What happens when you find a lucrative, risk-free deal with an experienced trader… and your standard deal structure is completely unusable?
We’ve been leveling up. Anything below the $50,000 purchase price, $150,000 or more preferred. More experienced operators. Less volume, higher absolute returns.
For higher value deals (rough guideline: any purchase price over ~$200,000 to $250,000)… almost always come with greater complexity from due diligence, value-added, regulatory, and/or structuring perspectives.
(Not always, as it is occasionally possible to find a large tract of land or a luxury infill lot above that price, which is relatively easy. On the other hand, complicated title deals can require a tremendous amount of effort to acquire, with a lower purchase price.)
Quick Breakdown of Rights Offerings
One type of agreement we’ve spent a lot of time on recently is rights offerings…specifically, fund indirect costs (e.g., engineering reports, planning and zoning applications, surveys, environmental consulting, etc.) to prepare major subdivision projects for a paper lot sale to a developer/builder at various stages (e.g., preliminary plat, improvement plans, final plat).
Generally, the The starting price will be higher the further down the approval path.and sometimes departures may occur before approval is granted.
Indirect costs (for the paper batch stage) can range from ~$100,000 to $500,000 on average (sometimes less, sometimes more, depending on the project). The upside potential? Low seven figures in an attractive asset in a solid location.
The critical risk here…you typically don’t own the underlying asset. You have a purchase agreement from the initial seller, you are paying for the law work, and you are selling lots of paper to the final buyer.
If the pool of buyers dries up, development problems arise or costs soar, the seller abandons and/or the local planning authority rejects their plan…your invested capital reaches zerowithout recourse.
The best version of this play (and a requirement for us to consider financing) is to have the end buyer already lined up (with a signed letter of intentat least) before starting to enter soft costs. It reduces timeline and market risk and gives you a much clearer picture of actual returns.
(And the the absolute best version is to have the end buyer finance ALL of the soft costs, plus DME and land acquisition costs, while you still keep a portion of the profits for facilitating the deal. This requires several years of relationship building, and I only know of one group that has managed to implement this model. The vast majority of the time, you’re on the hook for at least some of the soft-cost capital.)
The IRA problem
We have taken an in-depth look at some of the best rights deals we have seen obtained by the experienced operator mentioned above at the beginning of this newsletter, however…
A problem. A big one.
The operator’s investing entity (which already provided capital and owned the underlying LLCs linked to specific contracts for each transaction under review) was a self-directed IRA (Individual Retirement Account with Self-Directed Investment Authority), which comes with a comprehensive list of prohibitions on the owner’s ability to personally guarantee investments or have any of their other assets cross-collateralize IRA arrangements.
Our favorite structure? An operating loan with limited recourse personal guarantee (e.g., bad actor clauses).
Completely unusable in this scenario.
When debt becomes worthless
So we looked at a different debt structure, in the form of a secured note.
Without the ability to personally cross-collateralize the operator, the debt was worthless. If the deal were to fail under a limited resource structure, there would be no underlying assets we could leverage. The newspaper says they owe us money, but there’s nothing to back it up.
And remember, even with accredited end buyers lined up and a favorable approval path, these are inherently higher risk deals with significant complexity… even for limited principal amounts (in these cases, we were looking at checks between $50,000 and $175,000).
Rule number 1 in investing (any asset class): Don’t waste money. Every dollar must be used with care and consideration.
I’ll be honest… I initially felt more comfortable with the revised debt approach and was excited that we were.almost at home‘ on a couple of solid deals in a difficult market.
But my business partner, who has spent many years working on major and complex corporate restructurings, kept listing the reasons why the debt trajectory and performance profile were inappropriate from a risk management standpoint… and he was right.
(The lesson here is perhaps as important as the structural one… you must have the humility to defer to your partner’s experience, or when presented with conflicting data, even when it means cutting hours of work and starting over… or potentially losing a deal.
Sometimes inertia is your biggest enemy. You don’t want to have to go back and rethink everything, so you rationalize the path you’re already on. The comfortable route is the lazy one. That is a trap against which we humans must remain constantly alert).
The SPV pivot
So we thought carefully about what could make these deals work. We have structured investments before using an LLC framework in the form of an SPV (special purpose vehicle, which is basically a separate legal entity created specifically for a particular investment or project), allowing different investors to come in through equity and have ownership within the SPV.
Could we adapt that here?
Turns out… yes. There are no prohibitions on a self-directed IRA (that is a sole member of an LLC) to have other investors enter the LLC as members, as long as we are not personal relations of the operator behind the IRA. SoInstead of debt, we structured it so that our LLC was a limited member either the underlying operating LLC.
Although we run the same risk of the deal falling apart and our invested capital reaching zero, we have actual pro rata ownership of the LLC, which inherently gives us greater legal protection tied to the deal we are trying to close, compared to debt backed without assets.
Additionally, we use our promotion structure (a performance-based incentive level that increases the upside to the lead operator of the deal), similar to what we have done in other deals, and is heavily weighted toward the financial benefit of the operator, while providing us with a return profile appropriate for the level of risk to which our capital is exposed. No personal guarantee needed. And no UCC-1 filing is necessary (it’s a recorded lien filed against an entity that incurs debt, basically a public tracker in county records).
Cleaner. More protective. Better aligned with the real risk profile.
The reward
After a couple of hours, we spent time reformatting the structure and massaging the messages…the operator accepted the frame.
That’s the part I’m most excited about. An experienced operator who trusts us enough to work on a completely restructured deal and who understands that we are (necessarily) strict with documentation and risk management, all in favor of build long-term sustainable partnerships.
(The real estate industry is full of lazy negotiators, who back up results with handshakes instead of paperwork, and that will come back to haunt you sooner rather than later… if it hasn’t already. I have learned it the hard waya story for another time.)
The broader conclusion? High-level agreements require high-level problem solving. AI is a huge lever (I use it extensively to think through adjustments to legal structures and agreements), but it won’t rescue you if you don’t understand what the end goal should be. Context matters more than anything… and if you don’t even know what question(s) to ask, you’ll get repetitive nonsense back.
The willingness to do the hard work…the creative structuring, the awkward back-and-forth between partners and operators, the elimination of hours of prior effort when the situation calls for it, the ability to let go of the ego (probably the HARDEST part for most entrepreneurs)… that’s where you’ll reap the benefits that most people will never bother to fight for.
Do you need an equity partner to do the extra work in structuring and documenting deals for long-term mutual success? We have funded over $6.5 million in land deals with industry-leading 41% operating margins and closed 100% of the deals we commit to. $50K+ check sizes. Domestic underwriting experience on every transaction.
If you’re an experienced trader with a steady flow of transactions and want a partner who doesn’t take shortcuts… let’s talk.
Analyze your property today
Originally published on SeriousLand.capital on February 16, 2026.
