In this episode, competing quotes and material substitution negotiations reduced Louisiana subdivide dirt work costs from an initial $140K to $100K using washrock instead of limestone while maintaining quality standards.
Key Takeaways:
- Volume Plays Unlock Contractor Discounts The first contractor dropped from $140K to $125K when clarifying that all three child parcels would be cleared simultaneously rather than sequentially, demonstrating the cost benefits of consolidated scheduling.
- Material Substitution Requires Market Testing Switching from limestone 57 to washrock for driveways saved $20K, but only after confirming with the realtor that retail buyers wouldn’t discount offers due to the material difference.
- Regret Not Countering Immediately Waiting 10+ days to negotiate the initial $140K quote cost scheduling priority, pushing the start date from a few days out to mid-May as three other landowners secured contractor time.
Hear the complete negotiation sequence that delivered $37K in savings below budget while building in cancellation optionality for the southernmost parcel if the neighbor makes an offer.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Today wanted to provide an update on that Louisiana subdivide deal. Some of the ways that we handle negotiations for the dirt work contracting. So to quickly recap, those of you who aren’t familiar, we had made a roughly a half a million dollar all in purchase, including
you know, value add budget for about 32 acres in central Louisiana. The plan was to subdivide into three, roughly equal, equally sized parcels and then do full turnkey setups, know, clearing home sites, installing quality driveway.
Basically just leaving it to the end buyer to you know, lay down a foundation build a house but Everything else is done for them You know, it’s public water and electricity at the street they’d have to do septic but you know, no surprise out there so Some key updates is that we were expecting when we submitted the
Subdivide plan and survey over to the parish Again for those not familiar Parish is equivalent to a county It’s just the nomenclature within, Louisiana We were expecting that to take anywhere from like four to six weeks for approval, you know putting us closer to Mid-may approximately
And we just happened to hit the parish at the right time and got full approval for our plan in about a week. So, we were kind of scrambling. Okay. Now we were like well over a month ahead of schedule here from where we thought we were going to be. And now we need to accelerate the dirt work quotes, the remaining ones that we were getting, and then also trying to sell one of the parcels over to the next door neighbor.
that would save us extra costs from a value add side because they were just going to buy one of the child parcels as raw land, or at least that was the plan. So in terms of how we were handling the dirt work. So first, when we got a soft quote on the expected cost for doing the clearing sites and
driveway way back in January was coming in at $123,000. We said, okay, you know, let’s budget in an extra 10 % or so. And according to the contractors like, yeah, there’s there’s no way it’s going to go over another 10 % for a hard quote. So, you know, we raised enough to account for that extra 10 % plus a couple of extra grand. so, you know, post purchase of the property,
post survey and subdivision approval, had like roughly 137,000 left within the SPV LLC that was managing this particular property. The first dirt work contractor, when he came back and with a hard quote and you know, so they only were able to do soft quotes because before you have
A lot of the boundary lines set for the final survey and you the actual child parcel is marked very clearly. It can be a little tricky and disorienting for contractors to fully account for what their final cost might be. So he came back at 140,000 flat.
So that was actually a little bit above that 10 % buffer we built and you know, we would have had to inject another 3k of cash into the account, you know, not ideal, but not game breaking either. If we were to go with that contractor, the key thing was from a timing side, he could start like, you know, within a few days when he had given us this quote less than two weeks ago, maybe 10 days or so ago.
But again, we’re not local to the area. Our realtor also had three other very solid dirt work contractors that we wanted to get competing quotes from. Plus, you know, we could come in and kind of hardball a bit. It’s like, okay, you know, 140K, that’s more than we were expecting. Can any of you guys come in below that and ideally still have like a, you know, a short timeline if they’re going to be like a month or two months out.
You know, it’s okay. We were fine paying for a little bit more to, uh, to get this job done. Um, but it was kind of taking forever to get these remaining quotes and there was, you know, some inclement weather or a lot of storms. So it was just tricky to align the scheduling and, know, have, have the property be dry enough to, to sort out. Plus we needed the surveyor to go back out there because
He needed to lay down extra stakes to more clearly delineate where those child parcels were fully lined out. So the contractors could give a hard quote. So, you we had a little bit of back and forth there. The next door neighbor, I mean, you never know, right? Anybody who’s been in the land business, other neighbors are like, yeah, I’m interested, interested. But when it actually comes down to making an offer in written form or…
You know, one to one to put cash down usually turns into a different story. So we weren’t really counting on them, but it would have been a great option for us to still exit at the same, relative margin in regard to our purchase price, price per acre, but reduce the expense out for doing value add on one of the parcels. Plus it could get us a way faster sale return capital even faster. That improves our, our internal rate of return metrics. So
that was a great option if it actually worked out. So, you know, a lot more back and forth, back and forth, trying to figure out these contractors. And some just like, weren’t that reliable or something. Hey, I need to schedule my equipment to get out here and figure it out. And so finally, you know, I was talking with the realtor more this week and figure out,
We need to really get this thing going here. So like we have until like today this this Friday to come to a firm decision. So, you know, we’ll either pay that 140k if needed if we can’t get these other quotes out or figure out can we get better quotes in and people who can still, you know, work on time to get this project started. And in the meantime, I’m like, you know, back my mind thinking again, tough.
macro economy here. I’m already trying to fire sale a lot of my other portfolio. I’m still bullish about this asset. Like if any land assets going to perform well in this economy, this Louisiana one is positioned about as well as you could be. But still, I want to get things on market and moved ASAP so I can reset underwriting criteria. This is like absolute top of mind for me. And with that in mind, you know, we were able to get two other quotes in.
yesterday, and actually taking a step back from there. So this is something I regret right off the bat, just because I thought we were going to be able to get these other quotes in way faster. But, the realtor was like, well, why don’t we just go back to that? The guy who gave us the hard quote, see if he’ll do it for a bit less. And,
you know, to say, Hey, we’re ready to confirm and move and like, okay, can we get them down to like 125 K to 15 K off? It’ll be in line with what, what he suggested on the soft quote a few months ago. Um, and when we went back to him, the guy said, yeah, I can do that. Can shift some, you know, shift some things around. Uh, and, and I guess he came back at a higher quote because he thought it was going to be like, uh, you know, one.
Property one child parcel done after the other but it wasn’t necessarily confirming all three done at once So yeah, if you can do kind of a volume Play here for land clearing where you can have all your equipment out at the same time It costs way less to do that then you can bring costs down. So I guess there was some disconnect there with what he thought Was needed from our end? But the problem was is you know, because we were delayed, you know an extra 10 days or so
maybe even a week of getting back to him and confirming his job. He had three other landowners put down deposits and get on his schedule. you know, whereas he was ready to start within like a few days of us confirming his quotes, now he’s like a month out until mid May. So that pushed us way back with all of that time that we gained from the parish approval.
plus again, navigating this economy. that was pretty disappointing. And I regret not just trying to counter right off the bat and see if we could get to a more agreeable number and then just be ready to go. Nevertheless, it’s like, you want to balance that, like being an outsider, not still potentially paying too much and not having other quotes in hand. So it was something…
that I’m going back and forth with. probably would have discounted in retrospect right away and I’ll do that in the future. Especially when I think time is the more important issue like in this environment versus an extra 10, 15K in terms of costs. So getting back to the other contractors, one came back at like 170K. I’m like, yeah, this is just.
way too high and we had already preface again with these contractors. Hey, you need to like be below 140 fight for your bid. Otherwise we’re not going to consider it. So he was out of the running. Then this other guy came back and was like, yeah, I know I can beat that. Even that 125 K reduced bid from the other first contractors. And I can actually do it even cheaper if I can give two quotes. And so I can do either, you know, limestone for the
driveways limestone 57 to be specific or washrock and washrock according to the realtor like it’s a slightly inferior material if you were getting a lot of usage on you know gravel roads With washrock it’s not going to have quite longevity as limestone will have but
It’s more locally sourced. It’s way easier to manage and it’s just going to be cheaper. Um, most importantly for me, which I really grilled the realtor on was like, okay, is this going to make a material difference for M buyers? Like, are they going to notice that there’s wash rock versus limestone and like, you know, are they going to decrease their bid for the property by like, you know, 30, 40, 50 K whatever, like how, what, what’s the discrepancy here? And he’s like, no, I don’t think it’s going to be concerned.
most buyers, they’re not going to note something like that. And for driveways, you know, probably aren’t going to have like the most heavy daily usage in and out traffic. So wash rock versus limestone for driveways, like it’s not going to make as big of a difference. And, know, it’s going to be a very, very solid job, you know, clay underpacking and so forth. So
He wasn’t too concerned. And so like, ultimately came to the conclusion and okay, if it’s like a 20K difference in terms of the quote for washrock versus limestone, like let’s do the washrock and gives us extra margin to negotiate with buyers again in a tough economy. But if it’s like a few thousand dollar difference, then we’ll just do the limestone. So the guy came back and it was like pretty much exactly 20K. So it was a hundred K bid for.
Using washrock versus 118 for limestone and again confirmed with realtor like Yale Let’s do the let’s do the washrock that buys us, you know again extra cash within the bank account. It’s 25k below budget actually 37k below what’s actually in our account so we could actually distribute funds back to investors and Decrease the preference that we’re paying out to because this is our last expected
expense on this property outside of holding costs, which would be below a thousand bucks per year if we really needed it for property taxes. So ultimately we’re getting that set up. Plus this contractor could get scheduled within two weeks, probably even sooner, but it looks like again, weather is not going to be cooperative. It’s going to be wet again over this next week. So it looks like he could start on May 1st, know, pending additional weather.
related issues and get that ball rolling. So now we’re back to being ahead of schedule, under budget and feeling good from that standpoint. Plus within the contract, we’re building in a cancellation for the southernmost child parcel, which is the one that the neighbor had an interest in so that, you know, Hey, we can start putting some pressure on. start at the northernmost.
Parcel and like showing these neighbors. yeah, these guys are serious. They’re they’re actually doing the dirt work and everything now they’re not just talking and Then it’s like okay now or never hey, you’re either gonna make an offer on this or we’re gonna do the work and if they do decide to make an offer then we can get our deposit back and Not have to pay for that third child parcel and just exit out of that one with a earlier sale
Or if the neighbor doesn’t want to play ball, then we proceed as planned and still do the value add. So that gives us additional optionality for, for possible exit solutions. So hopefully this is helpful for you, how we thought through it. A couple of things I would do differently, but mostly I think it’s worked out in our favor so far. We’ll see how the actual exit goes. I’m going to be thinking about this parcel day in and day out until we.
until we fully exit out of this thing. But that is the latest with that in mind, serious land dot capital for any of your funding needs within the land space and then land daily diligence Facebook group for zero cost review of your land deals. Remember you can check out the replay myself, Dave Dennison, Justin Sleva hosted a virtual unconference hot seat session, really well attended, great comments. Thought it went about as well as we could expect. So if you want to check that replay, it’s up on
the Facebook group Plus again, there’s only 11 spots left for unconference in August. So hope to see you there if you’re at all interested in joining us and Yeah, so almost so 59 slots filled up 70 is the absolute cap So hope you are grabbing one of those last slots and then lambpricer.ai even more great feedback from
some early beta testers in terms of utility here. Again, we’re speeding it up ASAP. Can’t wait to release this new version. I couldn’t be more pumped for that. So TBD on actual launch here. With that in mind, subscribe and share. Take care, everybody. Until tomorrow. Bye.
