Moving from flipping to ground-up construction is not a career change. It’s the same acquisition-and-execution business with four non-negotiable tweaks, and each tweak is where flippers give their money back: buying on what the municipality will allow instead of what’s cheapest, treating the land disturbance permit as the real asset, underwriting to the county’s maximum allowed density, and paying your builder in equity so the schedule is their problem too.
Jackson Sells runs Black Timber, an eight-person Metro Atlanta shop that entitles land, develops it, and builds build-to-rent townhome communities. He also does fee builds for flippers making the jump, so he sees exactly where they stall.
What follows is the practical sequence: how to buy for entitlement potential, what the LDP actually buys you, the density math that decides whether a deal pencils, how to structure a builder partnership, how the institutional exit dictates project size, and what it takes to get a first ground-up deal funded.
Key takeaways
- Buy on what the municipality will allow, not on price per acre — a parcel zoned for farmland will never support a townhome community, no matter how cheap it is.
- The land disturbance permit is the asset. Once it’s in place, you can either start moving dirt or sell the entitled land without ever building.
- If the county allows 40 to 80 townhouses and your plan puts 32 on the site, you are leaving roughly half the profit behind for no reason.
- Fee builders keep about 30% of what they charge. Trading that fee for an equity share makes schedule slippage cost the builder directly.
- Institutional buyers like Blackstone, Invitation Homes and Progress Residential generally won’t look at a build-to-rent community under 100 doors, which sets the minimum viable project size before you buy the land.
From the Real Estate Pros Show
This article draws on an interview with Jackson Sells of Black Timber on the Real Estate Pros Show, hosted by Dylan Silver.
Flipping to Ground-Up Construction: Why the Instinct to Buy Cheapest Backfires
Flippers are trained to hunt the lowest price point. On land, that instinct is actively dangerous, because price is not what determines whether a parcel works — the municipality is.
“You can’t go buy something that you’re planning on putting a build-to-rent townhouse community on when it’s zoned to be a farm,” Sells says. The cheap parcel is often cheap precisely because nobody has found a use the county will approve. On a flip you can always cut price and move the house. On unentitled land with no approved use, there is no discount that saves you. As Sells puts it, treat a development like a flip and you’ll “lose your butt,” because it isn’t the stock market — you don’t buy low and sell high, you get stuck with it.
Two habits have to change before the first contract. First, get comfortable being told no, by zoning boards, engineers and neighbors. Second, get comfortable saying no yourself, and walking from parcels you’ve already spent money studying.
The other adjustment is patience. Entitlement runs on government time, not your renovation calendar, and there is no way to sprint it. Sells describes investors arriving at his office in roughly two groups, split about evenly: some already own land and don’t know what can go there, and others are simply tired of flipping and have capital they want deployed into development while they learn the process on a deal or two.
Neither group gets to skip the underwriting question that drives everything downstream: what will this jurisdiction actually permit here, and does that use produce enough units to justify the land price?
The Land Disturbance Permit Is the Asset You’re Actually Buying
In Sells’ words, obtaining the land disturbance permit is “the most valuable piece to the whole entitlement process.” The LDP gets the property entitled and lets work begin. Until you hold it, you own dirt and a theory.
The sequence on a typical deal looks like this:
- Take raw or unentitled land under control — it may have a house on it, it may not.
- Work with engineers to determine the highest and best use the jurisdiction will permit.
- Run the entitlement process to that plan.
- Secure the LDP.
- Either develop — roads, infrastructure, house pads — or sell the entitled parcel with the LDP in place.
That fifth step is the one flippers miss. Once the LDP exists, you have a salable asset without pouring a foundation. If a partner’s goal is to exit before construction, that’s a legitimate business, and it’s a reasonable way to run a first land deal.
Budget for the process being political rather than technical. Sells has been denied at zoning “for no good reason” on several occasions and has gone back and sued the town. He is currently controlling seven acres in Jonesboro, Georgia under a loose moratorium where the permits aren’t blocked outright — you first have to appear before the zoning board to learn whether you’re even allowed to take the project to zoning. His objection to that is the right one to internalize: why pay for a process whose only output is permission to enter the next process that can also shut you down?
The most common failure he sees is not zoning at all. It’s investors rushing partner selection and getting tied up in engineering work that takes ungodly amounts of time on a use that was never going there.
If all of a sudden my builder has equity share in my project, why would he not be on time and why would he do things wrong when it’s hurting his pocket? It rewards the under-promising and over-performing, and it punishes the over-promising and under-performing.
— Jackson Sells, Black Timber
Underwrite to the County’s Maximum Density, Not Your Comfortable Plan
Highest and best use is not a philosophy, it’s the underwriting standard. “If the county allows you to put anywhere from 40 to 80 townhouses and you’ve got 32 in there, you’re missing half your money for no reason,” Sells says. The density the county permits is the density the county built its own projections around — coming in under it is a self-inflicted wound.
Density is also where product design beats acquisition price. Black Timber uses a stacked townhome plan that wraps floor to floor like a DNA strand, keeping the exterior footprint identical while fitting two units inside the space competitors use for one. The result on a 5-to-7-acre infill lot: where another developer pays $3 million and gets 60 to 70 townhomes, Sells gets 120 to 140 on the same ground. His deal pencils at that land price. Theirs is $3 million underwater. He won’t underwrite a project without $10 million-plus of profit in it, and doubling the doors is how he gets there.
The same principle explains why one investor’s dead deal is another’s project. Sells walked a parcel where a rock shelf at the bottom made the road cost high enough to ruin the rest of the numbers. Another developer bought the adjoining piece to the north, ran his entrance through it, and put the community amenity space on top of the rock. Same land, same product type, different plan, different outcome.
Before you sign, price at least two site plans: the one you’re comfortable with and the maximum the ordinance allows. If only the second one clears your return threshold, the first plan was never the deal.
How to Pay a Builder So the Schedule Is Their Problem Too
Sells’ recommendation to investors hiring a builder is to give up an equity share instead of paying builder fees. The logic is blunt: “If all of a sudden my builder has equity share in my project, why would he not be on time and why would he do things wrong when it’s hurting his pocket?”
The tradeoff is real and worth stating plainly. Equity comes out of your profit margin rather than showing up as a line-item fee, so you can’t pretend it’s free. What you’re buying is alignment. As Sells frames it, an equity structure rewards under-promising and over-performing, and punishes over-promising and under-performing.
It also filters your candidate list for you. Some builders will walk, because they know the structure makes them accountable. Others will say it isn’t how they normally do business but stay because they’re confident they can beat the schedule and earn more than a fee would have paid.
To judge what you’re trading away, use his fee-build benchmark: builders make roughly 30% of what they charge. Take whatever your builder quoted for the house and take 30% off — that’s approximately their margin. Compare that number to the equity slice you’d be giving up on the whole project.
And set your schedule expectations from someone who has done volume, not from your last flip contractor. Sells can put a house up in 30 to 90 days and complete a 14-unit townhouse building in 120 days. If a builder’s proposed timeline is wildly longer than that with no site-specific reason, either the plan is wrong or the crew capacity isn’t there.
Sizing the Project Around the Exit: The 100-Door Institutional Floor
Project size is not a comfort decision. It’s set by who buys the finished product.
Black Timber’s build-to-rent model runs like this: the company owns the property management arm, so leasing starts as soon as the first building is complete. Starts are sequenced so residents aren’t driving past active construction or walking under ladders to reach their front door. Once the community hits 90 to 95% occupancy, the whole stabilized asset goes to an institutional buyer — Blackstone, Invitation Homes, Progress Residential. Sells describes showing up with 100 leased units, full payment history, new construction with no deferred maintenance and completed inspections as handing over a Christmas gift.
Here’s the constraint that should shape your land search: those buyers have “no interest in buying anything under 100 doors.” Below 80 doors, the institutional exit is gone and you’re selling heavily specified Class A product to a local buyer who often can’t write that check. That makes a very good small project harder to sell than a larger one.
In practice, his target scale is a $30 million development producing roughly 100 to 150 doors. The rent side of that math: a two-bedroom, three-story townhome with a private garage leases at $2,300 a month, a three-bedroom at $2,500. He estimates a project like that pays itself off in under ten years even if the sale never happens — which is the real reason the model tolerates a long timeline.
If your first land deal can only support 40 units, know going in that your exit is a retail sale or a long hold, not an institutional buyer.
What It Takes to Get Funded on Your First Ground-Up Deal
Debt is usually not the hard part. Sells has banks willing to carry the senior loan on a community — the big portion of the money. The gap is equity, and specifically someone willing to put their name on the paper, because on a $30 million development the guarantee matters more than the pro forma.
Hard money will lend on ground-up, with conditions: you already own the land and you have the liquidity for down payments. Own the dirt and hold cash, and a capital stack comes together. Neither is trivial for a first-timer.
Expect one objection every time: “Have you done one of these before?” Sells can answer yes — four build-to-rent communities — but those were completed under another company’s banner in a fee-build arrangement, and that experience doesn’t transfer as cleanly as it should. His summary of the reaction: “It’s hard to put money behind Jackson, but Black Timber, we can invest it.” Plan for your personal track record and your entity’s track record to be priced differently.
His sourcing channels cost nothing but gas: developer and real estate networking events, zoning meetings, LinkedIn, and a group most investors overlook — subcontractors working for DR Horton, Lennar, Pulte and Toll Brothers who are sitting on serious capital and investing it passively.
One failure mode worth guarding against: his first investor relationship listed seven properties, offered to cover 100% of the financing against Sells’ 100% of the know-how and execution, 50/50 down the middle. The man had no money. Verify capital — statements, proof of funds, a closed deal — before you spend months and engineering dollars on someone’s promise.
Frequently asked questions
What is a land disturbance permit and why does it matter before you close on land?
A land disturbance permit, or LDP, is the approval that gets a property entitled and allows physical work to begin on the site. Jackson Sells calls it the most valuable piece of the entire entitlement process, because until it’s issued you own land with an unproven use, and once it’s issued you own an asset you can either develop or sell as-is.
That’s why the LDP belongs in your acquisition plan, not your construction plan. Structure your contract so the diligence period and any extensions give you a realistic path toward entitlement, and price the risk that the jurisdiction says no for reasons that have nothing to do with your engineering.
Should I pay my builder a fee or give them equity in the project?
Equity ties the builder’s compensation to schedule and quality, which is exactly what most first-time developers are worst at policing. The cost is that it comes out of your profit margin instead of appearing as a fee, and some builders will decline the arrangement rather than accept the accountability.
To size the trade, use the fee-build benchmark Sells gives: builders keep roughly 30% of what they charge. Subtract 30% from your build quote and compare that to the equity percentage a builder is asking for on the whole project.
How many doors does a build-to-rent community need before institutional buyers will look at it?
About 100. Sells’ experience selling stabilized communities is that buyers like Blackstone, Invitation Homes and Progress Residential have no interest in anything under 100 doors, and that under 80 doors the institutional exit is effectively closed.
Below that threshold you’re marketing Class A product to a local buyer who frequently can’t afford it, which means your realistic exits are retail sales or a long-term hold. Decide which of those you’re comfortable with before you buy land that can’t support 100 units.
Will hard money lenders finance ground-up construction for a first-time developer?
Yes, under conditions. Sells’ experience is that hard money will lend on ground-up construction when you already own the land outright and have liquidity available for down payments. Owning the dirt is the single biggest factor.
For larger projects, the structure is different. Banks will often carry the senior loan; the harder piece is finding an equity partner willing to bridge the remainder and put their name on the loan, which is where most first-time developers stall.
How do national builders like DR Horton offer lower rates and cheaper homes than everyone else?
Vertical integration. Sells started his career at DR Horton and describes the company owning the development, the groundwork, the construction, the on-site sales agents, and DHI Mortgage, which underwrites the buyer’s loan. Every dollar a buyer hands over goes to building material or back into the company.
Because land acquisition and materials are effectively the only outside costs, and because the company has enough capital that it isn’t sourcing funds elsewhere to fund your loan, it can price homes and buy down rates in ways an independent builder working with third-party lenders and subcontractors cannot match.
The bottom line
Before you write an offer on your first parcel, get a written read on maximum permitted density and a realistic LDP timeline from an engineer who works in that jurisdiction — that single piece of diligence determines whether the deal pencils, how big the project has to be to reach an exit, and how much equity you need to raise.
