Creative Land Financing | with Guest Geoff Hurdle, ALC

[music]

Justin Osborn: Welcome to the Realtors Land Institute Podcast, the voice of land, the industry's leading land real estate organization.

JO: This is Justin Osborn, accredited land consultant with the Wells Group in Durango, Colorado. On today's episode of The Voices of Land podcast, we're talking to RLI member and accredited land consultant, Geoff Hurdle. Geoff's development company finances rural farmland tracts to families that want to have a more relaxed lifestyle out of the traditional neighborhoods where restrictions are heavy and houses are close together. His late father started the firm in 1969, making it almost 55 years old. He serves as a source for land acquisition managers, private developers and builders to find land for single family attached, detached and multi-family projects for development and building lots in bulk. He works mostly in Atlanta, Georgia, Chattanooga, and Nashville, Tennessee markets, but will work with anyone searching for those types of properties. Welcome to the podcast, Geoff, and congratulations on joining the ranks of RLI's Executive Committee as our new National Vice President starting in January 2024.

Geoff Hurdle: Thanks, Justin, I appreciate that. And thanks for having me on.

JO: Yeah, I'm excited, man. You and I... Let's see, did we first meet at LANDU in Texas? 

GH: At LANDU in Arlington in 2018, I believe that would have been.

JO: Nice, man. Well, that's pretty cool. We've had some other podcast guests that have been on the show that were first met in that same setting, so it's kind of cool seeing all of us alumni regrouping a few years later and looking at where our paths have taken us, and the accredited land consultant being after a lot of our names now.

GH: That's right. I think it's pretty cool set up we have.

JO: Well, I remember one of the first conversations I had with you, man, when we were hanging out back then was kind of about the niche market that you've created out there in Tennessee and Georgia, and it was really cool here, and so if you don't mind, just kinda go back a little bit back to the past, you guys have been doing this for 55 years, and tell our listeners kinda how this got started and how it's come so far to be so successful.

GH: Oh, wow. It could be a long story, Justin, so I'll try to paraphrase. My grandfather and his cousin bought a 1000-acre tract in a little town called Walnut Grove Georgia in about 1967. My dad was looking for something to do. They hired him to go down there and sell land, so they cut it up into tracts, and back then there was no rules or regulation, this is the late '60s, they were just taking dozers, cutting in roads and building lot lines. And he went down and sold it and they financed it to people. And back then it was like $49 down, $49 a month, something like that.

JO: Nice.

GH: He sold it all. He went back to Memphis, where they were from, and... No, I'm sorry. They called him and says, come on back to Memphis. And he was like, no, I think I know what I'm gonna do. And he went out and started buying properties cutting 'em up and selling 'em and financing 'em to folks. And he did that the rest of his life. I started with him in '90, well, '91, really right outta college. And honestly, I probably started when I was 12, putting signs on trees, jumping off the back of his Bronco. But we did business together. He died in 2012, and so all the way up to there together, and then I've just kept it running since then. But we just found a need for people with little to no or lower credit to buy a piece of property, have a way to do it, own their piece of America, and just finance it to 'em. And that's just, that's what we do.

JO: That's awesome, man. And you're still able to do that kind of without going through the county zoning process. Is that still the case out there? 

GH: Nine times out of 10, yeah, we... Five acre tracts is usually our minimum. There are cases where it becomes smaller, but if it allows us without having to go through that process of rezoning, then yes, all of our properties are zoned Ag.

JO: Okay, great. Yeah, that's a little different. Out here in Colorado, 35 acre parcels is our magic number. So once we get below 35, we gotta start going through county planning and city regulations and man, it's a headache. And so five acre...

GH: Please keep that there. [laughter]

JO: Say it again. I'm sorry.

GH: Keep that restriction there. I don't need that down here.

[laughter]

JO: Right. Well, that's what keeps property values high here. We just can't create enough inventory, but... So educate me a little bit here. These buyers buy these properties and then, you know, a few years later, are they putting homes on 'em? Are they using 'em for recreational getaways, taking campers, or what's kind of the highest and best use? 

GH: All of the above, really. Most end up either building a house or bringing a modular or mobile home on the property. Some of 'em do farm it. We don't allow businesses, but we allow any Ag business. So we've had greenhouses built on properties and people go into business that way. Some recreate, some, you know, buy just for, I mean, not all of our tracts are five acres. That's our minimum. So we've, I've had, I think the largest one I financed was 88 acres and they built the house and built the deer camp. And but for the first few years, I remember they'd come out there on the weekends in the camper. So, a little bit of everything.

JO: And I imagine like the rest of the country, the COVID years, the COVID era probably just made there be way more demand for that type of product.

GH: One of my fastest selling developments was in Baldwin County, Georgia, and I opened it right in the middle of COVID. It was 57 lots that were about five to 10 acres each. And they were gone. I mean, I didn't market it hardly. I put it on our website and it just, it got gone.

JO: Yeah.

GH: And most of the people, I say most, after about settling 30 of 'em pretty quick, I started asking people, you know, why'd you choose this? And they were like, we're just trying to get out of town. We don't know what's coming. And all the sales, you know, they've stuck, so.

JO: Well, that's great, man. So educate is kind of on what the creative financing or right now the owner financing looks like, you know, you've got a normal bank where I'm at on vacant land, they're anywhere between 40 and 50% down. And they're at, they're at 10% interest. And unlike a home, they can't amortize that over 30 years. They'll, they might amortize it over 15 or 20, but then have a balloon due in five to seven years. And so, educate our listeners that maybe don't sell a lot of land that are used to selling residential, how different land financing is and why we're seeing owner financing step up.

GH: Well, they, you... To correct you, they can do it, the banks, but they won't [laughter] because I do it that way. Creative financing... Well, actually in my world, in my mind, financing started creatively and because of something happened, banks were formed and then the banks started lending money. It used to be, and this is not official, but I'm sure before the banks, one guy would have something that somebody else wanted, they'd trade for it. Whether it'd be all upfront or over terms, who knows? But creative financing is the way to get a seller and a buyer together and get a transaction taken care of. In my world, I sell our properties for 295 down, so there's little to no payment, but you can choose whatever down payment you want, if you're... You can choose 10% down. That's the thing. There's no regulations around seller financing. I've done... I'll give you an example. If you've got a property with a sales price of $100,000, the bank's gonna want a bunch of paperwork, the documentations, credit reports, references, bank records, income statements and all that other stuff.

GH: They're gonna want appraisal and they're gonna have to wait on that. And we all know that time can kill a deal. They're, like you said, 40, 50% down, 10% interest. They'll do a 15-year term. I probably have some three or five year balloon attached to it. So to buy that you're $40,000 out of pocket, your loan's for 60. At 10%, your payment's about $650 a month, and after 36 months you get to do it all over again. And your balance is somewhere in the mid 50s and they're gonna get more fees and all that. So in a seller finance transaction, say it's the same deal, say it's $100,000 piece of property, your seller's probably gonna want some kind of creditworthiness proof of you. But other than that, your due diligence time is short. There's no appraisal requirement, there's not gonna be hardly any fees unless you just choose that, no bank fees, no points.

GH: So the same property at $100,000 at 10% down is $10,000. So now you have $30,000. You can use your own money to improve the property. I do, and anybody could do a 360 month amortization, amortization of just the 30 year, you can do 8% rate, which is a pretty good rate considering for a return on your money in the markets you'd be hard pressed to get that. I don't have a balloon, doesn't need to be a balloon. So you get a payment of $440, and that's guaranteed for 30 years. The seller's also got an improved property now 'cause it's collateral. He's got a, the buyer has a longer term interest deduction. Of course, the payment's more affordable, cash flow for the seller. And now the seller has a note that if he really wanted the cash, he could sell that note to an investor for 10% discount and get his money. So that's kind of the differences between seller financing and bank financing in the way I see it.

JO: And you're not charging a loan origination fee like a bank would either? 

GH: No, no. I could, but I think I'd lose customers. That's a just fee, that's just a junk fee, in my opinion.

JO: Well, that's how the, I mean that's how the lenders, how the bankers make money. And so, yeah, I mean that's, on an owner finance deal, you don't have to do that. But I think that's important to point out. So not only is the borrower keeping that $30,000 in their pocket, not having to come and bring that to the closing table, but they're also saving a few thousand dollars in just straight up closing cost. When you figure, you know, appraisals, you know, out here where I'm at, depending on how complicated it is, they're anywhere from $700-$1400 for just a straight line appraisal. What is it out there where you're at? 

GH: Honestly, I don't... The only appraisals I deal with, the ones the banks require me to do when I buy a piece to develop, usually about 3600.

JO: Okay. So yeah, that's 'cause you're buying the big acreage development to make subdivides. Yeah. So you figure on a five acre parcel, you know, a $100,000 for an appraisal, $100,000 loan origination fee, all the other miscellaneous recording fees that the bank is gonna have, that's anywhere from two to $4,000 just in closing cost that the borrower is saving by going the owner carry route in addition to the $30,000 they don't have to come up with to put down. And then also the, what was that example you gave, over $200 a month in monthly payment that they're saving by going with a lower rate of 8% from the owner than what the bank is offering at 10%.

GH: And that longer term. And that's the thing about seller financing, Justin, you can change the rate, you can change the loan amount, the down payment, interest rate, I mean term of the loan, any of that, you can just solve for whichever one you want and you can make it work for both buyer and seller. If he says, I'm shopping for a payment and I want it to be $500 or less, and you had already told him you're gonna get 9 1/4 percent interest, drop it to 8 1/2 and see what happens to the payment number. You can always lower the price a little bit. You can raise the down payment, that'll lower the amount of finance. I mean, there's all sorts of ways you can back into whatever it is y'all are looking for.

JO: Well, that's exactly right. You know, one of the thing I'm telling a lot of our newer agents is that in this industry, you've got the deal breakers and you've got the deal makers, and the deal breakers are the realtors that say, well, here's what the bank said, here's what the lender said, maybe here's what the farm lender said. We checked with three different people and we're just getting shot down. Sorry, we couldn't get the deal done. And...

[chuckle]

JO: You know, no fault of their own, they're just not educated, those are the deal breakers. And the deal makers are the ones that are sitting here doing exactly what you're doing. Okay, let's change the rate a little bit. Let's change the term a little bit, let's change the amount down a little bit. Let's try to get creative so that we can take care of a seller on this side and a buyer on this side and we step in the middle to make everybody happy by getting creative and thinking outside the box and not taking no for an answer from the bank.

GH: That reminds me. There was one time I did a deal and the banks were just dragging their feet. I don't know if it was, the appraiser was taking too long. It was down in South Central Georgia. And so finally I went to the seller and I said, look, I said, if you'll finance me your farm, I'm gonna turn around and develop it and I'm gonna finance it to my buyers and I'll subordinate my loan to yours and we'll work out whatever we have to, if someone paid me cash, get a partial release negotiated so you know what you're getting if that happens and I know what I'm giving. And he and I worked it out. And so he financed me the farm. And then I turned and I financed to the other folks. We didn't need a bank for anything for that one. No appraisal, kind of probably saved me, well, saved a ton of money on the front end.

JO: Yeah.

GH: And still made me money in the long term. I gave him a 10 year note and I sold mine on 30.

JO: That's great, man. That's getting creative. Let's go back, a few minutes ago you made a comment, and we kind of blew by it pretty quick, but it was about that the seller now has a note that could be sold to another investor at either face value or a discount. And I've done that and you've done that, but I don't think a lot of people realize the power of being able to sell notes. And so kinda walk us through that process if you would, please.

GH: I will. I haven't done it. Well, I'll take that... I sold one note one time on something I was, before... I was still in college, so I wasn't even working yet. That was just something I had done 'cause I'd seen my dad do it. And so I made me one, but I realized I could make it and sell it. But yeah, when you create a promissory note, that is a marketable item. We'll use that example we had earlier. If you have $100,000 note on a piece of property and you're holding that note and you've been collecting payments and you can season that buyer to show that they are of good quality and that, you know, they'll pay their bill, you can take that note out and sometimes sell it for face value. 'Cause they're getting an 8%, or in this case it was a 10% return on their money over time.

GH: But sometimes you'll have to discount it just a little bit, say five or 10%. But realize when you own or finance a property, generally speaking, you can get a little more for it because the buyer is in the position where if they need your financing, they'll pay more. And to them it'll be about the payments. So now you've got a property, I mean, you've got a, just it's a sheet of paper, it's one page, and it's all the value that you have there. And you can sell it. You sure can.

JO: Yeah. When you say season the note, you know what you mean there is hold it for a few months, hold it for 12 months. Because any investor is gonna wanna make sure that they're not buying into something that's high risk. The more risk they have, the more they're gonna try to beat you up on the... Reducing the price of that note. So what we've done is step in and, you know, you get sometimes these old-time sellers that are in their late 70s, in their early 80s, and say, man, I don't wanna talk about a seven year balloon 'cause I don't know if I'll be around that long. And so you say, well, how about we step in here for six months or a year? We'll do owner financing. We'll get you out of it by selling the note to one of our investors.

JO: And the last two I sold were at face value. You know, there's a lot of uncertainty right now in the market. I mean, you can put your money in a money market and get what? Five and a quarter, five and a half percent, and it's just sitting there. But then you come and you say, all right, you've got a seasoned note that's had 12 payments. Nobody's behind. They're looking good, it's at 10% interest. Man, that's a no brainer for a lot of investors. I mean, hey, you bring those to me, Geoff, and I'll be happy to buy 'em all day long, man.

[laughter]

GH: Well, that's gonna be part of my retirement package, I guess, is trying to figure out how to slow down.

JO: Well, there you go. You know, I mean, talk about simplify, man. My wife Tammy's kind of on that kick right now. And this is a good way to simplify, you know, just collecting, collecting notes. Nobody's calling you saying, Hey, the dishwasher's not working on this rental. Or, you know, the water heater's not working on this rental. You got money coming in without the headache of renters. And man, I love that.

GH: Yeah, that's true. The only headache is if you have to go figure how to collect. And that is the downside to seller financing. You're the bank, and so that risk is there that someone will default. And you have to have your ducks in row when that time comes to be sure you can... A good attorney in the land business and maybe in finance that understands how to do a foreclosure, 'cause that does happen.

JO: Well, let's talk about that. Yeah, let's talk about that process. Obviously, the more money the buyers put down, the less risk of foreclosure. So when you're talking about no money or very little down, what... If you don't mind sharing, what is your foreclosure rate? How do you go through that process out there where you're at in Tennessee and Georgia? 

GH: Well, the rates, it's kinda, I'd say probably 30%, just because of my liberal terms, but it's not as bad as it sounds. A lot of these foreclosures can get expensive, but some of them are not. We try to work with and try to give them the benefit of the doubt, if they'll communicate with us generally, we're fine with them. Most of the time, the solution is take their balance, put it on the back end of the note, refinance them and start them over. Something like that. A lot of times... Someone told me once, he says, "Buying a piece of land from you is as easy as buying chapstick at the checkout counter." And I said, "What are you talking about?" And he said, "Well, I had the money in my pocket for the down payment, I liked it, so I bought it. I got home and told my wife, she told me I was crazy." And so they say, "What do I do? I don't want it now." I'm like, "Well, just give him his down payment back and sell it again." So that's part of that 30%.

JO: So he bought the property from you with the money that he had in his pocket, and then he told his wife he did it? Did I understand that correctly? 

GH: Yes, sir, you did. [chuckle]

JO: That's another podcast in itself. We'll do round two on marriages and how to make them thrive.

[laughter]

GH: Yeah. It happens. But it is... You just gotta be sure, if you're gonna do it, it's a great business model, but you have to understand that it's not all good every day.

JO: Sure. Yeah.

GH: So you have to deal with the bad.

JO: Yeah, there's risk associated with all investments, you just kinda gotta weigh it out, and so... Well, that's some good testimonials on owner financing. I'm personally dealing with some creative financing where we're getting private lenders, private investors to step in on some of these deals that we're doing in Colorado and New Mexico. Are you seeing anything like that out there or are you strictly focused on the owner financing in your world? 

GH: No, I'm more focused on what it is that I do. One thing my dad did teach me was, do what you know and know what you do, don't go off on some other tangent. And he's right 'cause I did that once and it didn't work too well. So no, I don't know, but you... Let me turn the table on you, tell me about the private lending, how does that work where you are? 'Cause we don't see it.

JO: Well, it's real... Yeah, it's real similar to kind of what you're doing, except with it being... Not being the seller, we've got private lenders that step in, not loan sharks by any means, they step in and they offer basically a scenario so that the buyers can have a choice, and we can take your same example of $100,000 property. If somebody's looking at just off-grid property and wanting to go get away from the world, shoot deer, shoot an elk, something like that, maybe it's 20, 25 acres, we're selling for $4000 or $5000 an acre at 100 grand, we give them options and we say, "All right, we don't like to do anything for less than 25% down," just because of what you talked about earlier with the default risk. So we'll give them a scenario and we'll say, "All right, you put 25% down, then your interest rate is gonna be right around 11%. You put 30% down, we'll lower your interest rate to 10%; 35% down, we'll lower that interest rate to 9%; 40% down to 8%." And typically, we're about a point and a half to two points over prime. But because of the little amount down that we require, that's why we're able to do so much private financing.

JO: And just like you were saying, amortization, balloon, all that kind of stuff is pretty negotiable. If somebody wants to do a 20 year am or a 30 year am and we're collecting 10% interest over that whole time, then we're okay with that. If it's an interest only loan, we're okay with that. So we do a lot of different scenarios to step in and bridge the gap where buyers don't wanna come up with the 40% or 50% down that the banks are requiring, owners don't wanna do an owner carry. And we step in, we'll get a first lien on the property, record the deed of trust at the county courthouse, and we're acting just like American AgCredit or Wells Fargo or any other bank in that we've got a first note on the property that's paid off when they go to sell.

GH: That's a beautiful thing.

JO: Yeah, I think just... We've talked about it before, but the more tools that the land brokers can have in their toolbox, the better it's gonna set them up for success when it comes to representing their client's best interest.

GH: I understand that.

JO: Anything else on the financing topics that you wanna hit on, Geoff, that we've kind of skirted over maybe? 

GH: No, I tried to make sure I hit it all the first time through. I'm sure someone will have questions and if I can, of course, I'm an open book. And if not, Google me. 'Cause someone asked me, "I couldn't find your number." I said, "You didn't try too hard."

[laughter]

GH: Google my name and it comes up right away. So I'd welcome a phone call.

JO: Yeah, in this day and age, it's pretty easy to obtain. And just for liability's sake, I think it's important, we remind our listeners that you're familiar with what the laws are in Tennessee and Georgia, I'm familiar with what's out here in Colorado and New Mexico, where I'm licensed. But every state has their own laws when it comes to financing and deeds of trust, and specifically foreclosure. So I would just encourage our listeners if this is something you wanna learn more about, seek somebody that's qualified in your state to learn what these laws and foreclosure processes are, 'cause they may be totally different from what Geoff and I are talking about.

GH: No, absolutely.

JO: Geoff, if you've got another couple of minutes, I'd like to kind of pivot and just welcome you, man, I think it's totally awesome that you stepped up and are the incoming vice president for the Realtors Land Institute. And so, if my math is right, is it two years or three years where you're gonna be running the ship? 

GH: I'll be, not running the show, but I guess I'll be the president in 2026. I'm VP, then president-elect, then president, and then immediate past president.

JO: Okay.

GH: That's the whole career. And those four positions make up the executive committee for RLI.

JO: Great, man. So you're on the board, committed for at least four years then, huh? 

GH: That's correct.

JO: Well, that's awesome, man. Thank you, thank you for stepping up and serving. What are you most looking forward to you during that time? 

GH: Same thing I look forward to every day with RLI, and that's the camaraderie in the business building that I've done since I joined in 2018. It's a wonderful organization. But I see myself in the next few years, Justin, as being a learner. There's a lot of things I'm sure that are going on at a level that I need to be aware of. I know what's going on right now, I keep in touch with Lotus and the open-fields doctrine. But just keep in touch with their most up-to-date statuses, so if someone has a question, I can answer it. I'm aware of our diversity, equity, inclusion policy and the code of conduct and all that, but I need to know it better if I'm gonna be on the executive board, so I'm looking forward to learn a little more of that. But my main objective is to be there for membership, I should know the policies and be able to answer those questions. They've elected me though to be one of the four members that have their voice, it's not a Geoff Hurdle show, it's a position I chose to run for to listen to the members, to take their praises, their concerns and their questions, and run them up the flagpole through the executive committee and other committees.

GH: It's not for me to decide what their position should be, and nor is it for me to have my opinion expressed as their policy. So I got some learning to do, but I look forward to it. And I've already... You can't see it, here to my left is my RLI bible that I've been creating to learn some of those ins and outs.

JO: Well, that's great, man, and I think you're the right man for the job. And I think... Not, I think, I know there's a lot of truth to what you're saying, because I remember... Was it three years ago when you did that trip across the country, or was it two? 

GH: That was the summer of '21, August of '21, and I walked up on your little grill setup you've got. That thing's awesome.

JO: Yeah, that was right when we finished the outdoor kitchen, but that was awesome, man. I tell you, for those of you that are listening that don't know Geoff and his story, during that time, he traveled the country. And he didn't just travel the country, these few states here, he traveled all over, visiting the RLI members and asking what we cared about, what we wanted to see as change, and he made sure that our voices were heard. And I think that that's just such a testimony to your leadership and you wanting to get educated, and I'm excited to see what happens over the next four years, man, with you coming in and really being open-minded to the... What's our membership at now? Golly, it's huge. I don't even know, but...

GH: Well, see, that's... And it's over 2600, I believe. But that's the kind of question I should be able to say, it's 2611, Justin.

JO: Well, there you go. You can go back and research it.

GH: I just know it's north of 600, but I don't know how many, so that's why I gotta get my bible up to date.

JO: Well, there you go, man. Well, anything else you wanna throw out for our listeners today, Geoff? 

GH: I just thank you for having me and I look forward to serving in my next four years and beyond. But no, thank you so much.

JO: Well, folks, if you wanna understand more about options to help your clients finance land, reach out to Geoff or another RLI member near you who understands your geography. You can find them by searching on the Find A Land Consultant tool on the RLI website. And if you want formal training so you can better advise clients on topics like this, consider taking a LANDU designation course, multiple course topics are offered throughout the year. Well, Geoff, thank you so much for joining us today and helping out our listeners better understand land financing so they can better advise their clients. If a listener wants to get in touch, what's the best way for them to do that with you? 

GH: They can call me or they can email me at thelandman@geoffhurdle.com.

JO: The landman@geoffhurdle.com. I love that.

GH: That's G-E-O-F-F.

JO: Excellent. Well, for more expertise on land real estate topics, be sure to check out the RLI blog, follow us on social media, and of course, tune in for the upcoming episodes of The Voices of Land podcast.

[music]