Advantages of Land Investments and Land Flipping
Lance Edwards recently hosted Jack Bosch, “The Land Guy,” on his Greenlight podcast, and Mr. Bosch discussed what makes land investment different from conventional real estate – and what some of the advantages are. Land flipping is real estate without houses. You can do almost everything that you can do with real estate, with the exception of course, of putting tenants onto your land. You can rent it out for a cell phone tower or a billboard, but you can’t put 100 people there to collect rent from.
You can wholesale it, buy it cheap and sell it at a high market value. One of the great discoveries that has earned our students a lot of money is that they can sell these properties with seller financing. That’s the key. Another huge factor is that you can actually split the land you make. You can double, triple, quadruple your profits by taking, say, a 40 acre parcel onto roads and cutting it into a 20 and four fives. Because real estate land is particularly the larger parcels, when you split it in half the value doesn’t get cut in half. So you can sell a 20 acre property for as much as a 40 acre one. So if we split it in half we can sell the 20 for almost as much as the 40 and now we have five other parcels left that we can sell with seller financing.
So in one scenario, instead of making a $13,000 profit, we ended up making a $42,000 profit just by splitting them. The good news is, splitting them is very simple in many states. If you follow the rules and don’t build a subdivision, but you split it a certain amount of times, you can keep making money this way. You can put up billboards and you can split the land and build houses on it. You can develop it and rezone it. There are a lot of different things you can do with land that you cannot do with a house. If a house is in a residential subdivision, usually you cannot rezone it. But if you have a piece of land somewhere on a major road, you can change it from commercial to industrial, or from C1 to C2 or from this use to that use.
Having said that, 90% of our deals are flip, flip, flip or seller-financing. And we love the seller financing because when you buy properties as we do with our method, we buy them at literally five to 25 cents on the dollar. Because we’re dealing with people who don’t want these properties, they discounts are much higher than they are in the housing world.
. Having said that our 90 percent of our deals is just flip flip flip flip flip or seller-financing. And we love the seller-financing because when you buy properties as we do with our method we buy them at literally five to 25 cents on the dollar. So because we’re dealing with people who don’t want them so the discounts are way higher than they are in the housing world. So if you buy a $10,000 piece of land for 400 dollars, you could sell it for a $7,000 with a thousand dollar down payment and monthly payments that are $400 for a couple of years. So you essentially get your money back when you when you when you’re ready when you sell a property. It’s a beautiful model that really works with almost no cash of pocket.
Getting Into Great Deals
Lance Edwards recently hosted Jack Bosch, “The Land Guy,” on his Greenlight podcast, and Mr. Bosch discussed some of the most effective ways to get into great deals, and how to use direct mail to your advantage. Jack’s bread and butter deal, or 80% of what he and his wife Michelle do, involves becoming really good at figuring out who the sellers are, what kinds of properties are available at what price range, and what kind of people don’t want their properties anymore.
Often, he says, these are properties that have been owned by the same family for 30 to 40 years. They have been inherited by the parents and the kids really don’t want them. There are many reaons why people want to get rid of these properties. One of the big criticisms about land from people who don’t invest in it is that it doesn’t generate cash flow. Well, that’s true if you hold onto it. But we don’t hold on to land. We flip it, but the people we buy from have held onto it forever and they don’t want to pay property taxes anymore. So most of these deals involve us going to find the people who don’t want them anymore. We make a cash offer for literally anywhere from 5 to 25 cents on the dollar. Obviously, not everyone will accept it. For those, we can go back and do something creative like seller-financing, making an offer at a higher price, but only if we know the area very well already.
So if I have already flipped 10 properties in a market where I know I can get $30,000 for a piece of land anytime, and have a line of buyers lined up, and I find a seller who’s willing to sell it to me for $20,000, I can do a seller finance contract with them and go flip it right away. But the easier way is to do a double closing. Most of our students don’t even buy the properties anymore. They just put them under contract with a 120 or 180 degree close of escrow – because again, you’re dealing with people who want to unload their property. We don’t have to promise a seven day close like a lot of the house flippers do because we’re dealing in an almost non-competitive environment. There are very few people besides us and our students flipping land.
So we can go to put half a year close of escrow in there. Now we have half a year to market that property, and then when we find a buyer, we just do it to do an assignment or do a double closing. And the only reason that we might buy this is if we do a seller financing deals that costs $10,000 and we sell it for 50 and only get $8000 down. We might have to come up with two thousand dollars out of pocket right now. But then get a six hundred dollars a month payment that in three months, we have our money back.