Have We Slowed Down In This Crisis?
A question we’ve been getting a lot lately with this season we’ve been going through…
Are we still out there putting land deals together, given the current COVID crisis?
The answer is YES.
There are 2 reason for this:
1. We are seeing development construction costs come down right now.
2. We’re seeing seller confidence come down as well. And it’s allowing us to put deals together that maybe didn’t work 6 months ago.
So let’s talk about construction costs. For about the past 5 years, it’s been challenging to put some deals together is because the construction costs have been so high.
The reason the construction have been so high is that the demand has been higher than the supply. The 2008 recession took out a lot of contractors. And unfortunately, a large percentage of those contractors never came back. So we’ve found that there currently there aren’t enough contractors to meet the demands of construction. So there’s more demand than there is supply… and costs go up.
Now, there are some asset classes of real estate where I would suggest you hit the pause button. But with our world – single family residential development – I don’t believe that now is the time to sit on your hands. I think now is the time, from the developer’s standpoint, to be putting deals together.
With our development deals, from the time we go under contract with a piece of property, it’s a couple years down the road until we take the real financial risk of closing on the land and developing it. So we have some runway before the real risks hit.
Regarding seller confidence, we’re also seeing that come down. For the last several years, many sellers have been stubborn in their pricing. They have felt like they hold the leverage.
Now, suddenly, these stubborn sellers are starting to call us wanting to do a deal. Their confidence level has been put in check.
That allows win-win deals to be made and it’s extremely encouraging.
It’s time to make some money.
If you want to learn how to do what we do – making 5 to 7-figure returns on land deals, check out our presentation video here: https://shrtlnk.co/KuwiM
Posted by Cody Bjugan – VESTRIGHT on Wednesday, May 6, 2020
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A question we’ve been getting a lot lately with this season we’ve been going through…
Are we still out there putting land deals together, given the current COVID crisis?
The answer is YES.
There are 2 reasons for this:
- We are seeing development construction costs come down right now.
- We’re seeing seller confidence come down as well. And it’s allowing us to put deals together that maybe didn’t work 6 months ago.
So let’s talk about construction costs. For about the past 5 years, it’s been challenging to put some deals together because the construction costs have been so high.
The reason the construction has been so high is that the demand has been higher than the supply. In 2008 it was hard to make money during the recession and it took out a lot of contractors. And unfortunately, a large percentage of those contractors never came back. So we’ve found that there currently there aren’t enough contractors to meet the demands of construction. So there’s more demand than there is supply… and costs go up.
Now, there are some asset classes of real estate where I would suggest you hit the pause button. But with our world – single-family residential development – I don’t believe that now is the time to sit on your hands. I think now is the time, from the developer’s standpoint, to be putting deals together.
With our development deals, from the time we go under contract with a piece of property, it’s a couple years down the road until we take the real financial risk of closing on the land and developing it. So we have some runway before the real risks hit.
Regarding seller confidence, we’re also seeing that come down. For the last several years, many sellers have been stubborn in their pricing. They have felt like they hold the leverage.
Now, suddenly, these stubborn sellers are starting to call us wanting to do a deal. Their confidence level has been put in check.
That allows win-win deals to be made and it’s extremely encouraging.
It’s time to make some money.
If you want to learn how to do what we do – making 5 to 7-figure returns on land deals, check out our presentation video here.
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