- So from CoLab INC, it's There to Here.
A show about entrepreneurs, innovators,
and investors and the impact
they seek to make on the world.
On today's episode, we
talk with Fred Cornforth,
founder and CEO of Community
Development Incorporated
in the CDI group of companies.
Fred shares some key insights
on how he built a billion-dollar portfolio
over 25-year career in commercial
real estate development.
I'm Ryan Dye, executive director of CoLab
and today's episode is a bit unique
as it is part one of a
two-part series on real estate.
So Fred, thanks for joining us today.
- Thanks, Ryan.
It's good to be here.
- So like many of the guests
we've had on There to Here
your entrepreneur journey
did not start in real estate.
Perhaps you could touch on
your career path as a young man
and share how you got
into commercial real estate development.
- Yeah, I always felt a struggle
between two professions,
one to be a pastor and also
another to be a businessman.
And so, but I think I was
destined to be dominant
in the business side
because I remember winning
27 straight games of monopoly
in college.
And so it was kind of a precursor probably
or forewarning to me that real estate
was the way I should go.
But when I was a pastor,
every place I went I had a
building project or an expansion.
So it was always building
development, land,
something affiliated with that.
- Tie in a little.
- Yeah.
But I absolutely love it.
Sure it's frustrating at times,
but overall it's been
a wonderful profession
to be involved in.
- Yeah, so what was that
turning point where you went,
"You know, I think real
estate is the area of business
"I wanna focus on."
- When I left pastoring,
I was developing
orphanages around the world
and I was working particularly
on an orphanage in Mexico.
And I was slowly starting to see,
'cause this was a ground-up project.
And so I was able to see,
I was starting to envision all the steps
that needed to happen and take place.
And one thing led to another.
And there was a very important meeting
that I was at a Boise Hawks baseball game
and I was sitting next to a couple
that happened to be in real
estate and we got talking
and I'll never forget what she said to me.
She said, "Well, if you
can do orphanages overseas,
"you can do real estate
development here in the US,"
and I thought, "Wow, I've
never thought of that before."
And she invited me to this event
that was in a couple of months.
And before I left that
event on the first night,
I had my first deal, it was
about a $5 million project
and I just threw myself into
it the 70, 80 hour kind of
work week and just got lost in it
and loved every minute of it.
But it's a little bit like
if you were going over a waterfall
where you never actually hit the,
you just keep tumbling through.
- Yeah, the internal free fall.
- Right, exactly.
So it ended up, in the middle of that
it led to other developments
that actually got me going.
And so even to date,
we've done about 40 orphanages ourselves
that we've been able to fund
through the money we've made
with CDI.
So instead of out doing
orphanages and asking for money,
we were actually able to
keep doing orphanages,
but we generated the money
or the income to actually
do the orphanages ourselves.
So that's been rewarding too.
- That's fantastic.
Yeah, what was your first
real estate project here
in the United States?
It was residential development,
single-family homes where
we actually helped people
they did 70% of the
work on their own home,
but it was heavily
supervised and overseen.
So we were able to
arrange low-interest loans
for the families.
But it took them nine or 10
months to build their own homes.
But that was the first one.
And then the next one we did,
we started doing the subdivision.
So we were learning about
all of the civil side of it,
all the approvals, the
process of going through
and getting land subdivided, permitted
and then the individual lots to the point
where you could sell them.
So we started making money
on the sale of the lots
along with making some money from,
'cause the building of the homes
through the Sweat Equity
program really wasn't
for-profit, motivated endeavor.
So eventually we started just picking up
all these little extra things.
And the very first project outside
of the single-family residential
was a senior project,
not very far from here.
It was small, was a $4
million, Oh, I say small now,
but back then it was huge.
- Right.
- But that $4 million project,
we happened to compete at
a national level for it.
And the particular State
we did that project in
hadn't had those funds in
it in like 20, 30 years.
And so it was a big deal
that we just happened
to meet the right people
at the right time.
Whether you say that's fortunate, luck
or you know, God moments, I don't know.
- Mix 'em all.
- Yeah, yeah.
So that's how we got started.
- And was that here in
the State of Idaho or,
- Yeah, it was here in the State of Idaho.
Just about 45 minutes from where we sit.
- Wow, that's great.
- Yeah, yeah.
So the first projects
were single-family homes
and not apartment complexes?
- Right, mm-hmm.
- But since that time
you've developed complexes
in 27 different States, roughly?
- Right, right.
- And are those primarily
apartment complexes or duplexes?
- Right, and what happened was,
what really got me going
on the apartment side was
we had bought land that we were gonna use
for the single-family program,
but it also had some perfect
land for a senior development.
And so I had both going at the same time.
And that really began to open
up some doors for us too.
And met the right contractor,
met the right architect,
started to build a reputation
in the finance world
where people were starting to seek us out
as opposed to us begging and pleading,
- Right.
- For somebody to believe in us.
And trust us enough to
see a project through.
But all total, I've done
125 apartment communities
that serve both families and seniors.
We've also done student housing as well.
And we've done,
multi-hundred-bed facilities
for different universities and colleges
but it's just all under $1
billion so far in my career.
- Yeah that's a lot of contracts.
- It's been a lot of fun.
- So when you're getting
ready to do a project
and you're in that exploratory
phase looking at land,
things like that, what are
the things you're looking for?
- Well, land is tricky
because it's a little bit like dating.
Something might appear attractive,
but you don't wanna be
married to it, right?
So you really have to
approach it cautiously.
- [Ryan] Sure.
- And this is gender exclusive.
This can go anyway.
But yeah, when you approach land,
there you really need to
have your head on straight
and you need to think beyond, it's like,
"Wow, this is a great location."
But then maybe the soil is really bad.
And there's ways to discover that
without spending a lot of money.
But you really, as you
approach a piece of ground,
and I won't say the
city but it's within two
or three hours of us,
a great piece of land.
It even had streets, all the
water and sewer were to it.
But what we found was, we noticed
that the sidewalk across
the street was super thick.
And then there was some repair work
that was happening in the street.
And we went over and looked
and we saw that the
asphalt not only was thick,
but the road mix that was
underneath it was extraordinarily,
and it looked like they
had to go down four feet.
So they had to remove four feet of soil
and then re-compact it
with a non-native soil,
foreign soil in.
And so all those indications to us were
that this soil is bad.
And so we walked away from that project.
To do that being a smart thing.
So when you approach a piece of ground,
you wanna make sure preferably
that sit in the city limits,
that if you can see curb,
gutter and sidewalk,
which is a common term that we use
when we're talking about streets.
Most cities require gutter
and curb and sidewalk,
so a dollar per lineal
foot that that runs.
But there's inexpensive common sense ways
that you can evaluate
land by looking at it
if you know what to observe in the area
of what's already there.
If you're new, and I have done
maybe 10 projects in areas
where there weren't
other developments around
and I'll look you straight
in the eye right now.
And I regret doing every
single one of those.
So I was the one that
was out the furthest,
I was that the next one
at the end of the line.
- Right.
- It's ended up being,
you would think that that
would be a natural thing,
but I really encourage
infill as opposed to urban.
- Being the outlier.
- Yeah, an outlier and
contributing to urban sprawl.
But the idea, the problem is
when you try to do infill,
sometimes people try to jack the prices up
'cause they know that it's got less risk.
And when you're approaching
a piece of land,
your goal is reducing the risks.
So 'cause sticks and bricks,
that's what the term we use for everything
that's above the footings.
The real variable in
real estate development
on the apartment side and house
and single-family housing,
the risk is not in what's
above the foundation.
It's what it's in the soil,
what surprises you're gonna get.
- Right.
- I remember checking out a site thinking
that it had sewer to it
because it was a manhole there
right on the property.
So it looked like everybody
would assume that.
- [Ryan] Right.
- You've seen the word assume broken down
and this totally smacked me with it.
When it got time for the civil
engineer to go out and check
that I already had the site under control.
I had the financing lined up
and we were literally
ready to start construction
when I found out that
the manhole was there.
But the sewer line was 200 feet away.
- Oh, man.
- This was 200 feet away
down a newly paved street
that the mayor didn't want me to cut up.
So I had to take it a circuitous route.
Ended up costing me $175,000 extra
because I didn't look at that manhole.
And sometimes the city doesn't know
or they'll tell you
something and you think,
"Well I can trust that."
I will say this city,
'cause I never quite forgiven him for it.
But this was in St. George, Utah.
I remember going to the
office, it was around noon
and everybody was at lunch
and some guy in a back-office
could see me at the counter
and he said, "Hey, can I help you?"
No, it's actually the guy
that's the head of public works
for the city of St. George's.
This is 20 years ago.
So I'm sure he's not there anymore.
But he asked me what I wanted
to do and he was going into,
he's getting out the maps and he says,
"Oh yeah, you've got sewer here.
"There's an eight-inch
line that runs right out
"the whole length of your property
"and it looks like you're good to go."
And I said, well,
can I get what's called
a Will Serve letter?
That means that as part
of the due diligence
a developer does, is you
wanna get documentation
that all the city services
are not only available to you
but that they have capacity
'cause sometimes there'll
be a sewer line there,
but it's already being used by everybody
that's upstream from you.
So, he gave me a letter saying, "Yeah,
"we've got an eight-inch
line, looks empty,
"there's nobody using it."
So great.
- Yeah, you're good to go.
- So we actually get as
far as pulling the permits
and our guys are out digging
on the site when we find out
that the sewer line
does go by our property,
but there's an intersection
a quarter of a mile away
and it stops there, a
mile and a half short
of the city's most active sewer line,
a mile and a half short.
- Oh my goodness.
- So I had 'em kept going
on the construction.
'Cause if you stop, I
mean, you don't wanna stop,
you don't wanna demobilize in any case
if you can avoid it.
But yeah, I had to go up and
down the street and I was,
what, 33 or 34 years old
probably at the time.
And I'm going up and down the street.
I'm getting in with the city,
I'm doing research in the County to see
who owns these tracks
of land along the way.
And within 60 days I got
everybody who owned land
that would benefit from that sewer line.
I got them signed on,
they contributed cash
to an escrow account.
The city signed off on drawings.
And so we actually built
this mile and a half long
sewer line to connect
it to the city services
while we were building
the apartment complex.
But it was almost by
luck that we found out
that it didn't connect.
- What would've happened
if you didn't find that?
- Right.
- Yeah.
- And I share these tales only
because partially I want to
cause a jolt of adrenaline
that will kick into somebody's,
heightened their awareness
to really be on guard
that you can even get a letter
from the head of the city
that will say something.
- And it's got to verify it.
- Right, or there's a
manhole on a property,
think we're all good and
you'll actually find out
that indeed it's not.
- Well, do you find that
having been in this industry
for so long and obviously
things change over time,
but dealing with various municipalities,
especially in a variety of States,
that you're gonna run into all
kinds of variations to rules
and regulations that I would
imagine could be prohibitive
of someone wanting to
continue in this field
because it just becomes so aggravating
to make sure that you're
crossing all the T's
and dotting your I's properly.
- Right, I think you add
in all the varied policies
at both the Federal State and local level,
and then you add into it the
personalities of the people
that are interpreting all
the codes in the policies.
I mean it's like going
to a family reunion.
I don't know what your
family reunions are like.
I only like maybe a
third of the people there
at a family reunion and
their family, right?
- [Ryan] Of course.
- So two thirds, you really
don't, and it's about the same.
I mean people are people,
whether you're related to them
or whether they're the
one sitting in the office.
- Whether you elected them.
- Right.
- Yeah.
- So yeah, I've seen so many
instances where we had people
that were doing everything
they could to work for us.
And then we've had people work against us.
This didn't happen to me,
but it happened to somebody
that I've done probably
half a dozen projects with,
it was a big project in California.
They'd gotten it approved
and they had got all the plans done
and so they submitted them
to the building department.
The head of the building
department didn't want the project,
so he sat on the plans
and he actually exceeded the ordinance
of how long he could hold on to the plan.
So that's, but he just
kept sitting on them
and he told this developer
friend of mine, he said,
"Well, sue me."
And what happened during that time was
he was getting the building code changed
because they were about seven,
eight years, which is common.
But it's another thing
you gotta be mindful of.
Every city has a building code
and your plans need to be built to that.
But you also need to be
mindful that during that time
that you're drawing your drawings
and you're getting ready
to start construction,
that that city could change it's code,
which would change your plants,
which would change the cost.
- [Ryan] Right.
- This building official
delayed him long enough
to get a new code update
and it increased the cost per square foot,
15, 20 bucks a square foot
and it killed a project.
- [Ryan] Yeah.
- So he was the building official.
Even though it was zoned,
the city had approved it,
the city council had signed off on it.
The city needed it.
The building official actually,
he was able to kill the deal
'cause he just didn't want it
or he didn't like this developer.
- That's pretty powerful.
- Yeah, that was a $3
million hit on that deal.
- Yeah, that's, well, you've
kind of touched on this,
but regardless of the industry,
a wise entrepreneur can
learn a lot from their peers.
On the pitfalls to avoid in business,
what would you share on the,
what not to do in real estate?
- Well, I think one of the
challenges that I have,
having 150 to 200 employees at a time,
I've had every type of employee
and sometimes employees can be activists.
You know, 'cause housing it's
really needed in some areas.
But when you approach
real estate development
an activist mind isn't
the best way to approach.
You can be an activist.
You can pro-housing for everybody
and having accessible housing
and affordable housing.
But if you approach it as an activist,
I think you can get tied up and
you end up taking the energy
and the time that you
could be producing housing
in a community that wants you to be there
as opposed to fighting
your way into a community
that doesn't want you there.
So probably the biggest mistake,
I haven't made this one,
but once in my life
and it actually had part of
the approvals on the land.
This happened in a State
not too far from us
but not here in Idaho in
a very conservative State
that you would think
would be pro-development,
pro-construction.
They ended up delaying us
on the zoning approvals
even though the land was partially zoned
for what we needed it,
we were having to go in for
a slight zoning modification
and they held us up
and then they just really
cleaned our clock on.
They made us put in like
two times more parking
than the code required.
They made us put like three-quarters brick
on the buildings instead of
half. That happened to kill it.
But when you get land
that isn't zoned right
and ready to go right now,
I really strongly discourage
somebody from doing that.
You're gonna regret it.
- [Ryan] Right.
- Even if you get it changed and approved,
there'll be other roadblocks that come up
and development's already hard.
But when you add to it, trying
to get, you know, nimbyism,
you know, "not in my
backyard" kind of thinking,
and it's odd because you
get like a business owner
who's got a lot of employees
and he's having a problem
or she's having a problem
bringing in employees
because there's nowhere to live.
You would think those people
would be first in line to say,
"Yeah, let's get some
apartments if we can."
But we have found that sometimes
they don't, they're blind,
the nimbyism will erupt so
strongly in their own lives
that they won't realize
that they're actually hurting themselves.
- [Ryan] Right.
- One other mistake that
I think you should avoid,
especially if you're doing apartments
and this really has to do
with a duplex or bigger.
Now in my own portfolio,
we have projects that
are hundreds of units.
And then we even have
single family that we have
that maybe we bought for
one reason or another.
But really, when you start
to approach a project,
you really need to keep in mind.
There's probably going to be three
or four things in that
timeline of developing it.
That could be a deal-killer
unless you've developed
experience and a skill set
on how to work through those
things that you'll find.
- Right.
Do you feel that,
if someone was kind of
new into the experience
of doing real estate development,
that they should kind of
have that moment in time
where this is where I'm going
to pull the plug on a project
if it's not going well
so that you're not so far
out financially (chuckles)
that it can really take you out.
- Well, and I think this has to do with,
in any size development
from a single-family
to a large multifamily complex
is that the money you put down,
the earnest money as they
call it, or EM or deposit,
some people call it deposit.
Generally speaking, it's
1% of the sales price.
That's kind of industry-standard.
Though sometimes a
seller can ask for more,
but what you wanna make sure
is we call them off-ramps,
I call them off-ramps,
that these are conditions that
you build into the contract
that allow you to get out of the deal
without losing your money.
- [Ryan] Right.
- Now, excuse me.
Sure, you would lose the time
that you've invested into it.
And if you did some preliminary studies
you might lose some of that money,
but there is a way to protect yourself.
And that is to put in conditions like,
confirmation of financing
necessary to develop the project
at the buyer's discretion.
And when you use buyer's discretion,
that's taking the seller out of it.
So the buyer is the one that decides
whether the project goes forward or not.
So when you write up
your purchase agreements,
which we probably could
do a whole podcast on just
how to write a construction
purchase agreement,
a purchase sales agreement,
I don't use LOIs, by the way,
LOIs are the worst thing on the planet
because it gives you a level of comfort.
You think you've got a deal.
But somebody could come in
and I just, I don't use them.
They're not strong enough.
- I would agree with that.
That's been my experience with LOIs.
- Yeah, you got it.
- Yeah, I've had LOIs in place
and you think you've got
a deal in the last minute,
it completely falls apart,
- Right, yeah.
I've moved to a PSA as soon as I can and,
but you wanna build in there,
confirmation of the utilities
available to the site
that the existing approvals are in place
to construct a project
that you wanna construct
and that you get a chance to
also review the title report,
which is something the title
company to get your business
they'll generally provide you
a current version of the title report
so you can actually look and see.
I remember buying land in Montana.
It was only 25,000 an acre.
I was like, "That's cheap."
- Right.
- And I was like, "This is great."
And we got ready to close and we found out
that there was a LID, a
local improvement district
that the city had failed to
get onto the title report
or the title company had not recorded it.
It was $80,000 to pay for
the curb, gutter, sidewalk,
asphalt, water and sewer lines
that ran by the property.
So I benefited from it,
but it wasn't in my budget.
'Cause it hadn't been
picked up and so that was---
- So you'd just have
land you'd be sitting on
for a long time.
- Right, yeah.
- Fortunately, it wasn't a deal killer,
but we ended up making less
'cause we had to pay for that.
And, so yeah, those are some
of the things I wouldn't do.
- Well, in that regard.
Do you prefer to work in communities
that are kind of moderate to smaller sized
or have you done large
cities all the way down
to small country towns?
- Yeah, the small country towns
I've regretted every one of those.
- [Ryan] I understand.
- Yeah, when you're
getting started though,
I think you go where you can
get your foot in the door.
- [Ryan] Sure.
- The very first project that I---
- [Ryan] Where the price is right.
Right oh, that too.
The very first project
that I told you I did,
that was multifamily,
the senior project within
45 minutes of here.
I'm a pretty confident guy.
I have been all my life.
But I remember going in to meet
with the mayor of that town
and probably 10 minutes into
the conversation he said,
"You've never done one of
these deals before, have you?"
And it totally caught me flat-footed.
And I said, "Well, I've done some deals."
That was my response,
but it was actually my
first deal on my own.
I had done two others plus
the subdivision before that,
but this really was, and
he read right through me
and come to find out,
even though it was a small
town of like 8,000 people,
he was a former Nestle
Corporation executive
and he was retired and he
was bored in retirement.
So he ran for mayor.
But it was a guy that,
- He knows what a contract looked like.
- Yeah, and he know, he
could just read people
and they could tell that I was,
- Wet behind the ears?
- Yeah, yeah.
So that was one of those
uncomfortable moments.
But you really just have
to stay in the saddle,
even though the horse
is about to throw you.
- You gotta start somewhere.
- Right, you gotta start somewhere.
But yeah, we've done
developments in towns like Omaha,
Baton Rouge, we've done
some stuff consulting
in Los Angeles, Seattle area, Charleston,
South Carolina, Atlanta,
we've been in the 27 States.
But for me, I found the
perfect size for me,
this is just for me.
And I didn't have hardly
any money when I started
and I didn't have hardly any experience.
So for me, that 50 to a 100
unit project really ended up
being the best.
And so towns, in the 50,000
to 250,000 range ended up being the spots
where I really found...
But having done probably 10
or 15 projects in really big
towns, the bigger the project,
the sharper the shark's teeth are.
- [Ryan] I imagine.
- So you do a 50, $75
million construction project
and you're dealing with a contractor
who probably has lawyers on their staff
that are writing documents,
that are skewing
everything to their favor.
- [Ryan] Right.
- And you've just gotta
be mindful of that.
And if you're ready to
box with the big boys.
I remember going into one meeting,
there were 20 of us in the meeting
and half of them were lawyers
and only two of those
lawyers were on my side.
The rest were all with the contractor.
And that was a tough one.
There's no class or podcast
that can get you ready for that moment
when you're millions of dollars at stake.
You're looking back and
you're seeing how, "Shoot,
"if I had written the
contract a little different,
"if we'd made sure and double-check this,"
and you see that they've
exploiting all of your weaknesses.
It's like being in a
really, really bad marriage
that they just keep hammering you.
And I've never been in
a situation like that
just to clarify.
But you know where they just
bring up every single thing
that you've done wrong from the beginning
and they just hammer and
hammer away knowing that,
well, there's a cartoon
that shows a huge yacht
and then there's a
little dinghy on the back
and the dinghy's name is original contract
and the name of the big
yacht is change order.
- [Ryan] Right, that's true.
- There's people out
there whose business model
is to make their money on
change ordering you to death
because they know that
usually litigation on
even a hundred unit complex,
litigation is probably gonna
be the 800 to a million range
for lawyers, all the experts
and just the loss of time
'cause could take two
or three years to even
get in front of a judge
or an arbitrator.
So they know that.
And so they'll think,
"I bet I can get a half a
million more out of this."
And so they'll play it.
And so they're what we call
one-rs, you know, one-offs
where they have no intention
of developing a relationship
with you after, you know,
it's not, "Oh, this went really good.
"Let's do the next one
together, and the next one."
'Cause I've had contractors
that were honest
and you do 25 projects
with them or 10, eight,
I've had a lot that we've had
that kind of relationship over time.
But getting back to the dating metaphor,
there's a lot of first dates
and dates that you wish
you'd never had gone on.
And so it's, but that's
how I'd answer that.
- Yeah, when you're working
on a real estate project,
it's easy to get tunnel vision
on missed opportunities.
Are there ways to generate other
sources of income on a deal
that some people might miss?
- Well, yeah, there are.
And this, so let me
bring this into real life
because I just made an offer on a 9-plex,
just nine units yesterday.
And the reason why I made an offer on it
is because I've got some cash.
I'm not gonna be using a bank,
so I'm gonna pay cash for this.
And the return on it
will probably be in the
12 to 15% range, right?
And it's in a great location.
But what happened was with the land came,
or with the property comes
a vacant piece of ground
that I'm basically getting for nothing.
So when I'm buying this half a city block
with nine units on it,
but there's also a third of an acre
that I can actually
put probably another 10
to 12 units on it.
So I'm able to make money that way
because I'm getting the
land almost for free.
- That sounds like a monopoly move.
- Yes, exactly.
That's right, that's right.
Another way that I've done it,
and this was something
that I probably missed
on my first 40 or 50 deals.
I probably missed doing this,
but let's say you're
gonna do a 75 unit project
and the land that you want
is let's say it's six acres.
I only need four acres to do the 75 units.
So what I do is I go and
I structure the purchase
of the six acres for the price
that I'd be willing to
pay for the four acres.
So I end up, once I
build the 75 unit project
on the four acres, I'm left
with two acres free and clear.
- [Ryan] Right.
- And I have made hundreds of thousands,
millions of dollars probably off of,
I haven't pushed it as much
'cause in some situations
you could really,
and I was looking at Terry
Bradshaw's net worth,
it's like 15 million.
And then you look at Joe Montana
and his net worth is a 100 million.
And then you look at Tom Brady,
who's four or 500 million,
these are all great NFL quarterbacks,
but it's the time that
they were quarterbacks
and how much money they made
during those different eras.
- [Ryan] Right.
- Well, 15, 20 years ago,
if I made a $100,000 on a land
flip, I was happy with it.
You might think, you think,
"Well, a 100,000 is nothing.
That doesn't even cover my
student loans," for example,
just as an example.
So yeah, there's ways though
to structure these deals
where you can get your first
phase to include the cost of
that extra land.
And then while you're going
through and getting permitted,
you go through and you
subdivide that piece of ground
and you separate it.
So in this case, the six
acres, you'd break off two,
you'd have it free and clear.
And then another way you can make money
is when you go to install
the water and sewer lines.
And if you're doing street,
what I do is let's say this
six acres is rectangle-shaped.
I developed the road through the property
and I developed the back four acres.
So I leave the two upfront vacant.
But what I've done is
I've had the first phase
if the property can afford it,
I've had the first phase pay
for the road, curb, gutter,
sidewalk, water, sewer, takes
it right through the property
back to that area that I'm
gonna put the 75 units on.
And so what I've got is I've
got a fully developed lot now
and I will include stub outs,
so I'll make sure that when the
water and sewer line goes by
and there if there's manholes
or curb cuts or those things
that you wanna pay attention
to, that's another way
to drop the cost of what
your next phase could be.
If it's smaller or, and
I've even done some projects
where I only carved off an acre,
but I was able to get three
triplex lots out of it
and sell for $225,000 for one acre.
- 'Cause you've stubbed it
out, it's all ready to go.
You've got again, the curb
cuts are put in, the asphalt,
everything's right there ready to go.
And you just make it easier on yourself.
And that $225,000 was just pure profit
because you didn't have to pay
somebody for the stub outs.
You didn't have to pay somebody to bring
in all the infrastructure.
- Everything's ready to go.
- Yeah.
- Yeah.
No, that makes a lot of sense.
- But I miss that about half my career,
I missed those kinds of opportunities.
- Doing that, yeah.
- Figured it out, but it took me a while.
- [Ryan] Well, you won't
be an expert on day one so,
- Yeah.
- So given the current
climate of uncertainty
with the global economy,
would you agree that there's
still opportunities out there
for growth in the real estate market?
- Yeah, and I think things
are gonna be different
from here on out.
I think there's going to be,
it's just a different time.
But the thing you've got to remember
is that people keep having
kids and they go to school
and they eventually become young adults
and they need housing, right?
So just given sure population growth,
unless we have some terrible plague
that wipes out 60% of the population,
which is, you know, you watch
enough Hollywood movies,
you'd realize it is possible.
At least it is on the big screen.
But this, what I have found
is that you take COVID,
for example, the Coronavirus.
There are deals happening
right now regardless of it.
I know of one case where a
man passed away last summer
and his sons are now trying
to sell their father's rental properties
and they're out trying to,
and they don't want anything
to do with real estate.
They realized the Coronavirus
has impacted things,
so they're willing to
discount their stuff.
- Sure, there's deals to be had.
- There's deals to be had at any time.
And the key thing is if you
have your financing lined up,
and we can talk about
that some other time,
but there is a way to start
and I think in the next episode
of this real estate talk
is I wanna go back to the beginning
of how I would even
recommend somebody to start
if I were Fred Cornforth,
knowing what I do at
this point in my life,
if I hit the reset button
and I had to go back,
how would I start today?
But you know, if you're out
there pounding the pavement
and one of my old coaches
is called Bill Napier coach,
as we used to call him.
He told me one time
and I was thinking about
going into one profession.
I said, "Do you think there's
a need for somebody you know,
"in this field?"
And he said, "Fred, I want
you to remember something.
"There's always room in every field
"for one more good person."
And that struck me.
And I say that that's true
because if you really
wanna get into real estate
and it ends up being what your calling is,
that there's always gonna be room
for one more honest person.
You wanna always keep your word,
do what you say you're gonna do.
Pay people what you
promised you'd pay them.
Don't try to take shortcuts.
I don't like guys that do that.
And there's some developers
that are quite well known in the world
that have, I mean, they're notorious
for striking a deal and saying, "Okay,
"let's do the HVAC in this 20 story hotel
"in downtown New York and 20 million."
And then when they get it done, they say,
"Well, I'm only gonna pay you 18 million."
So they're trying to
already cut and shave.
If you promise somebody
to pay him something,
even if it's at a cost to
you, you wanna pay them.
But that's a different subject.
But this, just getting out
and hitting the pavement.
I remember driving through neighborhoods,
looking for houses that had tall grass,
so there was either it was a rental
or there was something
wrong with the owner
and you find out, "Oh yeah,
this is going into probate."
Or "Oh yeah, come by at three
o'clock, Sheila will be here.
"And she's selling this house for her mom
"who they just moved into a nursing home
"and has been really tough.
"And I think she, you
know, she wants to sell..."
- [Ryan] She wanna offload it.
- Right, and by the way,
I don't believe in
negotiating somebody down
and just bloodying them to death.
Some people, I have one
friend, I won't say his name,
but he says that if once
he's closed the deal
if the people don't hate him,
he didn't get it for the right price.
And I totally disagree with that.
- [Ryan] Yeah.
- That is a terrible attitude.
And, 'cause what I find is if
you come to treat people right
and you give them a fair
price, it had probably been,
I had bought some land, there were six
or seven of us developers that were vying
for land in this one area
and I ended up getting it
and I paid a reasonable price for it.
But what happened, the
difference in it was
that I had done a deal with
the guy that had access
to the sellers seven years before
and I had treated him right,
that we found out later on
that there had been some
things that they had paid for
that hadn't been excluded
in the sales price.
And I didn't have to pay it,
it was like $37,000 or so,
but I ended up paying it.
But seven years later
in the midst of trying
to fight over this other piece of land,
this guy remembered that
I treated him fairly.
He gave me the inside track.
And I'm not saying we should do it
as a quid pro quo kind of a thing.
But if you have business MO
of operating from paying people fairly,
there's just a residual benefit
that you don't ever feel
guilty about having.
And some people don't feel guilty,
they'd just have an absence of
feeling that, and I get that.
But I think if you, even
if you're a sociopath
and you don't have compassion on people,
the fact that in your mind,
and so I'm appealing to the sociopath,
to the people that don't feel
like they have a conscience,
what happens is you end up taking up brain
or hard drive time storing
the fact that I got them,
I got them.
- Right.
- And what I have found in life
is that if the more that kind
of crap you have in your head
the less productive you can be.
- [Ryan] Right.
- So if you're fair with everybody,
you don't have to remember the deal.
You don't have to remember
or even tell stories later on
where you're bragging about.
- Yeah, I really got them good.
- Yeah, I got them, yes.
You say, "Wow, I really got him."
Well, what you've done
is you've told everybody
that's listening, the
kind of person you are.
- Right.
- Number two, you've also
just burned up precious,
valuable time and energy.
Plus it tells what you're
storing on your hard drive.
- Right.
- Nobody wants to do business
with a guy like that.
- Yeah, no, that's an excellent point.
Well, Fred, thanks for
sharing with us today.
We look forward to hearing more
insights on future episodes.
- This was fun, thank you.
- Absolutely.
Thanks for listening to There to Here,
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Editing by Tonya Musgrave
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Until next time, be well, and God bless.
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