This episode reveals how the Louisiana 30-acre subdivide (purchased at $335K, $130K value-add planned) suddenly became a potential transactional deal when the broker generated verbal offers at 22-23K per acre pre-improvements, allowing a possible 2X gross exit in two months by skipping $130K in clearing and driveway work while preserving value-add optionality if transactional buyers fall through.
Key Takeaways:
- Pre-close soft marketing creates transactional exit options. Broker relationships generating written offers before capital calls allow operators to skip value-add expenses ($130K saved) while preserving full IRR benefits through compressed timelines.
- Structure capital calls to preserve multiple exit pathways. Calling full capital ($335K land plus $130K improvements) maintains value-add optionality if transactional closes fail while allowing pro-rata reductions if faster exits materialize.
- Written contracts before A-to-B close provide 99% certainty. Verbal offers convert to binding agreements pre-close eliminate speculation and allow confident capital deployment decisions with institutional-grade risk management.
Listen to the full episode for the complete playbook on maintaining deal optionality through creative structuring and investor capital management.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital Vacant Land Funding. Partner wanted to provide another tangible update on that Louisiana minor subdivide deal that we are imminently closing on. I know I’ve discussed it off and on several times on the podcast. If you haven’t heard, just to rehash, it’s a roughly 30 acre property. We’re planning to subdivide into
Three child parcels, very, very solid economics on the deal, quality utilities, terrain, everything is in our favor. We are also raising outside capital to diversify our risk on this particular project. so the numbers.
Roughly, we’re going to look at about $335K for the land purchase, maybe $130K for value add. We’re planning on clearing out some home sites, driveway installations to make it as turnkey as possible for end buyers to add homes onto the property. So pretty simple.
subdivide and perish approval process for these ones. So all in the price per acre with improvements is going to be roughly 15k per acre and we think those could conservatively exit for 35 ish k per acre maybe downside scenario like 20 29k per acre in
You know sub six months to be conservative maybe sub nine months Talking with our broker though. He’s already been you know, he’s extremely connected with the Community and was already marketing out this Property to possible interested buyers and he’s already gotten a few verbal Offers that
would seem to equate to a roughly 22 to 23k per acre pricing without improvements being needed. So all of a sudden we could just buy the raw land, spend maybe five grand for the survey, go through the parish approval process and have one or two buyers who are willing to buy off those child parcels. At the moment it looks like it could be one buyer for
one of the three parcels and then another buyer for the other two together and So then if we subtract out that anticipated value add we’re suddenly looking at below 11,000 price per acre and you know exiting for a gross double where all of sudden we could set up effectively what would be a transactional type deal for
you know, 2X gross margin with equity type returns. So, you know, the absolute returns could be less than they would be if we did the full value add approach there, but it would be risk the sale of the property even further. And we could probably be in and out of the deal in roughly two months total, you even accounting for the parish approval process of the
subdivision of which we already have tested approval. I can go over how we handled that in another podcast. But it’s always great to have some optionality with the deal. And so the way that I’ve structured it, because we already have capital commitments with our investors, but capital hasn’t been called yet. So we’re anticipating doing that in mid-March. So I told our broker,
you know, if you can figure out a way to get these, you know, possible buyers, the ones that seem to be strong verbals, get them into written contracts, prior to us calling capital and closing on the property, you know, so we can have, you know, 99 ish percent certainty that, the
final purchases would go through after we complete the A to B side of the transaction. Then we could just reduce everybody’s investment in the deal pro rata and then be able to, okay, accept less money into the deal and then, you know, plan to exit the entire thing within.
you know, two months or so, which would be pretty ideal again, from a risk standpoint and you know, for an IRR perspective, internal rate of return on the asset. It’s very, very favorable for outside investors and for improving our own solid track record accordingly there. Even if we
still took in the additional 130,000, 140,000 of capital to account for there being a chance of the effectively transactional closes don’t happen. But even if they do, it really wouldn’t affect our IRR. It would affect our multiple on invested capital. But that’s more of
you know, kind of a headline number, but IRR is really how most institutional type of investments are going to be advertised anyway. So we wouldn’t be knocked from an IRR perspective because it’s so fast, even if total dollars in is more than is necessary. We can still return that capital very quickly and preserve our optionality to still do value add on
the deal in case the transactional type of exit fell through or possibly one of the child parcels is able to exit via transactional format and we do only one or two of the properties, the child parcels with value add. So then we have optionality from that side as well and potentially de-risk some of our initial purchase.
right off the bat with a written offer even prior to closing on the property in the first place. again, having multiple different options is always going to be ideal when you’re approaching any type of land deal. especially if you’re using investors funds, you have to be smart with.
how you would structure these different scenarios to make sure that you’re not potentially taking more capital than is necessary and keeping everybody apprised of the situation for possible exit pathways that might be more advantageous from a timeline and de-risking perspective. And worst case, if those transactional type deals don’t end up working out, we can just go back to the original plan of value adding and…
exiting the child parcels with potentially a lot more juice in the deal, even if the timeline might be a little bit longer. So hopefully this provides some tactics that you can use in the future. Just again, the more you’re in this business, the more you can kind of just create or think of creative solutions on the fly. Like I had no idea that this
Type of exit was even going to be possible until it’s chatting with the broker and we’re like roughly two weeks from closing and then you know Just on the fly speaking with him like okay. Well, I have all these other factors if you can set up this this this Contingency then we can do it this way if not proceed as as planned here. So You know just to kind of show okay, yeah the experience matters just be thinking creatively about deals. You don’t always have to do it
in a particular format every time here. You know, the more creative you can be, the more opportunity there is for potentially participating in a wider variety of deals. And that is just the way my brain operates now. It’s just pretty much every conversation. It’s like, how can we figure out a deal structure in one form or another? So
Please put this to use if helpful. Subscribe and share. And if you are looking for funding, a huge backlog of deals. just running through. Again, still recovering from a bit of a bug from Logan’s summit over the weekend, SeriousLand.Capital. I’d been getting occasional bug reports about the deal submission process. We’ve been having our web developer work on this routinely. It seemed to be a issue with the cookie.
tech Add-on there so we remove that for the time being Get a different platform that should help us more. So just FYI from that side. It should all be working now Otherwise, you can always email us directly with any deals and Land Daily Diligence Facebook group growth there every day zero cost review of your land deals landpricer.ai to
simply review your land deals with our software built with our entire underlying underwriting process, which I’m about to work on right after this. Hopefully this was helpful. Again, take care everybody. Talk to you next time. Bye.
