How To Invest In Dirt: Brandon Rooks - Rockstar Capital Development Group

SPEAKER_01 0:04

This is the Beyond the Story Podcast, a show that goes way beyond the story. Brandon, welcome to the show. Thank you, Sebastian, for having me on. Thanks for inviting yourself on. I do that all the time. I do that all the time. I'm like, great podcast. Can I be on it? Or better yet, somebody calls me and they're like, I'm starting a podcast. I better be on it. Yeah.

SPEAKER_00 0:43

Aren't we told don't invite yourself on to things? And that's how my per approach is running it.

SPEAKER_01 0:48

Like you did you did preface your text message with that. You're like, I know this is a big no-no, but I'm just gonna do it anyway. Yeah. We're meant to be broken. You and I actually met uh beginning of last year. Vegas. Yeah. Yeah, Vegas. Super Bowl party with uh insider investors. That was a good time. That was a good weekend. That was a great weekend. That was good. And uh you came out as a bartender when our bartender did not show up or couldn't get up to the suite because they capped the amount of people that could come up. Good times.

SPEAKER_00 1:21

Yeah, yeah. The guys were shocked. They're like, dude, what are you doing? You're a like an elite sponsor. I'm like, you don't have a bartender. Yeah, you've got experience.

SPEAKER_01 1:29

Perfect. Yeah, that worked out all right then. That worked out all right. So uh we've stayed in touch since then, seen you at a few Apex events and uh learned about what you do with helping people uh leverage their investments through what you guys specifically do, as you would casually say, investing in dirt. So let's back up a little bit, help our listeners better understand a little bit more about your backstory, how you started to do what you're currently doing right now.

SPEAKER_00 1:57

Uh pretty much consider me like a blue jeans investor, you know. Uh grew up poor, one of those stories. Um, my dad was in construction for years, and I used to build decks with him and frame and do finish work. And I went into the Navy right out of high school. Top secret clearance, three tours in the Gulf. Uh absolutely hated advanced electronic warfare when I got out. I never wanted to look at a motherboard again and try to track down a problem. So I went into sales and um I love sales. It's to me, it's like one of the greatest careers you can have, as long as you're ethical, have integrity and honor, which is part of what we're taught in the military and part of how I was raised. But uh, I just got really good at it, and I learned that I'm never really selling anything, I'm just helping somebody get what they want and just making it sure that I can stand behind it, that it makes sense, that it's affordable, that it'll perform, and I'm not gonna have to apologize for it later. And uh, that's really been how I've evolved into this level. And I've been in real estate investment world for about 23 years. I've done investment mortgages, um, I've done so turnkey new construction and rental properties, uh, was involved in some large-scale development, uh, rental and real estate properties like Lake of the Ozarks, which is central Missouri. It's party town, you know, resort retirement, second home destination.

SPEAKER_01 3:33

But um yeah, I've seen the series on Netflix.

SPEAKER_00 3:36

Oh, yeah, yeah. Which was not even filmed there. Oh, yeah, that the Ozark. Yeah, Ozarks, yeah. That's pretty pretty true to form for what's down there. But uh anyway, um got into the investment side of things, and you know it was pretty interesting. I sold cars for a while. I sold MCI long distance, then I went into selling in-home water treatment systems, and then I got into the mortgage industry. And when I went into the mortgage industry, all I did was send a letter out to everybody that I had ever sold MCI water treatment um or cars to, because I kept everybody's name and I made sure I made little notes on what the kids' names were and what we had in common. And I have pretty much until it got too full, a photographic memory, and I could just always see that page, you know, in those notes. And uh I sent letters out to all my clients, started making six figures a year in the mortgage industry, haven't made a cold call since 1999. All of my business is past clients, existing clients or investors, or referrals from clients and investors. And then a handful of groups, mastermind groups that I'm a part of, uh, like Apex and High Speed Alliance and Family Office Club and Insider Investor Club. And, you know, I have a few of those connections, but uh it's just all been about the networking. And, you know, it there tends to be so much information, but I've learned that if you do right the first time, if you're always available to answer a call, email, or text the same day that your clients, your investors become your friends and they come to rely on you. And it's not that hard to get into business. We raise about a million dollars a month on average uh for the operations that we run. And we just had a $20 million cap raise that I went out to all my investors, said, Hey, we've got an opportunity, scaling and duplicating, growing the land side of things. We need $20 million. And within nine days, I raise $20 million from 160 investors because they know me. Yeah, and they trust me. And, you know, the long and the short is you invest with us, you can start with as little as $10,000. You can invest your personal funds under your LLC, you know, from an IRA. We can show you how to do convert it to self-directed IRA or self-directed 401ks, and you can invest with that. And we never, we've never missed a distribution, and we've had multiple profit sharing events, and you know, we run in this circle of there's a lot of people out there that don't do what they say they're gonna do, but this new fund that we have act to technically call it an offering, it's no longer a 506C or 506B reg D fund. It is a regulation A tier two offering that I have to do third-party CPA audits and compliance every year to send up to state and SEC. And you know what? If you're concerned about what you're doing, you probably are not gonna go that route, right? Yeah, but uh I did, and I'm fully comfortable with that. So, in a world of here's here's why I did it. You know, I I grew up poor, and for the most part, the space I operate in, only the wealthy, the elite, the big boys, the accredited investors, the you know, the high net worth investors have the opportunity to get into this. And what I've done is create a vehicle where your average Joe can invest with the Rockstar Group. And we put the money to work with three strategic partners. One of those is BRD land and investment. They go out and get raw ground, free engineer, figure out how many lots they can put on that thing, and they preview it to our national builders. We sell to 13 of the top 25 builders in the country, by the way. They don't move on that ground or put it under contract until they have verbals from our nationals. They're like, yeah, that works. Let's go for it. So that's what they do. They get the ground. I'm the one that funds and finances all of the entitlement costs, the soft costs, you know, the deposits, everything that gets that ground ready. And then, man, when they're all said and done, and they turn that into what we call paper lots, meaning it's fully entitled and fully permitted, and they sell it off, their profit margins are 40 to 60 percent. And it's because their profit margins are so high that they pay us an extremely good interest rate, or like a bank. You invest with us, I put the money to work, we all earn interest, but we earn an average blended interest rate of 25% per year. And from there, investors get 10%. They also get 60% of what's left from what we've earned after the 3% management fees and fund operating expenses. And if you know anything about funds or offerings or syndications, 3% of the capital is pretty low. Um, there's a lot of there's a lot of guys out there that they're fee heavy. They like to make their money first and they let their investors make it last. I just come from a different school of thought. And um I figure if I can help enough people achieve above average returns lending on dirt or lots or land where the value of that never goes down. There's not much you can do to screw up dirt, right? The hurricanes can happen, but that land dries out and they will build. People never move from those places. Puerto Rico, no one left Puerto Rico because it got wiped out. You know, there'll be time for building again. And in the end, everything that we lend on ends up being in the what we call workforce housing space. They're going to build homes in that 250 to 450k price point, which is what America is starving for. Like six and a half million units short in America because all this crap since the last 08 collapse with COVID and the aftermath of COVID, builders have never been able to get back up to par and build the 2 million units a year that we need just to keep up with regular population growth. And so that's what really makes me feel comfortable is that we're lending on one of the strongest commodities that there is out there. Something that if you buy it right and in the right zone, it only continues to go up in value. It becomes more scarce all the time. And we're working with the biggest builders in the country. And guess what? Their businesses, you know, Dr. Horton's not just going to go, you know, we've made enough. We're just gonna slow down and stop building. You know, I told you a little earlier, D.R. Horton, 32% of the single family rooftops in America are built by Dr. Horton. And that's one of our biggest buyers. We also work with, like I said, many others Stanley Martin, Meritaj, Manami, David Weekly Holmes, Lenar, Ryan. Uh there's a handful of others out there. They're all in the top 25 builders in the country. So how did you in a nutshell?

SPEAKER_01 11:19

You might have answered this, and if you did, forgive me. Um, so how did you get into this specific niche and find this space? Is it something that you went and created and then it made sense? And there was a there was a there was a void in the marketplace for it somewhere. How did that all come together to be able to say, hey, we've got a solid investment opportunity for the average person to invest in dirt?

SPEAKER_00 11:42

Yeah, there's a story behind it, right? Because a lot of times people think buy land way out there and it's going to take 10, 15, 20, 25 years before it becomes valuable. That's been the mentality of most Americans. Now, let's keep in mind that most Americans are never really taught anything about how to invest. We learn from the people that think get a job, work 40 years, pay off your house, and hopefully you've put enough aside, 10%, so that you can afford to live when the time comes. Well, if if most Americans really understood finances and investing, we wouldn't see so many of our older populations working terrible jobs. You know what I mean? Um, it's unfortunate. Here's how we got into this, though. And what's really cool is, and I'll we'll talk a little bit more than a minute, but so we were, I had some partners, Mr. Lindsay Jarvis, he's from New Zealand, and Kevin Burrell, which is out of the Carolinas. And when I met them, they were just building a handful of houses and doing a handful of renovations. And but I saw fire in these guys. And this is at a time when I was working with investors and selling them turnkey new construction rental properties across the country. In 2015, which by the way is the one year that I had one of my big, hairy, audacious goals that I did not achieve. I sold 954 rental properties across the country in 2015. I had a goal of a thousand, I didn't hit it. It haunts me till this day. But we were, they were building a handful of properties and doing some new construction, which all our investors made a killing on. But they're like, man, we need to buy more ground so that we can build more. And they saw that was the direction. So they started going to the banks, finding these legacy lots, you know, things that the bank took back in the from the last real estate collapse, getting good deals on them, buying stuff in Southwest Florida, Charlotte, Charleston Raleigh, you know, all around those markets. But they had a piece of ground. It was called the Oneida, that's what we called it, and it was gonna be like 99 lots, and it was right out at the edge of Charlotte metro area where the last stop for the light rail was. They picked it up and had the idea that it they would eventually build it out. It was just a couple months after they bought it, they got a call from Tim Samuels from Ryan Holmes. Tim Samuels is known as the godfather of land, and everybody in the southeast that is a builder knows who he is, you know. And anyway, he came to Lindsay and said, Hey, Lindsay, he goes, We were just about to buy that ground. We want to buy it from you. And he's like, Well, no, he goes, You should have acted quicker, you know. What'd you think about it? It was great, it was a great buy. And he goes, Well, we didn't think anybody else was looking. He goes, Oh, well, too sorry. So anyway, he's like passed on it, and they still hadn't built on it about three months later. And Tim Samuels called him again. Said, look, you know, we really want that piece of ground, you know, we'd love to make you an offer. And he's like, uh, I'll have drinks, I'll have a steak on you, yada yada. But uh, you know, we're gonna build it eventually. He says we just got other things going, we've got to finish these projects. They're a smaller builder. This went on for a while, and I think it was somewhere around like ninth month or 10 months, 10th month, that Tim says, Come on, let's go out and have drinks. And he figures if he can get Lindsay to have a few drinks and feed him some steak, maybe he'll make a difference. And anyway, that meeting went to the point of Lindsay's like, I tell you what, just to satisfy you, I'll let you make an offer and we'll see how it goes. And he goes, I'm not promising you anything though. Within about 24 hours, Tim came back with an offer from Ryan Holmes. And Lindsay looked at the paper, and in his mind, he was like, But in his face, he's like, Is that really the best you can do? I thought you were gonna actually show me something that was impressive. Tim's like, All right. It was another 48 hours, he comes back with another offer, even better, and said, basically, he's like, Look, we really want it. This is our highest and best. We can't pay any more for it. And Lindsay's like doing the math in his head, and he's like, if we took this project, built it all the way through to completion, carrying costs, uh, rented it up, you know, sold it uh to our investor group, paid our commissions, paid all the lease up fees and all that stuff, they're gonna make about $20,000 a door. But just the ground, selling it straight to Ryan Holmes, made $30,000 a door. A lot. And Lindsay was like, what the hell? And basically, what it boils down to is scale. The biggest builders in the country have got their building costs so low that the smaller builders cannot compete with them. So, what they can do is they can pay a stupid more amount of money for the dirt as long as it's fully entitled and permitted and ready to go. They're not carrying it on their balance sheets, they're not having to do a 40% down, you know, pay a loan. And then a lot of the guys after the last collapse, they stopped buying ground and having their own teams that get it ready and get it entitled and get it pay-per-lot and permitted. It there was a shift from that last collapse. That's how we kind of fell into it. It was like Lindsay's like, we make more money selling dirt than if we took this thing all the way through to completion. And that was that light bulb moment. What I tell everybody is Lindsay's brilliant, right? He's just he's one, he's got that New Zealand accent, he's just got that wit about him. You're just like, everybody just enjoys sitting in a room with him, sitting at a table with him. And he's a little cocky, but cocky on the confident side of what he's created. But we've created a situation and we've made relationships with some of the biggest builders in the country, and we're doing something that nobody's ever done before. Most of the time, these land deals come to fruition because a farmer owns them and he's like, Man, city's encroaching on me. Maybe I need to get this thing ready and sell it off, you know, put it with a realtor and get it sold. Soon as you start going that route, one, they don't have the experience on how to get it fully entitled and permitted quickly. No, I can tell a story on that, probably not in this one because you have short calls, but you know, might be part two, right? Um, but it takes those guys a lot longer. And then by the time you actually give something to a realtor, no offense, got a lot of realtors in our network. I have a real estate license. I've just never actually sold a residential house to an owner-occupied buyer. But by the time it gets to there, it's not the deal that most national builders want to look for. They like the off-market stuff, they like the stuff that moves through the channel a little bit faster. So Lindsay went after some of the top land asset managers in the Southeast, hired them away from the national builders, keeping it short, forexed their income, and now they work for us and they do the same thing they've always done. They're just not on the uh the builder's payroll anymore. And the those builders still get first look at all the deals. And now we're the ones doing the approval on it. Doesn't have to go through land committees, it doesn't get some guru or you know, the board in New York and their uh number 75th story or whatever, is not shooting it down because it's 0.02% off of their figures, right? Another reason Dr. Horton's the biggest builder in the country, they got rid of land committees, they gave their division presidents full autonomy to make purchases of land as long as it fit all their criteria, which is why Dr. Horton's built 82,000 homes and sold them last year. And the number 10 builder barely did over 10,000 homes. There's a big spread in between.

SPEAKER_01 20:08

Yeah, I'd say so.

SPEAKER_00 20:10

Yeah, it's been it's under you know, I fell into it because of relationships. Um, I had the relationship with Kevin and Lindsay. We were in the right markets, Southwest Florida, Charlotte, uh, and stuff, and all around that market. Lindsay forged those relationships. Well, Tim, by the way, Tim Samuels, Godfatherland, is now a partner of BRD Land and Investment. He's no longer at Ryan Holmes. And we just also hired Mo Johnson from Meritage Builders. They're the number five builder in the country. And Mo's been watching what we've been doing, and he's the division president, was extremely well off. And he's like, You guys are changing the face of real estate now, national builders by ground across the country. He's like, I gotta be a part of this. He's like, This is this is next level. And just to give you an idea, and some people may grasp this, may not, we currently have over 800 million dollars of retail ground in our pipeline and around 38,000 lots under our control that we own or control or is going through the process. And that's huge. And I have a total of 70 million dollars in assets under management against 800 million of retail ground, and then another couple thousand lots on the build for rent program. Even if all, I'm well, not all, even if half their deals fell apart and all they did was move on half of the inventory at all, they could still pay off every single investor, every bit of interest owed, and still operate and continue to operate for years. There's just so much profit on the dirt side. Like I said, they could be all in at five million, they'll sell. That ground for 12. And uh they they turned that usually within nine to 18 months on average. COVID kind of created some issues. People don't really want to work anymore where they work from home and they don't work well from home, you know, city employees and municipalities. And so sometimes it's 24 months, sometimes it's a little longer, but with profit margins of 40 to 60 percent, it doesn't matter. So they have 163 million dollars of ground under contract right now with the national builders. And Kevin on the build-for-rent side, man, poor Southwest Florida just keeps going through something, right? Hurricanes and you know, interest rates doubling and all this stuff. But prices are going up. They'll kick out 50 to 60 homes a month starting next year. Uh, they've been running a lot lower this last year, just from everything that kind of happened. But the reason we're successful is we don't have enough homes in America. People don't want to sell their existing homes because they don't want to lose their 3% mortgage rate and end up having to go to a new home and pay 7% mortgage rate. So that inventory is extremely tight. But the biggest builders in the country are buying up some of the smaller builders in multiple markets right now, and they're buying them because of the ground that they have and the land that they have and the lots. Plenty of articles I can send you on that. It's this is just nothing that a 15-minute presentation will ever give anybody enough information on. So, but I'm telling you now, everybody knows by land they're not making any more of it. Well, we figured out a way to cash flow on land, and that's a difference.

SPEAKER_01 23:47

So if they're not making any more out of it, I you you're still able to make something out of it. I mean, that's kind of a complexity.

SPEAKER_00 23:54

It's like taking a lemon and making lemonade, right? The lemon may be there, and maybe that lemon tree is only going to produce so many lemons, but we're taking that ground and we're now making it usable for the builders so that they can put something on it. But the actual ground, you've seen the cities either go up or they go out, and it's all dependent upon what the community will approve or allow. And not everybody wants to live in a city with a bumpster high rises. Sure, there's plenty of people to do, but after COVID, there was a shift. People didn't like the fact of being locked up and everybody touched that entrance door, everybody touched that button on the elevator, everybody, you know, was walking up the same flight of stairs and touching the same handrails. There was a shift. And a lot of people, with the fact being able to work from home and work remote, they're like, that's it. I'm out of this big city, I'm moving further out. And some have come back, but there's still a lot, like, this is much better out here, you know. So DR Horton has told us that they they plan to double production, which is just absolutely crazy to think about. And um, I've seen four companies that they've snatched up already in four different markets, including where I live in Mentonville, Arkansas. They bought the number one production builder out of here. Um Riggins Construction was the number one production builder in Northwest Arkansas, which we're home head headquarters of Walmart, JV Hunt Trucking, Tyson Foods, amazing market, by the way. But uh, it's just having that inside scoop. This is just something most people don't know. And it's not something you follow, and it's not something that's talked about. And I was very fortunate to fall into this level and this space. I wished I had learned about it back in the beginning of my real estate career. But you know me, even though I'm 55 years old, I've still got the mind of a 29-year-old. I'm not slowing down anytime soon. Um, like I said, uh uh Warren Buffett, he's getting up there in age. He's he can't live forever. And we are gonna outperform Berkshire Hathaway, and I'm gonna become the new oracle of Bentonville. Let's go. And when I set goals, I hit him, except for 2015. I missed that one.

SPEAKER_01 26:21

Well, it happens. Even Babe Roos struck out every now and then, right? Well, Brett, it's been great to have you on the show, man. I'm so glad you invited yourself to be on the show because I wanted to learn more about what you do and uh looking at a few of your opportunities here, excited to find out. Uh, you know, get in the mix here, take advantage of some dirt. So if you're joking this episode and you're thinking, you know, I want to learn more about what Brandon's doing, you can go over to rockstarcapitalfun.com. That's rockstarcapitalfun.com. The link will be in the show notes. Uh, or you just hit me up. I'll be more than happy to make an introduction to uh to Brandon. Thanks again for your time, brother. I appreciate it, man. You bet.

SPEAKER_00 26:55

You have a fantastic day.

SPEAKER_01 26:57

You do the same thing. Until next time, friends. Thanks so much for tuning into this episode of the Beyond the Story Podcast. Be sure to appreciate it. If you haven't done so already, make sure you're subscribed to the show. This way you'll get updates as new episodes become available. If you feel so inclined, please leave us a review. Be sure to appreciate it. Signing off from the podcast, launchlab.com studios. We'll talk to you next time.