pre-deposit-development

Pre-Deposit Real Estate Development

Walk someone through using customer deposits to validate demand, attract bank financing, and fund a real estate development — before breaking ground — using the Firecrown/Flying Magazine air park playbook from My First Million.

When to Use

The user is trying to develop real estate but is struggling with financing or worried about demand risk. They might say:

• “How do I fund a development project without a huge upfront investment?”
• “How do I know if there’s real demand for what I’m building before I build it?”
• “How does pre-selling units work?”
• “Can deposits replace a construction loan?”
• “How did Tesla fund Cybertruck production? Can I do that in real estate?”
• “I want to break ground but the bank won’t lend until I show pre-sales”

The Core Principle

From Preston Holland, CEO of Flying Magazine (EDjT_goV9Ow.md):

“We are we’ve taken $25 million of pre-deposits. So that’s people basically sending us a percentage of the deposit.”

And from Shaan Puri’s framing of the model:

“You basically funded it through the pre the the deposits. Kind of like how Tesla does with the trucks and all that before they before they build the trucks, they they take the deposits and they use that to to basically finance the the manufacturing.”

The pre-deposit model solves two problems simultaneously. First, it validates demand — if customers are willing to put real money down before the product exists, you have proof the concept works. Second, it funds construction — the deposits become the equity base that convinces banks to lend against the project.

Preston Holland and Craig Fuller used this at Firecrown’s Chattanooga air park: they announced the project, collected $25M in pre-deposits from prospective buyers, and used those deposits to unlock bank financing for the first phase of infrastructure.

Step 1: Design the Product Around a Validated Pain Point

The pre-deposit model only works if the product addresses a real, felt need. People don’t pre-pay for things they merely want — they pre-pay for things they can’t get anywhere else.

Preston Holland on why the air park concept generated demand (EDjT_goV9Ow.md):

“We’ve got three airports and each of them have a wait list of like seven to 10 years long. And so we were like, ‘Well, I guess we’re going to have to build an airport if we’re going to be able to get hangar space for any airplanes, you know, that we get on demo or whatever.’”

The problem was concrete and documented: hangar space in Chattanooga had a 7-10 year wait list. That’s not a hypothetical demand signal — that’s proven, frustrated demand. The air park was the solution.

How to identify a product-market fit signal before building:

• Wait lists for similar products in your market
• High prices for existing supply (indicates unmet demand)
• Content engagement data — what topics are your audience most interested in?
• Direct customer conversations: “If this existed, would you buy it?”

Preston on using content analytics as a demand signal:

“We started writing about it and realized that like there’s really high performing content. Like user, you know, from a from a Google Analytics standpoint, it’s like, you know, we could see that the content being engaged with and we’re like, ‘Okay, people actually care about this. They care about air parks.’ And so we said, ‘Okay, well let’s let’s go ahead and let’s build an air park.’” — Preston Holland

Ask the user: What evidence do they have that there’s unmet demand for what they want to build? Wait lists? Competitors with high prices and no availability? What data points prove the pain is real?

Step 2: Find the Opportunity Zone or Tax Incentive Layer

Before committing to a specific site, identify structural advantages that reduce the cost basis and improve buyer economics.

Preston Holland on site selection (EDjT_goV9Ow.md):

“We bought the acreage around $1,500 $1,500 15 in uh in acre. Um so it was it was really cheap land. It’s also in an opportunity zone, so there’s a lot of tax incentives for making investments in that area.”

Two advantages stacked here:

1. Cheap land — rural land at $1,500/acre, far below comparable suburban pricing
2. Opportunity Zone designation — federal program that defers and reduces capital gains taxes for investors who place capital in designated low-income census tracts

Opportunity Zone benefits for buyers:

• Deferral of capital gains taxes until 2026 (or when investment is sold)
• 10% reduction in capital gains if held 5 years
• Elimination of capital gains on appreciation if held 10 years

This makes the investment more attractive to buyers without reducing your price — it’s a free enhancement to the value proposition.

Ask the user: Is the target development site in a designated Opportunity Zone? Check the CDFI Fund’s Opportunity Zone map. Are there other tax incentive programs relevant to the site — historic tax credits, low-income housing tax credits, TIF districts?

Step 3: Structure the Pre-Deposit Offering

The pre-deposit isn’t just a payment — it’s a product. Design it carefully so customers understand what they’re committing to and what they get in return.

Key elements to define:

Deposit amount: Typically a percentage of the total purchase price. Common ranges: 5-20% for residential, higher for commercial or unique properties. The amount needs to be meaningful enough to demonstrate serious intent but not so high that it scares buyers off.

Refundability: Deposits can be fully refundable (reduces commitment), partially refundable (milestone-based), or non-refundable after a certain date. Non-refundable deposits are more useful for bank financing but harder to sell.

What the deposit secures: Priority selection of specific lots/units, a locked price, first access to amenities, or some combination. Make this concrete and valuable.

Timeline commitments: Be honest about the construction timeline. Deposits collected for a project that takes 3 years longer than expected create legal and reputational risk.

Disclosure: In most states, taking deposits for real estate that isn’t yet built triggers disclosure requirements. Consult a real estate attorney before collecting.

Preston on what their deposits represented (EDjT_goV9Ow.md):

“So that’s people basically sending us a percentage of the deposit.”

And the validation signal this created:

“We basically met our three-year kind of pro forma in pre-reservations in like the first three months. So we’re like, ‘All right, there’s there’s definitely demand here.’” — Preston Holland

Their three-year pre-sale target was hit in three months. That’s not just validation — it’s a forcing function: suddenly the project is real, the timeline matters, and the bank conversation becomes much easier.

Ask the user: What is the total unit price for lots/units in the project? What percentage deposit makes sense? What does the deposit get the buyer in terms of priority, price lock, or selection rights?

Step 4: Use Deposits to Unlock Bank Financing

This is the core financial mechanism of the model. The deposits become evidence of future cash flows, which banks treat as de-risking the construction loan.

From Preston Holland (EDjT_goV9Ow.md):

“Yeah, if you’ve if you’ve got those deposits, it’s it proves to the banks. You can go to the bank and basically say, ‘Okay, look, we’ve got, you know, $25 million of of these lots pre-sold, so like, you know, that represents future cash flows of $25 million.’ And they say, ‘Oh, okay. So let’s say, you know, using round numbers, let’s say round one of infrastructure costs, I don’t know, 10 or $15 million.’ The bank’s going to go, ‘Okay, well, you’ve got $25 million representative of of future sales. Um so that, you know, $10 to $15 million of phase one infrastructure is a super low risk bet for them.’”

The bank conversation:

The deposits don’t replace the construction loan — they make the construction loan available and on favorable terms. The bank sees:

• Proven buyer demand (not a projection — actual commitments with money behind them)
• Known future cash flows that will service the debt
• Reduced default risk because buyers have skin in the game

Loan-to-value logic: If $25M in pre-deposits represent future lot sales, and you’re asking for $10-15M in infrastructure financing, the bank is lending 40-60 cents on the dollar against known future receivables. That’s a conservative loan.

Phased approach: Break the project into phases. Phase 1 infrastructure is financed against Phase 1 pre-deposits. As Phase 1 closes, use proceeds to fund Phase 2, and collect Phase 2 pre-deposits before starting Phase 2 construction. This controls risk and keeps the capital structure manageable.

Ask the user: What is the total project cost? What phasing makes sense — what’s the minimum viable Phase 1 that would generate enough deposits to prove the concept? What bank relationships do they have, and have they had preliminary conversations?

Step 5: Use the Media / Community to Drive Pre-Deposits

The pre-deposit model is dramatically easier if you already have an audience in the vertical. This is why Craig Fuller’s media strategy and his real estate strategy are the same strategy.

Sam Parr’s description of the Firecrown model (EDjT_goV9Ow.md):

“He bought Flying Magazine, and then he also bought a $7 million like 300-acre plot of land in Tennessee and was turning that into basically a flying club where you it’s kind of like a country club where you like can own a home on a golf course, except now you own it around an airplane strip and an airplane hangar. And they used the magazine to sell plots of land.”

Flying Magazine had an audience of people who loved aviation, many of whom wanted hangar space and flying community. The magazine didn’t just market the project — it was the reason potential buyers trusted the developer.

If you don’t have media:

• Partner with an existing publication or community in the vertical to get the project in front of the right audience
• Build a waitlist before you build the project — email capture with a compelling vision document
• Use targeted social media to reach the specific hobbyist or buyer persona
• Get coverage in trade publications and hobbyist forums

Preston on how the magazine reaches buyers in unexpected places:

“We send them unsolicited uh to a lot of FBOs across the country. […] We’ve had conversations with you know, some pretty wild folks that were like, ‘Oh yeah, I was in the FBO and I read your magazine and I want to collaborate on your real estate project.’” — Preston Holland

Ask the user: Who is the target buyer for the development? Where do they currently consume information — what publications, communities, events? How can the developer get in front of them before marketing dollars are spent?

Quick Reference

Step	Action	Output
1. Validate pain	Find documented unmet demand (wait lists, high prices, content engagement)	Demand signal with evidence
2. Site selection	Layer in tax incentives (Opportunity Zones, TIF)	Improved buyer economics without higher price
3. Deposit structure	Define amount, refundability, what it secures	Clean legal deposit offering
4. Bank conversation	Present deposits as future cash flows to unlock construction loan	Phase 1 construction financing
5. Audience distribution	Use owned or partnered media to drive deposits	Pre-sales hit target ahead of schedule

Search the Archive

grep -ri "pre.deposit\|pre.sale\|deposit.*develop\|construction.*loan" transcripts/
grep -ri "Firecrown\|air park\|Preston Holland\|Craig Fuller\|Flying Magazine" transcripts/
grep -ri "opportunity zone\|phase.*infrastructure\|validate.*demand.*real estate" transcripts/

Output

After the session, deliver:

1. Demand validation — documented evidence of unmet demand (wait lists, pricing data, content signals)
2. Site assessment — land cost, Opportunity Zone status, tax incentive stack
3. Deposit structure — amount, refundability terms, what buyers secure
4. Phase 1 pro forma — how many deposits at what price unlock Phase 1 bank financing
5. Bank pitch outline — how to present deposits as future cash flows to a construction lender
6. Distribution plan — how to reach the target buyer to drive pre-deposit commitments

Source

This $50M/Yr Side Hustle Is On Track To Make $1 Billion By 2030 — Sam Parr and Shaan Puri discuss Craig Fuller and interview Preston Holland, CEO of Flying Magazine.