The Hidden Costs of Commercial Land Development: $50K Before Closing? | Wendal Miller

Wendal Miller (00:00)

You always have to go stand on the property. You always have to go look at it in real life; that’s the part it can’t do. There’s a lot of science now behind site selection. There’s a lot of wonderful tools. When I first started doing this to do due diligence, I can’t tell you the number of hours I spent in a Register of Deeds office going through courthouse records and all this other stuff, and now it’s all online.

Scott Bursey (01:00)

Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host, Scott Bursey. Glad you’re with us. Today we’re pleased to be joined by Wendal Miller. Wendal owns and runs Prime Commercial Realty. He works with a pool of investors. He finds the land, lines up the tenant, and takes the deal from prime, raw ground to a finished leased building, and he does it all on his own. Listeners, today you get the real ground-up story from the man who lives it. Wendal, welcome to the show.

Wendal Miller (01:32)

Hello, Scott. Great to be here. Thanks.

Scott Bursey (01:34)

It’s excellent having you here, my friend. And to help our listeners get up to speed, please give us the ninety-second highlight reel, if you will, of how your career ignited and where you’re pouring your fuel now.

Wendal Miller (01:46)

Well, Scott, I grew up in the construction business. Actually, I was a bricklayer before I was anything else. And so, you know, but I have progressed along through the business from the construction side to getting my real estate license, and then getting involved in development work. And I have mainly stayed in the commercial side of the business. When I was, you know, in construction, I did all commercial projects: tenant fit-outs for different clients. I’ve built banks, I’ve built warehouses, I’ve built all sorts of commercial buildings.

I have done—I used to draw plans, and I would literally, when I was in the construction business, I would take the piece of property that the owner had and I would plan it out, get it all entitled, and get it built. And I brought that with me into the real estate side of it so that not only could I do the stuff that I did in the construction business, but also take care of the brokerage side and get more involved in retail development.

And what I do now is I’ll have a client that will either have a piece of property or will have a particular need, and they will engage me to basically help them get it entitled—you know, all the if it needs rezoning, getting the engineering done, the due diligence work, which would entail getting geotech work, Phase Is, appraisals, and all of those types of things that you do before you ever start construction. Because now the entitlement process—now it will take you longer to get a piece of property entitled most of the time than it will to build it. It used to be, twenty years ago, it was flipped around the other way, but the bureaucracies get deeper and deeper.

And so basically I’d get it entitled, oversee getting it constructed, and then also get it leased up for their final tenant and hand them the keys to it, and there you go. And so I call it “from trees to keys,” and that’s what I call it. And I’ve done it over and over again over the last thirty years. So here I am.

Scott Bursey (03:58)

From trees to keys. Wow, thank you for sharing that with us, Wendal. And what really caught my attention about you is how you read a piece of land. You look at raw ground and you see the roads, the water, the power, and the finished building at the end of it. I guess taking that a step further, right out of the gate, when you stand on a raw piece of land, what do you see that most investors may overlook?

Wendal Miller (05:03)

A lot of time it has to do with the amount of work that goes into the topography of the land: how much cut, how much fill, because elevations are really deceiving when you look at a piece of property. Sometimes you can look at it and it will look, “Man, that’s a great looking property. Look how flat that is.” And when you get the survey and the topo back, you realize it’s eight foot from the road to the back of the property. We’re gonna have to cut six foot of fill out of that thing we didn’t figure we’d have to do.

Or the topography is the first thing, but the other is sometimes you’ll have power lines coming across the property that you’re gonna have to deal with. Or there’ll be easements on the ground—you know, telephone lines, cable lines, fiber optics lines. There’s just all kinds of easements that could be involved with a piece of property that you have to go ferret out.

Of course, a lot of that—before I ever, you know, if it’s a piece of property that we have to go get under contract, before I ever write a contract, I will literally go get the deeds from the courthouses, go through the deeds. I’ll actually take the legal description from the deeds, draw it out, get it drawn out, and actually do what we call a fit-up on it to make sure that whatever building—the property will accommodate the building and the parking and the easements and any kind of setbacks. What are the properties around it zoned? Or do you have light zoning around you? Are you sitting against a residential area and you have to put buffers in?

And you have to ferret all of that stuff out before you ever—I do all of that before I ever turn it over to the engineer. Of course, they’re gonna do that, too, but I wanna know it first. Because once I hand it over to the engineer, they’ll start designing stuff. And sometimes they don’t always think about how much it costs to do this or that; they just design it up whatever is easiest for them.

And so, you know, I’ve had engineers before that would lay out a building on a piece of property. I’ve had my geotech work done on it and come to find out part of the property has had fill put on it and part of it has been cut into the side of a hill. And I’d have to go back and say, “Look, we’re gonna have to flip it over and put the building over on the side of the piece of property that you’ve got original dirt, and the garden center on the other side of it, so that we don’t have to spend so much money.”

You just get into things like that, that by being intimately involved in the property itself and having the ability to make decisions on the fly from having to do a lot of the layout myself, I can get with the owner. And before we ever start spending money with the engineers, I’ve already done two or three different schematics or concept plans on how to best value-engineer that piece of dirt.

Scott Bursey (07:57)

Appreciate you spelling that out for us. And you touched on this a little bit, Wendal, but real curious: permits take a long time these days. Where does that slow your deals down the most?

Wendal Miller (08:07)

Well, the one department that really slows us down the most is the Department of Transportation. Because, you know, in the retail world, it’s all about location, access, and visibility. You have to have your access points right, and you can’t get your permits for your access completed until all of your other entitlements are finished, because the Department of Transportation won’t give you an answer until you have had approval from the local authorities. And the only way you can get that is you have to have already gone through their planning process.

And sometimes that will be six to nine months just to get through that process. And then you have another sixty days or so just getting your answer out of the Department of Transportation. That’s where the biggest hold-up is. And so your contracts now that you have to put on a piece of property have to go for almost a year to be able to get them closed if you want all of your answers done.

It’s just too dangerous in today’s environment to think that you have something nailed down in an entitlement world. You could get hung with a piece of property real quick. You could get hung real quick without that. And it’s really a tough thing to get across to the landowners and the sellers, because they want their money today, and it just doesn’t happen that way. And that is one of the biggest sell jobs that you have to do in this, is to get across to the property sellers the amount of money that you have to spend to get a “yes” that your property is going to meet all the requirements and get all the permits that you need. That is the biggest sell in this.

You can get to the land price and all that, but getting the time is the big one. And so I have one right now that I told my client, I said, “You’re gonna have to have almost a year of due diligence on this because of what we were dealing with.” And everybody negotiated, and they cut the time down. And I’m having to go right back to the sellers again and say, “Look, we have to have ninety more days of due diligence before the hard money hits.” You know you’re gonna have to come back to it at the end of the day.

It’s hard, and you have to go back and you have to show them: okay, the planning department wants this, the road department wants this, water and sewer wants this, and all of the things that they want. And the time just builds up until you get to a point where this thing will never close in the time that you’re wanting; it just won’t happen. And then they usually come around. Because in most deals, you’re gonna spend forty to fifty thousand dollars in due diligence before you ever close on the property.

Scott Bursey (11:12)

Thank you for taking us down that road, Wendal. And really curious about this: when it comes to your business, Prime Commercial Realty, what’s the biggest opportunity right now for your business in today’s landscape?

Wendal Miller (12:04)

Well, the opportunity is what you make it. And you know, the more effective you are at being in the marketplace, then the luckier you get. Every segment of the market kinda has its own cycle, and you have to recognize where those cycles are—whether it’s office, which has really been lagging because of what COVID did, but office is getting ready to come back around.

The retail side of it—again, retail really got hit hard with the whole COVID thing, because the retailers that were doing the best were the ones that were kinda protected against Amazon. But those retailers are coming back around, because they have learned to be able to compete with Amazon and a lot of the mail-order stuff a lot better, because they’ve become online as well.

And so, you know, the apartment cycle—I’m in the Nashville area, and right now in Metro Nashville, they have apartment projects that are just falling off the wagon right and left because they’ve built too many. But that will cycle back around, the absorption. And so, you just have to understand the cycles of where they are.

And you never want—if you haven’t been in a particular cycle of it, you never want to try to go just because it looks like it’s hot. Well, by the time you figure out that it’s hot, if you’ve never been in it in that segment, you better stay out. Go pick something that’s on the downside, and by the time you get entitled, it will be cycling back up again. Because the entitlement process is going to cost you a year or so getting it ready, and then plus a year or so getting it built, and then by then the market will be ready for you.

You have to have that intestinal fortitude to be able to take that risk at the low point, knowing that that segment’s gonna cycle around. You know, for a while there, everybody in the world wanted storage buildings. Well, storage buildings have come and storage buildings have gone, and they’re low. Well, it’s getting about time to get back in the storage building business again, because they’re all about to get filled up and it’s not the darling so much of the market. But hey, life’s a wheel; it goes round and round, and that’s the way the markets are.

Scott Bursey (14:36)

You spoke about storage. Is that where a new investor should start in your view right now in today’s market?

Wendal Miller (14:43)

Well, it has started to cool down enough; it’s probably something to start looking at. But you really—matter of fact, I’ve got one development that I’m working on, and part of that property is well-suited for climate-controlled self-storage because the area that it’s in has very limited inventory of climate-controlled units. And on top of that, you also look at what—for that particular market that I’m talking about, their housing within the next year or so is getting ready to really take off. And it’ll be all subdivisions where people can’t have storage sheds and all that other stuff, and they’re gonna be looking for places to do storage buildings. So we’re thinking about doing storage buildings on that one.

But it’s just something you have to research. And there are sources out there for every segment that help you identify, okay, what’s the capacity of this market to absorb whatever I’m putting in here?

Scott Bursey (15:44)

Real talk, Wendal. This business can swing hard, fast. You run solo on purpose. How do you ride out a slow stretch?

Wendal Miller (15:54)

Well, you have to keep your pipeline in there. And actually, if you think they’re starting—you know, because if you’re not getting a check this month, it’s not because you didn’t do something last week or last month; it’s because you didn’t do something a year ago. And that’s how the cycle goes. And that’s the reason I try to keep a certain amount of either commissions or fees in the pipeline, so that when things do get slow, I’ve always got something going.

And I always have to cover a certain base, and then when things get—they’re gonna get better, and then you just have to put back more. It’s just like farming: when the harvest comes, you don’t go spend all the money that you just got at harvest. You have to allocate that out so that—because this business is like a lot of others; it’s gonna have its ups and downs and you better prepare for it.

Scott Bursey (16:56)

Appreciate the clarity there. Wendal, if you could walk us through this one: new tools can hand you a pile of data fast. What can’t they do out there on the land?

Wendal Miller (17:07)

You always have to go stand on the property. You always have to go look at it in real life; that’s the part it can’t do. There’s a lot of science now behind site selection. There’s a lot of wonderful tools. When I first started doing this to do due diligence, I can’t tell you the number of hours I spent in a Register of Deeds office going through courthouse records and all this other stuff, and now it’s all online.

The demographic stuff, the phone data that we have available is out there. We know how many trips one retailer is getting versus another; we have a lot of other stuff. But there is nothing like—you can go to a town, and after you’ve been doing this a while, there’s some places that you can go to that they just look dead. There’s just no energy there. AI can’t give you that data.

It’s like when somebody’s having a cooking show on TV: you can do everything but smell it. You can’t smell a cooking show. Well, AI can’t get the feel of the energy of a particular piece of property unless you go there, you visit it, and you watch the traffic and you see it in person. You can’t do it. There’s an art to this business as well as a science, and you better be able to do both.

Scott Bursey (18:32)

Wendal, if you could talk to us about the relationships that carry your business right now—in essence, what type of value have you found from being in the correct rooms with like-minded individuals over the course of your career?

Wendal Miller (18:46)

That’s huge, in the fact that it gives you a lot more confidence. Number one, you see other people that have succeeded. When you’re in the room with one of the big guys—I won’t name any names here, but I’ve been in the rooms with them—it gives you confidence that what you’re doing is right, and the fact that you know, at some point after you get enough sites under your belt, you just know that you know. I really don’t know how to explain that one other than you reach a point where you just know that you know, and you just have to carry that confidence.

And now you don’t want to make the mistake of being too overconfident, because you never want to try to oversell a site and then under-deliver—when you build something out and then all of a sudden you can’t get any tenants for it and blah, blah, blah. You’re just like, “My gosh, I’ve totally oversold this.” Fortunately, I have not had one of those, but there is a danger to that.

Scott Bursey (19:48)

Appreciate the insight there. Very valuable. Wendal, let’s dive deep. If an investor came to you with money to place, let’s say in their first commercial deal, what would you tell them to do first?

Wendal Miller (20:00)

Good question. And the first thing I would tell them is you have to be patient and you have to let the deal come to you—whether they already own a piece of property or where we’re gonna go out and find the piece of property for them to do. Because you don’t wanna go just grab up something. You have to be patient to find the right thing, because if you get the right thing, the right deal is going to come to you.

And the other thing is that you make the deal that you feel comfortable with. You don’t want to try to overspend on a piece of property. Whatever your gut is sitting there telling you, a lot of times, don’t go past what your gut is telling you. Because I’ve had these before where I would talk to someone and I would say, “This is what this property is worth.”

And in the retail world—I know more about the retail world than I do a lot of others—in the retail world, everything’s based on how much sales you can do, and then you work backwards from there. There’s tools that we use to say, okay, this site will generate two million dollars’ worth of sales a year. And then I know that with two million dollars’ worth of sales a year, I can’t be over eight percent of sales in my allocated rent—you know, what I factor in as a rent number to myself in rent, taxes, insurance, and all that. And then whatever that number comes up to be—I’m sitting here trying to do the math in my head, but anyway, we work backwards to get to the value of the property, and then you stick with that.

And it doesn’t matter what the property owner thinks his property is worth; his property is not worth more than what that property can generate in sales from a tenant. And you have to stick with that. That’s where you have to be. And if you can make the deal on that, then you’re good to go. Then everything’s gonna work forward from there.

Scott Bursey (22:04)

That’s some powerful perspective. Wendal, for those of our listeners that want to keep this conversation moving, stay in your lane, what’s the best way for them to plug into your pipeline and reach you directly?

Wendal Miller (22:15)

Well, I’m in Murfreesboro, Tennessee. I can give you my email address. You want my email address? My email address is real simple: it’s wmiller@wwmiller.com. Or you can send a message to my website at primecommercialrealty.com. And I’m easy to find—just Google Wendal Miller in Murfreesboro, Tennessee, and it will find me.

Scott Bursey (22:40)

Wendal, thank you so much for joining us today on the Real Estate Pros Podcast.

Wendal Miller (22:45)

Well, it was a pleasure being here, and I hope that I’ve helped somebody out there somewhere. If you can use anything that I said to help you, then that’s great. So I was glad to be here.

Scott Bursey (22:56)

It was an honor having you here. And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with the lineup of elite guests, just like Wendal Miller, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.