The Real Estate Investing Club

Finding and Developing Raw Land with Neil Goradia | The Real Estate Investing Club #14

Transcript of “Finding and Developing Raw Land with Neil Goradia”

Gabriel Petersen 0:02
And we are live. Neil, thank you for joining us today. How are you?

Neil Goradia 0:08
Good. How are you? I’m doing fantastic.

Gabriel Petersen 0:11
I know you’re calling from the Midwest Indianapolis correct?

Neil Goradia 0:16
Yep. And you have this Indiana I grew up here. It’s a great place to invest in real estate.

Gabriel Petersen 0:21
So I’ve heard so I’ve heard I’ve been trying to get into Columbus myself. To get us started though, why don’t you tell us you know a little bit about yourself, who you are, where you’re from, and how you got started in real estate in the first place?

Neil Goradia 0:34
Sure, yeah. My name is Neil radhiya. Like I mentioned, I grew up here in Indianapolis. And by training, I’m a mechanical engineer. I’ve always liked how things works, try to figure out how they work. And went to Purdue to get my engineering degree and then worked for Rolls Royce for 10 years designing airplane engines, so it was completely different than real estate, but that’s how I got my start in my career. A couple years into that experience I kind of I read a book like like most people had Rich Dad, Poor Dad. And it really got me thinking about the idea of passive income. And that was just a big, you know, mind blowing, thought that you can make money when you sleep and I didn’t want to let that idea go. I wanted to see where that could take me. So I started talking to friends about that. And you know, before you know it, I had two or three people who had read the book as well and they were there my good friends growing up, and we just started buying houses. This was all during working a nine to five job and it just progressed from there. We started buying renovating refinancing the bur method, we started flipping, we bought delinquent notes where the person hadn’t really been making their payments on time and we took those assets over from them. It, it kind of went from there. So that’s, that’s kind of how I got started. And eventually I got to the point where I could leave my job. And in fact, what I’m doing now is more on the wholesaling side as well as developing land into actual neighborhoods. So our first neighborhood that we developed was 20 acres and 41 lots that we were able to subdivide. And we’re doing another one that’s 33. Lots this year, and it’s just going to continue from there. So it’s been a great experience.

Gabriel Petersen 2:38
Wow, there’s a lot to pull from that you expand pretty much every niche of real estate investing in that, uh, when did you get started? What was the first year that you you know, you bought that first house?

Neil Goradia 2:49
So I was 25. This was 2007 2000.

Gabriel Petersen 2:53
Oh, wow. So right at the, at the bottom of the barrel there.

Neil Goradia 2:57
He kind of was I bought my first two deals when it was wasn’t quite at the bottom. And so that that probably was the reason why I didn’t do very well on those deals. But, you know, I have to say having a business partner that pushes you allows you to get through those low spots where you think you just want to give up. And it really helped me continue going. I mean, there’s many times where I just wanted to stop. But looking back, I’m so glad that I didn’t.

Gabriel Petersen 3:23
Yeah, I can, I can actually attest to that having a business partner, or anybody listening, watching if you don’t have a business partner that you’re working with. It is so important, at least for your motivation. Neil, you can probably speak to this to having a business partner. Not even on individual deals, but to like work together and push each other. It’s it really helps you keep going when the when the inevitable downturn comes.

Neil Goradia 3:50
That’s right. Yeah. And one thing you’ll learn is, you know, there’s when you have a business partner that complements your skills, it’s really great because you can Focus on what you’re really good at. And you can have them focus on what they’re really good at. And, you know, it’s whereas if you have the wrong partner, you guys are both trying to butt heads on every decision. And so it’s really important to do your due diligence upfront and make sure that you guys are a right fit for each other.

Gabriel Petersen 4:18
That is also very, very good advice. So it sounds like it’s funny you are, I think the third engineer and at least the 10th person that said they got started with Rich Dad Poor Dad. So this is a common theme that’s been coming through the show, it’s really good. So you got started buying houses you did just regular you know, rentals and then fix and flips and then you got into the bur method, then you got into notes. And now you’re you’re doing development. So kind of tell us why why did you decide to I mean, that’s, that’s a broad breadth of different strategies. And they all kind of you know, entail different things. So why did you decide to go into into land development?

Neil Goradia 5:04
Yeah. So land development has always been just something that I thought was really cool. I mean, everybody that I talked to about it just gets super excited about it. Like, how did you get into that? You know, and that’s how I felt before I got into it. I wanted to get into it. I want to learn how to build neighborhoods, how to build something that’s going to be there after I die, you know. And so, the funny, funny thing came about is that my my old roommate from Purdue, called me one day, this was 20 years after we graduated, and he said, Listen, I’m relocating to Indianapolis from Chicago. And I haven’t been able to find a property to buy that fits my needs, but I did find this piece of land. You have real estate background, and I have experience in developing high rise buildings and other type of developments in Chicago. Maybe we can combine our skills and try to make this into a neighborhood and I can My home in this neighborhood. So it it probably wouldn’t have come about if I wasn’t listening for that nugget. You know, once you start thinking about things more you start your ears start picking up things. And he just happened to mention something about development and I my ear perked up and we had that conversation. So, you know, it took us about five years to really complete that development. But it was a lot of lessons learned a lot of, you know, cutting our teeth on some things that we just had no idea how to do and how, you know, luckily, we were profitable. You know, we didn’t probably make as much money as we could have, because you know, things go wrong when you’re doing it for the first time. But it was really exciting, and it was something new. And I think that’s why you’ll see you know, that I’ve done so many different things. It’s not because I necessarily wanted to do 10 things in real estate. It’s just that I love the challenge of learning something new. So after a couple of years, when I get To routine, I don’t necessarily feel like I want to keep keep staying in that routine. I want to go on to something new and learn something new. And that’s that’s how I probably ended up in development.

Gabriel Petersen 7:10
I like it. I like it and I’m sure it itches or scratches that engineer itch to solve all the problems that go along with developing land.

Neil Goradia 7:19

Gabriel Petersen 7:22
So why don’t you take us a little bit further into you know, developing land this isn’t something that a lot of real estate investors do, especially when they’re getting started. I mean, it’s definitely something that a more experienced investor engages in. So kind of tell us first How do you decide on you know, you’re starting from scratch you’re starting from from raw land. So how do you decide on the parcel on the land and you know, what are you looking for? What demographics are you looking for? What what you know, aspects of the actual land itself Are you looking for and then kind of tell us, you know, what’s the process from there? You know, you got to get permits, you got to find a builder. Just take us through the entire process nuts to bolts. How does land development go?

Neil Goradia 8:11
Sure, yeah, it’s and there’s so many variables involved, no two deals are going to be the same. So that’s kind of also why it’s tricky. But yeah, starting from the beginning, when you’re locating a piece of land, you know, it’s important to know what type of utilities are available. You know, it’s not necessarily true that you’re always going to have a water connection or a sewer connection right across the street. And you might have to go two miles down the road drill under the road to get your parcel, and that’s a huge cost. So you need to you need to understand that part of it. You also need to understand what type of plan the city itself has for that parcel. And this is something that a lot of people don’t know is that most municipalities actually have land plans for the entire city. They have a vision for their city for the next 20 years. And they’ve actually blocked out every part of their city as to what they would like it to be. So there’s parts that they want to be residential. There’s other parts that they want to be commercial. There’s other parts that they want to be industrial. And so really understanding what their land plan is and what their vision is for the future gives you a step up when you get to the point of proposing your project to the city because you can tell them that you’ve already looked at their vision and you’re in line with what they want. So those are a few things you need to look at. Obviously, school systems are important if you’re building residential homes, and you want people to be able to to build a home that they want to stay in for a long time. Access to infrastructure, such as you know, interstates and things like that. So pretty much there’s a lot of similarities with single residential flipping that you do to make it desirable for someone that wants to buy. But you just have some added things infrastructure wise on the land development, that you have to pay attention. too. And then structure wise once you buy the land, you you have to take it through rezoning typically isn’t it’s usually not zoned to what it needs to be on the back end. And that cross,

Gabriel Petersen 10:16
there’s both zoning and what you said before was just city planning that has nothing to do with zoning, it’s just their, their vision for for what that plat should be.

Neil Goradia 10:27
It does have to do with with zoning, it’s kind of it goes hand in hand. So basically, if their thought is that this area needs to be residential, then there’s zonings. There’s zones that that will comply with that with that process. So, for example, a single resident single family residential neighborhood, there’s our one or two or three those are the main densities eat with you know, each number represents the amount of density and the amount of units you can have per acreage. And if you’re going to have it more dense, you Go towards one zoning, if you want it to be more spread out and not as many units, then you’ll then you’ll go towards another zoning. And so that’s that’s kind of the iterative process you have to go through with the city is you have to sit down with them and say, This is what I’m planning. Does this work for you? If not, how you want to tweak it. And it’s a very political process, which I never really understood to begin with. You’re dealing with presenting your project to city council members that have been elected to that office.

Gabriel Petersen 11:31
Oh, it’s,

Neil Goradia 11:34
it’s a situation where you want to make sure you appease all of their all their requirements. And even if you go in doing exactly what they told you to do, there might be two or three people on the city council that disagree with what you’re doing and they’re going to vote no regardless. So it doesn’t

Gabriel Petersen 11:55
have to be I’m assuming it doesn’t have to be unanimous vote in that case or outside.

Neil Goradia 12:00
doesn’t doesn’t need a majority, but it’s it’s nerve racking because not everybody shows up all the time. So initially you thought, you know, you’re needed the majority of nine people, and it might be like a five and four account that you have to go for. But then if only four people show up, now, you know, now the ratios are slightly different. So if you just know what you’re gonna get,

Gabriel Petersen 12:21
I’ve I’ve never thought of that aspect of I’ve never done development myself. So that’s, that’s really interesting. You actually have to never considered that you’d have to deal with with local politics in that sense. Yeah,

Neil Goradia 12:33
yeah, exactly. In most cases, you know, we try to do what’s right for the surrounding neighbors. And a lot of times what that is, is improving drainage. You you end up buying land in areas where water pools next to people’s houses that are next to you. And it’s really great to be able to present your project and show that you’re improving the neighborhood around you that helps you with with support and helps you get approved in the city council. And we’re proud of being able to do that for our neighbors.

Gabriel Petersen 13:07
Hmm, interesting. Okay. So once once you do get the zoning, so say you got your r three, which you’re looking for and now what’s the next step

Neil Goradia 13:17
after that. So after that, you know, during the same process, I would say you also have to look at your soil make sure that the there’s no environmental contaminants in the soil, you have to make sure that if you’re building a home that’s going to have basement basement then that the soil composition is suitable for for digging basements. So you want to make sure you do all your due diligence. And once all that is complete, and you can pretty much apply for permits with the city and bring those utilities to the site if you need to water sewer, sanitary, sorry, water, storm, sewer and sanitary and once you have As utilities there and the infrastructure is built, you’ll pay roads, and you want to get those roads paved. And you’re basically creating a secondary plat, which is what the document is that gets recorded that shows you’ve split up the property into however many parcels. That’s what gives each of those individual parcels its own parcel number. And at that point, you just have to team up with a builder that that’s going to build those actual homes. There are some developers that build homes as well like themselves. And so then they just they can start building their product. In our case, we don’t specialize in building the actual structures, we just specialize in building the infrastructure. So on our first neighborhood, we found a home builder that’s looking for that particular parcel, and we partnered up with them and they signed a takedown agreement, which guarantees to us that they’re going to buy a certain number of lots per month and after so many years, you’ll sell your lots and you’ll be done. Gotcha. Okay,

Gabriel Petersen 15:04
I, I always wondered that. So you, you actually you do the land itself, you prepare the land and then that’s where you stop, then you’ll sell the the plots, the prepared plots in our flats to, to the developers,

Neil Goradia 15:18
right, and the investment is all on the front end. So the land purchase the construction, the rezoning paying the attorneys to do all the rezoning all of that work, cost money and you have to pay that up front. Then as you sell lots that those loads, those construction loans get paid back. And then the rule of thumb is basically that you’ll you’ll need to try and aim for 75% of the lot sales to pay for the infrastructure and then after that, the remaining 25% on the back end is where you make your profit. So it’s a little bit riskier, because you’re you’re taking all that chance up front, but if you do our due diligence the right way. You’ll be making pretty good money on the back end.

Gabriel Petersen 16:02
Let’s go say that sounds sounds a little too scary for my for my kids. Yeah, you got a bigger balls than I do.

Neil Goradia 16:10
All right, for sure. I mean, but that’s kind of what I thrive on. Right is that challenge? So hopefully you build up enough buffer in there to where even if things go wrong, you know, you’re not in the read at least. Yeah.

Gabriel Petersen 16:22
Yeah, for sure. Because I, so the last development you did about what, how, what was the size in terms of, you know, upfront capital that you had to do for that?

Neil Goradia 16:31
Yeah. So our first one, cost about two and a half million to purchase the land and do the development on and, you know, hopefully, when you when you sell those lots, on the back end, you can sell them for, you know, between 90 and 120 k a lot, just depending on the type of product that’s going to go on there. Or, you know, whatever a builder is willing to pay really because it’s a negotiation at the end of the day.

Gabriel Petersen 17:00
Okay, that’s interesting. So I want to take it a little bit. A little bit past just land development. So you’ve, you’ve gone I mean, you’ve done single family multi, are you have you done multifamily? Have you like split multi family houses

Neil Goradia 17:14
and we have not flipped them? I mean, I’ve owned them as a landlord. But, but yeah, I have not flipped on.

Gabriel Petersen 17:22
Do you? Do you still own rentals? Are you 100% in for?

Neil Goradia 17:27
No, I do I do. I still own about 12 and I’m still looking to acquire more because as you know, you know, as Rich Dad Poor Dad treated teaches us is that you know that the passive income is what allows me to do this full time. You know, it allows me to I also mentioned earlier that we moved to Asia with our move our whole family to Asia for almost a year. And I didn’t have a job there. So it’s the passive income that that allowed us to do that. So yeah, I’m a big believer in inventory.

Gabriel Petersen 17:58
That’s great. That’s Yeah, that’s Exactly what Rich Dad Poor Dad says. So congratulations. Thank you so actually I’m curious what of all the different strategies that you’ve done you know, land development, single family, burn method, etc etc which one has been I was gonna say your favorite but also I suppose the most effective in getting you to where you want to be financially

Neil Goradia 18:25
yeah that’s a really good question I would say a lot of people get started in wholesaling first then maybe flipping and then maybe rentals just because the barrier to entry is lower and it’s it’s better to make money faster in that order. I did it the exact opposite. I it’s it’s so strange. I started buying a rental and then after the rentals, I started flipping and then after flipping, I got into wholesaling and I think there’s no good explanation for that other than in my mind. After having read everything I knew that passive income was the ultimate goal. That’s how I knew that you become wealthy it’s not from just making the money up front quickly and then doing it over and over again because again that’s going to feel like a job you know, just keep doing those things over and over again. And so I mean, we didn’t have the capital we needed right away to buy the rentals but we borrowed and bagged and who knows took out credit cards and

Unknown Speaker 19:33
didn’t really had to do to do

Neil Goradia 19:36
you know, we work eight hours a day at our normal jobs and then work eight hours after that in the same day, renovating our properties. So it was a long you know, for two to three years so I would say there’s no there’s no best way of doing it if you if you’re interested in wholesaling. If you want to make quick money with with little investment, that’s perfectly fine. If you’d rather do Get your hands dirty and flip yourself, that’s fine as well. Or, you know, if you want to go straight to the rentals that works. Also, you just got to think about what opportunities are coming your way be open to doing all three of them just depending on what comes your way.

Gabriel Petersen 20:13
Like it. So we’re going to switch gears just a little bit here. We’ve talked about, you know, the nuts and bolts of your business, how you do land development, you know, the actual process of getting, you know, buying the land planning it out. So now I want to hear a little bit more on the personal side, a little bit more of the stories. I mean, we all know, real estate is you know, it’s a roller coaster, you got your ups, you got your downs. So kind of take us what has been kind of the most not the lowest point but also the most difficult thing that you’ve run into in real estate and what what lesson did you pull from that?

Neil Goradia 20:48
Yeah, I like that question. It’s challenged me personally in more ways than I ever would have imagined. And it continues to do that even today. I mean, even after having Everything I’ve done, I get challenged on a personal level level every single day. And a lot of it comes down to things that you’re just not quite comfortable with. Like, for me personally, I’m an entropy an introvert. And I can pretend like I’m an extrovert for a certain period of time. But at that point, I have to go back to being an introvert. And that was a big personal thing that I have developed and I’m still trying to develop because real estate is a people business, you have to be able to speak with people negotiate with people and network with people, right. I mean, your network is your network is what they say. And I wholeheartedly believe that. So as far as the toughest thing I’ve had to encounter, it’s the people part of the business. It’s initially when I was getting involved in real estate, I like I mentioned to you I had business partners, and we all had different strengths and weaknesses. And I’d be lying to you if I said all of our all of my partnerships were perfect partnerships. I mean, there were Many things that we butted heads on and there were shouting matches and there and it was all in good, you know, for good intentions of trying to grow together and build our business together. But it was very, very challenging. And I’ll say, after all, that, you really learn what you’re good at. And there’s a really good book called traction, which I’m sure you’ve heard of that really goes through whether you’re a visionary or whether you are more of an integrator type personality, and understanding which one you are, will allow you to focus more of your time on doing what you love to do.

Gabriel Petersen 22:36
Like what was the name of that book, again,

Neil Goradia 22:37
called traction. I actually

have here with me, but there’s traction and there’s rocket fuel. And those are the two really good books that that talk about visionaries and integrators.

Gabriel Petersen 22:53
I like it. And I’m going to have to apologize. I mean, this is Corona time. So I’m in my home office. And my Beagle must be seeing a dog out front. So she might be barking a little bit. So sorry if you hear no worries, I’m

Neil Goradia 23:07
waiting. I’m just waiting for my kids to barge into the door.

Gabriel Petersen 23:11
Yeah, you deal with what you got to do it. Right. Okay, so yeah, that’s really good. I mean, I we all know that real real estate really is people business. I mean, you got it, you really do have to get out there. And so one of the things that, you know, the lessons that you kind of had to overcome was, was dealing with, you know, being a little bit more of an introvert and, and, and, you know, running into the reality that real estate is a people business. So, so that’s a good lesson. And so now take us to, you know, to the top, what has been the thing that you love the most about real estate? What’s the thing that gets you out of the bed, when you’re when you’re thinking about it?

Neil Goradia 23:49
It’s, I think the flexibility is just amazing. I mean, this pandemic is a very good example, right? I mean, a lot of people out there that have have worked their whole lives, at their, at their jobs and have really dedicated their lives to to these employers are now just laying people off, left, left and right. And, you know, I’m very fortunate to have been able to get into real estate when I did and to build up a rental portfolio and to be able to work for myself. And, you know, I’m not dealing with the same types of things that some of these, you know, lifelong employee employees are dealing with, with struggling to make payments on their mortgage after they lose their job. It’s it’s not something that that you know, that we should take lightly. I think everybody has to really invest in themselves is really the way to put it because nobody else is going to invest in you like you’re going to be able to invest in yourself. So, you know, I think the flexibility is huge, being able to wake up, help make breakfast for my kids. Take my cake, take my kids to school, you know, go to All their activities after school and really just dictate the life that I want to live, you know, understanding what my why’s are in my life and making sure I fit those into my day instead of putting an employer first. So I think that that in itself is is worth it.

Gabriel Petersen 25:20
I like it couldn’t put it any any better way. Unfortunately we are we’re running at the end of our our scheduled time here. We like to keep these about 20 to 30 minutes. But before we go, I mean, everybody needs things. So what is it that somebody could bring you that you could benefit from?

Neil Goradia 25:38
You know, like I said, I always love learning about new areas of real estate. So I would love to just continue to network with people and really understand different aspects of real estate that I haven’t gotten into yet. I haven’t done the multi families like you said on the flipping and flipping multi families. I love the idea of apartment complex. Being able to force appreciation and you know, maybe selling five years down the road. But really, I just love networking. So if anybody is interested in just learning more about what I’ve done, or you know, maybe maybe they can share something that they’ve done that I haven’t done, that really gets me excited. And I love helping people take control of their time again, and be able to fill their days with things that they want to do.

Gabriel Petersen 26:30
Awesome. I love it. All right, man. Well, I know I can speak for everybody, both listening and watching that we really appreciated having you on here. Sharing your your wisdom about land development, and just your entire experience in real estate. If somebody did want to get get a hold of you get in contact with you, what would be the best way for them to do that?

Neil Goradia 26:49
Yeah, so I’m on all the social media platforms Facebook, LinkedIn. So yeah, just you can reach out Neil aradia Gio ra di a it’s kind of a tough last name to spell. But yeah, just feel free to get in touch with me. And I’m pretty accessible. I, you know, just I think like one of your other guests said, just please try not to sell me on something but more than happy to talk and you know, and learn from each other.

Gabriel Petersen 27:15
Sounds good. Again, thank you very, very much for coming on and for everybody else. We will see you on the next episode.

Neil Goradia 27:23
All right, thank you very much for having me.

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