Reality of Rejection · The Dirt Road to Wealth

Reality of Rejection

Hey team- I just wanted to share this very thoughtful rejection letter I got from a private capital investor. Most rejections aren't this specific. I'm sharing it as a reminder for everyone to not take rejection personally. And to remember that having local knowledge of the advantages of your project and knowing your community doesn't always mean that an underwriter takes those intangible items into consideration.

Here's the rejection I received:

Hi Joe, thanks. We took a much closer look at the market and child parcel potential, and conservatively think the low range projections are probably most accurate. We're in the midst of a buyer's market, and even when we undercut the market, 80%+ of our recent parcels are selling for below list, so we take this into account.

Understandably, there's a lot of seasonality in MT, and the lagging 6 months is almost non-existent.

We devalued the subject property considerably compared to the lots closer to the lake, and accounting for competing lot sizes. Eight 2 acre's hitting the market all at once is tricky. For the later phases, difficult to find reliable comps for larger acreage properties, not a robust market, even accounting for limited inventory.

This comp (link) is informative, and in a better neighborhood, with a PPA even a bit less than the proposed low range.

We're extra conservative with phased dev plans in case properties sell for below expected value, and take longer to offload with adverse selection, etc. With the low range in mind, we wouldn't expect to see any funds returned until phase 3 starts to exit, and that would be at a 1.25X anticipated ROI on a deal-level basis. With profit splits and timing, this is going to be far too risky for us to pursue currently in comparison to our more routine opportunities.

Appreciate all of your effort and DD on this one though. A better fit for us would be a single phase subdivide with reduced project expenses. Let me know if any come up, would love to partner accordingly, and best of luck on this one, thanks,

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