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Ever wonder what really happens behind the scenes in construction, real estate, and development?

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We pull back the curtain on the new home construction industry, the real estate market, and the trends shaping it all.

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Discover the stories, insights, and expertise behind the process of building a new home.

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Join us for Trust the Process podcast, and let's build something great together.

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Welcome back to Trust the Process, podcast where we look behind the scenes at real estate, construction, and everything in between.

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So this is part two of this episode that we did last time on subdivisions, got into subdivisions and realized it's a really big part of it.

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As it turns out.

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So we thought we could sort of manage it in one and realized quickly that it's just a much bigger topic.

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So we're going to just continue our conversation and probably end up continuing it again over time at a later time again.

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Possibly.

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I was wishful thinking to think we could get this done in 15 minutes when the Louisiana purchase was literally brought on.

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I can't believe we couldn't get it done.

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We're back to 1804.

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Come on.

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So I think, yeah, I'm glad we did the side.

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Brian, I'm glad to break this up into multiple episodes and I think it'll be useful.

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We could almost just call that subdivisions zoning.

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I mean, that's it's really what we were talking about was, why do we have zoning the way that is?

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Why do cities look the way they do today?

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And why are we kind of stuck in this cycle?

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Yes.

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Of growth.

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Of growth.

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It matters.

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So now you've acquired this piece of land.

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Right.

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It's already zoned.

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So you have to either decide that that's what you want to build.

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That's right.

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Or have it rezoned.

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And what are the partitions that you have to remain between if you do get it rezoned?

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Or what are the, you know, what are the legalities to doing that?

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And it's a push-pull with the city.

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And as I mentioned in our last part, builders generally want to go denser.

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Builders generally want to get more units per acre.

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Just if you're in the business of building and selling homes, the more homes you build and sell, the more money you're going to make.

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Tens too.

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Right?

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Generally, generally, as you get into a luxury, there is a fine line where you go, oh, I could actually build a more premium product.

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And if I'm looking only at margins and not looking at the greater good, which I do factor those things in, believe it or not, it's not just purely margins.

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It's what do I believe in?

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And what do I think this area calls for?

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And that's really what you're looking at.

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So in general, in most jurisdictions, if you control enough land, you can apply for increased zoning.

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If you don't, let's say in Las Vegas and the Greater Metropolitan Area, it's five acres.

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So if you own less than five acres, you're stuck with the zoning that it has.

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The city can rezone swaths of land.

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That's not a problem.

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And there are some areas that have been rezoned that may be started in Las Vegas.

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Our default zoning is two homes per acre.

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Pretty much if you pick a, if you throw a rock and you're in the desert and you went on that park, that is two home per acre zoning.

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That is our default zoning.

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Yes.

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And it can be right along a freeway and it can technically still be two homes per acre.

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And you can talk to the city and ideally talk logic into them and say, look, this is along a major thoroughfare here.

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There's apartments here.

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It's five.

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It's two homes per acre.

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I own five acres.

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Can I get 15 homes per acre?

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Can I do cluster homes?

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Can I do town homes?

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Can I do something that's more congruent and nine times out of 10, they're going to want the tax base.

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And ultimately 150 kind of moderate homes is going to yield higher property taxes than 50 luxury homes.

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So if you're looking at it in terms of the viability of a city, generally speaking, you're going to want that densification.

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Now, the push pull on that is denser neighborhoods are generally not as popular.

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So if you're a city council person voting these things through, you could become, you could find yourself very politically unpopular, at least with the immediate neighbors.

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And in your ward, you could see a smear campaign because you'd say, OK, this guy voted in favor of dense, dense, dense, dense, dense in our ward.

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And he angered all these surrounding people and then you could be next.

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So survival of the political fitness would say, OK, you've got to walk a fine line between not allowing too much density and allowing and also allowing growth.

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And then conversely, as we talk about a housing crisis, we might see political winds shift and hopefully we can break some of this nimbyism or not in my backyard.

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Everyone wants more housing, not around them.

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And they don't want the traffic. They don't want the noise and I want the schools crowded.

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So everyone wants the housing. They don't want to think homes are unaffordable.

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They want to welcome people into their city in general.

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I feel that most people are that way, but they don't want in their backyard.

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So we would never heard that before that we would undo 100 years of human psychology.

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I don't think we'll ever see those times change.

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But ideally, until we see it become politically unpopular to block housing, those are not going to change.

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There's always going to be a push pull where me as a builder is always going to want to build more units.

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A city is always going to want to push back, balancing their property tax rolls and making sure their city does grow.

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Growth is ultimately the best thing to curate a viable city.

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You're getting impact fees. You're getting permitting fees. You're getting inspection fees.

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You're getting new tax base. It's all fun and games as I mentioned in the last episode.

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The first 20 years of growth, amazing.

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And you have taxing. It's taxing to overuse that word.

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It can be taxing on the system and suddenly before you know it, your main thoroughfare is backed up now.

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But again, when you're in a short-sighted and you're a city and you're a city councilperson,

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you're running a city manager or a mayor, you're going to want that growth.

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You're going to want to oversee that growth.

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So that part we do have going for us, right? That most cities are going to want that growth.

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The challenge is getting it, getting those densities approved that you're looking for.

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So this serene project was under the threshold.

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We were zoned for six homes total on the parcel.

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So we just had to go through the engineering, the civil improvement plans.

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Where are we going to plug into? What are the right-of-ways going to be?

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We're able to use existing right-of-ways. We didn't have to build streets.

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And we'll go into more detail on serene later on.

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Right now we're in our land development stage.

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So the parcels are recorded. The map is approved.

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The civil improvement plans are approved. We've done all the grading.

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And we're currently pulling in utilities and it is January 2025.

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The parcel was acquired December 2022.

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So it is a long, long, long process and we did not even change the zoning.

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We followed the existing zoning and then we followed the exactly, you know, prescribed parcel sizes.

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They wanted this width for each parcel. They wanted it divided this way.

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They didn't want a bunch of triangle lots. They wanted nice square slash rectangular lots in there.

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And we gave them everything we wanted. They wanted between that and getting the proof to tap into the sewer system,

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a proof to tap into the water system, a proof to use the existing roadway,

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do a cul-de-sac and, you know, all of that represented pieces that create subdivision.

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That's right. That is then moving forward forever.

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That's fit forever. Right.

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And then we can further subdivide in 100 years. Those 15,000 square foot home sites.

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This is what we're stuck with. This is what we'll build out.

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So that being said, what was it to?

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It represented, we started the offsite improvements in September.

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So it was still a year and nine months to get to that point.

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Could we have tightened up some of the timeline? Absolutely.

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I came into the project as a joint venture partner in April of 2024.

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I was not involved for the first part of 23. So I've had all the good and none of the bad.

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And thankfully I was fortunate enough to have them having gone through all of that and moving.

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And yeah, so I can't speak to how we could have tightened up.

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Because within five months of me buying into that project, we were moving dirt,

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which is very satisfying.

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We were able to push, get the permitting approval and get all the bids in line and get the utility on all the infrastructures on the books

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and get that going. And when I think back to it, really five months was breakneck speed.

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And now we're four months into that process of moving dirt.

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And if you drive by there and we'll share in later episodes some drone imagery and some,

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in the field imagery, they look like they're ready to go, which is really interesting

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and really, really neat, really satisfying.

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And the homes are designed and the engineering for the homes are ready to go.

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We're ready for permitting as soon as we get our addresses.

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Probably next week and we'll be able to submit to the city.

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And we'll let you know when that happens because we're waiting anxiously for those addresses.

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Once we get those addresses, we'll apply for all six permits.

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And we probably will start all homes all at one time.

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That's my intention.

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And then we'll trickle them into the market as the market can bear it.

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So we might prelist a couple at slab and then a couple at framing and just kind of trickle them and stagger them in

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and kind of let the market absorb them.

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And then if we are left with a couple at the end, then that's okay too.

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And even though they'll be starting at the same time because they're using the same subcontractors and a lot of the same vendors,

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there will be a stagger.

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They will not finish at the same time.

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They will.

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They will.

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They will have a inspection on one home that is on another.

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That's right.

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And so while they'll all be happening together, they won't necessarily be happening at the same pace.

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That's right.

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I would imagine between the first one completing and the last one completing could be as much as six months of difference.

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So I think we'll probably stagger them in between the two and four months probably between, you know, the deliveries.

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Yeah.

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So, great.

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So that's kind of where that, how that looks.

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And does that answer the questions on at least zoning and subdivisions?

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Oh, I mean, it's a good, it lays a foundation for where we're, you know, that's kind of the launching pad.

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So creating that subdivision, starting with that raw land and then what happens to it from there to actually become a home site.

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So that, that sort of that, I feel like that answers that piece of it.

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Right.

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And this will continue talking about.

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Yeah.

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And Serine will be a good example of how those decisions are made.

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We have a couple of other subdivisions that are in the works and we can kind of touch on those as they, as the picture becomes more clear.

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Yes.

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But to touch back on your zoning and your parcel sizes and things like that, that kind of informs the product that we're going to put there.

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So when I knew these had to be 15,000 square foot home sites, that's on the, that's large for our market.

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That is a considered a, at least a move up, but probably it's an estate size.

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It's an estate size.

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I would say that probably 12,000 and above is kind of the category in the threshold.

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So in the sales world, in the sales world, in the sales and marketing side of it, you know, from the right.

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So with that, when you have your land cost, your infrastructure costs, everything that takes to get those pad ready.

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And you're dividing that by six versus eight or 10 your parcel, your individual land costs is so much higher per per home, your individual cost.

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Therefore, you have to build more of a luxury product, but you have a larger lot to carry that sales price.

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So that's kind of all those moving parts come together when you're in the build to sell world.

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You think, okay, I can get 15,000 square foot home sites out of this.

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And that's an estate style home.

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That's a luxury or at least an entry level luxury home.

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In our market, that's about a 1.7 to 2.2 million dollar.

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Home and the why we're not higher or not gated.

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There's other, there's other limitations and objections that that neighborhood will have.

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So I think of what's my floor.

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I know I'm at least a million four just I could build a cardboard box on that, but because of the lot size, because of the location in the zip code.

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So 1.4 million dollar home even if it built to 2,500 square foot simple basic box.

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And then you're trying to find the sweet spot where you can maximize your margins and then say, okay, I can put another 100,000 into this home and sell it for 1.7.

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And then you kind of start chasing your tail until you hit your, your, your limiter.

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And you say, okay, now let's start working backwards.

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Now we're at a 2.5 million dollar end of day sales price because I've created this home.

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That's 5,800 square feet with accessory structures and we're going to build six of them.

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We're going to include the pools and that's actually how it worked. I created about 10 performers that said, this is our, this is our dirt costs per lot.

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This is what the market can bear up to this point until I had around 3 million and then pulled it back and went to 2.5 and then you look at the market and say, okay, I know they're not delivered today.

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But if they were delivered today, could, could this area carry 2.5 and I didn't feel that it could and I dialed it back a little bit more and dialed it back a little bit more and kind of found a sweet spot.

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And I think those homes are going to land in the 1.8 to 2.2 depending on the model that we put there. We have two models and keeping in mind the feasibility of that. Right.

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Who is the buyer? What's your demographic? What is that? You know, what's the surrounding areas?

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That's right. You become so you have to know who you're building for, of course, to make sure that you're staying.

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You become incongruent with the neighborhood. Right. You're not, you don't exist in a vacuum. You're looking at, I mean, for you, you're looking at the numbers and all of those pieces.

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But then in conjunction, there's a whole nother layer that has to be. Absolutely.

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There's a lot of weight in the big decisions. That's right. And once you go down this road, you kind of are stuck with it. And those homes were conceptually done.

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Six months ago. So we, I had those pretty much that whole idea hammered out by July, July, August. So I knew six months ago what we were putting there.

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And now I just have to run with it and hope it was the right decision. And at the end of the day, you can correct certain things.

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You can maybe if you felt like you underdeveloped them a little bit, you can maybe increase the finishes, maybe include some pools, maybe just make certain decisions on the fly to say, let's, let's grab that.

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Maybe the market is 2.5 by then. Let's grab that 2.5 buyer by doing opaque glass garage doors or big aluminum sliders instead of vinyl and things that can move the sales needle that didn't need to be decided six months ago.

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That can be decided in six months from now. So those are the kind of the decisions, but you're stuck with about it. Yeah. Well, the market will bear.

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You're stuck in a 10% window though. You know, I will not be less than one eight. No matter what I do, and I won't be more than 10% of one eight on that particular model.

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No matter what I do, I could put gold played in everything and there's only so much that the exactly on the market will only support so much. Right.

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So that's, that's really how pulling the curtain back without getting into all of the nitty gritty of I think some of the nitty gritty will expose itself over time.

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I think as we follow that project and other subdivisions, the more we talk about these and the more that we look at some of the intricacies of how this is happening as we unfold this project, I think a lot of those things will, you know, the nitty gritty, if you would.

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It'd be better to see it through example to say, oh, this is what we're dealing with right now. And this is why. And this is what could have been avoided. And that's why, again, I can't speak to how we could have tightened up the timeline before April 24.

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But I'm in the middle of new subdivisions now and seeing how fast a month can go. Because there, there's one in particular that I have no zoning on, and I have to apply for all brand new zoning just to get anything in there.

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So I know how quickly it can get eaten out because I'm starting from even before, you know, farther upstream than they were landowners of the syringe project. So the original landowners that is.

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So great. Love it all great information. Yes. And kind of laying the foundation for where we're going to continue talking about that Serena States project, but also giving some backstory on zoning and subdivisions and how we kind of got to where we were with those.

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So hopefully that was good information for you guys. I enjoyed it. Thank you. Thank you. Thank you.

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And look forward to seeing you guys join us on this journey and we will see you again next time on Trust with the process podcast. Thanks. Bye bye. Thanks for tuning into the process podcast. Make sure to follow us on Spotify to stay in the loop with the latest insights project updates and everything in between.

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See you next time.