LGI Homes: Understanding Land Acquisition

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How has this process evolved with the growth of LGI?

LGI Homes is unique. During my time there, they didn't pay brokers, which was a significant mistake. They believed they could find enough land on their own and didn't want to pay brokers in markets. This strategy, in my opinion, was misguided from the start and remains so today. The focus should be on LGI making a profit, regardless of who else is making money in the deal. If I need to pay a broker $250,000 for a referral on a piece of land that will bring me 200 lots and $50 million in profit, I wouldn't mind that he's making some money. Pay the broker and let's get the project going. They would unnecessarily limit themselves. I'm not sure if they've changed this policy, but it was a firm one, and it didn't sit well with brokers. Why would they bring anything to LGI Homes?

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If we focus on the first bucket, which is buying and developing the lot, accounting for about 30% to 40%, what would be the split between purchasing the raw land and developing it?

You have to look at the finished lot and determine the cost to develop it. Then you back into that one more time to find the residual land value. Every property costs a different amount to develop due to a variety of factors such as the lay of the land, wetlands, streets, neighbors, orientation, and so on. If it costs me $300,000 to develop a lot because it's on the side of a mountain, but I can only sell the finished lot for $250,000, it doesn't make sense. So, you're always working backwards.

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