
9:47
what to build on this site. They have the product,
9:50
and if it doesn't fit on your site, they don't
9:52
buy it. So we have to design every community
9:55
with the end buyer in mind for that reason. So
9:58
I don't know, you know, how that translates over
10:01
to what you guys are doing because y 'all are
10:03
already the end buyer. You're wanting to hold
10:05
these and I guess sell them to, you know, the...
10:09
I guess the yeah, you're wanting to sell them.
10:11
Yeah, you're wanting to create affordable housing.
10:12
So yeah, you would need to design those homes
10:15
to fit these, you know, whatever the dimensions
10:18
of the product are. So to make sure that you
10:21
can maximize the density that is allowed so that
10:24
you can help as many people get into their affordable
10:27
home as possible. Yeah. Well, I'm thinking like
10:31
when you said that, even if it's not the end
10:34
buyer, because I know you're the end buyer, but
10:35
for me, it's the end user. And I still want to
10:39
be able to create something that they're going
10:41
to want. So we have a mix of single wide and
10:45
double wide locations within the community. And
10:49
that was done with the thought of, because when
10:53
I talked to Joseph, the one guy on our team that
10:54
has the experience, I was like, people still
10:57
want to be in single wides? And he was like,
10:59
well, yeah, there's still demand for those. And
11:01
I was like, really? Because again, they're not
11:04
very wide. how do you how do you put your furniture
11:07
in something that's only the width of a car lane
11:10
like in my mind that that doesn't calculate yeah
11:15
so i was like people still want singles but he's
11:18
like absolutely they do because they're xyz price
11:20
and so we had to kind of think about that when
11:25
we were thinking about the combination of what
11:27
we were going to um put put our pads out for
11:31
so i still i mean i think there's There's crossover
11:34
there, but still I wish someone had been there
11:37
during this process to guide us through because
11:40
I think the process, especially like the entitlement
11:44
and the approval, I think those are going to
11:46
be similar across developments. Maybe not the
11:49
product itself, but the process to get to where
11:52
the product is going to go in place. Yeah. So
11:57
those of you that are listening to my, my laments
12:00
right now, find your mastermind that can help
12:04
you through a process that's new to you. Otherwise
12:06
you're, you're learning what other people have
12:08
already learned for kind of zero reason. School
12:12
of hard knocks. I've been there. That's, that's,
12:14
yeah, we, we were looking for one when we first
12:16
started doing this entitlement and development
12:19
stuff and couldn't find one. That's what we ended
12:20
up, ended up creating one. But yeah, I've made
12:23
all the mistakes I got. all the lashes on my
12:26
back from all the mistakes that I made. And I'm
12:28
not proud of them either. Like there's just no
12:30
reason for it. But again, you know, it's, it's,
12:33
it's tough. A lot of people don't realize there's
12:35
resources out there for them. Yeah. Well, can
12:38
you talk a little bit about what y 'all develop?
12:40
Because there may not be people out. I've never
12:42
heard of someone that really, that does what
12:45
you do. Like I thought I had, I told you that
12:47
I'm like, Oh, well I've interviewed two other
12:48
guys that they do this. And you're like, so that's
12:51
not quite what we do. So can you talk a little
12:54
bit about what you developed? Yeah, so we basically
12:57
take Lenar, D .R. Horton, these national home
13:01
builders, and we reverse engineer what they want
13:03
and we give it to them. That's it. 50 home, 100
13:06
home, 200 home communities. And we do all three
13:11
phases of development. But right now we're primarily
13:16
doing phase one, which is the entitlement. That's
13:18
what you're going through right now. You're going
13:20
through fighting the city to try to get this
13:23
approved. We put it under contract, line up our
13:27
buyer and get the city excited about it. And
13:32
if the city's excited about it and we have our
13:34
buyer, then we take it through. So we've lined
13:36
up our buyer on our exit. There's no speculations.
13:39
There's no what if. I wonder if we're going to
13:41
get this for like, we know what we're going to
13:43
get. And then once we get our preliminary plat
13:45
approval with the city, And it's approved. And
13:49
all we need is just the money for the civil drawings.
13:51
We can go to investors and say, hey, we got an
13:53
approved project. We got a buyer. We need the
13:55
money. We need some bridge funding to bridge
13:57
that gap and close. So that's the first phase.
14:01
Second phase is we might develop the lots. So
14:06
that's where we grade it with the sewer, the
14:09
water, the roads, everything into it. And the
14:12
builders will buy the individual pads from us,
14:15
and they will build the houses. So that's, that's
14:19
the second phase. And then the third phase is,
14:21
you know, we'll do some one -off projects where
14:24
maybe there's like a 10 build here or a, you
14:26
know, 20 build here, something like that, you
14:28
know, five or six lots. We can, you know, we're
14:30
doing a lot of luxury homes right now is where
14:32
we're focused. We'll do some, some onesie twosie
14:35
stuff, but I'm not going to build a hundred home
14:37
community. I have no desire to do it. I'll entitle
14:40
it and sell it. Or maybe or maybe develop it,
14:44
but I don't want to build the houses on a hundred
14:46
home community I'll build homes on some smaller
14:48
stuff. That's kind of in -house. So that's those
14:51
are the three different phases I like it because
14:53
there's multiple exit strategies. So I'm not
14:55
pigeonholed into one particular exit. I'm not
14:59
Depending on net operating income or interest
15:02
rates or cap rates or anything like that and
15:05
during each phase I get the opportunity to force
15:09
appreciate the value of the asset. So it's really
15:11
one of the few asset classes where I can force
15:15
appreciate it before I buy it. And that's very
15:19
rare. Most of the stuff you have to buy it, renovate
15:22
it, force appreciate it, and then sell it. Here,
15:27
I'm building an equity cushion by buying it after
15:29
we've done the forced appreciation process. And
15:32
so you can stack those forced appreciation plays.
15:35
You can Create the value by taking it from farmland
15:39
to a hundred home community. Create even more
15:41
value when you put the roads, the sewer, the
15:44
infrastructure in. And then, you know, if you
15:46
want to build the homes, obviously that's where
15:48
you create the most value on the back end. But
15:50
I like that. I like being able to force appreciate
15:53
the value at each stage. Well, after our current,
15:58
I guess, entitlement battle, I can understand
16:02
why people would exit after that. This has been
16:05
rough. This has been real rough. But had we gotten
16:09
with the coach or gotten in a mastermind, we
16:12
wouldn't be facing this dilemma, I don't think.
16:16
We'd still be facing it, but not in the same
16:18
way. You got a really valuable, you'll learn
16:21
a lot of great knowledge and you'll take that
16:23
and that will help you do even bigger stuff in
16:27
the future and even be more successful. What
16:30
is your program called? Our mastermind community
16:33
is called the Land Development Accelerator. If
16:35
people want to learn more about it, they go to
16:37
learnlanddevelopment .com. I got a free course
16:40
called Land Development 101. It covers a lot
16:42
of the essentials that we talked about. Free
16:47
course that I could have gone to. You can't tell
16:53
me these things. Well, you know, it's hard to
16:56
find information. We live in a world where there's
16:59
information overload. There's too much of it
17:01
out there. And people don't have time to do things
17:04
either. The people who usually end up joining
17:07
the community, the ones who go through all the
17:09
coursework, they're like, oh my gosh, this is
17:11
amazing. This is the free stuff. What's the paid
17:12
stuff? And it's a really great community. If
17:15
you are serious about doing development and you
17:17
like the idea of somebody holding you through
17:19
your first deal and going through all the gotchas,
17:22
one of the things we do a good job of is you're
17:24
going to have to spend money on things as a developer.
17:27
You're going to have to spend money on concept
17:29
plans. You're going to have to spend money on
17:32
engineers, software to analyze things. We've
17:35
gone in and negotiated group discount pricing.
17:38
So, you know, I was paying 40 grand a year for
17:40
concept plans. You know, we got a guy in house
17:43
that does concept plans now for everybody. My
17:45
bill went from 40 grand a year down to like $11
17:48
,000 a year. And so like we can save people the
17:51
cost of the program just on concept plans and
17:54
engineering alone. you know, we got land entitlement
17:57
consultants that, you know, if you don't want
17:58
to go through, if you're not a pro and you don't
18:00
know how to do them, you can pay him and he'll
18:03
take it through and he'll take a little fee on
18:05
the back end for being able to successfully get
18:08
it done for you. You know, like we try to give
18:11
everybody the tools that they need that we wish
18:13
that we had it when we first started. And so,
18:15
you know, we've spent, you know, spent 10 years
18:17
cultivating the relationships. So not only do
18:20
we know the vendors that will help you, but like
18:22
We get really good pricing and the pricing alone
18:24
saves multiples of what it costs anyway, so we
18:27
try to make it a no -brainer And you can do that
18:30
nationwide Yeah, I mean anywhere that you're
18:33
I mean it has land that needs to be approved,
18:37
you know for It doesn't just work for what we
18:39
do. Like I work with the national builders. That's
18:42
kind of our main strategy But if you're doing
18:44
multifamily, it's the same thing if you're doing
18:46
mobile home parks It's the same thing all of
18:49
the risks and gotchas are the same. It's the
18:52
same approval process. In fact, I tell people,
18:56
if you're going to do this, don't do the 10 unit
18:59
deals. Do the 40, 50, 100 home bills if you can
19:02
afford it or have the investor backing. It costs
19:05
me maybe a quarter million dollars to do a 100
19:07
home community. So for a quarter million dollars,
19:11
I can control a 100 home community. That is not
19:15
much money for a lot of control. Right? So and
19:21
it's the same approval process. So like somebody
19:23
who's doing a 10 unit development, they have
19:27
to go through the same approval process that
19:29
I do for the 100 home community. So it doesn't
19:32
take me that much more time and effort to do
19:36
it than someone doing like a 10 home development.
19:38
The only time savings is going to be on the civil
19:41
engineering design. That's obviously going to
19:43
take five, six months for me, whereas it might
19:47
take them I don't know, three weeks to get a
19:50
drawing like that done. That's the only difference.
19:54
Wow. I'm, I'm in awe and I don't feel dumb. I
19:59
feel I'm frustrated that I didn't go out searching
20:03
specifically for someone like you. Um, so I,
20:07
I feel ignorant. But that's why we do these podcasts
20:11
is to get that information out there for other
20:13
people so that other people don't have to feel
20:15
like I feel right now, which is like, I feel
20:17
like I've been slapped or sucker punched. I'm
20:20
just like, oh my gosh, I'm wow. Thank you for
20:24
being the person that has that. That's why we're
20:29
trying to get it out there because you know when
20:31
you'd mentioned when we'd hopped on you're like
20:32
I know three people that do what you do and I
20:34
was like really I was like who are I've been
20:36
looking for them for a while because we were
20:39
looking for them and I looked them up and it
20:40
was like landflipping or something like that
20:42
a little bit different sub you know minor sub
20:45
divides which we you know we do some minor sub
20:47
divides too but the bulk of what we do are large
20:50
projects and I'll tell you developments not for
20:53
everybody right like it is a great fit for a
20:59
mature, sophisticated real estate investor who
21:03
already has cash flow coming in. We're not dependent
21:07
on any income from our developments to pay the
21:09
bills. We have cash flow coming in and all the
21:12
developments, they're just wealth hits. It just
21:15
builds wealth. And I don't have to do a ton of
21:18
deals. I'm happy doing one deal a year or one
21:21
deal every year and a half. I'm fine with that
21:24
because they're larger paydays, and they're the
21:27
wealth builders, and I don't have to scramble
21:30
and try to do 40, 50 deals a year. I used to
21:32
wholesale and house flip 10 years ago, so I'm
21:34
very familiar with that business and the marketing
21:36
machine. It's a grind, and this is not that.
21:39
This is more of a lifestyle business I enjoy.
21:41
I don't have to have a ton of employees because
21:44
most of the heavy lifting is outsourced, right?
21:47
Like as long as we got deals and capital, the
21:50
engineering, the engineers are going to do most
21:52
of the work designing it. Right. I mean, and
21:56
then I've got partners that can do all the development
21:59
work. You know, we're a GC, but you know, me
22:02
getting out and managing projects, those days
22:04
are long, long gone. Uh, you know, we got partners
22:07
that can actually do the development work on
22:09
there. And so I don't have to, I can be a solopreneur
22:12
and be a developer and do these things and not
22:15
have to have a huge team or anything. So I like
22:18
that. It's a lifestyle deal because in real estate,
22:22
I feel like so many people think that they get
22:25
into it and they wonder, man, what's the best
22:28
way? Is it mobile homes? Is that the best? Or
22:31
is it flipping houses or multifamily? That's
22:34
it, right? Or no, it's commercial. They all make
22:37
money. Do whatever you're passionate about. I
22:41
really enjoy this business and anybody can develop
22:46
but make sure that you've got your cash flow
22:51
set first. This is not for your entry -level
22:54
first -time investor or first -time entrepreneur.
22:57
You need to have cash flow coming in. to support
23:00
yourself during the life of the development.
23:02
And so that's one of the other things like we
23:04
teach in the program is how to create a fund
23:06
and a syndication and charge management fees
23:08
and create the cash flow for the life cycle of
23:11
the development and raise capital so that you've
23:14
got capital. If you're going to get the development,
23:16
you've got to be able to raise money.