Hey - happy Thursday.
Something crossed my desk this week that I can't stop thinking about.
Kevin O'Leary just got approved to build a $70 billion data center in rural Utah.
Box Elder County - which is dry and remote with about 10,000 people in the nearest town.
The project is called Stratos - 40,000 acres, 9 gigawatts of power, fast-tracked through a military development authority with one unanimous vote. Done. Despite thousands of residents protesting this move.
And overnight, land that nobody was watching became some of the most talked-about dirt in the western US.
Here's where it gets interesting.
See I’ve financed dozens of parcels in a nearby Utah County so I had to ask myself… how would I feel if this was in Roosevelt, UT instead of Box Elder County?
The seller financing downside
Say I bought 40 acres out there 3 years ago for $50,000. Smart buy. Then I sold it on owner financing two years ago - 10% down, 10% rate, 10-year note. My buyer sends me $528 a month. I love this deal.
Until this week.
Because my borrower just watched their collateral get repriced by a $70 billion project moving in next door. Their equity went up. Their upside went up.
Mine didn't. I’m still collecting $528 a month for 18 more years.
That's not a bad deal. But the appreciation on that collateral belongs entirely to my borrower now. I traded the upside for the income stream - and a lot of people make that trade without fully understanding what they're giving up.
The only way I could potentially profit from the appreciation is if the borrower defaults and I take the property back to resell.
The actual lesson in this
When you hold the note, you're the bank. The bank doesn't get rich when the property appreciates - the bank gets paid back based on the deal they made. Seller financing is a great cash flow tool. It's not an appreciation play.
And the real opportunity right now isn't Box Elder itself - it's the counties next door. When $70 billion lands in a rural area, the spillover goes 30 miles in every direction. That's where the next deal is likely hiding.
Quincy, Washington looked like Box Elder in 2007. Then Microsoft showed up. Then Google. Then Amazon. The people who won weren't at the county meeting cheering or protesting. They were quietly buying dirt nearby and waiting.
Cash flow and appreciation are two different bets. Know which one you're making before you sign the note.
Talk soon,
Jake
P.S. - More coming on the YouTube content side soon. Stay tuned.
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