Dirt Dogs

Unless you've been living under a rock, you've likely noticed that the real estate market has faced its share of challenges over the last 12-18 months. With interest rates on the rise, banks tightening their lending criteria, and a general sense of instability, it's been a turbulent time for the industry.

However, there's a silver lining I've observed running into 2024: the era of the Dirt Dog.

Dirt Dogs (noun):

Esteemed within the realms of real estate and land development, these are the tenacious and savvy professionals dedicated to land acquisition. Known for their keen ability to sniff out prime deals, negotiate with the persistence of bulldogs, and unearth hidden gems in the vast, often overlooked soil of property markets, Dirt Dogs excel at navigating the complex web of legal, financial, and logistical challenges to secure the perfect plot for their projects or clients.

Why is 2024 the Year of the Dirt Dog, you ask?

The pandemic in 2020 caused many builders to halt or slow their land purchases. Then, as capital flooded the market, causing a rapid increase in values, many land deals were quickly executed, leading to a whipsaw effect. However, 2022-2023 the spike in interest rates and the surge in prices led many builders to pause, cancel, or abandon their land acquisitions, anticipating a looming recession and preferring not to have unsold land on their books.

This seemed like a wise decision, but home builders continued to sell homes, many at record levels, not due to an extraordinary economy but because they offered to buy down mortgage rates to more attractive levels.

This strategy has now led builders to deplete two years' worth of land deals in just the past year. Despite the initial celebration, a looming realization hit: they now face a critical shortage of land inventory. I have talked to some builders and they have less than 12 months left of inventory. Which means unless they have started figuring out how to build floating houses they are going to be in trouble without the ability to build houses.

This predicament turns 2024 into the prime time for Dirt Dogs—those who can unearth and structure land deals to meet the urgent demand from builders. I also believe this is a systemic issue with housing as a whole. If builders can't build more inventory we are going to see values spike.

How does this landscape benefit the passive investor? Recognizing the scarcity of land inventory opens doors to investing in land funds, purchasing land directly, or even becoming a Dirt Dog yourself. Though not for the faint-hearted, navigating this territory can be highly rewarding if you manage to structure deals effectively. Recall the previous article I wrote about structuring a land deal:👉 Deal of a lifetime $50k to $7M 

In upcoming editions of TheTradeOff, I'll dive into some land deals, highlighting how to structure them and what to watch out for if you know of others looking to do these types of deals share this article out there on social media as it helps me grow the engagement and get bigger guest on the podcast to share their deals with y’all.

Until next week,

Jake