This episode explains the strategic portfolio liquidation decision to break even or take small losses on most holdings while protecting two near-million-dollar exits, updating underwriting to reflect land’s luxury-good status in a deteriorating economy.
Key Takeaways:
- Land is a Luxury Good in Recessions With 50% of US consumer spending driven by the top 10% of earners (who are equity-market sensitive) and lower earners squeezed by tariffs, discretionary land purchases face dual headwinds unlike the COVID-era remote work boom.
- Sold Comps Are Unreliable Until Mid-May Any closed transactions visible now reflect pre-April trade war conditions, making pending sales and broker activity the only trustworthy indicators until 30-45 day lag clears.
- Weekly Price Cuts on Questionable Inventory Properties that wouldn’t be funded under current criteria are receiving systematic weekly price reductions to fire-sale before market conditions potentially worsen further.
Listen to understand why defensive positioning and liquidity preservation now outweigh top-line growth targets that seemed achievable just three weeks prior.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Today wanted to give some updated thinking regarding dispositions. I’ve often remarked, and I think a lot of other land investors feel the same way, know, dispositions are, you know, ever kind of questionable or, you know, kind of on the fence in terms of where
certain properties in your portfolio are going to land. There’s nothing more in the business that keeps me up at night more so than thinking about Dispo. And yeah, especially in this economy, I think we’re on a real precipice here where we’re kind of entering uncharted territory and…
the way that I’m thinking about the macro economy and how it’s affecting our asset-based funding business overall. there’s a lot of current anxiety that I’m feeling about updating underwriting criteria. And on the flip side, I couldn’t be more excited about the continued advances in AI. And even testing out like the new Chetchipy TO3 model, it’s just…
wild how good that is. Or Claude baking in Google workspace integrations so it can just model exactly how you write emails and so forth. Really, really cool stuff. So it’s kind of a balance of top level excitement as well as a significant amount of anxiety about a lot of the happenings within the economy.
For anybody who’s been in entrepreneurship for at least a few years, like, okay, well, that’s just another Thursday. So nothing too new in navigating those continued roller coaster rides. That’s how I view it. If you’re not on an emotional roller coaster, you’re not playing a big enough game. So I just view it from that perspective. The uncertainty never ends.
Back to Dispo though.
You know, we were shaping up coming into or through quarter one to have like possibly like a Forex improvement on our top line numbers and you know, associated profit, at profit actually would have been probably even higher margin by the thing, the way things were looking for 2025. I am being way more cautious about our projections.
even over the past two to three weeks, at this point, just becoming more defensive in terms of, liquidating most of our current portfolio and just updating under writing criteria to keep in mind the changing macro environment. So we have like two.
You know anticipated roughly like million dollar exits within our portfolio That if we exit those ones solidly and one’s already been under contract know a lot more about that one in like two weeks or so likelihood of closing on time I Like if it really just came down to those two Closing really profitably for the remainder this year like that. That would be an excellent outcome for this year. Absolutely excellent
remaining parts of the portfolio, like I’ve remarked before, like I’m okay breaking even on it, but, and possibly even taking some small losses on these, just looking at the updated kind of macro economy and where, where I think land is going. I think we’re gonna be entering a highly risk adverse time for even a lot of retail investors here. That’s just where my senses are going, where I’m viewing the macro economic data.
people say, you know, Chris, all doom and gloom and I’m an entrepreneur. I’m optimistic by nature. the world is, or, know, progress is defined by optimists, but, know, you also have to be willing and, and able to adapt to changes. And, know, I’ve, I’ve felt the bad side of having my kind of head in the sand and not paying attention to macro indicators and
You know left millions of dollars of unrealized gains on the table like that That’s real pain, know and you have skin in the game and you know, you’re not just kind of talking armchair quarterbacking from the from the sidelines It’s a whole different story But if you felt that pain from like monetary side, I just resolved to myself like I’m never making that mistake again You know, might still lose money here and there It’s just you can’t if you’re ever gonna take risk in any market. There’s no guarantee on you know future
But I know that I can be way more informed and always have my antenna up to reduce that chance of kind of catastrophic loss like I’ve experienced in the past. So I’m just way, way more mindful about that nowadays. And it’s just kind of smart underwriting. And sometimes you don’t understand. I would say for sure you do not understand what your risk tolerance is until you lose money. So that’s just
the bottom line there and even when you lose money and you’re willing to go back that that’s kind of the mark of I Think folks who are like truly committed to finding a way forward And you know with that in mind here, you know, we just have to remind ourselves like land is it’s a luxury good You know if if people are really struggling from you know, food on the table or
shelter or even kind of more routine consumables. Think like childcare type items or even clothes and so forth that need to be cycling through on kind of an annual budget basis, like land kind of falls by the wayside oftentimes. So we just have to be mindful of where our…
you merchandise is in terms of the mind of the consumer. and I think a lot of people on the lower end are going to get squeezed quite a bit just from increased costs, lower job earnings, et cetera, or over these coming months, you know, based on how tariffs and trade war plays out, I’m kind of expecting the worst here. I just, I don’t think anything’s going to be resolved that quickly.
I would love to be wrong here and then it’s kind of easy to turn the Jets back on, but I’m not planning for that. And then on the flip side, you know, the…
less cost conscious customers, the richer folks in the U S and again, just remind yourselves that 50 % of all consumer spending in the U S is driven by the top 10 % of earners within the U S and a lot of those folks are more sensitive to, know, equity market changes and you know, that’s been getting hit pretty hard recently. So, you know, to expect a lot of folks to, you know, lay out
tens of thousands, hundred thousand dollars into land purchases is going to just be a riskier proposition. Same with developers and builders. They’re going to be facing higher costs on their materials, necessarily reduce demand from a home buyer perspective, but just reduced capability from and buyers for
housing or other structural improvements because they’re getting squeezed on their own end like I just alluded to. So you have a lot of pressure negatively across many of the exit pathways for our market here. And you could think, okay, back when COVID hit and there was like pretty
a short term downturn, like a nasty downturn, but it very short term. So we started immediately bailing out people, cut the interest rates. And within the land game that kind of coincided with a boom, both because people had the extra savings, the bailouts, etc., lower interest rates. But as we all remember, we were all locked inside and then there was kind of like, okay, remote work can make more sense here. Yeah, I want to get out of these cities that are just…
restricting my freedoms and looking at land, it’s a totally different public sentiment during that period of time as well. Whereas nowadays, we’re not facing down a pandemic. There’s actually way more of a back to the office paradigm that a lot of the major corporations have already instituted or continuing to institute and see of less freedom from people moving around.
to other parts of the country and not like just sitting on their computers all day looking, you dreaming about, uh, you know, land effectively. So, um, like we, can’t, we can’t delude ourselves as far as again, where we sit in terms of the end consumers mind and, uh, you know, requirements for their day to day life. Like land is a luxury good. So those are going to be the first things that get hit.
when there are economic troubles. So that’s why I’m just, again, being very cautious. And it takes a while for all this info to start percolating through different groups and buyer subsets and all of that. And again, for like the actual impacts of tariffs to really come home to people could be, you know, weeks to still months in line. Like, you know, if some of these on China stick here,
you know, a lot of the consumer electronics that, that, we as Americans use are produced and imported from China. And you think, okay, maybe there’s like, going to be exceptions for some of the, semiconductor or, you know, like, laptops and phones and so forth.
And, maybe there’s some cheaper ones that we won’t feel like that much of a bite for, but, know, consider how many, you know, like refrigerators or washing machines, like, you know, larger appliances that might be a thousand, 2000 bucks per pop. Um, that might all of a sudden have their prices doubled, um, overnight. Like people are definitely going to notice that. So I’m just, again, projecting forward to win people like.
realize, hey, this, this is kind of crazy here. This might actually affect my bottom line as far as how many discretionary funds I already have, you know, within personal budget here and not expecting that to get better anytime soon. So that’s what I’m kind of looking out for and why I would just be so cautious about considering any comps that
You know, even if you see some things that are showing up like on Zillow or Redfin that were sold, you know, this week, it’s still lagging data, right? By at least 30 to 45 days. I am not trusting any sold comps in this like, you know, true tariff impacted economy until like I start seeing the data from mid May, because then, you know, you’re going to get some closes that made of
might’ve already started happening by early to mid April-ish when we started really feeling the economic downturn. That I think is going to be very informative. But any comps outside of those future oriented ones like pending sales that are happening now, I just don’t think they’re very reliable at the moment, if at all. It’s such a volatile.
and fast changing economy. just a word of the wise on that. So that’s why I’m just trying to get ahead of all of this. And so, you a couple of these deals in particular, that would have just been more way more questionable. And I just flat out wouldn’t have done that in today’s economy. I’m just, slashing price on a weekly basis. Like, okay, if we’re not getting hits, boom, just knock it down again, fire sale, I might be taking hopefully small, no more than a small loss on it. You know,
And I have to remind myself, like we’ve never held a property that we couldn’t sell. and virtually all of them have been profitable. Luckily these like, aren’t crazy in terms of, equity that we pushed out for them. But you know, still I’m just, I’m stressed trying to figure out how to get these things to move before I think it’s going to be potentially even way harder to find any type of buyer activity. Again, hope I’m wrong.
could very well maybe we change our underwriting criteria and the way we’re orienting our business on a week by week basis. It’s the same thing that Nvidia does, a multi-trillion dollar company. So that to me is the smart way to go about it, stay nimble, adaptable, and pay attention to the market and just try to get ahead of things. We already know land is, it takes a while to move assets, so you gotta get ahead of the game and can’t be the last one holding the bag.
and be very, very careful on acquisitions. That’s why I’m trying to offload so I can reset my underwriting criteria with liquidity coming back into our account and being very, very cautious and conservative about future buys, utilizing new comp data that takes into account the more volatile economy. So that’s the way I’m thinking about it at the moment.
I’ll probably be updating a lot more on this shortly and I’ll let you know how many of these other sales come. We actually just got one property that we listed about a week ago that we’re getting an offer in today. I’m not sure where it’s going to land, but I told the broker, I’ll even take low ball offers. I’m fine breaking even on these. I need to get these properties out. And this is one we worked on like nine months to close. So even then it was like a bit shoddy in terms of
past underwriting not necessarily matching our current criteria. It’s just we had a lot of sunk costs. was, you know, sometimes you just put in some of these tough situations where you gotta make, you gotta make a call with, you know, the best info you have available. I still feel good about this one. fact, again, getting an offer within a week plus during this troublesome environment. But, you know, we’ll see where it comes in. Maybe I’ll report on that tomorrow.
With all that in mind serious land dot capital for your funding needs land daily diligence Facebook group for zero cost review of your land deals recall today I’m with Dave Denniston and Justin Sleva Doing a virtual unconference session two hot seats at 1 30 p.m. Central today I hope to see you there or you can check out the recording if you’re listening to this after it already happened and then landpricer.ai Making big progress on the LLM
integration with us, especially, I can’t remark too much on this right now. I just, I couldn’t be more excited to where that’s going. I’m just, blown away with, with where some of this tech is. And I just think we’re, we’re positioned real well to do something special with this over the next couple of months. More to come. Take care. Bye.
