Mike Minutes Mastermind (06/17/2022) - Buying Shop Space / Land

Well, Augusta Nation, hope you're doing well. Happy Friday. Couple things. There's no questions today, so I'm going to be talking about some kind of a cool topic. And then before I jump into that, though, Max Harwood had said something really cool, just like literally a few minutes ago on the Facebook group. And that is a reminder that if you are posting on Indeed, or even on Facebook or Craigslist, but those ones, you got to pay differently. But indeed, where most of us are seeing the most traction in terms of applicants right now.

You will get more applicants for less money. If you post a job ad every single day, you refresh it, you change it, Change the creative, change the title. Cause it pops up to the top. So do recommend that, highly recommend that. It doesn't cost you any more. It actually costs you less if you post every single day or every day or two instead of just doing it once every week or every month. Even to post up a new job ad, I would recommend that. So good, good note from Max on that one. But today, because there was no questions, I figured I would actually share what I'm thinking about doing. Why is this not showing up? Give me a second. I'm going to share my screen. I'm actually show you Zillow. I'm going to show you looking for land. Okay? So I know for a lot of you, this is probably a year or two or three down the road when you actually would even start thinking about this. But the reason I'm talking about today is because I think over the next six to 12 months, you know, really, really good opportunities to buy land for a lower cost than what you are paying for rent if you get a loan on it. So right now, in most of our markets, the real estate market is still hot and it's still expensive. I'm going to show you that today. But where do you. Where do you start thinking about buying land versus just renting it out? That's what I want to talk about today. All right, so here's kind of how I think about it, right? So this is the location that I just took over down Mount Vernon. And it kind of services this whole area. So the first thing that I'm looking for is location. It's got to be able to be central to my territory because if it's not, I do not want to buy land.

When it comes to buying any sort of real estate, you got to be very patient. Real estate moves really slow. So anyone who likes to like, buy into the like whole, like, you know, buying things fast, you're gonna get burned in real estate. So when it comes to buying shop space, the number one thing you want to look at is location. Is it central to your area? Because if it was, if it is not. Like. So, for example, they kind of service this location, kind of services this whole area. Right. This one down here. So there's some land down here. If I look over here, I can actually find it? Probably, yeah. Here, right here. This one right here. $250,000. It's over here next to Big Lake down here in the bottom right hand corner. It's five acres. It's fantastic. It has like this private gated entrance gravel. It already has a big burn pile. Like, this is a dream. But It's a good 30, 40 minutes from one side. Because on the, like, we don't even service down in the far right hand corner of the. Of the area that this is in compared to our territory. When I say bottom right hand corner. Right. So, you know, it's way down here. We don't service anyone outside of, like, this is probably the furthest south we go. So to be all the way down here, it's actually like right here. It's not showing up on the map for whatever reason, but it's like right down here, down next to Big Lake. So.

It might even be further down. Is this.

Was somewhere down here when I actually pulled up. The address, it's not showing up because it doesn't have an address. It's just a street name. But, you know, just the fact that it would take 30 minutes to drive from here to here, I'm just not going to buy the land. So location is the number one most important thing. The next thing you're looking for at, like, if you're gonna get the best deal, it's gonna be residential land that's private enough for you to run your shop out of and not get in trouble, that is going to be the best deal. Okay, because like, the land that we're renting down in Mount Vernon right now is probably worth at least 800 to a million. 800,000 to a million dollars. Because commercial land, it's like literally right where a gas station would go. Whereas this, you know, $250,000 I just showed here is five acres. It is residentially, but you could easily run a shop at it. So that's private entrance. No one's going to bother you. You can absolutely dump here. This is like, perfect. However, the location stinks, and so I'm not going to touch it. So it gets very difficult because Typically, we're usually in more. More neighborhood and more populated areas when we're looking for, you know, our territory and our centralized. Trying to be centralized. The problem with that is that means you're going to have a harder time finding land. So let me actually look at. Show you one that I'm going to be looking at for the Bellingham or for the Mount Vernon location, because right. Right now, we are Right. Right here. We are literally smack dab in the middle. It's perfect location, but there's nothing for sale here at all. And the market in this area is very, very hot still, because people are moving out of Seattle. So, however, about a mile north of us right now, maybe two miles, is this spot right here. And I can tell you what this is. This is someone that has subdivided their land and is.

They've cut it into, like, three different spots. So let me show you what this looks like. So there's. This is the first lot. It's half an acre. Half an acre is like, the minimum in terms of size that you want. So the first thing I'm looking for is, is this private enough to dump clippings and debris, Right? And these ones will. Will. They might work. Right. So what I'm going to do is I'm gonna go ahead and take this address. And this is what I love about the masterminds. I can show this sort of thing, because I don't know if I'm going to buy this. I really don't. I probably won't. But I want to show you my thought process in doing this. So, first of all, what I'm looking at is, is it central to my location? Right? It is. It's, like, almost central. Like, dead center. It's close enough. Then I'm like, okay, this is great. This is literally close to. Probably, like, a ton of our customers are, like, in here, which is awesome. So it's really close. And then what's really cool is, look behind me is a bunch of, like, farmland. So I shouldn't get a ton of complaints from people as long as I dump strategically on this property. So now let's zoom in a little bit more. It's like, okay, well, what happened here? Well, what probably happened, honestly, is this person had two acres, and they're. They're subdividing their land up. So this is the property. Right? Let me zoom in more. Sorry. This is the property. 2. Two lots right here. There's one right here, and there's one right here. So this is the first half acre. I wish I Could. No, I can't, sorry. This one right here is the first half acre. The next half acre is this spot right here. So what I'm thinking as I'm looking at this, because I haven't even gone seen this in person yet, what I'm thinking about is, okay, this is from the road. Okay. And let's just go down here. So this is Gardner. This is not the main street, but this is like one that I can see in. So this is the first half acre close next to the road, the second half acres behind it there. So I'm kind of in this residential multifamily. There's some commercial over there property. In terms of this land. I don't want to be close to the road. I'm probably going to get reported if I start being too close to the road and I'm dumping debris, have a bunch of trucks, it's very commercial. I have a lot of employees. And being out close the road, then I start thinking about theft, etc. People are going to be walking by here on the street. So not great. However. However, there's this big cluster of trees that could potentially dump behind. And if I go back onto this property and start looking at these here. So this is this one that's actually. This is the one that's closest to the road. Right? So this is the property close to the road. What they've done is they've cleared all those blackberries and now there's just that cluster of. Of blackberries and trees up front, which kind of offers a nice protection. And if I'm going to try to dump behind.

I could dump behind this part of the land. And this one I kind of like because here's the pros for this one. It's off. Off the road a little bit more. So I'll be able to get away with having my trucks there. I do not have an office. As soon as you have an office, you will get in trouble for having commercial because you have office space. You know, first of all, this property I like in the back a little bit more because off the road as well as there's this bunch of trees in the back here that I could easily dump into and have more privacy without making anyone mad. Now if I go back out of this, go back to my calendar view. So this is that front property. Here's the second half acre. This is the person I've got to be kind of worried about is these people that are in the back here that are going to drive by me every day. Those are the Ones I got to be careful of if they ever reported me. However, this massive cluster of trees, I could probably put my storage bins here and on this side and have a plenty of space to dump and have all my trucks parked here just on gravel. Now the site prep for this property in the back, I show this one, this one. The site prep on this one is going to be a lot more because there's just grass. So I'm going to have to bring a lot more gravel in, probably bring a bulldozer in. It's going to cost me a lot, a lot more to site prep this half acre. So this is the deal.

This is. Yeah. Cool. So I'm going to offer $100,000 for either of these.

That's what I'm going to do. And this is how I'm making sense of it. Right now we're paying $800 per month. However, the landlord doesn't want to sign a long term lease, so I can't really invest in the property. They do not want us to dump anything besides grass clipping. So any branches or like stumps, anything besides just clippings, we have to take off site, which is stupid and just very inconvenient. So.

What I'm thinking is if I get this for a hundred thousand dollars, 800 per month, the alternative, it cost me about what, $10,000 per year. So if I have to pay $10,000 per year for rent, let alone the fact that I this massive inconvenience of taking anything besides clippings off site. Just take that shelf that for a second. Just from a ROI perspective, $800 per month times 12, we're looking at about $10,000 per year. If I can save $10,000 per year and put $100,000 in this property, I essentially get a 10% return on my investment every year. Okay, now this is assuming I, I use cash. Now, if you're going to go finance this, you could finance this for less than $800 a month. Now, finding a property, finding a loan that's going to allow you to lend against land is tough because no one wants to lend against land because they typically want a structure on the land because that's going to be the thing that's actually the value and collateralized. Whereas land goes up and down in value, it doesn't really have any value until there is something on it. So that's why it's easy to get a construction loan is usually what you're going to get for blank land and a vacant land because there is no value to a bank for vacant land. So this is the reason I'm talking about this today is not because I think you should do this. It's have this information because I think in six to 12 months there's going to be properties like this available for 40 and 50,000. Okay. If we go into recession and you cannot sell land during a recession, you cannot sell land and people are needing to unload, these are going to go for pennies and that's the opportunity to buy because I feel like rents are going to stay high. If you have commercial land like ours. Our rent has gone 3x in the past six months. It'll probably double in the next year. And that again means that there is no dumping of branches. I have no control of this land. It's month to month lease. They will not sign long term because I know if they got a property, if they got a, an offer to buy it and just insurer into a gas station, they do in a heartbeat. So I have no security. I cannot dump, dump the type of debris that I want. And let's just say it's 800, assuming it doesn't go up, which it will over the next year.

If I can get a profit like this for a hundred thousand, spend twenty thousand on gravel and a fence and call this a day, move my storage bins, the or the containers over there, the 20 foot containers that we have, the shipping containers, I'm off to the races. So this is kind of how I'm thinking about it. I'm going to probably put an offer on this property for $100,000 in cash. And I'm looking at that as okay, $100,000. That's not any small amount of money. But if I can save $800 a month in rent, literally that's a 10, 10% return on my investment. And that means I also got to control the land, get good gravel the way I want it, dial it in and not be worried about a month to month lease and be able to dump the debris that I want and burn it, whatever. So it comes down to the zoning is the biggest thing, right? So when you're looking for land, you can absolutely run a lawn care business outside of residential zone land. If you don't have an office, if you do it in a way that is concealed from.

The neighbors. Because if you don't have trees and you're just dumping in the wide open, you're going to get complaints, you're going to get people complaining. You have to have an area that is private to dump the debris if you're dumping material. All right, so that's kind of my two cents. Got some questions here. I love the land idea. Our rent is 27.50. Oh, this must be Brian. This must be Brian Connor. And we'll increase by 500 for the next three years. The problem with residency zone land, at least in our area, is someone complains about commercial use, the county will force you to move. This has happened to two people I know in our area. This is 100% true. And so what you're going to have to look for, especially, you know, Brian, you have a lot larger of a company, right? Do you have lots of trucks, trailers, chemical truck, when you don't have a chemical truck anymore. But like you have a lot of trucks and everything and fertilizers and. Sorry, you don't do fertilizer. Sorry. But you have a lot of stuff going on. It's, it's a lot harder to buy shop space. You can still do it. But you would be looking at that five acre piece of land that I was showing at the beginning as you're really your only option. And that is it needs to have a long driveway completely. No one can see in there, and there's a gate at the front. You can, you can make it work.

And you're going to pay a little more just because the amount of land you'll need, when I'm talking about a spot like Mount Vernon that has six trucks or so, you can get half an acre and you can dump as long as it's secluded enough. So the bottom line is, though, this is the truth, someone can take this away from. Someone can tell you you cannot operate anymore. However, what I'm also doing when I'm getting these residentially zoned areas is I have a backup plan. And the fact is, if I go back to this listing, the fact of the matter is this property is allowing me to build a house and an adu, an accessory dwelling unit. So theoretically, accessory dwelling unit is like a, like a living quarters, Like a living, like a condo, you can kind of build onto your property either depending on the ADU regulations, either a separate dwelling or you can do an attached dwelling. If it's a separate dwelling, which most of the time in this area it is. That means I can literally do two units on this property. So worst case scenario is the county's gonna kick me out. I'm gonna go get a, a, a, a, sorry, a building loan or a construction loan. That's what I'm looking for. Construction Loan. I'm gonna go get a construction loan. And because I've already put a hundred thousand dollars down, that's probably enough to put as the equity into a $500,000 building project. And that $500,000 is gonna be able me a house and an ADU and I'll have no more money in the deal. All right, so this is, this is the kicker. I wish I would have said this before I started going to questions, because this is the kicker. I forgot to mention this When I'm buying residential land because it's so much cheaper, I'm also looking for, can I make this an investment? And at the end of the day, if I can buy this land for 100,000 and have $100,000 of equity, because I'd buy it with cash in this deal, it means that if the county came and kicked me out, I would go get a construction loan for 500,000. 20% down of that is 100,000. I'd already have that equity in the property. In. In the loan, I'd be able to take that $500,000 build and make use of this land. That's why I'm against actually buying commercial, because if some, if something happens, you can't use it for anything else besides commercial. Like, you can't be like, oh, let's build a couple houses, or I'll make a couple rental units. So I'm always protecting my downside. Like, if I do get kicked out from this property, I can make it profitable from a real estate perspective. Okay. Because when you're buying real estate, you are getting out of lawn care and landscaping business, and you're entering a real estate business. Right. It's a different business. And so what I'm protecting is if I did get kicked out of this property, can I immediately turn this into a construction loan and make use of this? Because I could do this in two units, have the main property do about 2,500 to $3,000 a month in rent, and then an ADU making a thousand to $1,500 a month in rent. Easily. Easily. So I know immediately I could do about $4,000 per month in rental income from this property. And If I have $100,000 into the deal, I. I'd be able to get the construction loan with any more. Without any more money into the deal, and I would be able to cover that loan on $500,000. You're looking at probably $2,500 in monthly mortgage. I'd be able to cover that and some with the Rent. So definitely. I forgot to mention that, sorry.

Would you build a wooden fence around the property for privacy, security or maybe plant some hedges? Yes, ideally, yeah, you would. Six foot hedges, arbor vita, or better yet a cedar fence. Wooden fence would be great, that's ideal. And again, because you're not doing anything subsurface, you're not connecting the power, you're not connected to water, you're not building offices. You should not like do this in a place where you're not going to need permits. Right. We've done this in multiple locations where we come in and just put gravel down and put boxes and we never had a problem with permitting. What you're going to have a problem with, which we haven't, knock on wood, is zoning. And what you want to protect yourself against, the zoning thing is if you had to turn this into residential and actually make this, could you make the numbers work and would someone want to live there? Right. That area is Perfect for an ADU. Perfect for a 2 unit on a half acre. It'd be stellar. Honestly, the back of my mind I'm thinking, man, if I can just keep it at six trucks, there's a possibility I could probably make a rental unit and an ADU in a couple years down the road and still have the shop there and make it a slam dunk. So that is in the cards. So I don't think I'm gonna buy this one, to be perfectly honest to you. I don't because I don't think they'll, they'll take a hundred thousand right now. But the reason I'm making this video is because I really do believe that in six to 12 months these are going to be going for 40, 50,000.

When I do a property, the storage complex with room to grow, empty lot next to it and then my shop could pay me personally and not be a liability at all and serve two purposes. Yep, that's always the perfect scenario. It's just a challenge because that shop space, now the building on it is a lot harder to run commercial out of if it's residentially zoned. That being said, a lot of states do have a clause called rural, rural, commercial or sorry, rural residential and then some call are called rural business. So check your zoning in all of your areas because there's a lot of rural areas that allow you to run your business out of your residential dwelling. So if you live there or if you rent some, you can just say hey look, it's a residential and I run my business out of it and have a shop and that is fine. So check your zoning because every single state and county is very different. But there's a lot of really good ways to be able to buy rural land, usually an acre to 5 acres that is residential but allows you to have a run your business out of it. And every state has different laws on running businesses out of your property. So definitely check those. So cool. That was fun. I'll let you know. I'll try to make, I'll probably make a video if I can go down there this Saturday and actually take a look at the property, make a video of it and I'll keep you guys in, in tune with it. I would ideally not like to buy it right now because I believe in six to 12 months it'll be half the price. It'll be 100,000 and I'll be offer 50, 60. But I am going to put an offer in for $100,000 cash, closing immediately and see what they do. Because this, this property landlord lady is a joke. The joke. She's. I've gone down there twice to meet with her and she just doesn't show up. And I don't usually go down there. So like, it's like I got to like schedule everything to be down there and then they don't show up and then she freaks out about their branches and she doesn't apologize for the fact that twice she stood me up. Bless her heart. We'll need that spot soon though. Running 400 out of two Mercy. Yeah, you're gonna need that space soon. So really it's gonna come down to either you're renting or you're buying it. And if you can look at your, what you're, what you're paying in rent as your ROI after you buy, that's ideal. It's just very difficult to get any financing for land. Very difficult. So if you, if you don't have cash, you are going like the most ideal scenario, if you get construction loan for your house on property that you're going to run your business out of because it's easy to get a construction loan on residential property. As long as you're that property, that land is going to be able to be used for your business because it's either private or actually zoned for rural business activity.

That's, that's like ideal. You just put 10 to 20 down on a construction loan. And so for, you know, 40, $50,000 down, you'd probably get the loan and you'd save immediately on whatever you spend on rent otherwise. So just know that if you're in your garage now, any jump in land, whether it be rent or buying, you're going to have a jump in overhead. So you're going to need a plan in terms of like, increasing your, your dump fees, your E fees, your especially your dump fees. Right. Your dump fees, again, should cover your cost of rental or buying land. So you might want to increase your dump fees if you move from your garage into a property and you can literally just look at like, you know, look at a month and just go through all your estimates. Like, how many dump fees did I collect? Oh, I dumped, I, I, I collected 20. Okay. If I'm charging $50 per dump for, on average, that's, you know, $1,000. Okay, well, and then, you know, the extra thousand dollars per month to afford this, let's go from 50 to 100. Right? So awesome. Have a great weekend, everyone. We'll see you on Monday.