Numbers have little meaning if not presented by a team that can execute consistently. Rick brings in Steve Landall head of our passive division along with passive investor and client George Satt to provide insights from the eyes of a passive investor.
Video Transcript
Rick : Hey guys! Rick Melero here with His Capital. I am so excited today because we just came back from a project where we talked to one of our project partners that is building some amazing properties and we got to give you guys a really beautiful view of what’s going on the actual property itself but I’m back at the office now from our passive division and we’re going to give you perspective today from a passive investor so I’m here today with steve langell who’s part of our passive division and also an investor and see what I want to do today is take this opportunity to really just kind of look at the investment from the eyes of a passive investor. And since you deal with that department why don’t you share with us a little bit about, First of all how a passive investor can be a part of deals like the ones we’re talking about today.
Steve:Yes, obviously. I’ll be honored to talk about passive investing that is near and dear to my heart and like you said, coming in as an investor I don’t have time to swing a hammer and be an active investor. Many of our investors want to be in real estate and they want to be tied to the security of real estate but they don’t want to be actively involved. They want to be 100% passive and now we’re talking about this beautiful project here and we’ll use that as an example. We have passive investors that are going to come in two different ways on a project like this. We have investors that will come in and take the whole deal down with what we call as a whole note a whole loan and we certainly can do that and we have several of them in the pipeline. The other way investors are coming in with a lower amount of capital maybe even as little as five thousand dollars but they want to be diversified with many investors and we have what’s called a regulation fund for these investors which we’re thrilled and excited about this new opportunity.
Today we have a special guest who joined us and he’s actually a passive investor and today we’d like to welcome our friend George. George, we are so thrilled that you are here.
George: Thank you Steve. Thank you Rick. I mean it’s a pleasure. We’re very excited to be here and be joining your team and be able to carry out all these projects that you have on the table. We have about a decade and a half of experience in the real estate market and as investors we’ve been looking for a team that can deliver for contractors that have the experience and the quality and that can build this product. This beautiful project that you have in the time frame that has been established and we believe we found the right team so we’re very happy to be here with you joining this great team.
Rick: I love it. Thank you so much for sharing that you know just for the sake of the audience is possibly considering investing and because you guys have been doing this for a long time obviously this is a process investing in. I’m a student and I always try to find ways to learn and grow. So with that said, maybe one of the things that we can share with the audience today is we’ll talk a little bit about some of the opportunities in a minute that we’re looking at these future forward looking at 2022. But currently right now when you’re looking at a project why don’t you break down some of the key things that you guys are looking at to kind of mitigate your risk when you’re considering an investment that’s passive for sure.
George: Sure. I mean you know the one of the main issues obviously all investors look at profitability, look at the numbers are as good as the team that will execute the project so we really need a team that can make this happen that has experience that has shown in the past that can deliver that they can deliver projects, different types of projects, different complexities and we’ve seen from what have you done that is present the numbers looks good as well. So the combination of the expertise to perform and in good numbers, good profitability on the investment that we’re looking at our elements that have made us decide on this investment.
Rick: That’s awesome! Thank you so much for sharing that you know one of them speaking of that I think one of the things that we can highlight we’re going to talked about a finished project that we’re working with a partner and because he’s been such a good steward we’re bringing them on and we’re going to work on a variety of different projects so what I want to do is just kind of highlight this simple project.
This is a duplex but this gentleman came to us and he wanted to build a duplex and we’ve already been coding him for several years and building a relationship. He’s a great guy and part of the partnership of course is when he buys a piece of land like he actually proposed this project to us. This is basically what he sent us along with his floor plans and we started looking at the numbers we began to analyze a project and because of the credit and the history that this gentleman has had with us we decided to move forward as his private lender and so clearly we journal through here. What it looks like as far as the entire process of clearing the lot and getting it ready and for pre construction. You know we have seen the stages when of course putting the slab making sure that all the utilities and everything have already been reestablished. We looked into the masonry work because every single draw that we’ve released we have our third party company go out and do an inspection and so this is what we are looking at here it’s kind of a journey through the project.
Ultimately again from framing insulation and naming it the entire process has taken place and we finished this project and as you can see here in these pictures for a duplex and this is mind you the purpose of this unit is to rent it to somebody. When you walk this property and you see the finishes. You see that the actual client, the partner of ours, really cares about balancing the quality of the materials and the level of finish versus the price and so he really made sure that the finishes were quality as if it was going to be somebody buying the unit so that allowed for a huge demand. I mean you would be amazed at how many people have already called who want to rent the property and are willing to pay a premium because again the space that he developed is so nice. It’s so upgraded in comparison to the neighborhood that there’s a lot more demand than he needs and in fact what’s unique about this is right before he got the certificate of occupancy right before. We actually finished doing the final draw. He already had an investor who called him to pay retail because he wants to hold this property for the next 10 years and so the beautiful thing about this is a project specifically that we started from the very beginning with a client that we’ve established a relationship with and that’s really our courting process and you kind of hit it that on. We don’t partner with every person that we fund because not everybody is doing it exactly like you said they don’t deliver on time it might be over budget and I get it things happen but what we want is consistency right and we want that so that we can make sure we’re good stewards of our investment so this is a perfect example in a case study of a client that is worthy of not only giving them a loan but also coming a partner and helping them to scale this business so what I want to do right now is why don’t we just start kind of digging into some of the projects that we’re already beginning to analyze for 2022.
And these are projects that we’re considering doing a combination of strategies and so the three projects in particular we’re going to talk about today specifically we’re going to begin with phase one if you will and that phase one is we’re going to build four spec homes with this particular operating partner.
These properties are going to range anywhere from 1650 square feet to about 1830 square feet and these are going to be in Deltona Florida where this is a market that has a lot of activity and a lot of demand and so from there we’ll talk a little bit about a more luxurious development project which is more of a spec house but it’s going to be more semi custom home is what I would call it and it’s going to be about 4300 square feet and then after that you the next phase which will take several months to get this thing going but there’s been a lot of legwork already done which is 22 homes that will be developed and that’s just in the queue from one of our operating partners so again the beauty of the fund is just ho many investors can really benefit from a variety of these projects that are being sourced by our team and they don’t have to do anything that is just literally participate whether they want to be in the whole loan investment or they want to partner with us in the fund and take a piece of pretty much everything. So let’s kind of get started here because I want to share with you guys so again these are now the specs and the actual visual representations of the actual first phase of our project with this gentleman carlos we’re going to be focusing on first of all these already have been filed for approval to the city but these renders basically give us a visual representation of what we anticipate these beautiful single family homes to be done with now.
There’s some additional changes so that not every single property will look identical but this just kind of gives you a concept of where we are now where the project becomes very interesting is when you begin to analyze so these are all primarily going to be three bedroom two bath that’s your 1600 plus square foot and then the bigger one which is about 1830 square feet will be a four bedroom two bath now what’s interesting is based on our current analysis today that’s not even taken into anticipation any potential appreciation which could be possibly done. We’re booking at an actual cost basis to build these four properties of roughly 960 thousand dollars. When you’re looking at 100 of the project cost that includes the land permitting everything the whole time but what’s amazing about this project is that we’re already looking at a current market value of about 1.16 million dollars so that leaves a spread, net spread at the end of roughly 205 thousand dollars so the beautiful thing here is a project like this what we can do is do a combination of the investment so we can incorporate a first mortgage and call it 70 of that project cost of the 960,000 ad the difference can come in from our fund as an equity participation and so this allows us to build a consistent return n that mortgage side.
But it also allows create an upside that’s fantastic with a project that is another beautiful thing that I want to bring out here is part of our due diligence our team’s already vetting this, we’re already running numbers but just an interesting note because the retail prices are still within a range and there’s a big market for rentals.
This could very well be a property that we end up selling to an institutional fund. That is looking to buy turnkey rental properties to hold for the next 10 years so that’s yet another element of an investment option that we have here. So, let’s take a look at the next one, this next one here that I really really think is solid because I know this area we’ve done a lot of loans in the past in Saint cloud is a project and here’s kind of the parcel the way it is right now. They’ve already submitted the plans so we’re anticipating probably by January to have the green light to go forward on this property but what you’re basically going to see with this parcel.
It’s a very big lot for what the property is in this area but if you start noticing some of these homes have a much bigger footprint. They’re larger because they’re more of a luxurious community and so this is basically the elevation render that we have submitted already before the city to get approvals and as you can see it’s a beautiful home. It’s gonna be a lot more modern and luxurious but when I show you the numbers this is kind of the part that’s really exciting. So if you take a look at this project and I want you to time it in a minute because I know you guys have worked on some deals with us here but particularly this one based on today’s estimated value. Five bedrooms, three and a half baths. We’re expecting this to have a retail value minimum six hundred and thirty thousand dollars all in cost is 490 so we have 140,000 equity pieces. So why don’t you guys chime in here for a second obviously this is a lot of opportunities coming to the table right. We have some great options for us to be able to invest passively but maybe you guys can share some insights regarding this or kind of your thoughts.
George: So far absolutely, I mean basically these are some of the things that have allowed us to make our decision process fairly easy. The fact that you have all these projects in the pipeline is great. I mean we don’t have to develop all these new projects in order to invest the funds that we’re looking at investing. That’s a key issue and the other key issue that the investors have to realize is the fact that the fund has the ability or the group has the ability to do a combination of debt and equity that really has an impact on returns. A very positive impact and you can handle and manage a project more efficiently so that is another element that really contributes to. It has contributed to our decision in investing here with you.
Steve: Awesome! Yeah and George you basically took what I was going to say but it is beautiful with the debt and equity with the fund. The whole note does not offer that the whole loads offers the debt side and the interest which is an amazing opportunity in itself but with the fund you’re absolutely right George, I mean yeah it’s you not only get the benefit of the interest as the bank but we also get a piece of the equity which is a game changer for all of us.
Rick: Yeah, right absolutely and I think this next project is the last one in the pipeline. I’ll show you the plot map but one of the things that highlight in this particular project is when we talk about 100,000 project or 200,000 or even a half a million dollars a lot of people see that okay that’s doable that’s something that I can personally do right and they’re in that position to do that but where the fund really comes into play and people really see the value is when you start looking at projects like this townhome community. We’re talking about 46,000 square feet of construction. We are looking at 22 townhomes. Well all of a sudden the numbers change right because when you start analyzing these numbers and you break down the cost from soft cost.
The cost associated with the land acquisition, the cost associated with the actual construction and the finishes and the management this becomes a lot more of a sophisticated project right and so we’re creating a five million dollar investment and so a passive investor might say well you had me till now like I don’t have those five million dollars to invest. I only have 200 or I only have 10,000. Well that’s where the power of the fund kicks in because when we all start shouldering the risk by investing money as little as 5000. We can take down deals like this because we’re doing them together which means that we also benefit from the growth and the return that these types of investments are able to produce. So let’s take a look at the floor plan here and you’ll kind of see the site map that really shows us exactly what this vision could look like when we move forward.
All right guys so here we have as you can see this is not just an idea, right , this is actually already something that has already been submitted for approval so that we can get going so we’re still anticipating that we start with the phases we talked about earlier and now we’re starting to move into a bigger development project. What’s really cool about this strategy is that when the parcel was purchased this is already an existing road and so all they’re doing is improving it so that we can have an entrance this entire road is being developed, what’s unique is that all the utilities have been run up from here because there’s already another subdivision on this side so that’s eliminated a lot of costs associated with actually getting utilities to the site so that’s going to save a lot of money.
This road has to be developed , this road will be completed obviously from there we’re breaking down these townhomes and what I love about it is again finding the balance for the consumer so instead of building these tiny little you know duplexes right of these townhomes. These are at least 2000 square feet and so it’s large enough for a family it’s spacious enough as far as the floor plans are concerned but it’s not going above or overboard where we’re overbuilding for that community and so that’s one of the things we’re working on now and so we’ll be talking more about where the garages will be front-facing, rear-facing and the rest of the site work that’s going to be done for this project but it’s just to give you an example of an entire project, nobody knows about this it’s completely private off-market deal. They’ve been working on this project now for almost six months to get all the land entitled and approved and yet we now get to step in as a partner and you know basically maximize our returns by financing people that have already proven to us of their good stewards and that’s the beauty of being a passive investor.
All right guys so in closing you know what I want to, first of all thank you guys for taking the time to look at this content and really learn from it from a passive investor’s perspective. I hope you guys have seen many opportunities. This is just one operating partner of many that we’re working here. What I’d like to do is see right now for those of you that are possibly considering joining us or maybe you already are in the fund and you’re getting kind of a sneak peak of where we’re going to be over the next year.
Steve, I don’t know if anybody’s considering getting involved. What are some things you would share with them as they’re considering them?
Steve: I would share probably the biggest thing is just take the first step and reach out and find out what His capital is all about. What’s going on? I did that about almost 10 years ago. My wife and I became students actually of these strategies and it is life-changing so take the first step and you’ll be amazed how much education there is and how much training and knowledge that’s at your disposal but you’ll also be amazed how the team will rally around you and help you learn and we would love to work with you and have you part of some of these projects and watch you benefit like our investors are awesome thank you so much Steve and George. Any last words let’s wrap up.
George: Absolutely well I was amazed when I saw everything you guys are doing so please reach out and call His capital. I mean it’s a great opportunity as a black lion group. We’re very excited to be part of this so I would really ask people that are looking at alternatives to look at His capital.It’s a great option. Thank you so much George, really appreciate those kind words and again don’t forget we have an education portal that Steve alluded to go through the process and learn, grow and take your investments to the next level.
