Does anyone actually run a land deal when their only prior closing experience is wholesaling

Question

I closed two wholesale contracts this year, one Phoenix, one Memphis, and both times I was basically just moving paper between a motivated seller and a builder or flipper. The land never touched me, I never had to care what happened to the dirt after assignment. Now I'm wondering whether that experience transfers at all into actual development or whether I've just been handling the easy part and calling it real estate. The Phoenix deal was 11 lots already entitled, the Memphis deal was a teardown situation in Whitehaven that a builder grabbed. I watched both of those go somewhere after I assigned them and I couldn't tell you what the buyer did next or why the numbers worked for them. I don't know what I don't know about the horizontal side, which is the part that scares me. If you came in from wholesaling and made the jump to actually developing or subdividing, did any of the deal-sourcing muscle carry over, or does it feel like starting from zero once you're responsible for the dirt itself?

Rena Guide · Answer

Your deal-sourcing instinct carries over more than you probably think, and that is the honest part of this. Finding motivated sellers, reading a market enough to know who the end buyer is, and moving before most people know the opportunity exists, those are the same muscles. The Phoenix deal is a clean example: you identified 11 entitled lots and matched them to a builder. A developer doing horizontal work does exactly that identification step first, every time.

What does not transfer is everything that happens after you assign. Your buyers were pricing in the cost of horizontal development, meaning the roads, grading, water and sewer connections, and utility runs that turn raw or entitled land into lots a builder can actually pull a permit on. That work carries its own financing, its own timeline, and its own risk layer called entitlement risk, which is the chance that the approvals you need never come through, or come through three years later than your budget assumed. You were essentially finding the raw material and handing it to someone who knew how to run the factory. The factory part is what's new.

The thing worth knowing is that the carry cost matters enormously here. If development takes 18 months and you borrowed money to buy the dirt, you are paying interest the whole time with no income until lots sell. The strategy guide for this section calls that the defining pressure on developers without patient capital.

Because you are at the exploring stage with this, I'd suggest your next move is finding one of those builders you assigned to and asking them to walk you through what they did with the dirt. They already trust you a little. That conversation will teach you more than almost anything else.

What market are you thinking about for a first development attempt, Phoenix or Memphis?

grant_ozuna7 · Answer

The Phoenix buyer on 11 entitled lots probably made four times what you did, minimum. What's your actual carry tolerance on a 14 to 24 month horizontal timeline with zero income off the dirt?

Does anyone actually run a land deal when their only prior closing experience is wholesaling

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