Unlocking Land Investment Secrets: The Key Risks and Rewards You Need to Know

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In this conversation, Don Healy, a land development consultant, shares his journey from mechanical engineering to real estate, emphasizing the importance of understanding land risks and due diligence in property development. He discusses common pitfalls in land acquisition, the rise of infill development and accessory dwelling units (ADUs), and the role of small investors in addressing the affordable housing crisis. Don also highlights the use of AI tools for research and the necessity of thorough investigation before making investment decisions.

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Don Healy (00:00)
Yeah absolutely. I feel very passionate that ⁓ one of the big keys to solving the affordability crisis is the investors that are developing small properties. ⁓ If you look at what jurisdictions are doing, there’s not a ton of work right now to make it easier on the big developers, right? But there’s a ton of legislative work going on right now ⁓ to help with middle housing codes. The middle housing codes in the Pacific Northwest.

frankly, have gotten very, very aggressive, you know, where they’re dropping lot coverage limits and they’re dropping, you know, tons of of setbacks and other regulations specifically catering to that, to that middle housing. So yeah, I think, I think that the, you know, the small, the small investor or the investors that are making moves on, on infill ⁓ is going to be where, where it’s at, you know, the, the, jurisdictions are certainly the ones that are, that are trying to make that easier right now.

Dylan Silver (02:29)
Hey folks, welcome back to the show. Today’s guest Don Healy is a land development consultant for single family developers and small multifamily developers servicing investors nationwide. Don, welcome to the show.

Don Healy (02:45)
Dylan, thanks for having me. I appreciate the opportunity.

Dylan Silver (02:48)
It’s

to have you on here. Great to meet you, Don. And I always like to start off at the top of the show by asking guests how they got started in real estate.

Don Healy (02:56)
Sure. Yeah. I actually, it was a funny story. I was, I went to

you got a degree in mechanical engineering and, ⁓ ran into the crossroads of life and a career fair where I could go left to construction and right to engineering. And I, I took the left, ⁓ came out of college and I went directly into home building, ⁓ high volume, fast pace production, home building, building about 80 houses a year, ⁓ 2008 hit and,

you know, wasn’t that great of a spot to be for somebody fresh out of college in home building. So I back on my engineering degree

ended up, you know, in various roles, managing engineering teams, high hazard nuclear waste, ended up managing a nitric acid chemical plant in charge of all the risk management. I came to a spot in that journey where I decided that, you know, that wasn’t the stress that I wanted on me and went back to home building.

landed in on your land home building where we were servicing people ⁓ building houses on their own lots. This included, you know, investors, small developers, and realized pretty quickly that the skills that I had gained in risk management applied really well to ⁓ helping people understand the risks with their land. And, ⁓ you know, I found that, you know, getting early evaluation of property and helping people understand those risks as early as possible in the process.

made ⁓ on the builder side, made, you know, the operational processes as well as the customer experience night and day different. And so when I decided to leave home building and start my own thing about a year ago, ⁓ you know, I really dove into where, where I could help people the most. And that’s, that’s with understanding land, helping them understand the risks, you know, coming in with the mindset that, that every property is hiding something and helping people understand what those things are as early as possible so that they can make good

Dylan Silver (04:39)
Yeah.

Don Healy (04:51)
investment decisions, as, as they’re preparing to, you know, build, develop, you know, infill, you know, anything that they’re doing with land, ⁓ it’s, you you absolutely have to have that early due diligence to understand what it is.

Dylan Silver (05:53)
You have

and it’s interesting because Land and I was mentioning to this to you before hopping on here is now Being looked at by more people than maybe in years past where people might have been focused more on on fixing and flipping It’s just harder to do that when there’s so much ground up construction But before we before we get into that I do want to ask it you mentioned engineering degree and then going into construction and then having a fallback on the engineering during 2008

So you’ve had to make some pivots. For folks who are listening who may be engineering students or engineering grads, do you have any advice for folks who may be trying to decide, what do I do? Where do I go? How do I find my career? What advice would you give engineers?

Don Healy (06:38)
gosh, you know, in my eyes, you know, that degree, that’s a, that’s a tool in your bag and you never know where that career is going to lead when you, when you walk out of those doors. And I realized pretty quickly when I walked out of that engineering school, that, ⁓ what I taught, what I was taught in engineering is not necessarily anything that you’re going to use at school or excuse me, in your, in your career. So, ⁓ you know, in school, you’re gathering tools that you’re going to be able to deploy.

wherever you end up and you know, looking back at, at, ⁓ at my career, you know, I’ve used the tenants of, solving hard problems, understanding details, ⁓ looking at things very analytically. I’ve used those tools from engineering through every, every career path that I’ve, that I’ve done, you know, even early on in, ⁓ in residential construction, you know, I could have a, a great conversation with an inspector because I understood the codes. understood the tenants of, of what was behind.

you know, the the codes to have an educated conversation, which you know, which which helped me even early on my career.

Dylan Silver (07:41)
speaking about codes and having difficult or educated conversations, when we talk about land specifically, I mentioned there’s people pivoting into this space out of fix and flip. What are some of the basic mistakes that you see people making that could be costing them time and lots of money?

Don Healy (08:02)
Gosh, know, the, ⁓ the, the top three things that I, that I see that costs people time and money and, and, know, slope is actually number one, that may be a Pacific Northwest thing. A lot of people don’t understand the costs of slope when they’re going to build on that. ⁓ Number two is, is zoning. You know, they, they purchase a piece of property that they’re planning to build something on ⁓ and it’s not entirely zoned appropriately.

And when I say that it, you know, in zoning code, there’s, there’s, there’s uses that are permitted or outright uses. And then there’s conditional uses and you may go talk to the County and run what you want to do by them. And they’re like, yeah, you could build a house on that. But what they may not tell you is that there’s a conditional use planning process that’s going to take eight months and $20,000 and a consultant to get you through before you can even get to building permits. So

We see that. And then the last thing that I see is, is utilities. ⁓ you know, utilities, ⁓ on the lot is a lot different than utilities in the area. ⁓ you know, or utilities available. We see that a lot in real estate listings. you know, recently did a, did ⁓ a review for a guy that was working on developing peace property in Washington and, the, was in the due diligence. Fortunately he hadn’t contracted on it yet.

And he sent me the listing. The listing said that utilities were available. And once I dug in, utilities were available ish. The sewer main was about 400 feet away. And the city was to develop that lot was forcing a mainline extension. And that mainline extension was going to be about $130,000 add to be able to do what you wanted on that property. So we see that a ton. Mainline extensions, laterals to tap into the main.

⁓ You know, we see a lot in the infill where power is available, but the transformers are not sized appropriately. So

the developer that’s building that infill building is having to pay for the new transformer and line extensions and that sort of stuff. So those are the main hits that I see when people go to ⁓ build, especially in infill.

Dylan Silver (10:47)
Now I’m imagining your background as a builder managing these sites is critical here. When most people are trying to do this on their own, do their own leg work, how are they missing these things? I mean, to me, as someone outside looking in, it seems like, yeah, that’s an important thing. Like water, you know, needed to come to the edge of your property. How are people missing that?

Don Healy (11:12)
You know, honestly, Dylan, ⁓ you know, I’ve, I’ve worked with, ⁓ probably a thousand customers ⁓ in my building career and, doing due diligence, ⁓ you know, and walked thousands of properties and I can’t fault the, the land buyer because there’s so many things that the average person is not going to know unless they’ve been burned by it before. And, you know, yes, it seems logical, but you know, they’ll go to their, their realtor and the realtor is like, yeah, there’s utilities available, but that’s not.

the next layer of information that, know, the final lateral in or, you know, the power, you know, the main line extensions, like that’s not stuff that the average Joe is going to know. And, you know, I see a lot of people get caught into the catch 22. The only person they know to go talk to is a builder, but then they get sucked into feeling the obligation to work with that builder, right? The builder will help them with due diligence, you know, potentially for free.

⁓ But then you have some obligation to use them. So I see a lot of people who are buying properties ⁓ They know there’s risks that they don’t know they don’t know who to ask So they choose to to just move forward Hoping that they’ve got enough of the risk mitigated to be able to make the the right the right decision to make some money on the backside of

Dylan Silver (12:29)
Now, when we’re talking about, you know, trusting the realtor, trusting the city, you would like to be able to do that. But then are there ways that people without having a background in building and construction can peel back that first layer of the onion and, you know, trust but verify? How would someone go about maybe without giving away all the gold, all the secret sauce? How would someone go about verify?

Don Healy (12:57)
You know, Dylan, I, you know, I’ll give it all away. I don’t, I, you know, I, I don’t care. want people at the end of the day to make good decisions on, on land. And, know, uh, there’s, uh, the, the, the GIS is right. Like that’s always the place to start as a GIS maps and the County maps and, just going through every single detail, click every layer on that G, on that GIS. And if something pops up on that, that you don’t understand, if it’s a landscape management zone or something goofy like that, then you have to go to the code and, and

you know, AI is an incredible tool that makes this sort of research way easier than it’s ever been because now you can take the zoning code from a, from a jurisdiction. can upload it into chat GPT and you can say, Hey, I found this landscape management overlay on my property. What does it mean? And chat GPT does an okay enough job of analyzing that code to be able to give you some, some, some, some idea of what you’re dealing with.

⁓ or enough of an, of information to go ask educated questions of the city. ⁓ you know, there’s, there’s a ton of data that’s out there. ⁓ you know, the NRCS soils reports, we use those on every single report or on every single, ⁓ due diligence that we do. And you can take and pull an NRCS soils report for a property and you can plug that right into chat chat TBT. It’ll analyze that and you can ask it, Hey, is this suitable for building a single family home on?

And it’ll, it’ll kick back and it’ll say, Hey, you know, there’s, there’s this in this soil that has expansive properties or whatever, but they, you know, these tools give you clues and, and, you know, the, the number one, the number one advice that I can give is, when you, when you run across a clue, like, ⁓ you know, ⁓ let’s say something in a code says, you know, if you do this, then that you need to pull that next thread, right? You can’t just go, Hey, it’s zoned. It’s zoned.

⁓ residential, but, and ignore the, but you’ve got it. You’ve got to dig through that, that, that next layer. But, you know, with that said, you know, AI is, is, is incredible right now for, ⁓ helping analyze those zoning codes. So you don’t have to spend

hours looking at the black and white. You can ask specific questions and get key answers. And you know, another, another little tip that I use when we use AI is, you can, you can prompt it to provide a citation to its response.

So you ask it to provide a citation. It gives a citation. Then you can go into the code yourself and verify the information that it’s giving you.

Dylan Silver (16:12)
trust but verify. When we talk about some of the ways where builders are acquiring these properties, you’re talking about infill lots, so, you an undeveloped section of a subdivision, fire damage. But then, you know, there’s newer developers even that are building small subdivisions, and that may be acquiring several properties on the same block, for instance, if they’re fortunate enough to be able to do that.

Where are you seeing most smaller developers, let’s say, acquiring their properties? Is it, it in Phil-Lance?

Don Healy (16:50)
Yeah, it’s, it’s primarily in fill and, know, when I’m talking in fill it’s, it’s not necessarily like the last lot in a subdivision. ⁓ you know, sometimes it’s a, it’s an old lot that’s sitting in, in town, ⁓ or it’s an old lot that’s been partitioned at some point and that vacant lot hasn’t been, hasn’t been utilized. ⁓ you know, also seeing a lot of people that are, that are, ⁓ working to increase density. ⁓ you know, here in the Pacific Northwest, there’s, there’s a lot of opportunities with middle housing where you can.

buy a property with a house that has a large property ⁓ and you can build multiple units on it. ⁓ You know, on a weekly basis, I’m getting calls about 80 use to understand if they, you know, if an investor can buy a property with a house, flip the house, put an ADU on the back to add some value and be able to make some cash out of the backside of it.

Dylan Silver (17:39)
The ADUs are huge, are huge. This specifically is probably gonna be a growing area of interest for investors all across the country, both because people who have property may be interested in seeing how they can make money off of their existing property. And then also you have this massive housing crisis really of affordable housing. And it does seem to be a way that can be addressed. What’s your per…

perspective on this, how maybe even outside of the scope of land development, how is this going to impact the way investors are looking at opportunities? Are we going to start to see more investors looking at potential properties where they can develop not one but two properties on?

Don Healy (18:30)
absolutely. I feel very passionate that ⁓ one of the big keys to solving the affordability crisis is the investors that are developing small properties. ⁓ If you look at what jurisdictions are doing, there’s not a ton of work right now to make it easier on the big developers, right? But there’s a ton of legislative work going on right now ⁓ to help with middle housing codes. The middle housing codes in the Pacific Northwest.

frankly, have gotten very, very aggressive, you know, where they’re dropping lot coverage limits and they’re dropping, you know, tons of of setbacks and other regulations specifically catering to that, to that middle housing. So yeah, I think, I think that the, you know, the small, the small investor or the investors that are making moves on, on infill ⁓ is going to be where, where it’s at, you know, the, the, jurisdictions are certainly the ones that are, that are trying to make that easier right now.

Dylan Silver (19:28)
When we talk about ADUs, when we talk about basically any type of dwelling that is not stick built, single family home on an undeveloped lot, it does seem to be a hot topic for a variety of reasons. You places like Los Angeles, which may not be renowned as being the easiest to develop in. They’ve really embraced ADUs.

Don Healy (19:52)
Absolutely

Dylan Silver (19:53)
And

then you have other other places where you would think there would be more ad use like I’m a Texas licensed realtor, you would think there would be tons of ad use and I’m sure there are but I don’t see the wave in ad development or folks talking about it in the same way that I hear in other in other areas. Do you think that beyond you know, ⁓ traditional real estate investors that the everyday person who owns a property is going to potentially

maybe not now, but in the next couple of years, start looking at, hey, I’ve got kids or hey, you know, I’m not using this area of my property, I should look at developing this.

Don Healy (20:31)
Yeah, absolutely. I just sat with a group of realtors two weeks ago and and so these these are general listing realtors that are selling selling properties in Central Oregon and you know asked him how many of them are getting questions about ad use and Every single one of them every property that even conceivably has has enough room for an ad you they’re getting questions about it

Dylan Silver (20:54)
Wow, wow.

That’s a game changer. You know what I mean?

Don Healy (20:59)
It is an end. You know, I’m to play the a little bit of the other side of the card though, Dylan, with, you know, 80 use 80 user hard. And there’s a lot of media out there about, you know, build ad use, build ad use. And that, you know, that kind of goes back to the premise of what I’m doing is ⁓ there’s there’s a lot of, you know, ad user not as not as easy as you might think, especially when we talk about slope utilities, you know, zoning, making sure that’s squared away. I see a lot of people get bit.

you know, because they, they, they have to extend the sewer line, right? Or they have to put in a new lateral or their electrical panel has to be upgraded to be able to tie in that ADU. And, ⁓ that doesn’t make ADU’s infeasible. ⁓ it’s just, you’ve got to know the numbers up front. You can’t, you can’t get engaged into a builder contractor to build your ADU, and then have those bids come in and, and, and get you completely blown out.

Dylan Silver (21:49)
Yeah, I mean, to break ground on something and start something and then have to encounter issues in development is a sure way to not have a successful outcome. We are coming up on time here, though, Don. Where can folks go if they’re interested in reaching out to you? Maybe they have a property, a prospective property that they’re they’re looking at. How can folks reach out to you or your team?

Don Healy (21:59)
Absolutely.

Yeah. So, you know, I believe in the show notes, ⁓ you know, our website for ⁓ www.sitefactsreports.com are going to be in the show notes. That’s a, that’s a great way to find out more information about what we’re doing. ⁓ You know, our, our key service product is a, is a flat rate report. It’s 500 bucks. We turn it around in five days. ⁓ The other place you can find me on LinkedIn. I’m real active there. ⁓ I’ve got a newsletter that’s called below the surface.

if you’re the type that likes war stories and, likes to scare yourself a little bit with, with some things that I’ve run across, ⁓ you know, pretty regularly, I I’m, putting stories up of, things that I find as I do due diligence and mainly, mainly, you know, for the lesson, there’s a lot of people that, that, ⁓ have aha moments as they’re reading those stories of, gosh, you know, I should look at that or I should dig deeper into that. And that’s, that’s the whole point of that, that newsletter, but yeah.

They’re on LinkedIn. If you just search for me, Don Healy ⁓ on that, you’ll find a facts reports. You’ll find a below the surface newsletter.

Dylan Silver (23:14)
Don, thank you so much for coming on the show here today.

Don Healy (23:17)
Yeah,

of course. I certainly appreciate the opportunity. It was great chatting with you.

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Unlocking Land Investment Secrets: The Key Risks and Rewards You Need to Know

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