Land Investing 101
I often see a lot of people interested in getting involved with real estate, but not knowing where to start. This is where I found myself a couple years ago. I started doing some research and I discovered wholesaling. After some more digging I found my niche of vacant land flipping and wholesaling. Many of these concepts can be applied to wholesaling houses, but I will specifically be focusing on land.
What is wholesaling? Wholesaling is when you get a property under agreement, which gives you equitable rights to the property. You can then assign the rights to that agreement to another buyer (typically an investor). The end buyer/investor will now move forward with closing on the property. After the property closes, you will get paid you assignment fee. The best part is, there is no out of pocket money from you. Just pure profit!
Here is an example:
I find a property with a market value of $50,000.
The property owner has owned this property for 20 years and planned to build a home there. These plans are no longer a reality. This property is now a liability to them as they have continued to pay taxes on it for 20 years.
They agree to sell the property to you for $25,000. You send a purchase and sales agreement to the owner with a 120-day closing period (negotiable).
During this 120-day time period, you will be looking to find a buyer. You call builders and talk to other investors to try to find a buyer for the property.
You connect with a builder that is willing to pay $35,000 for the property. You will now send them an assignment of contract where they are buying your rights to buy that property from the original seller. In this case, they will be paying a $10,000 assignment fee.
Once the property closes, you will receive your payment from the title company or attorney.
Congratulations on wholesaling your first vacant land property!
Wholesaling isn’t the only approach.
You can also purchase the property yourself outright. You can then list it on the MLS and sell to retail buyers. You can also act as the bank and finance the property to a buyer on terms. You can often charge 30% over the cash price when financing.
There is also the ability to double close in some scenarios. This is where there are two closings happening on the same day. You buy the property from the seller and then sell to an end buyer all in the same day. In some instances, the money from the end buyer can be used to fund your purchase of the property and therefore no money has come out of your pocket.
That is a high-level look at the process. Let’s get into more details about how to find properties and perform due diligence.
How to find off market vacant land deals
Here are a few of my favorite ways to acquire off market land deals. You can apply these same tactics for houses as well.
Pull lists – You can use services such as DataTree, Property Radar, PropStream or the county website to pull lists for land that fits the criteria you are looking for. You can also Drive for Dollars which means to find properties as you drive around. I prefer to go after owners who have owned the property for at least 8 years that live at least 100 miles from the property. Tax delinquent are also a great source.
Now that you have your list, how do you contact them?
Direct mail – Send them a letter! You can send a neutral letter stating that you buy properties in the area and to call you to discuss the sale of their property. If you are very familiar with the property or area, you can send a blind offer which is an actual agreement to purchase. If you have a good understanding of the value, but aren’t very confident, you can send a range offer.
Mailing is great because it works best for the older demographics. It is also something tangible that they may stick on the refrigerator or in with their documents. I’ve received calls from sellers I sent a letter to over a year ago.
If you don’t want to mail, you will need to submit the list to a skip tracing service to obtain phone numbers. Texting and cold calling are less expensive than mail, are a more immediate response, but can be very time consuming. I would suggest hiring a virtual assistant to perform these tasks for you. I can detail hiring a virtual assistant and the proper way to train in another guide. I would also suggest to use a CRM or a dialer/SMS platform for these approaches
SMS – Send text messages to owners stating you are looking to purchase their property. This is very low cost and you get an immediate response. Many service carriers are taking approaches to stop SMS from unsolicited numbers. There are regulations in place and more coming to crack down on this form of marketing. Proceed with caution as some fines can be very high.
Here is an example of a conversation
“Hi John, do you still own the 2.2 acres in Bastrop County, TX?”
“Would you consider selling this property?”
“Do you have a price in mind?”
You will need to tailor your responses based on the flow of the conversation
Cold Calling – This works best for landlines. This can be very tedious to call people and engage in conversation about the sale of their property. There are many negotiation tactics. I suggest the book “Never Split the Difference” – by Chris Voss. There are many scripts out there, but I prefer to just have a natural conversation. Always come from a place of being helpful and the deals will come.
Google PPC – Create a website with a funnel where sellers can submit their property info for your review and offer. These are very motivated sellers because they are coming to you! This can be expensive but can be very successful. Google PPC in itself can be its own full write up.
Joint Ventures with other investors – Once you understand the process of buying/selling/wholesaling, you can offer your expertise to rookie investors. They will bring you opportunities to help them close the deal. In these scenarios, you typically split the profits.
Hope this helps you with your real estate outreach marketing!
How to Perform Basic Due Diligence
There are many items that need to be checked and confirmed before entering into a contract for a vacant land property
Access – Does the property have road access? Is it a dirt road or is it paved? If the property looks to be landlocked, is there an easement? Easements can be found by looking through the recorded documents in the County Recorder of Deeds office or the County Clerk. I typically do not buy landlocked properties, but they can sometime be sold to neighbors.
Topography – Is the lot level? Does it have a steep grade or a ditch? You can determine topography by using the county GIS maps which typically have overlays. You can also look at the lot on google earth. A topography map shows lines. The closer the lines are to each other, the steeper the grade.
Wetlands – use the FEMA website to make sure there are no wetlands and that the property is not in a floodplain. You can still build on these lots, but they may require additional regulations and insurances. You typically want to avoid zone A and AE.
Utilities – What utilities are available at the lot? Does it have electric close by for easy hookup? Is there city water and sewer? If not, you will need to have septic and a well for the property. Make sure to understand set-backs and rules in regards to the placement of these items. Many rural properties have no utilities. Make sure you have a buyer for the type of property you are looking to purchase.
Zoning and Regulations – What are you allowed to do with the property? You will need to call the county to determine what is allowed. Some are no restrictions where you can literally live in a bus if you choose. Others may require site-built homes only and not allow for manufactured homes. HOAs and POAs add additional restrictions to these rules and regulations. These regulations and zoning can be difficult to find online. Pick up the phone and call the planning and zoning office and the building department for the city/county
Taxes/liens/judgements – make sure you look on the county/city website to determine if any back taxes are owed. This will also be determined if you are purchasing through a title company or attorney. If you are closing yourself, make sure to look into these items.