Reid Kurtenbach has been a member of the REtipster community for some time now, and he has been funding land deals across the US for land investors since 2019, using both his self-directed Roth IRA and his own personal capital.
We thought it would be interesting to bring Reid on the show because this idea of funding land deals has grown to be pretty popular in recent years, and for good reason.
There are some land investors who get into the business, they see the opportunity, they work some deals themselves, but they realize pretty quickly that they don’t have the time or the desire to do all of this hands-on work themselves. However, they DO still believe in the business model and they have the money.
Likewise, there are some land investors who DO have the time and desire to find and work the deals, but they don’t have the money to keep deals flowing through their pipeline. They need someone who understands the land business (because most conventional lenders don’t) and is willing to provide the funds they need to buy the properties.
Most land investors fall into one of these two camps… and regardless of which camp you fall into, it’s important to understand the perspective of the money partner who is willing to contribute the money and let the active investor take the lead while expecting a certain return after the deal is done.
- What’s it like to work with someone like this?
- What are the challenges in this kind of relationship?
- Why should or shouldn’t someone partner with a private money partner?
There are a lot of things to unpack in this kind of partnership, and Reid is going to give us his perspective on it.
This is also an interesting issue for us to explore because Jaren is coming at this from the other side, as the active investor who is using other people’s money to fund deals… so there will probably be some different options and perspectives as we talk about how things should look from both ends.
Links and Resources
- RawLandFunder.com (Reid’s website)
- Land Investing Masterclass
- What Does “Tenants in Common” Mean?
- The Land Investor’s Guide to Using Other People’s Money
- A Map of Every Non-Disclosure State in the US – And How Real Estate Investors Can Deal With Them
- The Fastest Way to Research Any Property in the United States
- Parlay 2.0
- 80/20 Sales and Marketing by Perry Marshall
- Reid on LinkedIn
- TenantCloud (this episode’s sponsor)
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Thanks again for listening!
Episode 107 Transcription
Seth: Hey, everybody. How’s it going? This is Seth and Jaren, and you’re listening to the REtipster podcast. Today we’re talking with Reid Kurtenbach. Why are we talking with Reid Kurtenbach? Because Reid has been a member of the REtipster community for some time now, and he has been funding land deals across the U.S. for land investors since 2019, using both his self-directed Roth IRA and his own personal capital.
We thought it’d be interesting to bring Reid on the show because this idea of funding land deals has gotten to be pretty popular in recent years. And for pretty good reason. There are some land investors who get into this business and they see the opportunity. It works some deals themselves, but they’re realized eventually that they don’t have the time or the desire to do all the hands-on work themselves. However, they do still believe in the business model and they do have the money.
And likewise, there are some land investors who do have the time and desire to find and work the deals, but they’re short on capital and they need somebody who understands the land business, because most conventional lenders don’t and somebody who is willing to provide the funds, they need to buy the properties because they don’t have enough cash to do it on their own. Or maybe they start with enough cash, but they eventually run out and they’re kind of just at a standstill.
The chances are most land investors out there fall into one of these two camps. And regardless of which camp you fall into, it’s important to understand the perspective of a money partner like Reid, who is willing to contribute the money and let the active investor take the lead while expecting a certain return after the deal is done.
So, what’s it like to work with somebody like this and what are the challenges in this kind of relationship? And why should or shouldn’t someone partner with a private money lender like this? There are a lot of things to unpack in this kind of relationship and Reid is going to give us his perspective on this.
This is also an interesting issue for us to explore because Jaren is actually coming from the other side as an active investor who was using other people’s money to fund deals. So, there are probably going to be some differing opinions and perspectives as we talk about how things should work from both ends.
Jaren: In other words, by the end of this conversation, both me and Reid are going to be already in the face and screaming at each other. It’s going to be fantastic. So buckle up.
Seth: We are going to walk away like new enemies, at the end of this.
Reid Kurtenbach: Thanks so much for having me. I really appreciate it.
Seth: Maybe you can tell us your 60-second story. How did you first get into the land business? How long did you work on any deals on your own before you decided to start exploring the opportunity to partner with other investors?
Reid Kurtenbach: Yeah, I guess what I would say is that I have a varied background. I started investing in manufactured homes without land. And I came across a manufactured home that had burned up and the land was still valuable. So, I bought the home with the land, scraped off the home, and then I was able to sell it for a pretty good chunk of change. And this was back in like 2013.
I didn’t really think too much of it, but as I was investing in other properties and prices were going up in the marketplace, I kept looking around and I thought, “Well, there’s got to be a way that I can earn the similar type of returns that I was earning back in 2012, 2011.” And so actually I came across your website and a couple other websites, but I was really gravitating toward your website because I just saw so many helpful articles and so forth.
And so, I just dug into it that way. I shortly thereafter signed up with REtipster’s Masterclass and then started exploring some deals and had done a few land deals with manufactured homes, more of those. But I started doing a little bit more research, took a couple other courses as well. Having a full-time job, my primary focus was self-storage. I was like, how do I put my money at work, but also use what I’ve learned from your courses and others. And so, that’s where I started.
Seth: What were some of the early challenges that you encountered when you started trying to do this? Like jumping into a deal where you get the money and somebody else is going to do the work?
Reid Kurtenbach: Yeah. Some of the challenges that I faced were, “Am I using the right contracts? Are they all legal in each one of the states? And how do I vet a land investor?” I had worked with another investor in another area of real estate in the past. And you look on BiggerPockets, there are a lot of unsavory posts about this individual. And I thought, how do I avoid something like that happening to me? Because I don’t want to deal with embezzlement or fraud or something like that.
So those were some of the things that I kind of ran into that were “How do I know if I can trust this other investor? Should the property be in my name or should it also be in maybe the investors name, the land investor?” Because I call myself a land funder. And then also what are their requirements? How are they doing their due diligence? How does that compare with how I do my due diligence?
So, hopefully that kind of gives you a little bit of background of some of the things that I kind of ran into. And then other challenges were “Okay, what happens if they are both on the title?” So, if I’m on a title and let’s say Jaren is on the title, if I was doing a deal with him. What happens if he goes dark, if he just disappears? How do I get rid of that property and does my contract allow for that? So, I guess I kind of look at things more from a stance of how can I take calculated risks and be protected.
Seth: One of the first questions that comes to mind for me, because I see this happen a lot is when people will jump into our forum or Facebook group and just make this blanket post for everybody saying, “Hey, I got money and I’m looking for somebody who wants to borrow my money.” How do you find people? And not just anybody who wanted money, but good, reputable, relatively experienced land investors that you could trust. Did you just keep an eye on conversations and send direct messages to them? What was your process for finding the right people to work with?
Reid Kurtenbach: First I would say, some are part of a couple of different land investment groups. And so, I’ve posted in those groups after, but I’ve mainly reached out individually to individuals, like you mentioned. So, direct messages. There is like a group of land investors that are very experienced. And some of them are actually even in your course or have taken it. And so, I’ve reached out to those individuals. I watch some of the forums, as you mentioned.
And then generally it’s word of mouth. Some other people that I’ve funded for land deals, they’ll refer me to other people. Like just last night, someone said I don’t have any deals right now, but a buddy of mine has done six deals. He’s getting coached by me. He’s looking for some money. What are your thoughts? And so, he just referred me. It was like a warm introduction last night.
So, as I kind of get to know people, I network with a lot of these other land funders, because they’ll tell me some individuals that weren’t really working out for them. And we kind of keep each other. I guess we kind of scratch each other’s back in that way. We just make sure that none of us are funding people that maybe we shouldn’t be funding.
Jaren: Man, there is a lot to unpack there because I have a whole bunch of stuff to comment on what you just shared. But I have to ask the question, what do you look for in terms of how do you define competency or what’s the due diligence, like one of the boxes that you need to check in order to happily fund somebody who is the land investor, the person actively doing the business?
Reid Kurtenbach: “Have they done at least five deals?” That’s one thing. What were those deals like? And then I kind of research, I do my own kind of due diligence on the backend to see if they really purchased those. They’ll give me the APNs and then I can kind of look it up and see what they paid for it. And then what they sold it for, what that time period was. And then I also do a background check on them. It’s free to them, but it checks if they have a criminal background or not. And I don’t care about DUIs and stuff like that, it’s more like white collar crimes, like fraud and embezzlement.
I also check for references. I look at some of their posts online. I look at their website, see how they’re listing properties. Is it blurry pictures or are they serious about it? Are they using drone footage, not drone footage? How did they market? Do they market through a broker? Do they not market through a broker? What’s their process like? And then I also look at their due diligence spreadsheet. So, they’ll usually send me a due diligence spreadsheet either through Airtable, Google Sheets, or something like that.
If I don’t see flood plain as a field or legal access, then I know that I’m dealing with someone very green. I have a person that approached me that said I believe I can get pretty much everything I need off of YouTube. I don’t need to take a course. And there were certain things that I came across where yes, you can get a lot of information, but they didn’t realize that it was in a flood plain. They didn’t realize that it didn’t have any legal access. And I thought those are really basic things.
So, I said, I would strongly recommend you take a course like REtipster or something like that, because these are fundamental things. And that’s one of the main things I always ask is “How did you get your education and how are you keeping up with the industry as well?”
Jaren: Something that’s interesting, one of my previous financial partners, one of the things that they asked me that I thought was interesting is if I’ve ever lost money on a deal, or if I’ve ever failed. And they wanted to see that failure before investing with me. So, if I had been so green that I hadn’t lost money yet or made mistakes yet, they didn’t want to be the person to fund my mistakes. So, they wanted to make sure, “Hey, have you actually lost money on a deal yet?” And if the answer was “no,” they were going to hold off on lending. So, I guess, fortunately, I did lose money on a deal in the past and we ended up working together. But I thought that was an interesting question.
Reid Kurtenbach: You said that they wouldn’t fund you if you did lose money on a deal.
Jaren: No, they wouldn’t fund me if I had not had a failure yet. They were looking for me to have made mistakes in my past because in their mind, they’re like, “Okay, mistakes are inevitable.” And land is a bit of a unique animal, but when we talk about wholesaling houses or flipping houses, it’s not a matter of “if,” it’s a matter of “when” you’re going to lose money on one deal here or there. Collectively, you’re going to make money.
But I know that there are guys in the land space that have never lost money on a deal. I think that that’s very possible if you do your due diligence properly and all of that, but this guy was coming from more of a conventional house flipping situation. And he reached out to me and wanted to know, “Hey, have you made mistakes yet? Because if you haven’t made mistakes, I don’t want to be the guy to fund your mistakes.” I thought that was interesting. It’s at least something to think through. It’s interesting.
Reid Kurtenbach: I will definitely add that to the list of questions, because one of the things that I always ask is, “What’s your ‘why’? Why are you doing this?” Because all the people that we fund, we’re friends with. And whether or not we’ve met them in person, we haven’t met any of them in person actually, but I want to be able to give them a call and just talk about random things. I want them to be like a buddy, as cheesy as that sounds because life is too short.
And so, if I know their “why,” I can make sure that we’re aligned and that if I’m doing something on the self-storage side and that’s something that they want to do in the future, I can help out with that and share my knowledge with them and vice versa. I just feel like it can’t be a transactional relationship.
Jaren: Yeah. I like that.
Seth: That asking if you fail and lost money on a deal, that all seems a little too black and white to me, almost like looking at a credit report and just seeing the number, whether it’s 600 or 800 or whatever, and I’m saying, that’s all I need to know. It’s like, there’s actually a lot of information buried inside that.
Jaren: I think it’s a bit extreme as a standard of “I will or I will not fund you based on if you’ve lost money before and wanting you to have lost money on a past deal.” But I still think it’s an interesting concept to walk through with, while you’re vetting an investor, because you want to make sure that they’ve gone through the bumps and bruises and you’re dealing with somebody who’s competent.
To be honest, if Reid were to approach me after doing five deals, there is so much I did not know still after I’ve accomplished five deals. It was probably closer I would say to like 15 or 20 deals before I really started getting the hang of what I was doing in terms of due diligence and all of that. So, you have to weigh the opportunity costs there, right? Not everybody. And it depends on the deal. If you’re doing bigger deals that require more due diligence.
But before we move on, I did want to mention, I don’t know the legalities of if somebody has money and they’re looking for investors to partner with, but I know that the reverse, at least from the syndication world. Obviously, I’m not an attorney. So, this is not legal advice, but I have heard that you can get into trouble if you go with soliciting money and kind of a public forum. So, if you’re on the reverse side, you’re the active investor and you’re going to random Facebook groups and be like, “Hey, I want money. Give me money so I can do deals,” you could actually be liable for breaking the law potentially. Again, I’m not an attorney. So, seek legal advice on that.
But I was actually talking to another lender, a friend of mine, and he actually asked me that question. How would you go about approaching, attracting other land investors? And he mentioned that he had been doing forums and all of that. And I told him, I was like, “Hey, I don’t know if that’s legal.” He said, “No, it’s on the other side. If you have money and you are soliciting investors, you’re totally fine.” So, I don’t know what the legalities are, but if you’re on my side of the equation, be careful there.
And one final thought I wanted to share with the audience, if you really wanted to, because we all know direct mail, you could actually look up cash transactions over the last six months in a market that you want to do business in. Find a list of land investors, and then just mail them and say, “Hey, I’ve seen that in the last, however so long you’ve done X amount of deals and I fund land deals. So, let’s talk.” And you can do a direct mail campaign and get active investors that way.
Reid Kurtenbach: I think it also depends on if you want your investor to be sophisticated or not sophisticated with land and how much you’re willing to hold their hands. Some people that can get money from their friends or relatives or whomever, that’s cheaper money. They choose not to because they just want to have a sounding board because they know that I’m looking at several different deals across the country. And maybe I’m asking questions that maybe a normal investor wouldn’t ask. So sometimes that’s a reason for them to use us versus just going to friends or family. But I do like that idea, because I know that’s one way that I targeted other things in other real estate, as well. So, it’s a great way to find private money.
Seth: Okay. So, when it comes to the profits split between the private money funder versus the active investor who’s doing all the hands-on work. How do you decide on that? Or what is your standard profit split? And if that ever fluctuates one way or another, what would make that change?
Reid Kurtenbach: It’s generally 55% to the land investor and 45% to the land funder. That’s for a new relationship. We cover all acquisition costs, taxes, anything that’s bad owed to buy that property. We cover that. If we’re doing several deals a month and depending on the track record, we’ll go as low as a 25% cut to us as a land funder and it’s 75% to the land investor. We haven’t gotten to that point yet because we haven’t seen that much volume, but it’s all about the velocity of our money. So, can we move these deals very quickly?
We’ve got some land investors that buy properties for $1,000 or $2,000 and sell them for $6,000 within a week or so. If we could ramp that up to 10 to 15 a month, then I think we would be way more negotiable on what that split is.
There are a lot of land funders out there that say I need to make 2X my capital, or I need to make 100% return within a certain period of time. We don’t really operate like that. For better or worse, we just look at every single deal on its own and the relationship that we have with that land investor.
Seth: Is that land investor paying their own cost of direct mail and holding costs in terms of property tax bills or whatever else that comes up? Are you paying for that? Or are they paying for that? How does that work out?
Reid Kurtenbach: If we have a track record with that land investor, we will actually fund their mailers. We started doing that recently. The split changes, obviously, it’s a little bit more because we can take a little bit more of a risk if there are no deals. And then when it comes to the split, it just fluctuates according to that percentage. Does that answer your question?
Jaren: Yeah. I have a follow-up to that though. Are you getting reimbursed out of closing before you do the profit split? Because if I’m using the private money lender to pay for direct mail, then it’s a line item that gets reimbursed before we actually do the split. Do you just kind of eat it? Because if you do, that’s a great value you’re providing.
Reid Kurtenbach: It depends on the situation. It depends on that, but the majority of the time, what we’ve been doing is that first we will pay back all of our capital and then it’s split. But it just depends on the velocity of our money and how quickly we can turn our money. And some land investors that we work with, they’re able to turn our money within a month or less. And so, that’s pretty powerful when you do that on an annualized basis.
And I realize I didn’t completely answer your question, Seth, about the taxes. Depending on the arrangement, most of the time we’ll cover the taxes as well. So, we cover any expenses that come up.
Seth: Is that written into your partnership agreement or something? When you say depending on the arrangement, how would that change?
Reid Kurtenbach: We don’t use a partnership agreement. We use something called “Tenants in Common Agreement.” That’s just what my attorney had told me to use and what the CPA had said was a good idea to use. So, generally, we are both, the land investor and myself, are on the deed.
Seth: Yeah, that was going to be my next question.
Reid Kurtenbach: Yeah. So that’s generally how it works. Now, there are certain situations where we run across land investors that for whatever reason, they’ve got something in their background. Like one person that we know owes some back child support. He’s going through some challenges with that. And so, I didn’t want any of that profit to be potentially garnished. So, at the advice of our attorney, we just put our name on it and then we just have this agreement outside. But generally, most of the time, whoever the land investor is that we’re funding, they’re on the deed as well as us.
Jaren: That’s pretty interesting. So, for me, as an operator, I feel like that would create a bottleneck if you have to sign off on closing docs. But I guess if you’re both on title, say if it’s clear that the operator can sign on behalf of your agreement, then maybe that’s the workaround there.
Reid Kurtenbach: Yeah. It’s a limited power of attorney as well. So, it’s very simple. I’ve not run into any issues. Sometimes they’ll sign on behalf of me, other times we just sign. And fortunately (or unfortunately), I’m kind of glued to my computer. So, if you send me a contract, I’ll usually get it done in an hour or less.
My goal is really—and what I think every land funder’s goal should be—is not to complicate your processes. They should just slide right. So, it should be very easy for you.
Seth: That tenants in common situation, again, I’m not an attorney, maybe I’m getting this wrong, but doesn’t that mean that Reid owns 55% of the property, the other person owns 45%. Like you could sell your percentage and be out while the other person is still on title. Am I getting that right? Or am I totally wrong?
Reid Kurtenbach: I’ve run into that but I don’t know of a time where I would turn around and resell it. But in my case, generally it would be 45% to me and 55% to the land investor because they’re doing the bulk of the work. I’m just funding the deal.
Jaren: If what Seth is saying is true, it’s the risk to you as the financing person, because then the land investor could sell their interests. And then you’re so tied to this deal, but they’re out and they’ve made their money. And obviously it would be foolish for them to do it because they’re ruining the relationship. But there is still a liability there, potentially.
Reid Kurtenbach: Yeah. I’ll have to talk to my attorney about that. That hasn’t come up yet, but we always find out different things. Because I’ve had two attorneys already review it that are actually land investors that I funded. But they didn’t mention that conveniently.
Seth: They probably know more than me, but I don’t know…
Reid Kurtenbach: No, I think it’s a good idea. I’ll take note of it.
Seth: Yeah. Well, I know there’s like joint tenants with full rights for survivorship and then there’s the tenancy in common and there’s a couple other ones. I can’t remember what they are called, but that’s like one of the key differences between them. It’s that one of them, everybody owns a hundred percent of everything. The other one is like, “Oh no, this person owns this percentage or share of it. And the other person owns the other share and they don’t have to both sign off at the same time. Like they could split up.” And again, I don’t remember which is which, but that question just came to mind.
Reid Kurtenbach: Yeah. I think my contract has language that we both have to sign off on, but in the event that someone stops communicating after a period of time, then the other person can go ahead and sell it. And then at that point… Let’s say I was doing a deal with you Seth, that I was funding a deal with you. If you didn’t communicate after a certain period of time and I’ve tried multiple different avenues to communicate with you in written format, certified letter, so forth (I think that’s all written in that tenant’s agreement), then I can proceed forward with selling it on my own. And then what I would do is I would just have the title company cut you a check on the sale. But I don’t think that the way that the contract is worded right now is that one of us can just sell our share to, let’s say you sell your share to Jaren, but that’s a good point.
Jaren: Well, I wanted to circle back a little bit to something that you said in passing about being somebody who can be a sounding board and somebody who is well versed in the land business. Especially for a new person or newer person, they can come to you and kind of have your glance over their shoulder to make sure that they’re not getting into a deal that they shouldn’t be getting into.
For me, I feel like if you offer that service, you’re stepping into almost like coaching territory at that point. And it would justify a higher profit split. So, the way that things have worked in my setup in the past, things are a little bit different now, things are kind of being switched up, but I kind of provided a sliding scale with private money lenders.
And guys, I and Reid have actually done a deal together. As I was figuring things out, I think we actually first met at a Land Mastermind group. And then from there, we ended up doing a deal together. The way that it typically works is like if it sells within three months or less, it is interest paid out equivalent to a 25% of the profits to the financing person. And then if we sell the property within 3 to 6 months, it bumps up to 35%. And then if we sell the property within 6 months to 12 months, it’s a 50/50 split. And then at the 12-month mark, I actually allow the financing person to call the note due as the lender with, I call it penalty interest, but it’s not really penalty interest is this 10% to 12% interest so that they at least make something for tying up their capital for a year.
Now they could choose to stay in the deal if they want to at the 12-month mark. But I give them that option because if we are sitting on a property longer than 12 months, generally, I feel like that’s my fault. Because I let us stray and we bought a bad property. Now there are circumstances, there are outliers. Like if we bought a property that needed some kind of major improvement or something like that and where we could get a huge upswing, if we got easement access or rezoned or something like that.
But generally speaking, I’m guaranteeing that they can get their money back within a year or with at least some kind of interest in return if we don’t sell. So, that’s kind of my run-of-the-mill process.
And the reason why I set it up that way is coming from the housing world, the role of the wholesaler and dealing with kind of more conventional real estate investing, 50/50 splits, or 45/55 profit splits is unheard of outside of land. And it’s very expensive money. It’s perceived that land is more risky, especially from a comp standpoint, it’s harder to analyze vacant land property. And I think that’s true in certain markets, like probably parts of Michigan, parts of Indiana and parts of like North Dakota, especially like non-disclosure states. It can be pretty tricky without MLS access to wrap your head around valuation. I don’t think that’s the case in places like Florida or California where there are tons and tons of data available.
But all that being said, I feel the reason why I set up my program that way is I want it to have a little bit cheaper money while still incentivizing people who are aware of the run-of-the-mill 50/50 split and to keep them incentivized to work with me. Now, all that being said, if you were bringing coaching to the table or let’s say I’ve only done five deals and I’m still pretty new, even if it was just like, “Hey, I got this lead. This is where my numbers are at, but I don’t know, this data point or this outlier is confusing me. I’m a little bit gun shy on this. What are your thoughts?”
Having that is a huge value. And that almost brings, I could see like a reverse of your situation where you get the 55% and they get the 45%, or maybe even doing like a 60/40 split in your favor. Because at that point they’re not only getting money, they’re getting coaching. I mean, they really are. They’re getting a different value.
I’m trying to think from, I call it the active land investor and operator. From an operator perspective, if I was green and I hadn’t paid for coaching, maybe I went through like the Land Masterclass and I had a lot of resources, but I was still really gun shy. I would totally have done like a 60/40 split in the beginning for sure. Because they would have been able to prevent me from making mistakes and losing money. I think that there’s a lot of value there.
Reid Kurtenbach: That’s the hope.
Seth: Yeah. And I think you’re going to get that insight no matter what, because any private money person, they have their own interests at stake and they’re not going to just do something stupid just because you, as the active investor are all gung-ho about it, unless they really don’t know what they’re doing.
Reid Kurtenbach: I would disagree with you because I did talk to a funder recently that funded a deal because they called me up and they said, “Have you lost any money on some deals? What’s been your experience?” They didn’t do any of their own due diligence. They just went off of that person’s due diligence spreadsheet rather than talking to some local brokers. It was kind of lazy money in my opinion. And maybe they own unsophisticated money, I guess where they just said, I hear that there’s a great deal. This person really seems to know what they’re doing. I always trust, but verify.
Jaren: And I would also kind of side with Reid on that because a lot of the people that I work with are friends and family, or they are associates from different spheres of influence in real estate. And they probably don’t even know what a comp is. And so, they’ll have, because they’re trusting in me and they’re like, “Hey, you have this land thing going. I trust you. Just tell me when I need to wire money and I’ll wire money and you do your thing.” And so, there’s a lot of trust on and there’s a lot of responsibility that I bear. Especially if people are putting up any kind of money for marketing costs or whatever. It’s like, all right, I better make sure thousand percent that this is a deal.
And that’s why one of the benefits of using land specialized real estate agents is that I am very good at vetting agents and I form relationships with agents. And then my agents go and handle a lot of the heavy lifting on the due diligence side. So, I’m very confident because I’m having people walk properties, take pictures of properties.
I’m working on a deal in North Carolina right now. And the agent that I established a relationship with, he’s like literally going to go out and stake my property for me so that we can go get a septic review done by the county. And I’m like, I’ll pay you for your time. He’s like, no, no, let’s just start the relationship off right. It’s invaluable to have agents in place and it gives me peace of mind, it gives my investors peace of mind.
So, it’s just really interesting because if you’re able to bring that to the table, you’re looking over people’s shoulders and saying, “Hey, this is a good deal,” or “Hey, this is a bad deal”, or, “Hey, did you check to see if it is landlocked? I see it’s in a flood zone or it’s in wetlands. Did you not check this?” That right there, that’s like one-on-one, I’m literally holding your hand and walking you through how to be successful in this business. And I think that’s a really big deal.
Seth: Yeah. I guess I wasn’t thinking about how many people might be lending money who really don’t know anything or care about it. They’re just kind of throwing lazy money at you. So, I guess, yeah, I can see what you mean. There’s a notable difference between that type of private money lender.
Jaren: And to be fair too, typically in the past, I’ve been an advocate for cheaper money and shipping from the rooftops, that kind of the anti-finance years in the land space. But I was always talking about that in the context that the land investor, the operator was covering some of their overhead and if they’re just bringing on an investor for the acquisition and closing costs, but they are paying for direct mail, they’re paying for their operation costs, they’re paying for all that, they still have financial stake in the business.
And so, that’s where it’s like, “Man, is it really worth a 50/50 split?” But if the financing person is actually fronting the cost of operations and marketing and there’s no financial risk for the operator, I think that justifies totally at minimum 50/50 split, if not higher, because they have no fight. Yes, they’re bringing their expertise to the table and that’s valuable, but there’s no financial risk to them.
Reid Kurtenbach: Except their time. It’s their opportunity cost on their time. So, that’s why a lot of people traditionally have gone the 50/50 split, but we kind of said we’re not really strict on those kinds of terms. We just want to look at it deal by deal. It may be higher if we feel like the margins are just really thin. I don’t know, it just depends on each deal really, but generally the standard for us is 45/55, 45% going to me and then 55% going to the land investor.
Seth: Reid, as a private money funder for land deals, how are you analyzing each deal before you decide to get involved? What is your process? What are you looking at? How much oversight are you getting?
Reid Kurtenbach: One of the things that I think I mentioned a little bit earlier is that I always want to see their due diligence spreadsheet. So, what’s their methodology? I want to talk with them, have they talked to a couple of different brokers in the area, give me the names of those brokers.
First thing is I’ve had a couple people reach out to me with properties that they don’t even have under contract, but they’re wanting me to do due diligence on it. And I learned quickly that it’s just not worth my time and generally it’s not theirs, either. So, it’s better for them just to get it under contract.
We’ll look at their due diligence spreadsheet. And then we have our own due diligence spreadsheet that we use on our side, where we at least talk to minimum two brokers in the market that are familiar with the area. But generally, we try to always strive for three. And we look at the location, we have access to DataTree and Parlay 2.0. Just all the different tools that every other land investor usually uses, we’ll utilize.
And then we’ll look at the chain of title. We’ll go through and make sure does it have a legal access, what’s the volume of sales in the area. We’ll even look at the slope. We’ll even measure the property sometimes. I was talking to an investor right before this, and we thought that we were buying a property that was around six and a half acres. It turns out it’ll probably be around four and a half. So, we were kind of doing some drawings of it just to see. And so, I think with the area of the country that we’re looking at funding and where this person purchases deals, they’re not too sophisticated with the counties. And so sometimes the data is just crap, to be honest. So, you can’t just totally go off of it. We’ll look at utilities, just all the normal stuff that everybody looks at, but it’s like we do our own due diligence and it usually takes us between 24 or 48 hours.
Seth: And I know when somebody brings a deal to you, it sounds like one thing that needs to be done already is it has to be in a contract, pretty basic thing. But what are some of the other common boxes that have to be checked? Does it need to be a certain size, a certain value? What would immediately disqualify it and what are you looking for in a good deal?
Reid Kurtenbach: Yeah, for me, it’s got to have legal access. That’s pretty important. I set up until recently that we wouldn’t do anything in the wetlands, but we’ve actually funded a few deals that were in the wetlands and came out pretty good, because it’s normal in that area of the country. It’s got to be at least one acreage. It can’t be too small. If it’s really irregular in size, we usually just cut that out.
We also want to make sure that if the investors just coming to us with one deal and only want to do one deal with us for the foreseeable future, it’s probably not going to be a match. We’re looking for more long-term relationships with these individuals rather than just onesy-twosy. Those are some of the things that I can kind of think off the top of my head.
I don’t discount it if it has an HOA, because to me, I’ve funded deals that worked out wonderfully with HOAs or that have a POA or an HOA. So mainly it’s more legal access. And even then, we’ve come across properties that don’t have legal access that we’ve funded and we’ve come out pretty good too. So, it’s hard to say, to be honest, I’m sorry, that’s kind of like a wishy-washy answer, but sometimes there are properties that actually have no legal access, but you can still make a good dialogue.
Seth: Is there like a minimum profit margin? Like it needs to be capable of making at least X number of dollars or we are not interested?
Reid Kurtenbach: Yeah. Really the bare minimum split would be probably about $5,000.
Seth: Like total profit margin?
Reid Kurtenbach: Yeah. And that’s very bare minimum.
Jaren: Net? You are talking after net.
Reid Kurtenbach: Yeah, that’s net. Generally, we’re seeing $10,000 and above, but it also depends on the velocity. There was a property that we funded where within about a week and a half, it was not that much more. I think it was like $6,000 of net proceeds, but it was a week and a half. It was like transaction funding for us. So, I thought “sell that all day long.”
And I think that’s another thing that I was going to mention is that when you’re looking at finding a land funder, you should really vet them as much as the land funder is vetting you to see, okay, what happens if we can’t sell it for this price? What happens if we’ve agreed to this price, but we spent a week or two or month or three months, are they willing to lower the price? And what if we’re coming out even, or we’re coming out a little bit less than what you actually paid for it? Is the greater sum of all the deals that we’ve done, does that matter, or are they going to just say, we’re done after one deal, one bad deal, or one so-so deal?
I’ve just learned with other partnerships that I’ve been involved with that people can get a little weird when it comes to money. And you just want to make sure that you see how they really react and you can only know with what they’ve done in the past. And if they say, “Oh, well, this guy didn’t really make that much money” or whatever. I feel like you just have to go with the flow on some of these things. Because if Jaren and I did three or four deals, or I did a bunch of deals with you or others, and we had maybe two so-so deals, but maybe there were three deals that were great or base hits or doubles. I’d look at the collective sum. I wouldn’t look at just those last two.
Jaren: I’m curious, do you always make it mandatory to go through like a title company or closing attorney and you always get title insurance? Or are you willing to fund deals for a lot of the land investors that don’t typically go through a title company or closing attorney?
Reid Kurtenbach: Lately, we’ve been mostly going through title companies and title attorneys, just because we do want that title insurance. For the more experienced investors, we have allowed them to self-close and we’ve been okay with that, but then we scrutinize the deal a lot more.
Jaren: The more and more I do the land business, the more and more I never want to close the deal on my own. There are so many things that come up just randomly that everything checks out from as far as I can tell, but then the title company finds some obscure thing or they need some distant relative or they need an HOA estoppel. That’s what tied us up last time. And I was like, I’ve been in real estate on and off for like the last decade and never heard of an HOA estoppel.
I just love having a title company that I can call up and be like, “Hey, what’s up with this?” I just wanted to understand more details about when you trigger, like what event triggers a quiet title action and when it’s appropriate to pursue that and when it’s not.
And literally, the owner of the title company, I just got him on the phone and he was like, “Yeah. You do a lot of business with us” and answered my question. To have that in your back pocket for free, obviously you have to have a relationship with them. They’re probably not going to do that if you just did one deal with them, but you build a relationship with a title company and to have those experts at your hand, it’s a huge deal.
If you’re buying property for $500, it kind of stinks to spend $600 to $800 on closing costs. But I would just rather buy a property for $2,000 and sell it for $8,000 or whatever.
Reid Kurtenbach: I think you just build it into the costs, to be honest, that’s what we found on the side of caution when it comes to that sort of stuff. And I always really prefer to go through that. I think it’s even better when your attorney is the owner of a title company.
Jaren: Yeah. That’s sweet. It’s hard to beat that. So, what about terms deals? I’m curious how you approach terms deals, because I know most of the finance guys that I work with, they don’t want to mess with terms. I don’t really want to mess with terms either because I’m busy working at a company called REtipster. So, I don’t have much time to deal with following on defaulted borrowers and all that stuff.
But you come from doing modular homes and dealing with a lot of seller financing. So, that’s kind of your wheelhouse or your background. Are you comfortable funding and staying in a deal for two to five years or whatever?
Reid Kurtenbach: Not with someone that I’ve never done a deal with. If I have a track record with that individual then yes. But if I don’t, then it’s kind of like you’re jumping from getting to know you to being married. And I don’t really like that. The first few deals I think are like interviewing each other, feeling each other out, seeing how well we can work together.
And of course, the ultimate goal is always to do cash, but if we get all of our money out of the deal with just the down and then it’s payments monthly, then that’s fine. There are just a few more nuances around how that’s handled. Usually, I want them to use a note servicing company to make sure that they don’t have to deal with it. We don’t have to deal with it, but if they’ve already got a bunch of notes and they’ve already got a system in place, then generally we’ll just do it with them. But the goal is always to do cash.
But yeah, we actually do have two land deals right now where we are getting paid on a quarterly basis. So, I’m open to it and we got all of our money back on the down and then some. Really how that works is that the same split occurs just because I still feel like they put the same amount of time and energy into it. It doesn’t matter if I’m waiting a little bit longer to get paid back. But yeah, I think on that one, it’s a 55/45 split. And then the note servicing fee and all that stuff gets charged back to the borrower, but we make our money each and every month and it just gets directly deposited into our bank account.
Seth: Yes. I believe with a note servicing company, the payment comes in from the borrower and then it lands in the servicing the company’s account. And then you can tell them, “Hey, send this percentage of each month to this person and this percentage…” It actually doesn’t seem that complicated if you have that kind of structure set up.
Reid Kurtenbach: Yeah. And I know a couple of companies that do that. I also have bought nonperforming real estate notes in the past, and worked them out. And so, I’m familiar with some of those companies. Honestly, when I think about the financing of deals like land deals versus manufactured homes, mobile homes, I used to do that when I was 22, 23 years old in Colorado, just fresh out of college. Imagine being 22, 23 on a cold January day where it’s like 20 below and you’re knocking on someone’s door asking for a $350 payment because they are lazy.
So, when you don’t have to do that, it’s a contract for deed or whatever the arrangement is. To me, that seems a lot simpler than what I had to go through when I had mobile homes and just driving up and down, asking people for money.
Seth: On that issue, say if you’re in a state where some action is required, there’s got to be a court procedure or something. Even if it’s just sending a notification to someone. Whose job is that? Is it your job or is that the active investor’s job if that comes up?
Reid Kurtenbach: It’s the active investor’s job.
Seth: And if they don’t do it for some reason, say two or three years has gone by, and they’re just either not able to do it or not willing to do it, then it falls on you.
Reid Kurtenbach: It falls on me and we have that in our contract if they stop communicating to me. Basically, they stop communicating, they stop performing upon their agreed amounts. So, it’s all laid out because we have a term section and we also have the cash section. And then at the bottom, we have like an NDA section too, where we can’t talk about the deal with anybody else too.
Seth: Reid, how long does it typically take for one of these deals to come full circle? What is the general expectation or desire? Do you want the deal to be bought and sold within six months or 12 months? And whatever that desired timeline is, what happens if it doesn’t sell that quickly? Is there a point at which you can jump in and be like, “Now it’s yours and you can take control”? What happens if it doesn’t pan out by the timeline that you had in mind?
Reid Kurtenbach: Generally, we’re seeing deals turn over within about three to four months. And it was actually quicker than that before. But a lot of the title companies that we’re dealing with lately are just really far behind. That is pushing everything back. Before they could close within 30 days. Now, it’s like 60, somewhere saying 90, which is insane to me.
Jaren: I should stop complaining. As opposed two, three weeks, I’m about four to five weeks for closing and I’ve been like, “uh,” I got mad at the title company. But if you’re dealing with 60 days, that’s a lot.
Reid Kurtenbach: Yeah. And unfortunately, in some of these areas, you only have a few title companies that you can go to and they’re all behind. Generally, we like to see the property sold within three months, but our norm is about five to six months in our contract. Typically, it’s six months. I’ve recently changed it to 12 just because I’ve been thinking, I don’t really want to deal with coming to the six-month mark.
Generally, if someone is not showing any effort, that’s where I will kind of take control. And that’s only happened once. That was nine months later. Let’s say I was doing a deal with a land investor, and this actually came up just recently. I think our contract states six months and then their percentage goes to, I think it’s 20% versus 80%. I forget what we actually agreed to. And he called up and he said, “Hey, I’m worried about this coming up. We’re about four weeks away.” And I said, you’re hustling, you’re doing everything that you can to sell it. Let’s just get on the phone and strategize. And the terms will stay the same.
And I just wrote up a quick email that says we’re going to continue this term another six months and we’re just going to extend it. Because we’ve done deals together before and they’ve turned out fine. And this property is just a weird one. So why would I be such a stickler with that contract to say, we’re almost at the six months, now I get 80% and you get 20%. I think that would make me a jerk from my stance. I just said, no, let’s get on the phone, let’s see what we can do.
He was trying to sell it originally on his own rather than through a broker. So, we said, let’s get a broker. And we came up with that strategy and we said there’s really not any drone footage, he doesn’t normally do drone footage. And I said, how about we try this? How about we try advertising on this website and this website? That’s where we are. And I think it’s not under contract where we’ve got some prospective buyers that are driving a significant distance to take a look at it. I don’t know, I think it’s all about being creative. I don’t think it’s just sticking to that term unless you really have to, because the person is just not pulling their weight.
Jaren: Again, if you’re jumping on a call with an operator and strategizing with them on how to get properties sold, that’s a different level of value. That’s very different than what literally all of the people that I work with do is just wiring funds. And then they collect a check like three to six months later. To bring that to the table, I think, is huge. So don’t underestimate that value there, Reid, if you’re bringing that to the table. Even if in certain relationships it’s different or whatever, that’s a big deal.
And I wanted to mention, for our listeners today, something that really helped me when it came to developing contracts, because I operate with a mortgage and promissory note. That’s how I structure everything. There were some pretty intimidating things in the favor of the private money lender in my contract that I was like, “Whoa, that is kind of striking.”
But I realized contracts exist for a worst-case scenario. If people aren’t holding their weight, if God forbid somebody dies or somebody gets hit by a car and they’re not able to communicate and perform their side of the agreement, contracts are there so that we know when we’re all mad at each other and full of emotions exactly what to do logically. So, we have a natural path where, if at all possible, we can keep the relationship intact, or if we can’t keep the relationship intact, at least we can be as simple as humanly possible in light of a bad situation.
So, with that understanding, the lender can call the note due at 12 months if they want to but if it’s a circumstance where it doesn’t make sense for them to leave, then they could just say, “Oh no, I’ll just write it out” and it’s totally fine. Or if they want to do things differently or things are a bit more nuanced in the practicality of the hustle and bustle of doing deals, then that’s totally fine if the relationship is good.
But the contract exists for a worst-case situation. So, if you see things in there, just keep that in mind. If you, as the operator, are doing what you’re supposed to do and you have high integrity, high communication, all that stuff, you’re going to be fine and you should be willing and happy to allow your private money people to come in and have peace about what they’re doing.
They need to be able to be comfortable with you and set them at ease. You shouldn’t have anything to hide. You shouldn’t be trying to do anything weird or shady. Just be generous, lead with generosity. And understand that, “Hey, you’re going to step up to the plate and you’re going to do what you need to do and give them as much value as you possibly can. And as long as you do that, everything’s going to work out great.”
Reid Kurtenbach: I tend to agree with you, but I also feel like the funders should be open to suggestions. So, I basically will send out the TIC agreement to anybody that we end up wanting to fund their deal. And I turn on track changes and say, if there’s something that you want to suggest making a change to, if there’s something that you don’t understand, have it vetted by your attorney, I’d love the feedback.
And there’s been a few times where someone has come back and said, “This doesn’t quite make sense” or “I would prefer to say this or that.” And that’s actually really helped me because it’s allowing me to step more into their shoes to make sure it’s fair. Just like you said, I don’t use that contract like, “Oh, I’m going to take you to court for this.” Because who’s really going to take someone over $15,000? It’s a lot of money, but I can do a lot more deals in that time and my emotional competence and just dealing with all of that other stuff. It just doesn’t make sense to just sue over that. It’s just more like, “Here’s what we agreed to and let’s just try to stick to what we agreed to. And if we need to deviate from it and we both agree to deviate from it, that’s fine.” But I kind of feel like you should make sure that your funder is okay with that. And that if there’s something that you really are hesitant about, you should really ask those questions.
Because a lot of times I’ve looked at other agreements and they’re very slanted toward the funder. And I don’t always agree, the money’s worth something, but it’s not worth having completely bleak to be slanted toward the funder.
Jaren: I thousand percent agree and I appreciate you bringing that up because I don’t want to suggest or paint the picture that you shouldn’t read through the contract to fully understand it. And if there are certain things that you need adjusted or changed, you should totally do that a thousand percent. So yeah, I appreciate you bringing that up.
Seth: On this whole thing, just the dynamic between the borrower and the lender, what are some typical points of tension or challenges or issues that may come up in this kind of relationship?
Reid Kurtenbach: I think communication, really. I think that we’ve only had one land investor that we decided to part ways with, and it was more so because they weren’t moving forward. When they posted pictures, they were blurry. It took them about two and a half months to put a listing up. I think it’s just follow-through and quality and also respecting my money like it’s your own. Or if you don’t care about your money, maybe you care about your grandmother’s money and look at it like that.
And that’s what I found that really is important for me. It’s just communication and making sure that they’re really in it for the long-term. Because this investor, I could tell after a period of time, it was more of a hobby for them and not so much a business or their “why” wasn’t aligned with mine, I guess. And that was early on when we were beginning our investment journey with land.
And so, I think for me, anytime that I really learn a lesson, it usually costs me money. So that’s what I found is really helpful. It’s really making sure that you’ve got that in place. And then also as we talked about a little bit before, just plan for the unexpected. What happens if I did a deal with Jaren and God forbid, Jaren is no longer around and I need to now deal with his wife? We may not have the same type of relationship. So how do we handle that? And maybe talking through that. I’ve definitely talked to my land investors about that and said, here’s what would take place, but they’re usually in the driver’s seat anyway, to be honest.
Seth: So, if an active investor is listening to this, somebody who wants to do the deals, they’re hungry for the action, but they don’t have the money. What are the right and wrong reasons to pursue this kind of relationship? And where should they go about finding these people like you? I know there are definitely some bigger names out there who have done a pretty good job of just branding themselves and letting the world know, “Hey, there’s money here,” that kind of thing.
But that might not necessarily be the best fit for everyone. Maybe there’s a rich uncle or somebody else who just happens to have money. It just comes down to networking and just understanding the land and who’s doing what. Is there a bad reason to do this? Is there a point at which somebody has said, “Hey, maybe I shouldn’t be going down this direction?”
Reid Kurtenbach: I think if they don’t feel comfortable risking their own money, then it’s probably not a good enough deal for someone else to invest in. So, I found that some people will come to me and say, “Hey, I want to explore this new market. I’m a little worried about using my own money. So how about we use your money?”
Seth: It’s a nice red flag.
Reid Kurtenbach: Can we repeat that? Did you hear yourself? So yeah, that’s one thing. If the spread is just not there, if we’re talking like $2,000 or something or smaller $3,000, I would say probably try to do it on your own. I think that gives you kind of a hint into when you wouldn’t want to do a deal with someone. I found that some people don’t want to do a deal with me when they find out that I may require a background check.
But we can always find compromises. This individual said, “I don’t feel comfortable with that.” And I said, “Even if I share the report with you, and even if you do a background check on me?”
“No, I don’t think so.”
And I was like, “Okay, well, what if we just put the property in my name and I have a little bit more control?” And he was like, “Okay, that’s fine.”
So, I’m in complete control of the deal and it is good enough merit for me to say, okay, well the spread is big enough that if he decides to just fall off the face of the earth, I can move forward and sell it on my own and then cut him the check or whatever with our agreement percentage. I think it’s all about thinking outside the box, but when it comes to that, I think if they’re not willing to risk their own money, I don’t want them to take a chance on mine.
Jaren: I think that’s actually a really good segue Reid for us to talk through a little bit on the deal that we did together. Because I remember one of the things that I struggled wrapping my head around was I think at that time, again, this is very different than your current structure. You were still figuring things out, I was still figuring things out.
But I remember passing at some point in the conversation, your preferred route to go was to take title to the property and then have me essentially get paid as a 1099 out of the deal. From the financial partner’s perspective or the funder’s perspective, that makes a ton of sense because if anything happens to me, I stopped communicating, I die, I do something shady, I violated the agreement, you are in a position where you have full control of the property, thousand percent.
It’s kind of like the reason why a lot of people suggest not recording the land contract if you sell a property on terms, because the title is remaining in the name of the investor, right? So, if somebody defaults, you can just automatically assume control of the property without having to go through foreclosure or do any of that stuff. It makes sense.
However, coming from somebody who is licensed, I’m not really using my real estate license anymore, but I did go through the process to actually become a real estate broker. I have a broker’s license in Indiana, which for those who might not know, there’s kind of a two-tier system in the real estate world. It can get complicated, but just to keep things simple, you’re somebody who is just an agent who has to hang their license with the broker. And the broker kind of serves as a guiding light in the world of real estate. And in exchange for that, you have to pay them a portion of your commission. I went through the process, which is you have to have several years of active experience as an agent and all this stuff.
I went through the process to become a broker. So, people could actually hang their real estate license with me in Indiana. And with everything that I have been exposed to from that side, I’m pretty sure you can make a case that the operator in that circumstance is acting as a real estate agent without a license.
I think you mentioned that you talked to your attorney and said, no, that’s not the case. So, I’d love to just pick your brain there and walk down that path a little bit in our conversation. Because from my perspective, if you are paying somebody out as a 1099, for them to sell your property on your behalf, that’s pretty much practicing real estate without a license. I think you’d be pretty hard-pressed to prove that otherwise.
Reid Kurtenbach: That was probably one of the main reasons why I switched. Because in each state it could be looked at differently according to my attorney. And so, generally I thought, “Could I really stand up in front of a judge and argue that?” It was tough. So, that’s why I just said, no, I’ll just go ahead and do the TIC agreement and make it so that way we’re generally both on title and it just keeps things simple. Plus, it’s just easier.
Now, there are other ways that you can structure it too. I’m exploring some other techniques with my attorney actually right now to give me a little bit more control because technically the TIC agreement, it depends on each state. Like I can’t cover every single state, so it’s kind of a blanket template. My attorney just told me it’ll generally work, but each state is different. So, unless you want me to go through every single state, and I was like, I don’t really want that.
It’s more like the law of averages. I’m just hoping that, so far, knock-on wood, I haven’t had too many issues. Actually, I’ve never had an issue with the TIC agreement. And generally, I can just work with the investor where if we want to part ways, we can part ways civilly. And I think that’s just because of the individuals that I’ve chosen to work with. I know there’s going to be a day where I’m going to have to look at that TIC agreement and if I can’t enforce it, then I’ll just probably look at it and say “How can we just part ways and somehow be okay in the end?” And maybe I’ll get screwed one day, but honestly, hopefully all the great deals of the so-so or good deals that I do should outweigh just one bad deal.
Jaren: I like that. I think that’s healthy. I can understand from the funder’s perspective, if it was a one-off situation where a guy that you wanted to do a deal with, but he wasn’t comfortable doing a background check or whatever. I think the tendency common is a workaround because you do have equity and you have ownership and you have interest in the property. So, if your agreement is solid, you should be protected there.
I could understand why from a funder perspective, you would shoot for that in that situation. Because ultimately, you’re not going to be liable. It’s the operator who’s liable. He’s the one that is practicing real estate without a license, not you. So, you’re going to be fine.
Reid Kurtenbach: But that has come up with another land investor that we’ve worked with, where he talked with his attorney and his attorney and their professional opinion felt like if we did not do a TIC agreement, and we did it another type of agreement or if I 1099 to him, he would be acting as an agent. So, we came with this solution and we were good to go. And it’s easier to do. I just feel like any agreement that you sign is only as good as if you’re willing to enforce it. And it just costs a lot of money to enforce stuff. And so, these deals that we’re doing, the highest deal that we funded was about $104,000 as of right now. If it’s that kind of a deal, maybe we would try to enforce it. But if it’s like a $10,000 to $20,000 deal, you deal with your scrapes and bruises and you move on.
Jaren: Yeah. At Simple Wholesaling I was head of disposition and I was responsible for selling 25 to 30 properties a month. And every single month we had properties that we lost money on. I think the average, it was like two or three properties a month. There would be ones where we either broke even or lost money, but the other ones made it up and made it worth doing.
I did want to make a note about some of the things that you said previously. I think that from an operator standpoint, at the end of the day, I take extreme ownership of my business and my relationships. And if I buy a deal or if I lead us to getting into a deal that ultimately turns out bad or mediocre at best, I don’t put the blame on the funder or the circumstances. I take responsibility for that because my competency, my reputation is at stake. And I ultimately want the private money person, the funder to have a good taste in their mouth, even in the midst of things going south.
So when things do go south, it is actually kind of an opportunity for you to shine as the operator, because if you step up to the plate and you lead with generosity and you go above and beyond to right the wrongs, I would be very quick under the right circumstances to lose money and have all of the proceeds or all of the revenue go to the funder, to keep them happy and keep them incentivized to keep doing more and more deals.
And I know that there are extremes there, right? There is a point where you’re getting abused and you need to have boundaries and all of that. But as a general rule of thumb, if I’m going to err, I’m going to err on the side of taking responsibility and being generous and making sure that my lenders are happy because they’re giving me the opportunity to scale. They’re bringing a huge value to my land business.
And so, I just encourage people out there if things go south, don’t play the blame game or be primitive and all that. Rise above the circumstances and say, “Hey, what do I need to do to make this right?” Even if in the short term you are taking a loss or you’re getting the shorter end of the stick. If you look at it from a long game perspective, if your funder is high-quality and high-integrity, that relationship and salvaging that relationship is going to pay far more dividends in the long run. So just keep that in mind.
I think the other thing too, that I’ve noticed lately is I’ve had some land investors come to us and they’re kind of shopping the deal. So, they’ll basically come to me and say, “Hey, I’ve got this deal.” And then meanwhile, they’re talking to two other land funders, which is fine, but I put a lot of time and energy into doing the due diligence. And it’s not that I don’t want them to shop before I say “no.” I would like to at least have the ability to do my due diligence, know that if I do that due diligence, they’re agreeing to do the deal with me because I can’t tell you, it’s happened to me like two or three times. And it really rubs me the wrong way. And I know that they’ve got to get the best deal for them, but I kind of feel like if I’m putting in a good number of hours to research the deal at a buy time, I feel like that’s something that could potentially rub a land funder the wrong way.
Seth: That’s actually a very common thing in the commercial banking world. We saw that all the time and it’s crazy. There’s not really anything the banker can do to my knowledge other than just waste their time and hope that they get the deal. It’s unfortunate. But unfortunately, that’s not entirely uncommon. It’s just the costs of doing business, I think.
Reid Kurtenbach: I think so. And what we’ve just told them is will you give us at least 24 hours to review this? And if you need an answer sooner than that, let us know. But we have other properties in the pipeline that we’re reviewing. So, we want to be respectful to those other individuals. But if it’s an absolute emergency, we’ll carve out more time out of our personal time to look at it. And then if you’re shopping with some other people, just let us know. And then if you like our terms, great, we’ll look at it. But we would just want some sort of a verbal commitment. Now I know that wouldn’t hold up in court, but just your word that if we move forward and do that sort of research, that you’ll actually dig into it with us and make your best efforts with it.
Seth: Reid, we are coming up on our time limit here. So, if people want to find out more about you or learn more about the operation you’ve got going, how can they do that?
Reid Kurtenbach: The best way is to give me a call on my cell. Shoot me a text, shoot me a phone call. I’m generally available. My number is (303) 960-8542. Or if you want to put in the show notes, you can just have a link to this forum that most people use. Now, if you don’t want to use the forum, that’s helpful, but if you have due diligence information that you want to go ahead and send us after you have a property under contract, then just go ahead and shoot an email to me and Seth, if you wouldn’t mind putting my email out there, that’d be great.
Seth: Yeah. The show notes for this episode are at retipster.com/107 because this is episode 107. So, you can go check out that page. We’ll have a link to the forum that Reid is talking about and his email address. You obviously just heard his phone number and you can get a hold of him that way. Reid, thanks again for talking with us. It has been very enlightening and informative. I appreciate it and I wish you all the best in your ongoing funding activities.
Reid Kurtenbach: Thank you so much. This was a pleasure talking with both of you. I really enjoyed it.
Seth: You bet. So, there you have it folks. That was our conversation with Reid. I hope you enjoyed it. I hope you learned some new things. I know this idea of funding land is it’s been out there for a while. It’s nothing particularly new, but it’s always helpful to talk with somebody who’s actually doing it. Because I think everybody’s coming at it from a slightly different angle with different types of agreements and expectations and processes and that kind of thing. And it’s just helpful to hear a real-life version of how one person is handling it. And you don’t necessarily have to use that as a template for the way you do it, but it’s at least insight and ideas you can take with you, if you decide to go down this route, either as a funder or as an active investor.
Jaren: Yeah, I was pretty surprised by how the conversation went. I thought it would be a lot more argument or a lot more kind of tit-for-tat, but it seemed like I was spending a lot of my time – well, this is where you should pay funders more. And he would be saying, well, no, this is where you should pay active investors more. And so, it was interesting. And we didn’t end up actually going through the numbers and the nuances of the deal that we did together. So that was unfortunate, but we had a time constraint there. But if you guys are interested in maybe a follow-up to that, and you want to know what my experience was with working with Reid, maybe I can schedule a video interview or have something over Zoom or something that I can put on YouTube.
Seth: Can you just tell us anything right now? Or does Reid need to be here for that?
Jaren: He had the numbers actually pulled up. I don’t have them pulled up. I don’t remember the nuances of the deal. If I remember correctly, it sold faster than normal and my normal turnaround time is about four months or so. And I know that we had a higher percentage split than I was used to at the time. Other than that, I’m sure it was smooth sailing and it was good, but I just don’t remember the details.
Seth: Well, that’s helpful.
Jaren: It’s not helpful at all, but yeah, I wish that we had a time to go through that, but we didn’t. Now there was one thing that I wanted to mention, Seth, during the conversation with Reid that for the sake of time, we couldn’t bring it up. I did a lot of research on mortgage and promissory notes with these blog posts of using other people’s money. And the two videos that I created for that blog post, I think to date, I spent more hours on those two videos. I think I spent over 30 hours. If you split that in half, maybe 15 hours a piece or something, that’s crazy. That’s a very extensive video, but it was because I had to go section by section and fully understand what they were saying so that I can teach it in the video.
One of the questions that you actually brought up to me when I was explaining the section of the mortgage or the promissory note was about who pays for taxes and HOA dues and holding costs. And I actually want to just mention here, because it’s very relevant to the subject that it’s more advantageous for the funder to cover property taxes and HOA costs and any kind of holding costs because conventional mortgages actually do that.
So, in your mortgage payment, a portion of your monthly payment is for property taxes and it goes through an escrow account. And a portion of it is for property taxes and a portion of it is for a homeowner’s insurance. The reason why mortgage companies will do that is because if you, as the borrower or the homeowner, neglect to pay your property taxes and you’re paying consistently, you’re not defaulted, you’re totally good. But all of a sudden, the property gets sold at a tax auction, just because you didn’t get notified or you forgot to pay your HOA dues, then that’s a huge liability for the funder.
If they’re putting up all this capital in terms of a loan, and then there’s just negligence on the part of the borrower, to avoid all that, they just collect a portion of pay to cover the costs of taxes and insurance from the borrower.
And so, if you are a funder consider doing that because you have more financial risk. And especially with land being in multiple different states and different addresses and people using stuff like Traveling Mailbox and all that stuff, things can get lost. So, definitely, if I was a funder, I would be responsible for that.
Seth: That’s not financial advice, just kind of a thought. But yeah, it does make sense. Likewise, a lot of people who are selling deals with seller financing, they’ll just assume it’s my job to pay for property taxes. Any ongoing thing it’s on me, not the borrower. And they’ll sort of add to that payment and make sure the money is there, somewhere in that margin. But yeah, it makes sense to me.
Jaren: So, do we want to ask a question or anything?
Seth: Yeah, let’s do it. So, you’re ready for it?
Seth: The question is, what things do you do every day that you wish could be automated?
Jaren: Do you have one off the top of your head?
Seth: The thing that comes to mind, I don’t see how this is physically possible, but it’s definitely important. It’s just so repetitive. Things like taking a shower, brushing my teeth, getting ready for the day. I just feel like so much time. If you really added up every single day, how much time you spend doing this stuff, it’s like, I wish it was a way where I could just push a button and I could listen to an audiobook or read something while that is happening. So, I don’t have to waste the time. It’s almost a weird productivity thing. I guess it is productive because I have to do these things to get ready, but I feel like it’s just spinning my wheels every day.
Jaren: Yeah. I would probably say for me, if we’re talking about just personal life. Sleep would be really nice to automate because if I didn’t have to sleep, I literally have like almost double my time, if not even more. It would be a lot. At least in terms of functional hours, right? Now if you say eight hours of sleep, eight hours a day, that’s 16 hours. You have some lead time in there, but I think that would be a big one.
The other two would probably be cooking and doing laundry because laundry is really annoying for me because it’s unending. Like it never stops. And it’s constantly, it’s just like you do laundry and you put all this effort to get done. And then all of a sudden you turn the corner and there’s like a brand-new basket full of dirty clothes. And then cooking is similar. I’m thankful that my wife cooks and she’s really good at cooking, she loves it. Because I think that I would definitely be a bachelor and just like eating out of boxes of frozen whatever.
Seth: I would too, man. It would not be pretty, if it was just up to me. It’s almost eye-opening to think of how little time every day is actually productive. Like actually moving the needle forward because so much of our activity is just survival. This is just what I have to do in my day, but it’s not like I’m making progress. This is just tread water and stay afloat.
Jaren: I spent a lot of time preparing for that productive time. In order to optimize it, it’s not this bad, but sometimes it feels like I spend twice as much time preparing as I do actually executing on productive tasks. Because the way my schedule works right now, I call it the defensive work where I’m just putting out fires. And that’s like during the day 5:00 PM or 6:00 PM. And then at night, I use what I call my offensive work or deep work where it’s in the middle of the night, my whole family is sleeping. And that’s where I really flush out blog articles or shoot videos or edit videos or do thinking and brainstorming and all that stuff.
A lot of that time gets eaten up by just planning for what I want to do. It’s really interesting. I think that a preacher one time said that if he was told that he only had three years to live, he would spend two years planning his final year. I think there’s something to that.
Seth: Say it one more time.
Jaren: If he had only three years to live, he would spend the first two years planning his final year.
Seth: Interesting. It kind of reminds me of that Abraham Lincoln quote. I forget the numbers. Something like “They gave me eight hours to cut down a tree. I’ll spend the first six hours sharpening the ax,” or something like that. Because that sort of feels like a waste, but at the same time, you look at anybody who really executes something well, you better believe there was a ton of preparation that went into that that you don’t see in order to get everything queued up and ready to rock. So, I’m sure that’s a big part of anybody who does anything well. There was a lot of stuff that happened up until that point that just feels like a waste, but not really because it was required to do it well.
Jaren: Yeah. Well, 80/20 is kind of weird that way because researching and planning, it feels like you said wasteful, and a lot of it is, especially if we talk about brainstorming or fleshing out ideas or new concepts or whatever. That can be wasteful, but essential in order for you to find that leverage point. And then once you find the 80/20 leverage point, then you’re off to the races from there. But it can be massively wasteful on the front end.
I think there’s a book or a story actually in Perry Marshall’s 80/20 Sales and Marketing, where he talks about some Egyptian Pharaoh having to prepare the pyramids. And one guy just got to work and ended up failing. And the other guy spent like two years planning or something and ended up being successful. So, there is something to it.
Seth: I wonder about that though because I could just as well make up another parable where the other thing happens. So, it’s like, is this actually a true story? Or just somebody making up a story to prove a point?
Jaren: Yeah. And it’s fair, right? Because there is overkill. There’s paralysis of analysis and there is a point where you have to reach good enough and just execute otherwise, you’ll never get anything done. So, there’s a tension there for sure.
Seth: Cool. Well, is there anything else we should cover about this topic with Reid or do you think we kind of hit everything with him?
Jaren: I think it was really good to go through that and I think we covered a good chunk of it. I think we were a bit rushed, but I don’t think that we have enough for part two. I think that the value was really there. I’m really thankful for Reid. He really seems to be somebody who at the end of the day just wants to do things with integrity and do things well.
Seth: Yeah, for sure. And again, if you guys want to check out the link to his forum and get his contact information and stuff like that, retipster.com/107 is the link to the show notes for this conversation with him.
And you guys, if you’re listening on your phones, just go ahead and text the word “FREE” to the number 33777 so you can sort of stay up to date with what we’re up to and things that are happening at REtipster.
And again, I just thank you guys for listening and checking out this audio or video if you’re watching this on YouTube and I wish you guys all the best in your real estate businesses. Talk to you next time.