Episode 112 - Losers are Winners: Trapper Roderick and the $4.4M Problem
Episode #112 | Losers are Winners | The $4.4M Problem
What do you do when your investor relationship goes sideways halfway through a spec home? Trapper Roderick joins Mark for a very honest Losers Are Winners conversation about refinancing mid-build, pricing a $4.4M Park City spec, walking away from the wrong client, and how some of the biggest wins in business start with things going spectacularly wrong.
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The host of the Curious Builder Posdast is Mark D. Williams, the founder of Mark D. Williams Custom Homes Inc. They are an award-winning Twin Cities-based home builder, creating quality custom homes and remodels — one-of-a-kind dream homes of all styles and scopes. Whether you’re looking to reimagine your current space or start fresh with a new construction, we build homes that reflect how you live your everyday life.
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Trapper Roderick 00:04
You look at like all the things that my company does, your company does, or some of our friends' companies that they do that are like kind of special to them, and that usually probably started that special thing that they do now started because of something bad that was going on, whether in business or with a client or whatever. Every single one that's like exceptionally awesome.
Mark D. Williams 00:29
Welcome to Curious Builder Podcast. I'm Mark Williams, your host. We've got a returning guest, two-time guest. We've got Trapper Roderick out of Salt Lake City. What's up, Trapper?
Trapper Roderick 00:37
Oh, not much, man.
Mark D. Williams 00:38
You are like you're like making the podcast round. So every time I go on a podcast, I see your face on like Builder Authority or Build This Like podcast. I don't even know what they're just. You're just everywhere. You're on every one of them. You're like a, you know, it's like you won the Super Bowl and you're going to every late night show.
Trapper Roderick 00:53
I haven't been on one in like six months, so that's good to hear that it's getting around.
Mark D. Williams 00:58
Yeah. See, there you go. They're finally making it to my algorithm. Well, today is Thursday, and so we are doing losers or winners, and you lead our curious collective out in Salt Lake City as well. I think you just had your first one a couple weeks ago, which is amazing, and you just had an amazing home that you literally just finished and brought to market. So maybe since that's kind of fresh in your mind, what have you got for a losers or winner story. Do you want to do talk about the challenging of this house, some of the banking, some of the financing? Like, what's hot and fresh that you think would be a good learning lesson?
Trapper Roderick 01:30
Yeah, am I losing or am I winning yet? Yeah, it's been it's been a really good success overall. Our main goal is really just to attract a very specific type of designer and architect, and the people that have come through it that have seen that are just they're refreshed, right? Like they they're like, wow, this is what our market's been missing. We want someone that's paying attention to this much detail, you know, because the home is not a $20 million home, but it's it's got $20 million features in it, you know, and just you can tell that there was love and care and emotion put into to that home, and so our our goal is being achieved to really attract that designer and architect. So that's our that's our win. The losing part, some of the challenges, like we talked about, I had had a an investor that I want to be as kind as I can. We didn't see eye to eye about 80 70% of the way through the the project, and so we had to you know refinance and buy them out. Which refinancing a construction project mid construction is like a no no. No one likes it. Makes it look like you're in trouble. And so yeah, that was a challenge. You know, just kind of had to
Mark D. Williams 02:36
what I mean down
Trapper Roderick 02:37
grind for a month.
Mark D. Williams 02:39
Share what you can share, and obviously don't share what you feel uncomfortable sharing. But I think that's an interesting scenario. I mean, I think I know of a couple other high-end specs that have investment partners, and I'll leave them anonymously for this episode because this is about you. But you know, when you go into a project and you're sharing funds, most spec homes are not done with exactly your own money, meaning like a lot of spec homes builders are using bank finances, and so when I say it's not your money, it's not like your own cash. And then there's more and more partnerships are breaking out. I mean, you know, you and I have a friend in Brad Robinson, and you know he's raise he's doing cap. He has a whole nother company that just raises capital to fund stuff. That's a whole nother entity. We should have him on sometime to talk about that, and then we have what you and I have done. I I worked with a past client to be my partner, and I don't know your situation, but I I feel like it's becoming more and more common than it used to be. I think the try the the old way of building spec homes was you went to a bank, you put 30% down, you financed it. They would make you either put real money in, or obviously hold your payments to yourself until the end, because banks are never going to write it to lose. And you know, there's there's difficulty in all the scenarios; they're just different. What did you find in your scenario? What would you do? What would you have done differently? And maybe describe some of the challenges of what led you to. Obviously, you had to change it. That is a really a tough one.
Trapper Roderick 04:03
Yeah. So yeah, typically we are more like Brad Robinson. You know, we typically raise capital or work with a past client, but we treat it like it's like it's a VC group or an allocation or something. So typically we're doing a preferred turn. We're doing equity split. This deal was just challenging from the very very beginning. It was in a neighborhood that is, I would say, you know, maybe more of like a C grade community in the Park City market, where we were trying to build like an A tier house, and so a lot of banks didn't necessarily see what we could achieve with that, and so our LTCs, LTVs, at least from a projection standpoint, we're a little skewed, and we just didn't have a lot of capital we could bring into the deal. We brought in some, and so we there's a typical hard money lender in our market that he's done a lot of deals, but this was probably not in dollar figure nicer, but like as far as quality. Fit and finish drastically nicer than what he typically would do, and so you know he just really like anytime we would say hey you know here's the cost he just like really kind of argues on most of those costs along the way and and typically you know an investor is a previous client or something so they they get what we're trying to achieve right, and this one was a little bit newer, and probably should have vetted a little bit more for our situation. And so he's like, "No, like I could get that done for this price. Well, I'm like, "Okay, please show me then, you know. And so it just was constantly a battle, and there was a little piece of our contract that I would say it was a little sneaky, and so essentially, I had to either refinance out of our loan or refinance with him midway through the project, which would have given him not only his guaranteed $300,000 plus his interest, but an additional 3% at that time, and just at that point, just because of how it went about in the contract, because I did use his contract versus mine to get that that particular spec house funded, I didn't catch it, and I just didn't think that that was necessarily right, given all the other things that we had had challenges with through the project, you know, anytime I wanted to do something nicer, even if we were getting 50% of it paid for from a brand partner, he just wasn't necessarily he didn't see the value in it. We parted ways. He came to our party though. I mean, we were still friendly with him. He came to our party the other day and he was blown away with how nice the house was and wished us good luck. You know,
Mark D. Williams 06:40
I mean, that sounds like it went about as good as it could go. I mean, it could have gone far worse. Would be yeah,
Trapper Roderick 06:45
yeah. I mean, yeah, could have got nasty.
Mark D. Williams 06:48
Did you, out of curiosity, did you find another hard money lender, another past client, or a bank to take it out? I
Trapper Roderick 06:55
found a bank that I was shocked was willing to take it. Actually, because yeah, I mean, a bank typically just doesn't want to touch a house and make construction, you know. So yeah, there was a bank in Maryland, and happy to introduce a bank in
Mark D. Williams 07:08
Maryland.
Trapper Roderick 07:09
I know, right? Of all places,
Mark D. Williams 07:11
I would have thought it would been like a local bank that knew you or had wow. Exactly,
Trapper Roderick 07:15
it was totally out of the blue. They just loved our portfolio. They loved everything we're doing. So, I mean I
Mark D. Williams 07:20
get it. I mean a whole point of a bank in some ways it would be attractive. I mean I know you and I know you do good work, so it's a little bit easier from my point of view if I had four or $5 million, which I don't because I would own it. I would own Misuhus then. But anyway, if I had an extra four or 5 million, right? I mean that's the kind of the whole point, right? Is like a bank is making a value proposition. They their job is to lend money. Like banks don't make money if they don't lend money. So if you have a lot of money on your books, you got to lend it out. That's just how it works, I would assume, on base level. And so yours is. I think what I would imagine they find attractive about you is the Utah market, at least from their point of view, is hey, it's a hop and market. You can sell spec homes. So unlike let's say Minneapolis, which is not a hot spec market, so you've got that going for you. Two, you were only like three months away from being done, so they didn't have to wait a year or two. Like they potentially their shortest window is they could turn their money in three months, which banks love that. And so one thing that I think is really difficult. Maybe we'll talk about it now. I think the hardest part about setting the price of a home is: do you price it to sell within that two to three month window so that it's a good price and you sell it out the window, or do you sell it for what it should cost? And I guess I'm going to throw in a third one there. Or do you price in the idea that hey, if you had to hold this for 10 months to a year, like you price that at the get go, and maybe I'll just hedge this whole thing with like Misu, who should have been 6.5 for a 20% return. We priced it at 599 to sell it to the third person that walked through the door. Like we were really aggressive. You know, we gave up 500 grand. That's a lot of money. Yeah, and so that brings our our perform return down to like 12, 13% which is not ideal. And and now today with our cash burn, we'll be lucky to sell 10% Now that's just if you view this spec home as like a straight financial success, which I think you know for me personally, I have five goals. But I won't talk any more about that. That's a whole nother podcast. With but now, well, maybe I'll finish it up with this one thing: is that if we wait, we have about a 60-day window to sell our spec home because it really goes pretty quiet here between you know summers are quiet in general. Then there's like a two-month pickup September to let's say Thanksgiving, and then pretty much Thanksgiving to like mid February, early March. It just a lot of people don't move, and then the hottest part of the market is usually March one, that first sunny, warm day in March to about May. It's rock stars, and then I don't know if your market is similar to that, but the hard part is, is if we, you know, if we priced it to hold it a year, I mean that might be four or 500 grand in interest cost, and that is a real. Cost to that home, but it's but if you go buy a house that you know Jack and Susie live in, they don't have to worry about that because they're paying their mortgage because they live there. Anyway, how do you with that poorly framed question? You have three options when you brought your house to market. How did you decide how you wanted to price it?
Trapper Roderick 10:18
That's a that's a great question. Yeah. So I mean, we listed it at four four. If we were in any other neighborhood in Park City, we would have listed this same house at 652.
Mark D. Williams 10:28
million more. Damn. So the land the land
Trapper Roderick 10:31
cost would have been a million to million and a half dollar difference. But there would so there would so let's just say if it was a million and a half dollar difference in land cost, we still would have had an additional $500,000 upside. We did price it on the more aggressive side at the top of the market for that neighborhood.
Mark D. Williams 10:47
You're saying you price it aggressively for value, not aggressive in terms of like low price to sell it.
Trapper Roderick 10:54
Exactly. Yeah. And we did that because our main goal was again to attract architects and designers. And if I would have had it sell day one, I wouldn't be able to show it. I wouldn't have been able to use the house, right? I also felt really good going into it because I have two people that really, really want the house. They just have to work some other things out, so they've they've not written offers because they know they can't perform on them. But today, but they are actively trying to perform on them, and so I have two verbal commitments, and then I also brought a bunch of realtors in along with my realtor, and we said, "What do you think this house costs to build, and what do you think it's going to sell for? So we didn't put any of the pricing on any of the marketing material, and that kind of just guided us to okay, the price we're listing it for is still less than all those numbers that were being set. So we felt really good about ours, and that that was just a little different in this situation. I probably would have been, probably would have priced it higher if it was anywhere else, though. So,
Mark D. Williams 11:56
so we expect to
Trapper Roderick 11:57
sell by by January 30.
Mark D. Williams 12:02
What is that's an oddly specific number or date? Why January? I guess
Trapper Roderick 12:07
whatever the month. Okay.
Mark D. Williams 12:08
Why? Why did you pick that date? Because
Trapper Roderick 12:11
our hot market is actually Christmas and ski week. Because everybody comes out here on vacation. All these second home buyers, or they were they were staying here on vacation, and they go. You know what? Let's let's look at some houses. And so that is actually our hot market. It's actually the winter season in the Park City area.
Mark D. Williams 12:29
Okay, I mean that tracks. That totally makes sense. It was definitely not the hot season here in Minnesota.
Trapper Roderick 12:34
Yeah, unless you
Mark D. Williams 12:35
want to come ice skating in minus 20, keeps the riff raff out. I heard this stat the other day that I actually really like that West Virginia is number one. Not sure why, but Minnesota is number two in the country for people that live in Minnesota are from Minnesota, which tells me two things. One is it's a great state that people don't want to leave because they love it, or if they leave, they return to it, which I think kind of speaks to you know the type of people that live here. We also have, I think, second only to New York number of Fortune 500 companies. Actually, a lot of people don't know that stat. There's a ton. Never
Trapper Roderick 13:07
guess that.
Mark D. Williams 13:08
Yeah, see, you've got Medtronic, 3M, Pentair, Best Buy, Lifetime. I mean, there's a ton of companies here, especially MedTech. But I digress. That was my pitch on Minnesota. Why there should be more vacation homes here. Also, with global warming, it's going to get too hot anywhere else. Everyone's going to be like, "Please, we need more ice in our life. Actually, it's kind of been depressing. Honestly, I feel like it hasn't been cold in Minnesota since I was a kid. I'm turning into an old man where I'm like, "I remember when it used to be cold. I mean, now outdoor skating season is like 60 days. We're lucky if it doesn't get like abnormally warm and just ruin all the ice in like end of January or February and just like the city parks. Like once it goes bad, it's like they they don't even bother to try to fix them.
Trapper Roderick 13:51
I feel that way a little bit because I definitely don't feel they used to plow the roads differently. So they would cut going up the out there. They would cut the road in, and now they push it all off the side. So it felt like there was a lot more snow growing up.
Mark D. Williams 14:03
Yeah,
Trapper Roderick 14:04
it probably was.
Mark D. Williams 14:05
Look at this. This is we should call this one old man talk. This was like back in my day, we used shovels to plow all the way up to Alta, and it was only skiers. Actually, I think it is still only skiers up in Alta, right? It's one of only the few in the country. When it comes to quality, craftsmanship, and performance, Pella sets the standard. Whether you're building custom homes or designing a timeless space, Pella offers innovative window and door solutions that blend beauty and efficiency. With showrooms and experts around the country, Pella makes it easy to find the perfect fit for your next project and their team to support it. Build with confidence. Build with Pella. Visit Pella.com to explore products and connect with your local rep today. For more information, you can listen to episode one or listen to episode 109, where we bring on Pella owners and founders at Pella Northland. As well as their innovative team behind the SteadyStat innovation. This episode of the Curious Builders brought to you by Olivenvine Socials. If you're a builder, a designer, or an architect looking to grow your brand without dancing on TikTok or spending your whole life on social media, listen up. Alvin Vine Socials specializes in Pinterest marketing, blogging, and email strategy for luxury home brands that help you turn your beautiful work into a strategic SEO-driven content that drives real traffic and connects you with your ideal clients without burning you out. Ready to grow smarter and not harder? Visit OlivinVineSocials.com and tell them the Cures Builder set to you. Just so you know, I've been working with Alyssa over at Olivinvine for three years. She helped us launch the podcast. She's helped us grow our brand at Mark Williams Custom Homes. I could not do what I've done without her help. What are some things that you've done in your career where you're like that was really boneheaded or that was really hard? But because it was so hard, I benefited from it in this way,
Trapper Roderick 16:01
oh man, I walked away from my job a couple years ago, and I walked away. I told the client, I said, "Hey, like I can see we're not a good fit, and this is really strange for me because the work's good. Like you're not a bad guy. I just I don't think we are meeting eye to eye, and so I'll help you transition to another contractor if if you're open to it, which was just so strange and abnormal, right? Like never have done that, and it was pretty ticked at first. But it's kind of weird of all the good that's come from it that clients like sued so many people that were involved in that job, people that were before me and well after me, and the architect and the builder that got involved after me, like, have been a great referral source because they think I do good work, and I dealt with a really challenging situation I that I didn't really realize was as challenging as it needed to be at the time. So that's kind of just like a really weird one, but like just following your gut, you know, like, and I had that gut feeling going into the job. So I think all too often we don't listen to our gut because just because someone is a challenge for for you doesn't mean it's a challenge for somebody else, right? So listening to your gut and guiding a client, even if that maybe means it's you're not the right person for them.
Mark D. Williams 17:19
I think I mean that's that's a great one. That's only the the benefit of hindsight. I mean, I mean, it seems like you knew before you went in, which is beneficial. I think if you polled builders that have been in business for any part of time, is there any client that you should have walked away from you didn't? I mean, I don't think you can really understand what a bad client is, or you know, we talk so much now about ideal clients or creating, you know, sort of a filter system to get to the right one. But I don't think you really start thinking that way until you've had a few that are difficult. Yeah, and I think that's part of the journey. I think it's part of the maturation process. I think it's you know when you learn to walk, you fall down a lot. You know, when you do a sport, you make a lot of mistakes, you break a lot of things, you get you know. I just think it's part of the human condition. I think that's why show me any winner, and I'll show you a loser. Hence the name of this series. I think you have the the more you the more you you handle losing. I mean, the better winner you likely are. I just think they kind of go hand in hand. They're yin yang of the same coin.
Trapper Roderick 18:16
Yeah, I completely agree, and and I think you know you look at like all the things that my company does, your company does, or some of our friends' companies that they do that are like kind of special to them, and that usually probably started that special thing that they do now started because of something bad that was going on, whether in business or with a client or whatever. Every single one that's like exceptionally awesome. I
Mark D. Williams 18:37
also would say time. I mean, I can speak to like Misu's just because that's my latest fourth child that I'm, you know, the most excited about. Is that I never would have created all that we created around it had we not had two jobs that fail through on that property, and we were slow. So we were slow. So it's like my, you know, you need that time and space to get creative, and sometimes a little bit like a diamond doesn't get formed without extreme pressure. There was kind of this moment in time, like if I was really busy and just cranking out houses and just like just super busy, like what? How in the world would I have had time to spend eight months creating a brand? And now I can't. I mean, I just had a brand meeting a couple minutes ago. You know, we have we're kind of laying out like a 135, year plan around what we're going to do with Misahoos in terms of our local market and how we're using it to sort of leverage against our competition. And and really, there isn't a lot in terms of the wellness space here locally. And so the the more, but again, this all stems back from it was really slow. I had to. I had to fire a few people. First time I'd ever done that in my career, and not it was not enjoyable experience. And again, you need that time and space. It's a little bit like being injured. I mean, if you are a runner or a lifter or an athlete, and you tear your ACL or whatever, you always see these athletes that they come back. They're stronger, faster. Bitter, and they've had more time because they were for the first time in their life they were forced to slow down. And I know I can speak for myself; it's really hard for me to sit still. So when circumstances dictate I have to, man, your your creativity just goes through
Trapper Roderick 20:15
the roof. You sent me a book, and every time I read it, I think a Misuhus.
Mark D. Williams 20:21
Which book was that I sent you? You
Trapper Roderick 20:23
sent me the Unreasonable Hospital. Well,
Mark D. Williams 20:25
it's funny because I just sent you that, so I thought maybe I sent you a book before. I didn't read the whole thing,
Trapper Roderick 20:29
but I know enough about the book. Yeah, did my cliff notes. I, I, the whole time I was thinking and reading the thing, I thought of Misu Misa Hus because I'm like Mark should maybe just he would probably be the best guy ever to run a bed and breakfast brand
Mark D. Williams 20:52
if you could make any money doing it maybe I would
Trapper Roderick 20:55
honestly but the your the your ideas of literally unreasonable hospitality and even the house you just did are just so spot on with like the most cute, quaint bed and breakfast brand. It's a good
Mark D. Williams 21:08
idea. Here's my one thing. That's funny you say that. I first of all take that as a high compliment. But two, I think the food industry is the one industry I would never in a billion years ever even remotely entertain. I think it's I think it's indentured servitude. You to own a restaurant like I'm a foodie. I love good food. Take me to a nice restaurant. That's great. But the idea that I have to be there every night, all the time. I mean, they're constantly fiddling. They're you know, it's ah, it sounds terrible. It sounds like a ball and chain. It sounds terrible. I could never do it. I could do it for like a day. What about the
Trapper Roderick 21:44
hotel aspect of it? And you let another restaurant handle that. I mean, I'm telling you, you'd be excellent. All those cute little tiles on the wall.
Mark D. Williams 21:52
Okay, now I can see what you mean. So, like, if I was the if I owned a hotel and I had a general manager that could handle the day to days and all that stuff, yeah, I'm not talking
Trapper Roderick 21:59
about you running a hotel. Tell you about you. I was talking about green.
Mark D. Williams 22:03
Okay, that yes, okay, that I could do. I could do. You're right. I could do a bed and breakfast franchise. Yeah, Misa, who's. I mean, that sounds very expensive. I'm not sure the. I'm not sure what the ROI on people staying there is. Although it's funny you say that. You know how like now you see wellness places popping up all over. Like what is it? The what's the spot they're doing one in Salt Lake City soon. The Amon Nigiri, the or
Trapper Roderick 22:25
Aman, the Aman. Yeah,
Mark D. Williams 22:26
yeah. They're doing one, I think, in Salt Lake, and and they've got like five more coming up in the next five years. I mean, just that the wellness vacation trend is just exploding, right? Oh yeah. But where I'm going with this poorly is well, shoot. Oh, I did a Lululemon. I don't think we've posted the photos. I think I did a few stories last week. But Lululemon did a 25 person event at Misahu's. No way. And I did it. Yeah, I just wanted to do it as there's a local person that put me in touch with it because the house lined very well for their statement. So they had 25 of their brand ambassadors. They had a photographer and a videographer. They did like outdoor, and we had you know they're doing yoga in the backyard, a sound bath, like the whole thing. And this is like it was cool, but I'm also like picturing like, wait, is the builder profile someone who's going to buy this house going to like the fact that they had 25, 30 year olds with tattoos and earrings and you know all the all the yoga stereotypes like in their backyard? I was like, I don't know. Maybe they will. That wasn't really the point, but it's like, how far do I go with this? And the reason I bring it up is like, several companies have reached out to me since they saw those photos, and I haven't even done a post or story on it yet. We will shortly. And they were like, Oh, we didn't know you were in the event wellness space. Can we rent Misahuas for a week? Or and I was like, dude, I can't have a bunch of people like spending the night here is like well, I could rent it out now. There's you know that the profile of someone who's going to buy this house is not going to want like this has been a bed and breakfast for four or five months before there's not enough money in it unless you you set it up as that business. But you're not far from the mark in terms of people being like, well, hey, can we sauna and cold plunge? And you know, I had people doing backflips into the pool, I'm like, oh boy, yeah. Someone cracks their head. This is going to get real expensive real fast. Yeah, yeah. We we
Trapper Roderick 24:08
had a similar thing. A very famous skier is going to be filming a commercial in their house.
Mark D. Williams 24:13
Yeah, are you charging them for it?
Trapper Roderick 24:15
We're working through some of that right now.
Mark D. Williams 24:18
Yeah, yeah. We and I think it depends on if you want to promote the publicity of it versus like right now we decided for any more we set a price and so it's a day rate they can pay it. It's painful enough that they got to be serious, but not so ludicrous that they wouldn't do it. And just like you know, I'm still in the job of selling this house, but I do like your idea of an event space, and we see them all over. It's just that, yeah. Now, who knows? Maybe the little, maybe this podcast, this episode will be like before you know it. We'll have Misa who's bed and breakfasts around the country. I
Trapper Roderick 24:49
fully expect a full-on breakdown tomorrow.
Mark D. Williams 24:51
I'm sure I could get I could get Joel to give you a. He'll probably no. He's the first person to tell me no. The way I can spend. Money is is actually overrules his ability to tell me no. He tells me no. 90. In fact, I just walk into his office and he says no as soon as he sees a twinkle in my eye. He knows I'm coming up with a way to spend money. Oh yeah. Thank you for your time. Thanks for coming on the Curious Builder as always, and thanks for the leadership that you and Stephanie are doing out at our collective in Utah. Yeah, thank you. Thanks for tuning in to Curious Builder Podcast. If you like this episode, do us a favor: share it with three other business owners. The best way that we can spread what we're doing is by word of mouth, and with your help, we can continue to help other curious builders expand their business. Please share it with your friends, like and review online, and thanks again for tuning in.
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