Our final land development video with Gary MacDermid! Read the transcript or watch the video walkthrough of the land as it now stands, 9 acres, split into 7 lots, 4 developed and already sold to buyers with the remaining lots sold to another land developer, the well pump with the 3000-gallon tank servicing the 4 lots is in and ready to roll.
Vacant land development is proving to be a hot market with investors buying high and selling even higher by bringing in manufactured homes (that water well also benefiting the value of the land). What was originally supposed to be a 7-month long project turned into a year but with valuable lessons learned to take onto future projects.
Maybe you’re thinking of investing and developing land, or you’ve already started the process, either way, this will give you some insight into what it’s really like to go through a whole project. Hindsight being 20/20 you’ll learn the biggest takeaways, just how important prep and planning are, and things they could have done differently to improve the process!
Gary MacDermid: So, we’re here inside the Holland’s. This is our lot D. So, it’s good to finally be back out here. This is pretty much going to be our final walkthrough, we’ve got as you can see the roads and the driveways are in, which the last time we did this, this mobile home right here this 2000 square foot home by Clayton, this was not here. And if you remember just over on this side, we had the hole where they had excavated for the septic tank. We took a tour of this one last time, this is also a Clayton, just under 1600 square foot, the Holly.
All these lots, remember an acre and a quarter. So, we did a tour of that one. This one was brand new, delivered maybe a month or so ago, five-bedroom. So, we’ll just take a walk of the property here. Remember, this was originally just over nine acres, it was split into seven lots, a couple of homes here and go down look at the Mariposa, and then there’s three more lots over there, Clayton Homes are actually doing that themselves.
So, over here, just past this driveway, you kind of see, if you remember from previous videos, the well pump, the tanks. That is a 3000-gallon tank. And this well will serve four lots. So, a lot back there is still available, that one needs to be developed. That tank is a lot larger, so it is shared. Remember the way we set this up is we want the well to be able to serve only four lots because that’s the limit for government-backed financing. So, USDA, FHA, and VA, those are pretty popular, especially USDA out here, that’s 0% down. And we’re in the right geography, just far enough outside of the Phoenix area that we can take advantage of USDA financing.
So, very important that we only put four lots on a well, so that people can qualify for those programs. So, over here, this is my favorite this is the nicer one, this is by CAF Co., this is also about 2000 square foot, really nice, we’ll probably be doing a peek inside here in just a bit now that everything’s all finished, cleaned up and ready to go. So, we expect these homes to turn over in the next week. Everything’s pre-sold. And we’re looking forward to the next one. So, once we get all the paperwork done, we are looking at doing a much bigger development, and stay tuned for that.
So, I’ve been doing land investing for quite some time. And we’ve done quite a bit of land acquisition where we typically would just resell the land on terms so that we could generate passive income or cash flow. And what we realized is that during this superhot market that we had, over the last couple years, especially for vacant land, that more and more people were developing it. So, what we noticed the trend was is that the price would be significantly higher. The prices were going higher than we ever thought they would. But what I found was that a lot of investors were buying the land at even high prices and they were still making quite a bit of profit because they were developing the land with manufactured homes. And so the manufactured homes, mobile homes, they typically have a much lower price point and affordability when compared to stick-built like the newer homes.
And so what was interesting is it seemed as if you know just kind of looking at what they were buying from us and what they were reselling it for, it almost made sense that we should probably try to do it too. So, what happened was is we had a great deal on a little over nine acres just about an hour or so south of Phoenix only about what 15 to 20 minutes from the Mesa Gateway airport. And I thought that that would be a good acreage to start this with.
So, we started with the minor land division and went down to the minimum lot size to give us four lots to develop and we sold off the remainder to another investor, which just to show how crazy the market was, that got sold about three times. Eventually, Clayton Homes which is owned by Berkshire Hathaway, one of the largest manufactured home companies in the country, bought that the larger four-acre lot that I had sold. And they actually split that into three more lots and develop the three mobile homes that you can kind of see towards the end of our project because they were after us.
And so, that was how we got into this. It was our first attempt at developing so it took a lot longer and we made some mistakes, but we did have the right people that knew how to do a lot of the infrastructure work, business partners, mobile home broker-dealer so, he’s good at sourcing and has dealt with mobile homes for many years.
So, we just put that together, after doing the minor land division we put in the utilities, we dug the well, put the pumps in a tanks which you can see on one of the videos. And then we did the trenching for the septic which you also see in another video and we put the electrical pedestals, there’s a service transformer that was put in, they put SRP, the utility company pulled the cable in. And each of the pedestals were connected to the houses and then you see the infrastructure being put in and then at the end after we did all the trenching for the septic and the well. We put the gravel road over to make it a lot easier and less muddy for the new residents to get in there.
Masrur Huq: Yeah, I remember the first day we went over there, we had our little hiking boots on, and getting all muddy and your wife got mad about getting the car dirty.
Gary MacDermid: Yeah, we basically had to proceed straight to the carwash. When I showed the picture of us in the land, and I think one of the early questions was, “Is that the car?” So, we took care of that. But yeah, putting in that the gravel roads, I mean, maybe we didn’t have to do that. But we put that in just to make it easy, so that the new homeowners will be able to have everything more or less ready for them. And we have some of the tours of the finished product to share.
Masrur Huq: Yeah, I’ll put up some videos of the insides of the homes as well. So, during that phase, I know one of the things was electricity. But was there any parts of the project that you wish you would have maybe recalibrated the timeline on when things happened?
Gary MacDermid: Well, I think if I had known the timeline, the biggest thing was as I should have started with the electricity a lot sooner than I did. And the other thing that I wish that I would have done is I felt like when we were doing the well, we were rushed into it because I underestimated the time for the electricity. So, I thought that doing the well, we rushed into it. So, basically, we overpaid by a lot. The person that was doing the well… it was a little bit challenging at that time, and maybe it still is. But they basically told us that they were overcharging us, because of the demand. Which I wasn’t too thrilled about.
And then in hindsight, we put a 3000-gallon tank there, we probably could have put a 1500 or 2000 gallon tank. And just overall the parts were marked up, then if we had had the time to buy everything or maybe split it up so that we just drill the well first and then maybe got the parts and then set that up separately. So, that was one thing that I would have done over, is I would have made sure that I not rush it, and hopefully, we’ll have better relationships that will get us better pricing. But take the time, look at what we’re doing now that we know what other people are paying and what this should cost to get the well dug at the right price. And then also to get the parts and the booster pump and tanks and everything.
If we have to source that and then just pay for the labor, that was a big markup.
Masrur Huq: That makes sense. So, was the well itself like a threshold for getting the rest of the project going as well? Like you couldn’t be doing that like concurrently?
Gary MacDermid: Yeah, the well is one of the most important things on these types of projects. And I’d already talked to other owners that have dug wells and other well drilling companies to know that there wasn’t going to be a concern on getting water. But imagine if you have the perfect plot of land to develop and then you go to dig the well and you find no water. So, having that peace of mind that the lots will have water. And not only that, but when you have access to water on the lots, it already improves the value of the lot. So, if we didn’t know, or there was no water, and then something happened where we couldn’t do any more development, like, say, for example, it would take 18 months to get a manufactured home, which is kind of what happened during the middle of the project. I mean, we were lucky to get the homes on order that we did. But if they say that project got delayed, because we couldn’t find the manufacturer homes of the size that we wanted to put in on the lots, at least having access to water, having that hooked up is a way that we could still sell the lots to at least either recoup or make a little bit of profit. And it protects that investment.
Masrur Huq: Yeah, that makes sense. So, what was the total time that it took from acquisition to now we are done, our hands are clean?
Gary MacDermid: Yes, maybe I’ll answer the question differently, because we acquired the land, and I didn’t really do anything with it for a while because I knew I wanted to develop it, didn’t know how. So, there was a little bit of time, just waiting before we decided. But from the time that we decided to really develop it, to selling, we actually started probably the beginning would have been – I’d have to check – but it is in the beginning of the year, where we started. We ordered the homes, and we pre-sold one of the lots right away, just by advertising that we were going to sell it. And then after doing that, that gave us the peace of mind. And so we started in January, we pre-sold one in March, and then we should have been done in August, but that’s when we found out about the electricity. So, we basically had to restart. That was the challenge.
So, it should have been about a seven-month process, but then having to restart the electricity because we made the mistake, ended up dragging it on to another three months. And then we had the holidays. So, that that that pushed everything back. So, really, it was about a year from start to finish to develop the three lots.
Masrur Huq: Cool. Let’s talk about each unit at that point. So, I know there’s three different units, and they’re all different sizes as well. I think two of them were the same as that correct?
Gary MacDermid: So, there were two that were roughly around 2000 square feet. And, and the reason for that is just that was all we could get, most new orders, were going to take 18 months. So, what we did is we put the feelers out to the different dealers or sources for the manufacturer homes. And what happened was there was a couple chances where somebody wasn’t able to pay, like maybe they put a down payment, and then they didn’t have the full cash amount to pay for the home when it was getting ready to be delivered. And so we were able to intercept a couple of those. And I think one of them was probably a residual order where a dealer just orders a whole bunch, knowing that they’re going to fill some of them. And so there was one that we were able to intercept that way. So, there was there was really no… if we were to put in a new order, they were just so backward, that we wouldn’t have been able to do this project, we’d still be waiting today.
Masrur Huq: Yeah, that makes sense. Cool. That’s a great little insight for getting those homes there. So, two of them are 2000 square feet. And the third one is a little bit bigger. Is that right?
Gary MacDermid: No, it’s smaller. It’s about 1600.
Masrur Huq: Oh, cool. So, now, you’re all done, all three of them, I believe are sold at this point?
Gary MacDermid: Right.
Masrur Huq: And the project is finalized and good to go. And that whole area just got developed as Clayton Homes just finished up the other three in that area as well.
Gary MacDermid: Yeah, they look like they’re doing a lot of these land home packages, which makes sense since they are their own manufacturer as well.
Masrur Huq: Awesome. Gary, it was a fun pleasure ride that we went on to get through this project. So, I have some of the videos from the beginning, so I’ll overlay that and show the project timeline from start to finish.
Gary MacDermid: Absolutely. Is there anything else that you think we should talk about to throw into the video?
Masrur Huq: Yeah. What’s one of the biggest takeaways and biggest advices that you can give for somebody doing it?
Gary MacDermid: Yeah. So, I guess the biggest takeaways is, make sure before you start that you have the right people that can really commit to doing the work. I mean, you need the infrastructure, so that you’re going to have trenching to get the well connected, to get the water connected to the houses. You’re going to need the same trenching for septic and then also for electricity. So, we chose underground, just because when I grew up, I remember we’d lose power through most of the storms. And so we just chose underground, it is a little more expensive, but we felt it was a better product. Having the people, you may be able to find somebody that does the septic but maybe they won’t do the conduit. So, you just have to make sure that you have the people that can do the utilities, so the water, the sewer, septic, and the electricity.
And then also if you’re doing the manufactured home, then you need to have a reliable crew that can set it up. Because remember, these houses they come… especially if you’re doing the larger ones, the double wides, there are two halves, you will get these two halves of a house and somebody’s got to seam it together and patch it and then put the skirting. If you’re going to do like some of these government-backed loans, you got to put that skirting on there and there are some other requirements. But so you want to just make sure that you have that team, or know somebody that has that team, because its speed on this, the velocity of money, so you don’t want to have all that money out there, especially if you’re paying interest on it and then have some unanticipated delay that adds three months to it, because you didn’t have the right requirements or the pedestals that they need for the electricity.
So, trying to think what else? So, yeah, the well, the well pump, the equipment for that. I mean, if you have to dig a well, and then… trying to think of some of the others. Yeah, so there’s also a series of permits and inspections that you have to make sure get done. So, hopefully, the people that you’re working with will also timely do that, because, just having everything connected, you can’t get the electricity turned on unless you’ve gotten the permits and the final inspections from the municipalities. So, that could be county, state, and city. So, a lot of work there as well.
Masrur Huq: Perfect. And you went in with the plan of being able to offer government-backed financing. And so you made sure that those requirements were addressed, first and foremost, to make sure that any buyer would be able to apply for FHA, VA, USDA loans, is that right?
Gary MacDermid: Yeah, absolutely. Because one of the things, you know, the USDA is a cool financing, just like FHA and VA where they require low down. And USDA, because the area that we did, it meets the map. So, the USDA, its Department of Agriculture, so those type of loans aren’t necessarily going to be available to somebody in the city, but because of where we were in the outskirts of Phoenix, that’s an applicable loan. So, we wanted to make sure that we were set up that way. So, on a development project, with a shared well, we made sure that we weren’t going to put more than four on that well, and there are some other stuff with the skirting and some other little details like that, that are required for the inspection, engineer certificates, and some other stuff.
Masrur Huq: Perfect. I think that’s super helpful. And I’m glad and congratulations on closing out the project. Is there anything else you want to add?
Gary MacDermid: No, I mean, just I’m glad that we were able to put this together and hopefully it helps. I think manufactured housing is going to be more in demand especially with some of the price points that we’re at and it’s more affordable and some of these nicer ones, like if you take a look at that the one by CAF Co, that Mariposa with the interior drywall, those are really a great product and I think that we’ll be continuing to do this for the foreseeable future.
Masrur Huq: Awesome. Thank you Gary for your time. And I look forward to documenting and checking out the next project.
Gary MacDermid: Yeah, we’ll invite you for the ride and all the fun. Thanks.
So, we’re here inside the Holland’s. This is our lot D, 2000 square foot made by Clayton. This is on a quarter acre and a quarter lot. So, this is five bedrooms. And when you go into the kitchen, we just got power so the lights are actually now working. We have drawn out the waterline, so see the sinks, the lights, beautiful view out here. We got this new smart thermostat. All the way down here, bedroom, another bedroom, the bathroom around here, bedroom, a little walk-in closet right there, you can see quite a bit of development going on here. This is the project we’ve been working on for several months now. We’ll be going in each one of these homes.
Another bedroom over here. I probably would have to put some batteries in the smoke detectors to stop the beeping. Here we have the master, a little bit bigger than the other ones. Great view, walk in the bathroom goes right to the laundry room here on the other side. This is the walk-in closet, laundry is just on the other side of the kitchen. Space for the laundry, so 2000 square feet brand new Clayton manufactured home, the Holland’s model. Alright, we are wrapping up that nine-acre development that we just shared. Looking at the next project over here. We’ve got 60 acres not too far away. So, we’re going to be doing some due diligence on this and see what we might be able to do out here. Stay tuned!