This episode dissects a 115-acre Oklahoma/Texas border property where CBRE’s $90-page appraisal valued it at $3.5M using 5-year-old comps from 1,000+ miles away, while proper analysis considering rezoning and minor subdivision potential revealed realistic $800K-$900K exit value, enabling a creative 2X equity cap with profit participation structure.
Key Takeaways:
- CBRE Used Comps 1,000 Miles Away A major institutional appraisal pulled industrial land comps from Kansas for an Oklahoma property, included 5-year-old transactions, and ignored subdivision potential—completely useless for pricing.
- Distressed Lender Creates Opportunity Original seller overleveraged on $800K+ purchase now controlled by lender willing to accept $325-350K to salvage position, enabling 2X gross margin with conservative assumptions.
- Creative Cap Structure Reduces Risk Negotiating 2X cap on equity before profit split with lender reduces downside exposure to $275-300K while maintaining upside participation if market exceeds baseline.
Listen for the complete breakdown of how institutional real estate analysis fails at land valuation.
(Podcast transcript below)
Welcome to Get Serious. I know we have the snazzy new intro. Finally trying to step up our content game and just make things look a little bit more professional as we continue to expand our content strategy here. So hopefully you’ll appreciate what we’re on our end. And today I wanted to touch base on
Another larger deal that we looked at in Oklahoma last week. And this was about 115 acres. And again, like all the, you know, same rules apply with like, okay, where are you finding real sellers to work with in markets like this? Acquisitions are tough. Dispo is arguably even tougher at the moment here. So it’s just, it’s a tough
a tough cycle to work in on both sides of the equation at the moment. And in this case, you know, it’s a more distressed seller. That’s just what we have been finding in regard to, you know, who are sellers that are willing to play ball at the prices that we need. And it’s kind of the usual suspects. Is there some financial distress? Family.
turmoil, ongoing airship situations. These are the things that make our industry go here. we are here to serve, to find exit pathways for those type of sellers. So in this case, 115 acres, just over the Texas border, but relatively near Dallas.
and it’s just outside of this, you know, rather tertiary, city, in, Oklahoma and roughly half of the property is owned for residential. and about half of it is owned for industrial and is actually like split in a decent way. Like it is right next to.
I don’t know if I would call it a subdivision necessarily, but a more residential part of kind of the city outskirts where, you know, there’s a whole bunch of like, you know, half acre, acre size lots. So, you know, most of the residential part of the property is like abutting right up against those areas. So it’s already in a developed area.
And then, you know, like kind of directly east of the property, there is a larger industrial plant. want to say it’s like steel manufacturing or something. Um, from what, uh, from what I recall here. And so, uh, you know, when we were looking at this property, uh,
first, know, it’s like, okay, this is not probably the greatest location, you know, not like the most active market here. And again, if we’re going to consider a property like this, probably be thinking a minor subdivide type situation from a residential perspective. And you know, could we look to rezone the property from the industrial
perspective, unless we saw like a decent amount of activity with, you know, people purchasing up industrial land, which is just not often the case here. I know, you know, there’s some data that will back up, oh, like industrial land is, you know, holding up values, but I’m not necessarily, um,
certain from a transactional volume perspective that that’s something you really want to rely on as much. we know like industrial starts and manufacturing have been down quite a lot this year. you’re like tariff uncertainty and it’s like, okay, you know, our company’s actually going to invest further into the U S it’s kind of been counterproductive when you actually look at what the intent was for tariffs to bring more opportunity back to the U S.
like it because of the kind of back and forth nature of it, it just has not really penned out that way. So you’re taking a bit of a gamble that the buyers are going to be there, in any case for some type of additional manufacturing. and so we were really thinking, yeah, this is probably what we would want to rezone and try to chop up, into a subdivide, possibility.
few other notes is that the seller had bought the property for like the mid-800s, three-ish years ago. It’s like a more peak market. 2022 is really the true peak for most areas of the country in this latest real estate cycle before we’re starting to have a lot of downward pricing pressure, and that is still ongoing. Probably not even halfway through that process yet in most areas of the country.
So we’re just, we’re, we’re baking that in. so with, with that in mind, like we were looking, okay, what, can we really consider here? And just another key piece. I like there’s an extensive story to this property. I’m just, I’m trying to hit all the key points here.
So jumping back to the seller distress, they over lever themselves. They were trying to do some type of development and they just, they, they screwed it up. It’s like connected to other properties, some near, or in Austin itself, maybe elsewhere too. So this was like kind of a, and I don’t think it was just purely land in Austin either. It was some other, improved real estate.
And the partner who brought us this deal, mean, very sophisticated investor, usually doesn’t do land as much. tend to do more entitlement processes or projects rather. Um, so they brought us this Oklahoma deal at least, uh, like take a look at it. Um, and said, yeah, the seller is like basically a passive entity and their lender has just kind of taken over the process and they’re just trying to salvage, um, as much as they can get, uh, within reason for, you know, their initial.
loan to the seller here. And so that was like indicating, you know, some of these times, like it can work pretty effectively. There’s another property intensity that we’re working on purchasing now where, you know, the seller owns like a quarter million dollars or something. And, you know, we’re getting a partial lease on the land that’s like for 70 K to at least waive some of the personal lien they have that a bank is, you know, has against them.
So like some of these lenders are willing to kind of work with, can we at least start getting something paid back? and, just being more reasonable versus just like holding out for, Hey, we’ve got to get like top dollar back. so these are like possible situations that you can sort out. and so with that in mind, we’re like, okay, there could actually be some, something interesting here. And what was key about this deal and I’d never seen a
Land appraisal report from CBRE before. mean, it’s one of the biggest real estate companies in the world. Making like $40 billion a year thing in revenue as of last year. And they had a 90 page land appraisal report. That was largely just terrible. When I was reviewing it and you know, there was admittedly some helpful like demographic type details, but like that’s not.
like the most critical piece for like a land appraisal. Like you got to show me the comps. Like how are you judging the value of this? And comps are like the dominant piece that we have to consider for like what the true market is. And that was like, you know, two pages out of, you know, the 90 page report. And it was just, it was just terrible underwriting. Like,
I can’t believe how bad it was. Even beginner land investors will tend to be better than this. In terms of my own valuation of the property, including the opportunity to subdivide it. So bumping the value higher than what the parent parcels could sell for. First, they only considered the parent parcels and they didn’t consider any rezoning. So it was an industrial side and a residential side. And they thought the property was appraising for like three and a half million dollars.
But when you look at the comps, you know, they’re pulling close to like five years of history, which is just, it’s just ridiculous. Like for, for properties like this, like maybe you can have that work a bit if you’re doing like a much larger major subdivide. it’s like really struggling to figure out, okay, what are some of these, you know, what, what did some of these larger developments move for?
and you can kind of like discount from there, but generally, yeah, if you’re trying to like, okay, indicate comes from these parent processes, you can’t like pull something from 2022, 2021 and tell me like that has anything to do with the current market. Plus their, search radius was, was just outrageous. Like we were on like the border of Texas and Oklahoma. And for some of the, the industrial,
comps they were trying to pull were like, you know, thousand plus miles away, maybe more like there was, there was a comp they were pulling from like the middle of Kansas, like from States over. Um, like I’ve never seen anything like that. Like you just, you can’t tell me that there’s really any relevance to something that is just so far away. Um, and again, you know, the improper, uh, consideration of time.
As well and then you they arrived at three and a half million dollars, but you just have to like throw that out And then like you see okay the you know, these like, you know suits at the end of the report You know so and so, know title on CBRE and stuff like this report probably cost thousands of dollars And and they’re paying these guys like, you know, you know six figures income for sure And for a report that’s completely useless
at least from like a pricing side of things. Plus there were a couple other things like they were taking, know, they had the seller’s anticipated plan for the property, which was trying to do like this multifamily play that could have fit like 700 some odd homes on the property, like pretty dense Rezzy. But at the same time, they show the demographics of
only expecting like the population growth of like 2,200 people in that surrounding city over the next five years. So basically you would need like every single person who moves to that city or surrounding Metro over the next half decade to only move on to that property from like a multifamily perspective. I guess it’s just completely ridiculous. I don’t understand how they didn’t piece these things together, especially like, you know, higher level operators at one of the biggest real estate firms in the world.
So we had to throw that out and we did our review. thought, okay, you can rezone, maybe do 10 to 40 acre, child parcels. And there’s that there’s a real market for that. Like the CDRE guys, they could have figured this out. Like it’s not the most difficult market I’ve ever looked at far from it. In fact, like I could pretty reasonably determine the exit price per acre and discount it, in relation to some characteristics and just like, yeah, tougher market.
And we know there could be a more distressed seller here. And we had already heard from our partner in the deal, yeah, like, you know, they might be thinking around like 300 to 400 K. It could be like reasonable here. And I was thinking, yeah, if you could get these guys down to like 325, even 350, that would be so discounted from an anticipated exit to be at least a 2X on the property that it could work out.
And we could have like a more creative structure where, you know, the lender could cap us at a 2X gross on our equity into the deal. And then they would get, you know, a percentage of the profits after like a promote structure, which is pretty interesting because then we can just drive down our, you know, downside risk even more by like, okay, could we do like 275K, 300K?
into the deal here, which yeah, if we have like a two X on that, I’m there, there’s no complaints about that at all. And it reduces our principal risk. And then if we still get a piece of any upside beyond that, we would probably list a bit higher, to account for that scenario. Anyway, it’s like, yeah, this is, this is a really solid opportunity in a very difficult market. So like, that’s how we’re still.
sorting out, okay, what is the potential here given, you know, the circumstances that we have to work with? Like, it’s not going to just drop out of mid-air. You got to be creative and you got to figure out how to work through some of these like a little bit more difficult situations here. you know, nevertheless, it was like, you know, my conservative estimate or even like, you know, baseline estimate, even optimistic for what you could get out of this deal.
was still like 25 % of what CBRE thought this property could sell for as parent parcels. Like just ridiculous, absolutely ridiculous. These guys should really be ashamed of themselves. Like it’s complete waste. So I just wanted to share that over, you know, those of us in the land space, like we do still have like leg up advantage on how to do this, you know, grounds up bottom.
Bottom up review, like, you know, we’ve built this into land price or on how to do this properly. Like, you know, these CBRE guys could have used that. They could have saved themselves a lot of time and been more accurate for what I’m sure they were charging their clients for. But just wanted to share another case study on how we’re looking at deals nowadays, how we’re looking to structure and outperforming the big guys. So hopefully this one is helpful to you all.
Hopefully we’re able to do that deal. We’re trying to go back and forth here, figure it out. Still a lot more to do, but we’ll see. So with that in mind, SeriousLand.Capital, any of your funding needs, 50K plus purchase price, Land Daily Diligence Facebook Group, Zero Cost Review of your land deals, and LandPricer.AI, most reliable land pricing tool on the market. With that, take care of everybody. Subscribe and share.
