Table of Contents - EPISODE 15: CANADIAN LAND DEVELOPMENT WITH BLAKE WYATT
Sandy MacKay [00:00:00] Breakthrough Real Estate Investing Podcast, Episode 15.
Rob Break [00:00:26] Hello and welcome to the Breakthrough Real Estate Investing podcast, we put this show together to inspire you and help you break through to the life that you want to live through the power of real estate investing. My name is Rob Brake, and here with me with his golf handicap of five is Sandy MacKay. How are you doing, Sandy?
Sandy MacKay [00:00:47] Fantastic, Rob. And happy to be here again. Looking to create some breakthroughs today. Let's I think we got some some really exciting stuff in this interview coming up.
Rob Break [00:00:58] Me, too. But, you know, with the handicap like that and you were telling me it used to be one, you really should be working more.
Sandy MacKay [00:01:05] I think that's what they say for your golf game is too good to not work hard enough in your business. I guess that's why I have dropped the four strokes there and working a bit on my business. Too much.
Rob Break [00:01:16] Exactly. Well, I guess you got to go one way or the other. Yeah, we went to school new in the Gulf school. Yeah.
Sandy MacKay [00:01:24] Yeah. I used to do a little bit of golfing
Rob Break [00:01:27] a little bit and still. Well that's good networking too.
Sandy MacKay [00:01:32] I think that's where, that's where we first met. Are not our hosts, our guests coming up in this episode. So, you know, it's still useful.
Rob Break [00:01:40] It all ties in. Yeah.
Sandy MacKay [00:01:43] So, as always, we want to recommend everyone go to break through our podcast Dossie, pick up our free guest there, the seven freedom activities that you can trigger in your property starting right now. It's a free report there. All you got to do is draw your name and email in there and you'll get that for free. And you'll also get access to every podcast emailed to you as they come out. So you never miss an episode.
Rob Break [00:02:06] And also, you can go on there and check out our blogs, bios, links to our services, all kinds of other interesting things to go on over and check it out. Breakthru RTI podcast Gutsier.
Sandy MacKay [00:02:20] And there's also that little platform called iTunes. I think they should probably go to subscribe to our
Rob Break [00:02:26] go subscribe there and give us a rating in the review. You know, everyone, if you enjoy the show, if you like what we're doing here, then just hop out over there and read us a little review. Let us know. Let other people know if you like it that way. You know, you can share it with other people. Don't be greedy. Other people want to hear the show.
Sandy MacKay [00:02:46] And, you know, Rob, I was telling you last night that a rain event here and then Toronto and we're talking to somebody that was mentioning that one of their buddies up in Calgary was listening to the show and a couple of people I've heard in Vancouver, B.C. area. So, I mean, for us, being from Toronto or Toronto area, you know, it's good to hear that it's reaching those those places as well. And people are listening in. So I think it's really growing. Everyone who is commenting, reviewing and everything like that is really helping. So we're very, very appreciative.
Rob Break [00:03:19] Yeah, it is kind of cool. People don't recognize me, but sometimes when I'm talking, they'll come up and say, I recognize your voice. That's a little bit different. I think it is catching on.
Sandy MacKay [00:03:28] Yeah, for sure. I mean, not really the goal to get famous, but the goal is to just create awesome value and help as many people as we can. Right.
Rob Break [00:03:36] So I think the last thing I want is to be famous. I know, but I love doing the show totally. So now it's time for today's investment tip. I guess that works. So today's investment tip is for everyone to go over to breakthrough. Aria, seei
Sandy MacKay [00:03:59] you know, we've got a new Facebook page up to Facebook dot com slash breakthrough r.i. And we finally got that up and running. You know, we're going to pump out some more value in there and put every episode up, share some links to some other cool stuff. There are some events go like that page.
Rob Break [00:04:17] So how do you find it.
Sandy MacKay [00:04:18] It's Facebook dotcom slash breakthrough RTI.
Rob Break [00:04:23] Cool. Cool. So we're a couple of weeks into our renovation project that the two of us are working on together, and there's been a few challenges, of course, but it seems to be going along as planned anyway.
Sandy MacKay [00:04:40] Exactly as planned, right?
Rob Break [00:04:43] Exactly as planned. There's been no no surprises at all. But, I mean, you know, all the stuff that's come up, we've been able to figure out how to move forward. And and this one, it is turning out to be the scope of work is a little bit more than what we had initially anticipated. But I we've reworked everything and I think we're going to do just fine.
Sandy MacKay [00:05:07] Well, you know what the most important thing is, I think Rob, is and Blake's going to talk about this, too, in their interview coming up as having some people to ask questions to having a team to to answer questions on a moment's notice if you need them to and help you out and just have people that you can kind of consult with on different challenges that pop up, because there's always going to be things that come up right. No matter how much you plan and and think you plan for a project, there's always things that pop up. So it's having a team around you just so important and valuable.
Rob Break [00:05:42] Yeah. And you know what? The funny thing that I found, too, is that every time I've run into something where it just takes asking the right person, hey, do you have a guy for this? And usually I could find one one person in my group that that will say, yeah, I got the best guy for that and you give them a call. And so that kind of stuff is really, really valuable. Mm hmm.
Sandy MacKay [00:06:05] So this value packed interview we got coming up with Blake Wyatt, we're going to discuss some really, really crucial elements of land development. And Blake is going to tell us about the challenges and the roadblocks to watch out for when getting involved in land development. I'm going to talk about his journey to creating his own land development company. And he's going to disclose his number one tip for investors interested in land developments. And I mean, those are just a few of the of the things he talks about. There's a lot a lot of good knowledge to take in in this interview. And it's really, really a good interview. I think it's fantastic, Rob.
Rob Break [00:06:46] Oh, yeah. It was it was really good. And this sort of years away from the traditional idea of investing, I don't have really any knowledge on land development. So it was pretty cool to hear how how all that sort of things works.
Sandy MacKay [00:07:04] Yeah. And you lied because now you have quite a bit of knowledge after listening to the interview.
Rob Break [00:07:09] Well, this is before the interview. OK, so here it is, our interview with Blake Wyatt. I'm happy to introduce our guest tonight, Blake Wyatt. He is a land developer and investor. And I'm very excited about this interview because I'm not familiar with land development, so I'm really looking forward to learning. Blake, welcome to the show.
Blake Wyatt [00:07:35] Good. Thanks so much for having me, guys.
Sandy MacKay [00:07:38] Yeah, awesome. You know, I'll do a little intro here to you, Blake, and then if you have anything to add to it, feel free to do so. So Blake is the CEO of Wyatt Development Group, a privately held real estate development and asset management group based in Oakville, Ontario. And Lakes has over 11 years of experience in real estate and financial services with extensive experience and development, financing and investment. Since 2009, he's been involved in structuring, consulting and funding complex debt and equity transactions, including private lending, joint ventures, syndications and exact market offerings. Previously worked as a real estate broker in the Vancouver market, developing deep knowledge and experience in the development industry, both in project project marketing and land acquisitions. And Blake has studied urban land economics and real estate at the University of British Columbia and also real estate development at the Urban Land Institute in Washington, DC. So a lot of info there, but certainly well qualified to be speaking on this tonight.
Blake Wyatt [00:08:49] Ed, thank you.
Rob Break [00:08:51] So, Blake, can you tell us how you got started and take us down the path from there to where you are today?
Blake Wyatt [00:08:58] I can tell that story and kind of fill fill some holes in that that bio there, but, you know, I always had an interest in in real estate from a very young age. You know, my parents had built a number of new homes when I was a child and probably from the age of five, I was interested in construction and architecture. And I actually started drawing houses about that age. And I used to draw up subdivisions and site plants and things like that. Certainly not riveting activity for most kids, but it was a passion of mine that I knew would be become a career for me at some point. My parents always figured I'd be be a real estate agent or an architect. So I did my thing for a number of years and at age twenty two and in twenty six, I bought my first property, which was a condo in Port Moody, B.C., just outside of Vancouver, that I paid two hundred ninety thousand for at the time. And from that point on, I was I was really hooked on real estate. I love the process from walking into a sales office to working with the developer to pick finishings. And I really love seeing a finished product and a community rise up from from a pile of dirt. And at that point, I was working in the financial services industry, but I knew I really wanted to pursue a career in real estate and development. So at that point in my life, though, I didn't really know much about the business and nor did I have the financial resources to get started. So I ended up calling a good family friend who I knew quite well. And he's developed many, many townhouse projects in in B.C., probably built about 20 units at that point. And I I took him out for lunch and I said to him, I want to learn more about what you do and how you do it. And, you know, he explained it to me. But at that point, you know, not having the background, I didn't really understand it fully. But what that lunch gave me was was a thirst for more knowledge. So, you know, I followed his advice and got my real estate license shortly thereafter. And became an agent and used that opportunity to network with developers and investors and learn as much about the the industry as I could. And I was fortunate to have opportunities to help launch new condo projects as part of the sales team and then also represent developers on purchasing land. So that experience really allowed me to see things through the developers eyes as well as get my my feet wet and better understand the actual work that goes into various stages of development. You know, everything from land acquisition to sales and marketing of of the finished product. So it was certainly a worthwhile investment of my time. And after a few years, I felt I had a really good framework of, you know, general understanding of the business. But there are still some missing pieces that, you know, of that puzzle that I wanted to solve. And for me, the biggest one was, oh, how do you finance a project? And I knew, you know, how to successfully or I knew to successfully develop you needed access to literally millions of dollars, which of course, I didn't have. And in 2009, I. I shifted gears again and started working for a large development investment firm raising capital. For their projects in Alberta, and at that time, Alberta was red hot, investors just were earning robust returns both in mortgages and private equity. And I continue to deny that that space working in development finance for a number of years, which brought me to Toronto in 2011 and shortly thereafter that I started my own advisory firm working with a small number of developers and investment firms, raising private debt and equity financing, typically projects in the kind of one to 10 million dollar range in terms of of equity requirement. So, you know, working in that space for me really opened up a number of doors and opportunities for me to be more involved in the development industry. And and I was fortunate to become an expert in joint ventures and various development financing structures. Throughout that time, and I was also able to attract many quality and experienced developers as my clients who were instrumental in helping me reach the next step in my career and my ultimate goal to becoming a developer. So in late 2013, I was ready to take the next step and I started wide development group and purchased my first piece of development land, which was a one acre site in Hamilton on the mountain. And we're developing 15 executive style townhomes there. And I spent the last year in preliminary planning stages raising our first round of equity financing, and we're now in the early stages of obtaining our municipal approval. So at this point, we're on track to complete this project in late 2016, and I'm now looking for other parcels of land to purchase.
Rob Break [00:14:19] OK, so I guess that pretty much answered my second question there. No, I guess that wouldn't have been the first land development deal that you worked on. Would it be that was your own that was the first one you did through your own company, right?
Blake Wyatt [00:14:33] Yeah, correct.
Rob Break [00:14:35] So how do you decide whether or not a parcel of land is good for a development project? But what is the criteria for you?
Blake Wyatt [00:14:45] Yeah, well, I look at a number of things and I think, you know, these are important factors for all real estate investors, not just developers. And, you know, knowing that you have a diverse group of listeners, I think this is an important point that anybody can can grasp whether they want to develop or what do they own, student housing or commercial property or whatever it may be. But really understanding things like zoning and how that impacts land value and understanding official community plans and things like that and how they work can greatly increase the potential value of any real estate asset. Whether you intend intend to develop the site yourself or not. So, for example, if you want to sell all commercial plans on a main road in a major city and the city announces plans for, say, future light rail, your land just became very, very valuable to developers. So you understand the developers value land based on potential density. Right? So, you know, if the opportunity to increase density on your property exists, the value of the land underneath that Marshall Plaza you own has just incredibly increased exponentially. So understanding how a developer identifies development sites is a really useful tool for any investor looking to maximize their own property portfolio and maximize their asset value. So going going back to your question, first, I try to get understanding of the municipality and the location that I want to develop. And so I'm going to be asking questions and do research, looking for information like. What is the population growth rate and how does it compare to the provincial average? What areas of the city do people want to live in and why? Who is moving to the community and why are they moving for jobs, lifestyle affordability, proximity to a major city? Who are the major employers? Is there a one employer town or is it quite diverse? And I want to get a good understanding of the development or the demographics of that area. Things like average age, average income and development project needs to meet the market demand for that community in that location. So understanding the local market will paint a picture for me as to what type of project may be viable in a given location. And I'm pretty.
Rob Break [00:17:17] Oh, go. Do you focus purely on residential or do you do commercial industrial or is it just mostly residential?
Blake Wyatt [00:17:26] Mostly residential right now? And I got more information to you in terms of how I evaluate a specific site which will kind of cover off, you know, what I look for in a residential site. So, you know, once I kind of get a picture of what the community is like, you know, I want to make my analysis more site specific. Right. So I'm looking for what I when I find a development site specifically, I look for, number one, zoning and time frame to develop. So we're in zoning. Allow what I want to build or not. And if not, that is my request for a zoning change. Reasonable. Is the location development ready or do I need to wait a few years for the city's growth to find its way there? Number two would be proximity to services. So things like hydro roads, sewer and the impact that this was going to have on my costs. Number three is, do I anticipate that any environmental risk, like with soil type contamination, agricultural or conservation authority issues? So, for example, if I was going to be developing a residential project on a former gas station site, one of the key things to look at is, is that your ground is likely going to be contaminated and you're going to be looking at significant cost and time to remediate that site to make it suitable for for residential. And lastly, would be is the project viable? You know, in some cases, your costs exceed your own sale price. So you need to make sure it's profitable. Of course, you know, getting maximum density is not always the name of the game. In some communities, the market prices will not support what it costs you to build. So, for example, high rise condos in downtown Toronto are much more viable. Well, it wouldn't be in a smaller rural community. And by the same argument, building single family homes on large lots wouldn't be economical in downtown Toronto, but would be in a smaller city. So you need to find that that ideal medium somewhere in the middle. So those will be the things that I would go through on any potential development site to start.
Rob Break [00:19:45] OK, so are you building to sell all of them or do you keep anything?
Blake Wyatt [00:19:51] I'm building to sell Rovere blindsiding with these questions. Sandy stimulus they weren't on.
Rob Break [00:19:58] Well, you're answering them all before we could ask them. Well, one thing I do want to say, though, is, you know, I really enjoy your tweets because they're quite a bit different then. It's not just you regurgitating articles. You've got a lot of personal stuff there and a lot of funny stuff on there. So I like you.
Blake Wyatt [00:20:19] Thank you. Thank you. Yeah. You know what? I think in this business, you know, everybody's faceless, right? And I try to be interactive. And if people want to get a hold of me and, you know, I'm never, never short of opinions.
Sandy MacKay [00:20:33] So can you give us an example of a real development project you've been involved with and just walk us through the basic structure and procedure of the mechanics of it?
Blake Wyatt [00:20:48] Yeah, I mean, I've I've kind of created a fictional example here just to not really disclose anything overly proprietary. But I think the numbers are pretty close to what the reality would be. And I think the scenario I've created here is pretty, pretty close to reality. But let's say I wanted to build a 30 unit townhouse project in, say, Waterloo. Firstly, when I first identify that site, you know, the first thing I'm going to want to do is just kind of create a little bit of a draft budget and pro forma. And based on what I think I can do with that property, it's going to be a very, very rough and very vague at that point. But it gives me a general framework in terms of what I know I'm working with. And I'm going to do a market study in the area to determine real estate values and what I think my product can sell for. And, you know, all of this is to understand my sale prices, project cost development, a construction schedule. And this can take time and research if you're new. But, you know, once you're experienced, you can generally evaluate a potential site in your head pretty quickly to know if it has potential to be viable or not. So secondly, I'm going to I'm going to make an inquiry with the municipality as to the current zoning of the site and also find out their requirements and costs in case I do need to rezone. So once I've done that, I'm going to make an offer to purchase the property. And, you know, truth be told, I can probably spend an hour just talking about terms on buying land. But, you know, to kind of summarize it into one paragraph, you know, I think in this case, let's assume that I put 90 day conditions on there for initial financing, feasibility study, environmental legal review. Let's assume I come to an agreement with the vendor for one point five million dollars for this two acre property. I also want to make that offer conditional for one year to obtain municipal approval for zoning. Now, sometimes a vendor won't accept that, but you might look at a scenario where they hold back a mortgage on it. But as a developer, your goal should be to tie up your capital for as little time as possible. So what, you don't want to close on the land ideally right away in terms of putting all your equity in. So next time I'm going to want to create a conceptual plan for the project, and that includes initial site plans, site layout, architectural and exterior and interior design concepts. And I'm going to want to bring my concept to the Municipalities Planning Department for a formal meeting and find out their level of interest and support for my plan. And during this meeting, they will give me a list of requirements that must be met, the applications that must be submitted typically to have zoning, draft plan, site plan as well as municipal and excuse me, as well as municipal fees involved and the approximate timeline to get there. So from there, I can further validate my costs and my schedule from there. So next I want to structure my financing. You know, I know in a project like this, it's going to cost me about ten million dollars to build, including land construction, marketing, municipal fees, soft cost, which would be engineers, architects, planners, et cetera. And I know a commercial or construction lender will typically land anywhere between seven point five and eight point five million on the ten million dollars. So in this case, let's assume they lend seven point five and I need to raise two point five million in equity so this can be the developer's own equity, or they can create a joint venture structure with an investor or a group of investors in a common structure that I see is investors will put up anywhere between 80 to 90 percent of the equity. So in this case of that two point five million in return for a 50 percent profit split at the back end so that the developer might bring 10 to 20 percent of the equity plus their expertize to the project in return for their 50 percent profit split. So on a project like this, your target profit would probably be around two million dollars total. So roughly one million dollars apiece for the developer and then the investors. So, you know, once once the equity is raised, that will give you sufficient working capital to get your municipal approvals. The project design created, marketed and ready for sales. So let's assume in this case that your construction lenders has agreed to finance construction after you have 50 percent pre sale. So 15 units, the purpose of your equity money needs to be to get you to the point that the project becomes construction ready and shovels can hit the ground. So you need to make sure it's sufficient. And once once construction is complete, if all goes well, your buyers receive occupancy and you can exit your project. It sounds simple, but of course, it's not right. And this process can take anywhere between two to six years, depending on the municipality you're dealing with and the type of product you're building for a project like this. Let's assume that it took three years.
Rob Break [00:26:21] So so you said it was a 15 unit in this scenario here,
Sandy MacKay [00:26:26] 30, right?
Blake Wyatt [00:26:27] It was it was a 30 unit, but 15, the sales would be required for for construction financing.
Rob Break [00:26:33] OK, I see what you're saying. Yeah. OK, so let's just turn this up here in my head, but I can't use my head, so I got a calculator. So you're looking at a sale price of around four hundred thousand dollars, a unit per per unit.
Blake Wyatt [00:26:49] Yeah, theoretically in this case, that's kind of your your number. So if I guess 30 units at, say, 400 grand, you're grossing about 12 million. You nailed it.
Sandy MacKay [00:27:01] OK, so what kind of challenges and roadblocks they face when you're doing a deal like this? Oh, man, there's a long list, but maybe some of the main ones that we often would see
Blake Wyatt [00:27:12] all development has significant upside, but also huge risk. Right. And, you know, every stage has its own degree of risk. You have risk the day you buy the site. I mean, it probably takes you anywhere between 50 to 100 thousand in capital just to find out if the site is developable or not in terms of due diligence and stuff that must be done. So you you have a risk the day you acquire the land, there's environmental risk. I mean, you can get your environmental report that you think is going to be clean. And it comes back with, you know, all sorts of challenges that you didn't know they might find, you know, archeological, you know, artifacts that you weren't aware of, which is going to set you back. They're zoning risk. There's entitlement risk. Those would be, you know, probably some of the hardest to manage because you're dealing with with political process and you're dealing with, you know, in a lot of cases, people's emotions. You know, a lot of people don't want their communities to be developed and they don't want density being added. So it's a very emotionally charged process. And and oftentimes cities and councils will, you know, listen to the voter, even though their planning department might have supported what you want to do with the site. Right. There's political risk. I mean, if you get caught in an election year, which we're seeing right now and, you know, a lot of applications of municipalities have kind of been on hiatus for a couple of months. You know, there's market risk. I mean, you might have that, you know, sale price pegged at four hundred thousand. But, you know, you might get a 10 percent correction in the market, which has happened. And, you know, your margins are cut in half. Right. You might have misjudged the market in terms of, you know, our buyers in this area going to pay, say more for quality or more for different floorplan or things like that that you weren't aware of. Or maybe somebody else with a competing product comes on the market at the same time and they undercut your prices by 10 percent. Right. I mean, these are all things that you can't control financing risk. I mean, you know, it's predicated on you being successful in raising the capital, both the equity and and the construction portion, you know, we saw in 2009 and the financial crisis, you know, very good projects that were approved and profitable and well-designed where there was demand could not get construction financing because the capital markets dried up. When that happens, you're paying interest on your land loan. You are you know, your land values drop when it comes up for renewal and you have to refinance here now, sinking potentially millions of equity just to avoid having your mortgage go into default. Right. So, you know, those things, they're not small. They cost millions of dollars. And, you know, nothing is ever fully eliminated in this business. But they can be mitigated. And I think the key to that is hiring and leading the right team of experts. As your consultants, you'll need an excellent lawyer who has experience in development. You need a whole team of engineers with varying specialties, guys who do traffic studies and environmental, archeological and so on and so forth. You need an urban planner who can help you navigate the municipal issues that you're going to face. An architect, a realtor, a mortgage broker. Your lender is a reputable builder. I mean, all those things are just the starting point of what you need.
Rob Break [00:30:51] And I guess it's probably tough to find reasonable prices as well to read. You know, the prices are being driven up right now. And so I would imagine that's pretty tough to.
Blake Wyatt [00:31:01] Yeah, land prices are being driven up. Absolutely. And, you know, and not only that, it's it's hard to get good terms. Like I mentioned earlier, like, if I was going to buy a property with a one year condition to get zoning, you know, maybe if I'm lucky, I can find a vendor who's willing to take the. But the problem is, is X, Y, Z developer down the street who has the cash resources to buy it in cash, is going to give him the same price with a quick close, which obviously he's going to prefer. Right. So not only land prices creeping up, but it's it's the terms. So, you know, because of that, I personally, you know, prefer markets that are on the outer periphery of of the GTA. If you're dealing in downtown Toronto, like, that's the kind of people you're going to be dealing with. But if you look at the Hamiltons and the waterloo's on the offshores in the areas of the world, you know, you might get lucky enough to find a site where you can pay a fair price and get decent terms.
Sandy MacKay [00:32:01] Is there a big difference in doing this type of thing in Vancouver or B.C., for instance, compared to Ontario or the GTA? And it's all pretty much pretty similar.
Blake Wyatt [00:32:13] You know what, it's similar in B.C. They have a different approval process. Like, for example, in Ontario, we we have zoning. Then we have draft plan approval and site plan approval. In B.C., they don't have site plan approval. Basically, you go from zoning to development permit. So it's a little bit of a different variation on it. But fundamentally, the business is more or less the same. What what we have in Ontario that's wonderful is what's called the OMB, which is the Ontario Municipal Board. And what that is, it's a government entity that oversees planning at a provincial level. And any municipality that overturns or any municipality that rejects a development application of any kind can be brought to the OMB by the developer and have the province overrule the municipal decision. So a lot of great projects that we see around our cities have actually been. Done that way, where the city says no, the OMB says yes, other jurisdictions in Canada do not have that. If the city says no, you're back to the drawing board or you have to walk away, you don't really have any other options. So I'd say in that sense, the the market here is very developer friendly.
Rob Break [00:33:37] That's cool, so that's an independent board.
Blake Wyatt [00:33:40] Yeah, it's you know what, to be honest, someone who has more experience with municipal matters could probably explain it better. I'm fortunate that I haven't been involved with them, like I've never been involved in a project that wasn't approved. So I haven't had to deal with them yet because I know it can get quite costly and quite expensive. But, you know, any any good municipal planner that you could hire to assist you in your project would have, you know, OMB experience that. If you had to go there, they would know how to how to handle it.
Sandy MacKay [00:34:12] Cool. So, like, there's a lot to this, obviously, and we all know that going in. Do you recommend this type of investment strategy for novice investors?
Blake Wyatt [00:34:23] I wouldn't recommend they develop their own land. You know, for a lot of the reasons I mentioned, like there, there are simply too many risks. You know, your your risk of financial loss is much too great. What I would do is they should consider partnering with an experienced developer as a joint venture partner, either where they invest in the developers project or in a scenario where the investor purchases the land and then brings the developer to the project to bring their vision and their expertize to to the property. And developers love that because they typically don't have to put any capital in for the land. Right. And another option out there is for there's a lot of companies that are promoting things like syndicate mortgages or private equity offerings, which allow smaller investors with as little as, say, twenty twenty five thousand to participate in development projects. So, for example, syndicate mortgages can pay between eight and 16 percent per year. And, you know, they're typically an interest payment plus some sort of bonus contingent on. The profitability of the project and in private equity, you know, typical returns can be north of 20 percent per year and they're usually structured without an interest payment and all profits are distributed at the back end of the project. So when it's complete. So for somebody starting out without expertize who wants to invest in development, I would look at something like that first. And then maybe once they get more immersed in how things operate in the mechanics of the project, they might consider being a little bit more aggressive and doing their own their own land deals at that point. So I guess
Rob Break [00:36:10] pretty tough for for for somebody just starting out unless they have maybe had 12 fifty million dollars in the bank, just sitting there burning a hole in their pocket or whatever, had be pretty hard for them to to start out with this anyway,
Blake Wyatt [00:36:23] that, you know, that's just it. And it's funny because I've seen a lot of not very intelligent people with a lot of money be able to be successful at developers because pretty much any problem that can arise if you throw enough money at it, you can solve it. So if you have, you know, significant resources and you're willing to take a gamble on it, then sure, why not? But if you're, you know, a smaller investor and you're just getting started out in the real estate game, you know, you're chewing off a lot without or sorry, you're biting off a lot with, they'll be able to chew it.
Rob Break [00:36:56] So they'd still need somebody like you anyway who knows that they do to run the project. Really, just because you have a lot of money doesn't mean and throwing money at is all fine and good, but still need to know what you're doing.
Blake Wyatt [00:37:09] That is true. But you know what? A lot of these guys with a lot of money, they'll just they'll they'll retain a team of people as opposed to a developer like myself because they want to keep all the profit for themselves. Right. Which, you know, not not an unreasonable proposition in our capitalist society, but certainly comes with a greater degree of risk for them.
Rob Break [00:37:32] Yeah, because get the money you throw at the problems is going down the drain.
Blake Wyatt [00:37:38] That's just sad. And I think anyone first go at it, they should have somebody experienced involved either as a project manager or a partner in the deal. And then once they they can absorb that knowledge from that person, I think they're well equipped to do their second one on their own.
Rob Break [00:37:55] So, Blake, what are you looking for in a partner who would be your ideal JV partner?
Blake Wyatt [00:38:01] I'm always open minded to partnering with the right people from the right people have to have a number of key attributes. For starters, the mutual trust is huge. Without trust, you have nothing. A shared vision is important. Do they share my vision for the community that I want to build, the product type I want to deliver and really the overall customer service experience that I want to create for my home buyers? Some developers and investors are more interested in building know, quite frankly, a garbage product that maximizes return rather than creating a product that has a legacy of quality. For me, I want to see what I have built 20, 30, 50 years from now and know that, you know, I can hang my head with pride, knowing it's something I built and that it's been lasting. You know, not all developer share that philosophy, right? So the people that I work with will share that that view. And, you know, this applies to everybody I hire, especially people that are going to have an impact on what my end user buyer sees and touches and smells and lives in. And I'd say in that sense, you know, really your builder, your realtor, your interior designer and your architect are going to be your crucial hires. And I apply the same philosophy to partnership that I do when I hire those professionals as well. I'd say a complementary skill set. You know, any time I bring in a partner, I know my strengths and weaknesses and I'm going to entertain a baby where somebody comes in and brings something unique and something I don't have. And, you know, I can give them the freedom to do what they're great at and they can give me the freedom to do what I'm great at without without tension. Right. And lastly, you know, I love working with great people that are pleasant and enjoyable. You know, I try to make friends with everybody that I work with. And if they aren't somebody I want to spend a great degree of time with, I probably wouldn't want to work with them either. There's enough there's enough egos in this business and in this town that, you know, you don't need them in your partnership. So I try to avoid it if I can and, you know, pick people that I that I love to be with.
Rob Break [00:40:23] How involved is the investor? Do they have an influence over your product or I would imagine it's more just they sort of have to mesh with your vision of what the product is.
Blake Wyatt [00:40:37] Yeah, you know, it really depends if you're bringing in a joint venture who let's say they're going to finance the majority of the project. You know, that's somebody who can probably write a seven figure check. They're going to want, in my experience, some degree of control or at least to be actively involved and communicated with in terms of what's happening. You know, if they're that successful, they're probably a person that you're going to want to rely on for some expertize because they probably have a lot of guidance and a lot of business success that they can share. So I'm certainly not closed to getting input from people who partner with me. But at the same time, if you if you are, say, syndicating a project where you might have to pool, you know, five, 10 or more investors to help finance the equity, you know, you're never going to get consensus. What that many people. Right. So in a scenario like that, I'd say the developer is best left to do their thing and the investors will be more involved in a passive role.
Rob Break [00:41:47] Perfect. I'm just going to jump back a little bit, because you said when you were looking at purchasing the land itself, you would try to put a clause in there for, you know, a year to get the municipal approval, though, is it correct? Yeah, something like that. And it probably takes pretty close to that amount of time to get everything looked at.
Blake Wyatt [00:42:12] Yeah, just for starters. I mean, you know, typically you have three three steps in getting approval. You might have zoning and then drop planning approval on site planning approval, which are all different stages and all have different requirements and they're all separate. So just because you get your zoning approved doesn't mean you're going to get your site plan approved and so on and so forth. Right. So, you know, typically zoning is the one that I would say, you know, it's pretty important to have before you own the land or at least an idea with the municipality that they're going to be supportive of what you want to do with it. You don't necessarily have to have a site plan approved land before you close on it. Site planning approval can typically take a matter of a couple of months where zoning can, you know, take, you know, a year or longer in some communities.
Rob Break [00:43:04] Well, I just thought that was really interesting because, I mean, that almost seems like one of the most important things to have in a purchase agreement, really, when it comes to this kind of thing.
Blake Wyatt [00:43:16] Well, I mean, back back in the day, like I say, in the 90s, you know, several years ago when when development was not as robust, it was pretty easy to get those term limits on a land purchase. It is much harder today because for the reasons I mentioned, I mean, if you if you offer that, you know, that some guy down the street who still sees the value in owning land, whether it is owned or not, is going to be making an all cash offer. So that's where you're competing with. Now, the good news is that if you buy a property, you can't get your zoning that you need. You know, you're probably going to find another buyer out there who's willing to take it off your hands. So you're probably not going to be caught in a situation where you have a worthless piece of land because someone else will come and buy it and they'll try to do something else with it or maybe try a different approach to what you were trying to do already.
Rob Break [00:44:13] So what you're saying is you want a guy like me to go out and find you land in the path of growth off the market, private deals and bring them to you? Absolutely. Absolutely. And that's interesting.
Blake Wyatt [00:44:29] Yeah, you nailed it. And and the great the great little ones for smaller developers to start out are, you know, the little infill projects where, you know, you're on a main road and maybe it's an old rural property that, you know, the city has grown around it, but it's a small city, maybe half an acre, you know, and there's an acre beside it. And you can kind of buy them as a package or, you know, I'd say anything less than a couple acres is a really good starting piece of land. You don't want to be doing one hundred acre development. Your first go at it.
Rob Break [00:45:05] It's making some alarms go off in my head. Interesting. OK, what real estate investing book would you recommend to our listeners?
Blake Wyatt [00:45:16] You know what I. I think I love Rich Dad. Poor Dad by Robert Kiyosaki. And I'm sure it's one you've probably heard on the show before. And many entrepreneurs rave about it and be their success to it. You know, I love it. It's not a how to book. It's not a get rich quick philosophy. But it really reading that book really opened my eyes to the investment portfolio, those of wealthy people and how they make financial decisions. And it pushed me and and drives me and still does every day to create that great business, as well as invest in real estate, both of which I believe core pieces for anybody who wants to create lasting, sustainable wealth.
Rob Break [00:46:00] And of course, I took in that book the same way as I do with every book. I was listening to that. And I remember when I first listened to and I called my wife right away, well, you know, because you do kind of something clicks that call them right away. And I said, Jen, we got to sell the house. We need to be renting. So that's a great book.
Blake Wyatt [00:46:22] You know, for me, I read that book back in 2004 and I guess, you know, ten years ago. And, you know, the first time I read it, I kind of I absorbed it, but it kind of went on my shelf and didn't really change the game for me. But, you know, I mentioned earlier in my bio that I do a family friend who has been very successful, successful in this business. And I asked him the same question, says, what's a real estate book I can read? And he says, read that book again. And I read it again. And after my conversation with him, you know, I saw things in a different way and know seeing now how he operated his business and how he built his asset base based on those philosophies, for me, it really started to make sense.
Rob Break [00:47:08] Well, you know, it's the same kind of thing with self development. But like I know I hear you saying when you first read it, it's hard to kind of grasp all that stuff. And it's the same with any personal development kind of material where, I mean, however many ten years ago, if you had asked me to read a Tony Robbins book, I would have said, oh, that why would I want to read something like that? That's all just baloney. Right? But I mean, there is so many things in there that can really help you improve. If you just if you just look for them, you can get a great audio book, just like the one mentioned here. When you go to break through Ariah podcast, Dossie slash audible free trial.
Sandy MacKay [00:47:52] And you know, it's another cool book I was just thinking of is just going back to your early on in this episode, your story there, Blake, was a book called Never Eat Alone. I don't know if you guys have heard of that by Keith Frazey.
Blake Wyatt [00:48:03] I've heard of it. I haven't read it yet.
Sandy MacKay [00:48:05] I was just thinking because you were mentioning that first lunch you went on with the developer and now catapulted your I guess that was almost the kick start in your career here. I didn't know this I. That box of cool book to just about the basic concept is just eat with somebody every day and it's kind of a networking and relationship building book, but it reminded me of that.
Blake Wyatt [00:48:26] I totally agree. And, you know, when I when I look back at my business career and, you know, some of the successes I've had and some of the contacts I've made, I'd say 70 to 80 percent of them were either made or solidified, either over a meal or on the golf course. So if there's anybody in business and I know Sandier, you're really not a good golfer at all.
Sandy MacKay [00:48:49] But I can have more. I can at least four to seven fairways. Think and but
Blake Wyatt [00:48:58] yeah. No, I think, you know, anybody who who wants to be in business, I think those are two things they really need to to capitalize on is just, you know, be be in front of people, whether it's via lunch or a round of golf or a networking event, and just be a sponge and and try to absorb as much information as you can from people that are where you want to be.
Rob Break [00:49:22] Does it count if it's a four year old and the two and a half year old?
Blake Wyatt [00:49:25] You know what, kids? I've got a five year old and he challenges me in new ways and he pushes me to be better and in a lot of different ways. So, you know, whether they're there to five or eighty five, you know, I think everybody has something they can teach us, right?
Rob Break [00:49:43] Yeah. Again, I think challenge is the right word for that. Yeah.
Sandy MacKay [00:49:47] All right. So, Blake, what would be your number one tip then for investors who are new to real estate development?
Blake Wyatt [00:49:53] You know, I definitely surround yourself with the right people. I realize as a new web developer, your ability to execute a successful project is highly, highly predicated on the people you bring in. And just because you know you're new, it doesn't prevent you from hiring the best builders, designers, realtors, architects, engineers, planners. You know, I recommend only hire people who work with other top developers. You know, you can learn some of their trade secrets and bring those people in your team and make you better. Right. And, you know, you have to understand your your role as the developer is not to be the expert in all things, but to be able to successfully lead influence and manage those people who are great at what they do. And remember, you're the conductor of the orchestra, but you also have the most to gain or lose if the project doesn't go according to plan. So the buck stops with you. And don't forget that.
Sandy MacKay [00:50:49] Awesome. So you're pretty active online on Twitter and whatnot. Where can people learn more about you? Where is the best place for them to go?
Blake Wyatt [00:50:55] Yeah, they can connect with me on on Twitter. I'm very active. My handle is quiet. B l e w y all one word and or they can email me. It's Blake at Wyatt DSV Group dot com or they can call me, have a chat nine five six one six two four one zero.
Rob Break [00:51:19] But really we really do appreciate you coming on tonight. This, this has been a great interview.
Blake Wyatt [00:51:24] Yeah. Thank you so much for having me.
Sandy MacKay [00:51:25] I know there's tons of value in there for sure. I really hope people got some some good information there and I hope people take it and do something with it, learn and and take some action to maybe invest with someone like Blake or just use it for themselves to to grow and grow their own business or grow their investment portfolio.
Rob Break [00:51:45] You know, this really is a different like a totally different offshoot of the topics that we normally do on the show. So this is the way that someone who wants a more passive role can really get involved with some really cool and exciting projects.
Blake Wyatt [00:52:01] Yeah, thank you. And, you know, just add to that, like I was saying earlier, you know, I hope that people who listen to this, if they're maybe involved in other areas of investing, whether it be commercial, residential, student housing, I hope that what I've been able to share will give them a different perspective. And for example, if you're looking at, say, two different student housing complexes that you want to purchase to understand how a developer would approach the purchase, may heavily influence their ability or their willingness to buy a certain one over the other because they might see now, hey, you know what? Maybe this one ten, fifteen, twenty years has the potential to be condos. Or maybe this has the potential to be on a light rail line, which I know is going to significantly improve my land value. So if they get anything out of that, I really hope that they can understand that that little piece of information could literally make them millions of dollars in terms of asset value in the future. Mm hmm.
Rob Break [00:53:05] OK, and one last thing again, just check Blake's Twitter. I really like it. So I suggest that everyone goes and checks it out. And congratulations on your one thousand followers. Thank you. Today. So that's Blake Wyatt.
Blake Wyatt [00:53:19] Yeah, I met one or two or a thousand to since then. Maybe it will be at eleven hundred after tonight.
Sandy MacKay [00:53:26] I get it. So. OK, thanks a great night.
Blake Wyatt [00:53:31] Thanks so much guys. You too.
Rob Break [00:53:33] But. If you're interested in investment opportunities with us, go to break through r.i Daudzai.