How Justin Higgins Turns Overlooked Raw Land Into High-Profit New Construction Homes

Justin Higgins (00:00)
I would say go find a lot that’s be like just maybe a quarter acre, half acre, whatever the acreage is, and keep it simple. A small, simple lot with a small, simple house. My very first project on my own was a seven hundred and twenty square foot house on a five acre lot. I got this five acre lot for seventy thousand dollars, built a seven hundred and twenty square foot house, sold that sucker for over four hundred K. And like so yeah, I’m over a hundred percent return. And and— and so that’s when I my clock started like, “Whoa, this is did that just happen?”

Cody Crabb (02:11)
Hello and welcome back to the Real Estate Pros podcast by Investor Fuel. I’m your host, Cody Crabb, and today I’m talking to Justin Higgins. Justin’s a real estate investor and builder in North San Diego County, where he’s finding overlooked land opportunities and turning them into high quality homes through ground up construction. We’re gonna talk about why he believes there’s still hidden opportunity in today’s market. Justin, thanks so much for hopping on the show.

Justin Higgins (02:35)
Hey, how’s it going, Cody?

Cody Crabb (02:36)
Doing so good. Happy to have you.

Justin Higgins (02:38)
Thank you, thank you. Glad to be here.

Cody Crabb (02:40)
So the one question I’d have for you to s— to start out with is, you know, you— you when— when you first introduced yourself, you kind of were describing yourself as kind of a investor slash builder a little bit. And then the more we talked it was like, no, this is this is we’re talking about investment here, really. I mean Yeah, go ahead.

Justin Higgins (03:01)
Exactly. We— we’re a construction company, but we don’t… we’re not our— the traditional type of construction company. We’re— we build equity through construction, so that’s how we gain our— our capital.

Cody Crabb (03:13)
Yeah, so tell us a little more about that for kinda how that works, and for someone that may not be familiar with the model.

Justin Higgins (03:19)
So our model is we buy raw, undeveloped land—the less developed the better. That’s… you wanna put all the equity you can into this thing. And for us, we’ve really kind of dialed in the— the process of going from permitting to ground up to vertical to s— to selling or leasing out the— the property. And by doing that, you create all the value within your own company. And the more you can do, the more you’re gonna save and the more you’re gonna make on the back end and on the front end.

Cody Crabb (03:49)
Yeah, so I— I think this is really interesting. So when you— when you say the less developed the better, you do have some qualifications. You mentioned there’s a couple things that you look for w— to kind of be a good fit for your model.

Justin Higgins (04:03)
Well, obviously you’re gonna want like water, you know, and power. Some… this day and age, power’s not as much of an issue with the battery storage and solar technology. So we have done a few off-the-grid houses with just… yes. You— you generally want city water unless you got good wells available, but as— as a general rule, you’re gonna want city water. And the biggest thing to look out for is fire compliance. And depending on what you’ve… district you’re working with, some are way more lax than others. Ours is particularly are not laxed—we’re in a very high-fire zone. So long story short, for us, fire compliance is the biggest thing that we look out for. If we can’t get a— a— a fire hydrant available, then the property’s a no-go.

Cody Crabb (04:50)
Interesting. Okay. Yeah, that— that’s— that’s… I find I find this interesting. I mean, the— the— the term that I… maybe I coined this, maybe I didn’t, I don’t know, the “sub-suburbs” is— is what I… And so I— I think that’s— that’s an interesting way to think of it, ’cause I’m thinking of my… I live in Salt Lake City, so I’m thinking of like the downtown area, then like the outside of the downtown area, which is kind of where I live, and then like the suburb area is kind of in there, and then this outside of the suburbs area. Like you said, it— it is exactly how you described. It’s kind of slightly undeveloped. There’s like… there are maybe a house here and there, but there… but clearly there’s a water availability somehow, because there’s a house out here. And so I find it interesting. Yeah, this is… it’s— it’s one of those… it’s one of those things that you may not think about in a really crowded, kind of a chaotic market like this one.

Justin Higgins (06:27)
Precisely. We’re actually in escrow on four rural properties right now, and the caveat is we need to put a fire hydrant at the end of the street. So we gotta do a mainline extension on the— the water infrastructure to get that fire hydrant. So— so did the typical person that wants just to build a house, they’re not gonna want to buy these four lots to— to build one house and do that whole infrastructure build-out. But for us, somebody that can develop all four lots at the same time, it makes sense to build that extra little bit of road. We add a little bit of mainline infrastructure and put in a hydrant, then boom, all of a sudden we have these four lots available. And if you pencil in this particular situation… well, if you were to pencil it out, we’re acquiring these lots of like ninety-three thousand dollars apiece and once— once it’s said and done. So there’s a lot of hidden value.

Cody Crabb (07:21)
It sounds like… it sounds like you in particular… I mean, I would… my next question was gonna be, “So why isn’t everybody doing this?” But you just answered the question. Like, it sounds like there’s certain things where, you know, you may not be equipped to do all the— the infrastructure to lead up to it, but where you guys are doing it in somewhat in bulk, it’s, you know, that’s…

Justin Higgins (07:40)
Yeah, and we use… we leverage our builder qualifications. A lot of banks want a of three houses done in the last three years kind of minimum to qualify for a builder financing. There’s also hard money loans that people that aren’t equipped to that kind of construction financing can utilize. But yeah, so we— we kind of just use our builder name and our knowledge, our equipment, our tools. We do a lot of stuff in-house. So we grade, we con— we do all our concrete forming, we have crews out there tying steel, placing the concrete and vertical construction. The only thing we really sub out is the stucco work, the drywall, and the roofing. Other… everything else we do keep pretty much keep in-house. There’s a few trades I’m probably overlooking right now, but as a general rule, we keep everything we can do in-house.

Cody Crabb (08:32)
So I— I’d be curious to know, is this just something that someone in your position could take advantage of? I mean, let— let’s say someone like me, where I’m off in… there’s plenty of— of opportunity in this kind of arena as I c— I’m just imagining where kind of where that would work. Do you have to be like in this kind of… you have have all these resources, do this in bulk? Like, does it have to be that kind of situation, or are there ways to take advantage of this for an investor that maybe can’t do it quite at that level?

Justin Higgins (09:00)
If you’re smart and you know how to like place all the chess pieces appropriately, anybody can do this. It’s just a puzzle. It all as it is is a puzzle and we have the experience in putting that puzzle together, so we’re really shining right now. But, you know, it doesn’t take a genius to do this. It’s like you just have to know a little bit about financing, understand your interest carry, and— and have the confidence of yourself to being able to pull it off. If you need to hire… like, we have the advantage of having the— the construction experience to do a lot of it in-house. But if you had the ex— the contacts to sub everything out, you could still make money at it. It’s just gonna be not as much, and you’re gonna have to be able to pencil everything out appropriately before you— you close escrow and anything, and have the confidence to— to c— follow through. That’s the whole thing. Everything works out if we perform. If we— if we don’t perform, that’s when it— it would all fall apart. So it— it all— it all comes back to the individual’s role and— and how confident they are in— in their abilities.

Cody Crabb (10:05)
So here’s— here’s a maybe an even better way to ask this: for someone who likes this idea and they’re like, “Well, yeah, I mean, I c— I think this could— this could possibly work,” what is the smallest version of this that you still think would work?

Justin Higgins (10:17)
I would say go find a lot that’s be like just maybe a quarter acre, half acre, whatever the acreage is, and keep it simple. A small, simple lot with a small, simple house. My very first project on my own was a seven hundred and twenty square foot house on a five acre lot. I got this five acre lot for seventy thousand dollars, built a seven hundred and twenty square foot house, sold that sucker for over four hundred K. And like so yeah, I’m over a hundred percent return. And and— and so that’s when I my clock started like, “Whoa, this is did that just happen?” Like, you know? And and it’s, you know, that was almost ten years ago, and I’ve been rolling ever since.

Cody Crabb (11:38)
Yeah. Okay, so this is— this is kind of a cool, kind of cool way to look at it. And I’ve… and really you’re kind of doing a service as well. This is one of those things where, you know, you’re not just flipping a house for a profit. Like, this is… you’re creating housing that…

Justin Higgins (11:52)
Creating wealth. It’s— it’s so rewarding when you get that… when there’s just nothing before, and you carve away a little bit of a mountain, and you put a— a nice-looking home on it, and then somebody buys it, and everybody’s happy. Like, everybody… it’s like a win-win-win-win all the way around. And then like, all of a sudden, there’s more money in the world because of this somehow, you know? It’s a— it’s a real mind game.

Cody Crabb (12:16)
Yeah. Well, I l— I like that, too, ’cause ’cause there’s so… there is such an availability crisis all across the… I mean, especially in California. So I think that must be nice, too, to feel like you’re not just… it’s not just kind of squeezing money out somewhere. Like, this is a real… not— not to like put it this way, but like it’s like real, honest work, you know? Like, it’s… you’re— you’re building… you’re building a thing and someone’s buying the thing, and it’s worth what you’re… what they’re paying. So that’s cool. So as far as like doing these projects, you’ve done a lot of these so far. What’s a lesson that you— that you learned along the way from doing things in this— with this strategy?

Justin Higgins (12:52)
It’s easy to bite off more than you can chew sometimes, but…

Cody Crabb (12:57)
Yeah, like I was just said just before I… not to cut you off, but like, I’m just… I’m imagining like all the things that you think of that you don’t think of with like a regular house in a regular suburban neighborhood. It must be times ten, because you’re just… you might be off in the middle of nowhere.

Justin Higgins (13:12)
And when you’re closing escrow on these lots, you have your due diligence period, but that’s up to you to find everything. So like, let’s say you close escrow, and then all of a sudden you find a petrified mummy or something on the thing, and then then all of a sudden you got like Environmental coming down thing. No, you can’t. So there’s a lot of little risks like that. So you gotta really know what you’re buying before your due diligence ends. A few years ago we closed on a property that there was a hidden covenant buried in the paperwork. And so in order to for us to perform on one lot, we had to make basically a whole neighborhood just to build one— build out one structure. And that was quite costly—not just in the— the buildout, but the time process of the engineering and— and carrying of that. It it— it’s still… we still worked it out in the end, ’cause there’s nothing… I like to say there’s nothing we can’t do, but it— it just… you gotta look out for that kind of stuff. And when you’re in the due diligence period of your escrow, make sure you look at every nook and cranny of that title report, and you know exactly what you’re buying, and there’s nothing that’s gonna prohibit you from building what you want to build.

Cody Crabb (14:22)
So as far as, you know, w— what when you’re looking for places like the— or for deals like this, for land like this, is— is there something that kind of sticks out to you where… I mean, th— there’s obviously the checkboxes of like, “It’s at least this big, it costs this much for this much land.” But I’d be curious, like, what other… you said one thing that you said before we started was it’s gotta be f— at least fifteen minutes from civilization maximum, right?

Justin Higgins (14:48)
That’s what, you know, no one wants to draw… well, it depends on the lot. Sometimes there’s some really beautiful rural lots that you’re like, “Okay, you can make this work to like a retirement couple,” that or whatever the case may be. But generally, if you’re not… like, I like to use the In-N-Out Burger. I don’t know if the… yeah, it’s all they have In-N-Out. Yeah, we… yeah, In-N-Out Burger. If you’re not within ten minutes of an In-N-Out Burger, like, people… it’s, you know…

Cody Crabb (15:11)
It— it may not be In-N-Out, but I definitely have like the chains in Utah in mind that like if you’re not… yeah, that’s— that’s really true.

Justin Higgins (16:00)
So I use that as my rule of thumb.

Cody Crabb (16:02)
That’s a real— that’s a really good way to put it, because that’s… when you say civilization, you’re not talking like the big city, you’re talking like enough that, you know, you could roll up…

Justin Higgins (16:11)
Grocery market. Hospital, too. People like to have like, even if it’s a— a regional hospital, they want some, you know, fifteen, twenty minutes doing like, you know. So you gotta like look at that kind of stuff. But at the same time, you know, the suburban, suburban, you can keep going deeper and deeper and the property just gets cheaper and cheaper. So it’s like, I don’t… there’s only so much property in this world, and there’s only so many times it’s gonna be for sale before it just is not no longer. So whether you’re i— i— there’s just, you know, now’s the gold rush for— for it.

Cody Crabb (16:46)
Yeah, yeah, for sure. Like, I— I— I’ve heard all these stories of where I grew up, right? My mom bought my— the house that I grew up in in like 1975, right? And it was in the middle of… when I say it’s in the middle of nowhere, I mean it is in the middle of nowhere. There was nothing for miles around it. And now it’s like literally every square inch of that is covered in like houses and residential and commercial, and it’s— it’s just… it— it’s hard to imagine that, I suppose, but if you can imagine it, I mean…

Justin Higgins (17:15)
Never underestimate the power of a bulldozer. So like, you’ll like a lot and you’ll be like, “Wow, this isn’t possible.” No, you get a— the right bulldozer on there and they’ll— they’ll make it the way you want, and then you just stick a house on it. And that’s part of the part situation, too: you have to know those kind of contacts if you don’t have your own heavy equipment, or learn how to operate and get a— a equipment rental contract with United Rentals or something.

Cody Crabb (17:19)
Wild up to like a… Yeah, yeah. Yeah, so— so is this… this seems like if you’re like the handiest person ever, like…

Justin Higgins (17:48)
You can make a— as much money as your ambition allows.

Cody Crabb (17:51)
Yeah. Yeah, so— so that’s— that’s what it is, is like it’s up to you… it’s— it’s a question of like how much… how well you could do something. But also like talking to you, like it seems like some of this is way beyond just your typical like “rent a thing for the weekend” type stuff. Like, you’re talking about making like creating roads. Like— like that…

Justin Higgins (18:12)
And whatever it takes. If it pencils out, it pencils out, you know. And like I s— making roads, never underestimate the power of a bulldozer. We bulldoze, put some base down, and if this— if the requirement’s asphalt, we roll the asphalt out. I mean, it’s— it’s all work, but it’s calculable work. So i— if we— if we try to eliminate all the unknowns as possible, we can get it down in our experience, you know, over the last… well, I could say fifty years if we’re carrying on from my dad’s experience before me, it— we got it down to a science. But like I said before, I don’t think it takes a genius to get this down. I don’t think it takes fifty years experience to figure out the calculations. If you’re smart, you can figure it out, you know, and— and just how smart the person is, how ambitious… and everyone’s different, so I can’t say it to that.

Cody Crabb (19:02)
Well, and the sky’s the limit, too. Like, I’m— I’m picturing all these— these options like ev— like a few minutes from where I live that are like kind of on the edge of civilization a little bit. And I’m also picturing on the other end of the Salt Lake Valley where there’s like the same sort of thing on the edge of where civilization is. I think that gives you a lot of options as far as like, you know, it— it s— sounds like it could be more accessible to maybe an investor that wants to get started and have something built of like that’s theirs, but maybe they can’t quite, you know, figure out a way to do that in right in the middle of where everybody’s living right now.

Justin Higgins (19:38)
Yeah, that’s part of the where we shine, too, is knowing the zoning and county permitting process and setbacks and you know, “Hey, this is zoned for, you know, th— a one bath or w— one dwelling. This is zoned for up to three dwellings,” whatever it could be. So…

Cody Crabb (19:58)
Gotcha. Yeah. Well, this has been really interesting. So what has… what has you excited over the next couple of years in with this strategy, with the— the industry, with the market? I’d— I’d be curious to know.

Justin Higgins (20:09)
Well, it’s what’s cool for us is we love to build. We’re builders at heart, generational builders now. And so the way the market’s looking, even if we can’t sell these suckers, we just rent them out, because the rental market’s there to— to satisfy these carrying costs and we can just hold until we can sell in the future. So we… the mo— what— what has me excited is we don’t have to work for clients per se anymore. We can just hire ourselves on every single lot to— to perform. So essentially we buy the lot, we pull the construction loan through our builder credit and perform, and then refinance at the end. And when we refinance, we either sell it off or keep that refinance structure in place and carry it through a lease.

Cody Crabb (20:56)
Interesting. Yeah, and is… would you kind of change the design of a house because of that? Like with that in mind that that’s possible, like maybe having it having a separate upstairs and downstairs rentable or something like that?

Justin Higgins (21:07)
Well— well, the biggest thing happened in California this last year. They just changed the zoning laws where they’re allowing three dwellings on one parcel to kind of curb the— the housing, so they want to encourage people renting out their ADUs. Before, you could have three on one parcel depending on county and city zoning, but as a general rule, you could— you could have three on one parcel ex— if you were the primary residence of that dwelling. So by— by eliminating that primary residence rule, now this opens up to we can buy a lot, put three dwellings on that lot, and rent each dwelling out at market rates and, you know, grow our income stream that way as well.

Cody Crabb (21:50)
In that perspective, especially, I mean, that’s— that sounds like a really huge opportunity, because…

Justin Higgins (21:55)
Especially when you take into account these old block parcel blocks that are being sold in blocks because of these covenants, like that road I mentioned earlier. You buy four of these, you throw up three dwellings on— on— on this. It— and for the… just to use this as an example, that’s twelve rental units on one three-hundred-and-eighty-thousand-dollar acquisition, so…

Cody Crabb (22:19)
Yeah, that’ll— that will return… that will— that will come back to— to pay for itself pretty… That’s— I find that really interesting. So— so where should somebody go to kind of look for these things? You… like you said, you find… you found these kind of i— these public auction-type things, or what— what is it that you…

Justin Higgins (22:24)
Yes, yeah. No, no. They’re just… you know what’s funny is I found most of my land by driving around. Like seriously, you look at Zillow and all this and that, but just driving around in these old back roads, and you see like this old, like, rickety “For Sale” sign, and you just call that number. And then they might not have that listing yet available because it got transferred to somebody else, and it’s a lot of these properties that just kind of get overlooked. They have a cousin that listed it and put it on the back, you know, like, or what…

Cody Crabb (23:04)
And also like, I’m— I imagine less competitive, too. Like, these are typically a little less desirable, it sounds like.

Justin Higgins (23:11)
We— we bought our last acquisition that we closed on in April, a hundred and seventy or a hundred and… was hundred and seventy-four thousand dollars. It had a water meter, a fire hydrant, everything in terms of buildability right then and there. Closed. We’re real close to going ground up on that in about a month or so. But long story short, about a month later, the parcel next door, not as nice as mine, sold or was bought for two-fifty. So like it’s like just because one real estate agent wasn’t really marketing it correctly, didn’t know what they’re doing, they had, like I said, like they have the cousin or brother list it. Yeah. And then the other guy had a savvy real estate agent and got seventy-five thousand dollars more.

So if you just kinda like gotta go explore and— and— and know what you can buy, too. You don’t wanna… you gotta know what’s… if you gotta have money in the bank or access to funds, either it explore the hard money aspect if you’re broke or— or trying to get start from scratch. My very first loan I got extremely lucky on and got like a hard money guy just based off of my reputation as a… as he knew he saw me working and just was like, “Okay, well you can build. Here’s money for the property.” And then when I bought the property and started building, he funded the rest of that seven hundred and twenty square foot house. And when I cashed out, I paid him back plus his interest, and that’s kind of sh— how I got my foot in the— in the game. So yeah, you gotta be smart, lucky, talented— the— all the whole nine yards, I guess.

Cody Crabb (24:39)
Gotcha. Cool. And it sounds like those three, of course, but it also kinda just sounds like really know what you’re looking for. Yeah, like having— having a certain criteria in mind and kind of keeping it, “Hey, if it’s this, then it’s also this and it’s also this, probably worth looking into.” And that’s not even a smart thing or a lucky thing—that might just be like you actually have your eyes open to something in particular. So…

Justin Higgins (25:10)
Yeah, I think— I think a lot of people when they go to look at land, they look at the landscape and that’s how they draw their conclusions. They’re not necessarily looking at like what it brings that land to an entitlement for a full-blown house, like in terms of power, water, permitting, this and that and the other. I would say the actual landscape, whether it’s hillside or flat valley or whatever, that’s like one of the third or fourth things I come across… like think about. When I roll up to a lot, my very first thing is water. Water, water, water. If I don’t have easy access to water, I just keep driving—it’s not even worth it to me.

Maybe some people, you know, can have that ambition to bring it that much further. I will extend a main line if I have to to get a little bit further down the road, but if I don’t have like reasonable access to water, then it’s like a no-go. I don’t even want to explore it, because we open up escrow, we start doing like exploratory and like well-site stuff, like I don’t even want to approach that road. I will say this, though: my dad did build a house in Idaho a few years back, punched a well. Everything is great with that house. So I mean, it just depends on the location. Here in Southern California, wells aren’t— aren’t the best.

Cody Crabb (26:23)
I suppose it depends on where you’re at, but no, that’s— that’s something to think about, too. I mean, for some places that might be a super easy thing to do, and it… the wells are everywhere, and you…

Justin Higgins (26:32)
You know, an alpine setting or something, you might get a well might like lickety-split.

Cody Crabb (26:37)
Yeah, I know Utah’s got all kinds of stuff up, especially as you get up near the mountains. But like, that’s a good point. Like, it— that’s really depends on where you’re at, too. So knowing you… knowing y— where you are and what your zoning is and what’s available where you are sounds like the key here for sure. Well, yeah, for sure. So well, once again, thank you so much for— for all this. I think this has been really interesting. You mentioned another thing that you— that you’ve been doing is…

Justin Higgins (26:52)
Yeah. Yeah, I would say entitlements.

Cody Crabb (27:04)
You’ve been taking investments, is that right?

Justin Higgins (27:06)
Well, so if you want to invest in our company, we just… i— i— we like to use other people’s money as much as possible, and then when we cash-out refi, we— we… everyone gets paid back and we retain whatever is left. And so that’s kind of been our model thus far. So we offer like a nine and a half percent return on any kind of dollar that’s— that’s let out with a— with a five point back or in the end, depending on the situation. That point is neg— as variable depending on— on what we are doing. But for a lot of ill… s— some investors get up to ten percent interest with five points for every… so like for example, if they give a hundred thousand dollars, they get a t— one thousand… it’s ten percent interest monthly, and then they would get five thousand dollars on that hundred thousand. So, gotcha. Yeah, if that makes sense.

Cody Crabb (28:02)
Yeah. So if— so if someone wants to learn more about how to do that or get in— get— get in touch with you somehow, how can they do that?

Justin Higgins (28:08)
I s— I would say the best is just follow me on Instagram. It’s @justin_higgins17. And my Instagram account has a— a lot of my business stuff on it. I post stories daily about what I’m doing daily, whether it’s a meeting or a county submittal or out on the actual job site building something. There’s always daily content on the story, and then plus the big upgrades, we of course we post reels and stuff like that. So I would just follow my Instagram at @justin_higgins17.

Cody Crabb (28:42)
Awesome. Cool. Well, thanks so much for— for that. Get in touch with him if that sounds interesting to you. I can’t thank you enough for kind of introducing our audience to some of the— this strategy, and kind of opening our eyes to what’s possible here, because it sounds like it’s awesome. Awesome opportunity.

Justin Higgins (28:57)
Yeah. In a nutshell, you buy, you build, you sell. Like, it’s— it’s a no-brainer and it sounds kinda like no-duh, but like it’s just not being done as much as it could be in the what you like to call the sub-suburban areas.

Cody Crabb (29:13)
I like to think that he’s gonna say that forever and that that’s just like a thing I invented now. So you’re welcome, if that’s… if you and you… you can have it if you’re… well, if you wanna use that.

Justin Higgins (29:22)
I say it… it’s— it’s sunk in there. It— it— it burrowed itself in there.

Cody Crabb (29:26)
Awesome. Well, thanks again, and we— we appreciate your time today. Audience, thanks so much for joining us as well, and we’ll catch you on the next one. Justin, all right. Take care.

Justin Higgins (29:36)
Thank you, guys. Bye-bye.