Tim Kristovich is a contractor turned land developer. He is also a friend of mine and a father who runs his business with his family. In this episode, Tim shares how he got into development and some of the dynamics of working with family in a business. We also talk about the ins and outs of investing in land development. The Boise area is booming right now. With 36% of the market being transplants from California.
These people are discovering that they have more buying power and that Boise is a wonderful place to live. The only problem is the housing market can’t keep up with the demand. That is where Tim comes in. He finds parcels of land to develop and build on. People who invest not only get to make a profit, but he shares the progress every step of the way. This is a great episode to learn about investing in land development.
You can find Tim Kristovich here:“36% of the growth in Boise is coming from California.” -Tim Kristovich Click To Tweet
- [01:41] Tim started as a general contractor. He was trying to find property to build on and decided to start developing his own properties.
- [02:33] There was a shortage of lots to build on for Tim and other contractors. Contractors build houses, so they need a place to build.
- [03:09] Developing was a niche with a huge niche. They can’t develop them fast enough.
- [03:38] The Boise market is unique. They had a slow down in 2008, but growth has taken off in the last five years. They have a housing shortage, and the quality of life is what is spurring them on.
- [05:16] There’s a great downtown and wonderful outdoor life. It’s an amazing spot to live.
- [06:39] Tim works with his family and adult children. In a family business, you have to sit back and be the partner and the boss at times. You have to set the rules when you first start.
- [08:52] Tim raised his kids to think like an entrepreneur.
- [10:18] The downside of land development is having a lot of money at stake. In a booming economy the cost of land is going up. A downturn can create a shortage of buyers.
- [11:17] Buying right and having an exit strategy is the best way to look at things as a company.
- [12:34] An upside for an investor is having land in the portfolio.
- [13:06] When they need a certain amount of money to get a property, an investor can come in and invest. The investor gets their money back when the blocks start selling. This is a chance to participate in the development side without having to do all of the leg work that needs to be done.
- [13:39] Tim sends his investors videos, so that they can keep an eye on the progress of the development.
- [14:11] After 18 months, they get paid back the principal with interest.
- [15:47] The first phase is raising money to acquire the property. The next phase is raising money for the construction. They want to have the majority of the money raised by the time the plans are approved. The last phase is the actual build-out.
- [17:32] As money is raised, further projects can begin. Doing it in smaller sections helps ensure against having a large investment if there is a downturn.
- [19:29] The biggest risks are probably not having enough capital or having the projects fall behind schedule. An economic downturn is also a risk when it comes to people buying houses.
- [21:11] The notes are secured with the deed of trust on the land. Everything goes through a third party like a title company where the construction loans are set up.
- [22:10] There are a lot of markets that are exploding right now like Boise and Montana.