\n<\/p>\n
Land investing<\/strong><\/a> may be the newest way to make cash flow<\/strong><\/a> in today\u2019s increasingly difficult housing market. With more and more investors fighting over real estate deals that break even at best, land investors are sitting pretty, with an almost unlimited supply of new investments<\/strong> and an even more robust pipeline of potential buyers<\/strong>. And while land investing may not have the passive income potential of a rental property, there are still numerous ways to take home some serious cash flow<\/strong> by dealing dirt.<\/p>\n Daniel Apke <\/strong>fell in love with land investing after a long history as a serial side hustler. He tried everything from ghostwriting romance novels to setting up stores online, but nothing gave him the financial freedom<\/strong> that land investing did. Then, thanks to a helpful tip from a mentor, Daniel was able to start buying land at SIGNIFICANT discounts<\/strong>. He would then flip this land on or off-market to anyone willing to buy, allowing him to walk away with a handsome payday WITHOUT dealing with tenants, toilets, or trash.<\/p>\n Now, Daniel has built an entire business out of flipping raw land, and the perks of a property-less lot may pique your interest. Whether it\u2019s low competition<\/strong>, no permitting hassles<\/strong>, or the ability to exit multiple ways<\/strong>, land investing could be an attractive alternative to rental property investing as competition gets tough. If you think there isn\u2019t much under the surface of these dirt deals, you\u2019d be wise to stick around!<\/p>\n Dave: James: Dave: James: Dave: James: Dave: Daniel: Dave: Daniel: Dave: Daniel: James: Dave: Daniel: Dave: James: Daniel: Dave: Daniel: James: Daniel: James: Daniel: Dave: Daniel: Dave: Daniel: James: Daniel: Dave: Daniel: Dave: Daniel: James: Daniel: Dave: Daniel: Dave: Daniel: James: Daniel: Dave: Daniel: Dave: Daniel: James: Daniel: Dave: Daniel: James: Daniel: James: Daniel: James: Daniel: Dave: James: Daniel: James: Daniel: James: Daniel: James: Daniel: James: Dave: Daniel: Dave: Daniel: Dave: Daniel: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: \u00a0<\/p>\n<\/div>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
What\u2019s going on, everyone? Welcome to On The Market. I am your host, Dave Meyer, here with James Dainard today. James, how\u2019s it going, man?<\/p>\n
It\u2019s good, man. I\u2019m excited to talk about dirt. It\u2019s actually one of my favorite business models is sourcing building lots.<\/p>\n
Is it something you\u2019ve been doing a long time?<\/p>\n
Yeah. Well, we\u2019ve been doing it for about 10 years, but then we really started sourcing a lot of dirt a couple years ago, or I\u2019d say three years ago because we were working with so many fix and flip clients, it\u2019s the same general process. But honestly, as a wholesaler broker it\u2019s a little bit easier because when you\u2019re selling dirt versus a fix and flip house, a lot of times they\u2019re just a professional company buying it. And so it\u2019s a lot more of a smooth transaction rather than the learning curve of fix and flip.<\/p>\n
Yeah. It seems like an interesting time to get into this business, which is why for everyone listening we\u2019re bringing on a guest, Dan Apke, who is going to teach us and inform us about a pretty interesting strategy I had not really heard much about prior, which is basically land flipping. And we wanted to do it because, James, you\u2019ve said a lot on the show recently that land prices are going down a lot and obviously that presents risk. But it also could present opportunity if land prices are falling so dramatically. I\u2019m curious to hear if you and Dan think that it\u2019s a good investment or there\u2019s going to be some attractive price points in the near future.<\/p>\n
Yeah. There\u2019s a great opportunity for people right now buying that kind, at least in our metro area. Dirt has fallen 30, 40%. And so what it\u2019s allowed us to do is actually buy some rental\u2026 Rather than just buying land cheap, we\u2019re actually buying rental property with zoning upside to where that property can be worth a lot of money down the road.
And so I know in our market there\u2019s a substantial opportunity. Anytime you can buy it 30%, 40% cheaper in a nine month period, that\u2019s usually a good idea. I\u2019ll be curious to see how it\u2019s going in the rural market because I know the more expensive product has came down more, but that cheap investments, they have a lot of velocity right now. They\u2019re still moving. People still want to buy real estate, but they want to buy the cheap stuff.<\/p>\n
All right. Well let\u2019s bring on Dan, because I think that you make a great point. We\u2019re going to bring on Dan, who\u2019s going to teach us all about a very interesting business model for buying land that maybe many of our listeners will want to consider. But I think even if you don\u2019t, learning just about\u2026 We\u2019re going to talk a lot about an area of the country and a part of the country that we don\u2019t talk about a lot in the show, which is rural America. And Dan has some really interesting insights into what\u2019s going on with real estate in general in rural America. So you\u2019re definitely going to want to stick around and check this one out. But first we\u2019re going to take a quick break.
Dan Apke, welcome to On the Market. Thanks so much for being here.<\/p>\n
Thanks for having me, Dave.<\/p>\n
Well, why don\u2019t we get started by just having you introduce yourself and telling our audience a little bit about your involvement with real estate investing.<\/p>\n
Absolutely. Originally, I got started in e-commerce. I had an e-commerce electric bike company. I was trying so many different businesses. I had drop shipping businesses, I had Amazon FBA businesses. And along the route, I bought my first round of property about five years ago. It was a commercial salon. That was my first introduction to real estate as a whole. So it was a salon on the bottom, apartment on top. I bought it for $82,000. That was my introduction to real estate. That\u2019s when I fell in love. And ever since then I continued to buy real estate along the way. I was involved in all these different businesses, like I said, 10, 12 different businesses. And I just saw lack of sustainability in a lot of these kind of get rich quick schemes, a lot of different things that will not be around in 20 years.
And I sold my electric bike company to an investor out in California. And during the process of that, one of my mentors kind of showed me buying undermarket land and I dove full force into that with my brother. He is my 50\/50 business partner. We looked into the business model. I loved the sustainability of it. I loved how just wasn\u2019t competitive like a lot of the other real estate industries I was seeing at the time, just lack of competition, sustainability. We dove full force into land investing, started buying anywhere between 20 to 50 properties in our first few months of getting into that. And ever since then, it\u2019s been history. We\u2019ve been hiring transaction coordinators, salespeople for our team. We dove into land investing, really full force. I love the sustainability, I love the lack of competition in the space and just something that\u2019s going to be around for a long, long time.<\/p>\n
That\u2019s great. Congratulations on your early success, or all of your success. I do want to get into the land, that\u2019s obviously why you\u2019re here. But given all the side hustles you\u2019ve done, what was the worst one you did? I\u2019m very curious.<\/p>\n
I had a ghost-writing business. So I was publishing books in the romance sector.<\/p>\n
Whoa.<\/p>\n
I\u2019m so glad I asked the question.<\/p>\n
I don\u2019t read a lot of books in general, for the most part. I\u2019ve always had trouble struggling reading in general, just from lack of attention. And then I started writing romance books using an author and publishing those on Amazon. It was actually good money, just I hated it. I hated the business model.<\/p>\n
You got out right before ChatGPT too, I\u2019m sure you\u2019re writing all the romance novels now.<\/p>\n
Yep. So Daniel, how\u2019s your dating life, if you\u2019re a romance novelist?<\/p>\n
I put a lot of emphasis on the editing. I never even got around to really reading one of the books to be honest.<\/p>\n
All right. Well let\u2019s get into the real estate side of things. So you said someone introduced you to the concept of land investing. Is that right?<\/p>\n
Exactly. His name was Mike Brusca. He was doing e-commerce with me, my mentor in the e-commerce and drop shipping space. And he had a lot of success and he saw this business model. The key, what he was doing, I think at the time he was buying properties under market value and then reselling them I think on notes or seller financing and things. And I saw the objective of buying properties under market value. And we switched up the business model a little bit, but that was the name of the game at the time and he introduced me to that.<\/p>\n
And Daniel, because land acquisition is a huge market and there\u2019s all different type of land that you can source, whether it\u2019s track home spot lots or affordable lots nationwide. What segment are you in, and then why did you go to that segment of the market? Because there\u2019s so many different businesses inside land acquisition and disposition. Which ones did you guys focus on immediately? Because getting going on 20 to 30 deals in your first couple months, that\u2019s a lot of moving. You\u2019re moving a lot of land, or dirt at that point. What made you focus on the specific area and what do you guys target?<\/p>\n
So we were targeting at the time anything from two to 50 acres that were really laid back with zoning. We want someone to be able to put a mobile home on it. Very, very little restrictions. We didn\u2019t like HOA properties just because they were more difficult to sell a lot of times if we didn\u2019t know the market and have a buyer\u2019s list and things like that. So we were going across mainly the south. At first we were in Tennessee and Georgia. Those were two main markets and we\u2019re really outside of those, the Nashville areas, Memphis areas and Atlanta. And we\u2019d go one to three counties away from those areas and target anything really between two to 50 acres with very little restrictions because the lower restrictions, without knowing a ton about the market when just entering the lower the restrictions, the safer it is. And that\u2019s kind of how we scale to that number. We just got nice pieces of land, we get drone shots on all of our land. We get really nice pieces of land with very little restrictions and they sell pretty well.<\/p>\n
Okay. So you guys focus on path of progress areas. Is that naturally what you\u2019re looking for, those core? Because that\u2019s where you can get big hits is that path of progress, metro areas are expanding out. Is that why you guys focus on the fringe with low regulations, but is it also just because the growth is naturally as the market gets better, it expands out? Is that been kind of the reasons you started with outside Nashville or major metro cities?<\/p>\n
So for us it\u2019s about finding that balance. We don\u2019t necessarily want to be in the hottest markets in the United States, but we also don\u2019t want to be in the slowest markets. We like to find that balance. That\u2019s why we take those hotter areas, the path of progress, take the Nashvilles of the world, that Atlantas of the world and bounce a few counties out. That\u2019s kind of the name of the game. We want to make sure, yes, we can sell it on the backend, but at the same time we don\u2019t want them being overwhelmed with other people\u2019s offers, extremely competitive. So we try to find that middle ground in this business model.<\/p>\n
Speaking of business model, that\u2019s actually the question I wanted to ask you, Daniel. Can you just give us a basic rundown of what the business model is for buying land?<\/p>\n
Absolutely. So the first thing we do, like we were just talking about, we actually need to select a county. We go by countywide. We\u2019re not in zip codes or anything. We usually select a county outside of an area. We\u2019re talking about one to three counties outside of a city of our choice. And let\u2019s say example is Atlanta, we\u2019re going around Atlanta market. We choose five to 10 different counties to analyze. And then we\u2019re actually analyzing what we do. We analyze, okay, what\u2019s the days on market? What\u2019s the population density? We don\u2019t want overly populated areas. It doesn\u2019t work well for this rural vacant land business model. So we also want to see another major thing to look at is what properties are for sale on the market now. Are we going to be competing against 25 other five acre properties on the market? So we want to look at the competition.
But then we also want to look at the sold data. Make sure the for sale to sold data ratio is okay to make sure, okay, we\u2019re going to buy this five acre lot, we got to put it up and we got to be able to sell it. So we start diving into things, how long did this five acre lot take to sell? How long was it on the market? How long was it pending and actually going through on the sale?
But then what we actually do, talking about the business model specifically what we do, we\u2019re pricing all of our offers. So we\u2019re sending blind offers, that\u2019s how we acquire. And we typically send blind offers to purchase their land in cash for about 35 to 45% of market value on average. And there\u2019s a lot that goes into that. But that\u2019s what we\u2019re doing in bulk, right? We\u2019re pulling a lot of data. So say Macon County, Georgia, we want all the records from two to 50 acres we discussed before. That spits out 5,000 records. Now let\u2019s go into the county and figure out how to price it, look at the competition, and then really just bulk price that 5,000, send them direct mail.<\/p>\n
But how are you making money off it? Who are you selling them to? How are you reselling them?<\/p>\n
Yeah. So we\u2019re buying these in our own names. We have a group of investors in our land community, and they actually will put up the upfront capital to buy the deal. So we\u2019re buying them in our name and then we\u2019re putting it on the market. If it\u2019s an area we do a lot of work in, like around Atlanta, Georgia, we have really, really good land realtors we work with that know us and work with us very closely, we\u2019ll give it to them. We\u2019ll just hand it over to them, they\u2019ll put it on the market, do the showings, handle all the leads for us. If we\u2019re in an area we can\u2019t, like we\u2019re talking rural America. Where\u2019s majority of our land? It\u2019s in rural America. And sometimes there\u2019s just not a lot of land agents out there. And then you take the small amount that there are and there\u2019s not a lot of good ones as well.
So if we can\u2019t find a good realtor, what we do, we will put it on the MLS using a flat rate broker and we\u2019ll put it on a website called land.com. It\u2019ll get to Lands of America, landwatch.com, all those. And then last is Facebook marketplace. We actually sell a ton of land on Facebook Marketplace and that\u2019s kind of our strategy. So we always get on the MLS, so it\u2019s on the Realtor and Zillows of the world, and we\u2019ll always get on the land.com and Facebook Marketplace. Those are our three key areas to sell. So we\u2019re selling to the mass public. We personally don\u2019t really utilize buyer\u2019s list because we\u2019re not doing the whole infill thing. We\u2019re selling the end users who are putting a cabin on it, putting a house on it, whatever, just hunting on it. And that\u2019s kind of our business model. When we get more into in infill lots, that\u2019s when we utilize our business or our buyer\u2019s list and all of that.<\/p>\n
And Daniel, what kind of feasibility, as you\u2019re buying land, because you\u2019re buying in all different types of areas and counties. So before even if you\u2019re targeting 35%, you want to make sure that you\u2019re buying something that\u2019s sellable. What kind of feasibility do you guys run on these properties before you close on them? Because if there\u2019s setbacks or anything like that, it can kill a deal really easy. Or if the topos out of whack, which is the topography, if there\u2019s a lot of hillside. What do you guys do prior, to find that deal?<\/p>\n
So for every five purchase agreements, so that\u2019s what we\u2019re sending out, we\u2019re sending out purchase agreements in the mail, blind offers. So for every five we get back, we usually buy one of them just because like you\u2019re saying, the feasibility. We call it underwriting the deal. We\u2019re looking at the wetlands, the slope, the typography. We get drone out to every single lot before we buy it to check everything. We look at the pricing, make sure\u2026 Sometimes we\u2019ll weigh overprice mail by accident. It just happens. We\u2019re sending out such a large volume of mail, some pieces we\u2019re just overpricing. Sometimes we got to go back and negotiate down.
There\u2019s a lot of things that come up. But in general, yes, slope, wetlands, floodplain, and then we look at attributes, things like that. Then we get a drone guy to walk out there. We have a set of things that we send the drone where he actually goes and walks the property, gets ground photos of it, aerial photos of it, walks the property, give us a report, and then gives us the pictures. And then if we\u2019re using a realtor as well, we\u2019ll send them their prior to purchasing it as well. So those are our steps. We have a very heavy underwriting process before we actually wire the money.<\/p>\n
So you\u2019re going out and buying these, you said like 30 to 40% of market value, is that right?<\/p>\n
On average, 35 to 45%.<\/p>\n
Wow. That\u2019s amazing. And then how long are you holding these on average and what kind of holding costs do you have?<\/p>\n
Yeah. So on average, we get it under contract on average in about three weeks. And then one of the bottlenecks we run into is just land loans. It\u2019s hard for people to get land loans in rural America, and that\u2019s where it\u2019s either okay, they have to have cash or they have to have some sort of banking relationship. And that\u2019s kind of the holdup is on the loan a lot of times. So usually, on average, we get it under contract within three to four weeks, and then it\u2019s usually an average of five to six weeks to close after that.<\/p>\n
What kind of debt? Because land loans are very tricky, especially in the last nine months, they\u2019ve tightened up quite a bit. There was a lot of raw lot loans going out. I know we were sourcing a lot of dirt where people would buy well before permits, right? Because typically builders, like in infill lots, which is a little bit of a different business model, they want to close with permits because they can get better debt on it and have less liquidity in the deal. You\u2019re targeting lots that are a lot more affordable, so you can kind of move, flip, it\u2019s a different sale. You\u2019re going after that discounted lot where the cash outlay is not as heavy. What kind of loans do you guys usually get? Because as the market tightens and the rates go up, lenders want more and more down. Have you had to change recently? And what kind of debt do you guys usually try to get and what\u2019s the average rate on those?<\/p>\n
The average rate, and there\u2019s specific banks, especially in Georgia, there\u2019s a company called, I think it\u2019s Finance Land Georgia or something like that. And they work with a lot of our buyers in that state. Really state by state. There\u2019s a lot of local banks who will finance land. Their average rate is probably around 10%. A year ago, probably 60 to 70% of our sales were cash, cash closes. But obviously things are changing, debt\u2019s getting more expensive, money\u2019s getting tighter.
So we\u2019re starting to really have to look in that direction. How are we going to move land quicker without having the debt side such an issue? So we\u2019re starting to look at things like seller financing, offering our own financing as well and then just selling the note. The good thing about selling seller financing is you can get things under contract really, really fast generally for land in these desirable areas. But the bad thing is on the back end we got to maintain it, it\u2019s more work, or we have to sell it off for 75% of the total unpaid balance. So you take a hit on profit. I\u2019d rather personally drop the price enough to be able to get someone with cash or a loan. That\u2019s kind of our business model right now.<\/p>\n
So in recent months, Dan, have you seen the time it takes for you to resell properties tick up?<\/p>\n
Yes, yes. Used to be, we used to put 50% of our properties used to sell same day or day after almost.<\/p>\n
Whoa.<\/p>\n
Now it\u2019s starting to, okay, it sits and some we\u2019re seeing more price drops for sure. It\u2019s definitely here for sure. Things are slowing down.<\/p>\n
Yeah, I know in our local market, we\u2019ve seen\u2026 We sell a lot of spot lots. We were talking about this before we hopped on, where we\u2019re focused on core metro areas. A lot more expensive dirt that we\u2019re usually trying to plan and permit out the site prior to even closing on it because the cost of the dirt. Our average lot where we are is going to be seven to $900,000 just to buy the lot.
And what we\u2019ve seen is that because of the debt, local banks and lenders are being very aggressive on land acquisition, or give permitted site to where they were asking for\u2026 We did a town home site where the bank financed us 90% of the deal. It was 10% down with the buildout in there. But that\u2019s drastically changed over the last nine months. These banks, especially the local banks, as some are starting to have issues, their regulations in underwriting has really stepped up to where now, they\u2019re not really doing raw land or they want to be at a 50% LTV on it. And so we\u2019ve seen the demand for dirt. Dirt pricing has fallen 40% in our market in a nine-month period, just because access to debt. The resale values have only compressed like five to 10%, but the cost of the dirt has fallen dramatically. Are you seeing that in these raw lands too, in these outskirts areas or because it\u2019s so cheap you haven\u2019t seen as much movement on it?<\/p>\n
Yeah, we haven\u2019t seen movement in the price you\u2019ve seen in that area. That makes sense, especially with building getting tighter and tighter and debt getting tighter and tighter. Out in our markets, we haven\u2019t seen price drops like you\u2019ve seen, but what we are seeing is more and more buyers backing out of the deal because they can\u2019t get loans. So they\u2019re getting pre-qualified or whatever a month or two ago they come to us, they put the offer in. We have to be really, really picky on the front end, kind of analyzing the offers because what happens is people are underqualified saying they\u2019re getting a loan and then like you said, these loans, their underwriting process is changing significantly. So yeah, we\u2019re seeing that as well, just not on the pricing side.<\/p>\n
Dan, you said that one of the things that attracted you to land investing is that there is relatively little competition. Why do you think that is? The way you\u2019re describing it, it sounds like a very interesting profitable business. Why do you think there\u2019s not more interest from other real estate investors?<\/p>\n
It\u2019s picking up for sure. You\u2019re starting to see there\u2019s certain areas we target where the landowner will get three or four different offers. Most of the time it\u2019s not that way. But I think it\u2019s just a newer emerging business, model to be honest. It is picking up the competitions rising, but it\u2019s still greatly lower than going to wholesale property in Austin, Texas or something like that. So I think it\u2019s just a newer business model that people are starting to understand and see. So what we\u2019re seeing now, there\u2019s a lot of wholesalers coming to try to wholesale land as well and they\u2019re starting with the infill lots and then they\u2019re coming to us and seeing our business model as well. And they\u2019re starting to come to more rural land and get outside the infill lots as well. So I think the wholesalers are starting with the infill lots, they\u2019re coming in and now they\u2019re starting to expand out. It is a really, really fast-growing niche right now, the land investing model, especially in the rural America aspect.<\/p>\n
And if someone listening to this is interested in getting into this model, what type of investor or what skills do you think are needed to get into land investing to be successful?<\/p>\n
The biggest obstacle that we see is mail. We\u2019re sending direct blind offers. That\u2019s what\u2019s worked best for us. We do text, we cold call, we have services for that as well, and we\u2019ve emailed. We\u2019ve tried all that. It\u2019s good to get people on the phone, but blind offers filters out all the BS. They call you and they actually want to sell their land.
So the biggest obstacle with that, blind offers, is the upfront capital. It\u2019s like 62 cents to send a piece of letter. So the biggest thing is people coming in that are kind of fearless, they understand we\u2019re going to reach people through blind offers. So that takes upfront capital and you have to believe in the business model to do so. The people that succeed are people who come in and they\u2019re more fearless, they\u2019re ready to go, they\u2019re ready to send mail, they\u2019re ready to acquire properties. And the biggest scale I see payoff in this business model is great salespeople, right? Because they get on the phones, they\u2019re not scared to talk, they\u2019re very confident. They negotiate down, they negotiate with these sellers because a lot of the sellers that we send a letter to call us, they want more money or they want to make sure they can trust us to sell us their land. So they just want a conversation. So the people that come in with good sales experience, I think, do the best.<\/p>\n
So you kind of referenced that a lot of wholesalers, and I\u2019ve been seeing this too, wholesalers was kind of a big deal. Wholesaling dirt was a big model for the last 24 months and actually guys were getting paid really well because builders were being so aggressive. I\u2019ve never seen builders buying like this in infill. They were paying 50% of value, which typically they\u2019re 25 to 30%, 35 to 40% with a permanent hand. But they were just breaking all their rules at the time. And then as it\u2019s gotten trickier, I think I\u2019ve seen the migration, like you\u2019ve said, from these wholesalers sourcing infill because it\u2019s a lot more complex on those lots to go into these more affordable markets. And just all investments right now, people are chasing that, affordable deals. If you have a really good fix and flip property that\u2019s more expensive, people are still wary of it because it\u2019s expensive, the debt costs more, you got to have more capital outlay, but then the cheap fix and foot deals are still flying off the shelf.
Are you worried that that space could get a little bit more crowded since wholesalers are having a lot hard time moving dirt in these infill areas? I know for us we had to switch our model from us tying it up, doing the analytics to going, \u201cHey builder, where do you want to be at?\u201d And we work it backwards at that point because it\u2019s just to lock the deal in because of the different variances that come in with infill lots like the city, the jurisdiction, the permitting. Do you think that your space could get more crowded with the complexity that\u2019s happened in these more expensive markets?<\/p>\n
Yeah, it\u2019s going to. They come in and they see the simplicity of it and the profit potential. They come in and they see the\u2026 Yeah, it\u2019s a matter of time before it gets more and more competitive. It\u2019s going to happen. It\u2019s much, much more simple of a business model, flipping rural dirt, rural vacant dirt without any restrictions on it than what you\u2019re seeing in those more metro areas with the very expensive lots. So naturally, it\u2019s going to get more crowded. That being said, the business model will change over time just like business models do. In five years, we might not be able to buy a piece of dirt for 35 or 45 grand and resell it for 100, 110 grand. In three weeks, it might not be that way.
But we might have to change the business model. Right now we\u2019re doing a lot of different projects, improvements, repurposing, rezoning, things like that. It\u2019s not that complicated too. You can take a 50 acre lot, split it five times down the middle and sell five 10 acre lots and get 310, 350%. So I think naturally as it gets more competitive, which it will just because the simplicity and the profit potential in the business model, naturally the business model will change a little bit and that\u2019s where these different niches are going to get more and more important and specializing in these different markets are going to get more and more important.<\/p>\n
Can you explain some of the specializations in the market? You\u2019re talking about sub-dividing land. Are you selling those to a developers, to farmers? Who\u2019s buying these?<\/p>\n
So we\u2019re not selling to developers typically, and we\u2019re talking minor subdivisions. Splitting something up five times for a 50 acre lot, it\u2019s extremely easy to do. We\u2019re not talking about putting roads and sewage and plumbing and all that stuff in it. We\u2019re talking about just minor subdivisions and our future buyer typically someone who just wants five acres outside of a city or they\u2019re sick of living in a city or they live in the area, they just want to move and have land and have space. I, personally, that was one of the biggest obstacles I had to overcome is understanding there\u2019s actually a demand in rural America for these rural lots. But there is, there\u2019s so many people out there looking for five acres, 10 acres, 20 acres.<\/p>\n
And with these people looking in high demand and what we were just talking about, kind of lack of access to capital are you guys looking\u2026 I know for us sourcing dirt, we\u2019re always looking. Anytime we\u2019re working on any type of investment, it\u2019s how do we maximize it? And for us, we\u2019re actually starting to take these lots in and entitling them ourselves because we can then sell these lots for typically 30% more than we\u2019re selling them for, raw.
As you scale your business, you\u2019ve had a lot of success, you\u2019re moving a lot of different dirt. Are you guys looking at getting into any other types of things, like entitling your property? And entitlement, just for everybody, is when you grab the piece of raw land, you permit out the site. Permits are ready to issue, which then a builder can get better financing on. Are you guys going to be doing any of that just to kind of expand the business model, or is it you focusing on the dirty cheap lots? You\u2019re obviously buying them at great spreads. You\u2019re getting 100% return on your investment, on each lot, but what\u2019s next on the scaling as far as sourcing dirt and selling it?<\/p>\n
Yeah, we are looking into doing that. We haven\u2019t done much of it so far, to answer your question. But for us, our target this year is let\u2019s do more expensive lots, more six figures, some seven figure lots that we\u2019re buying. And with those lots, you have a lot of different opportunity to repurpose them and rezone them or subdivide them like we\u2019re saying. So what we\u2019re looking to do, we\u2019re just looking for bigger, more expensive lots. So far this year we\u2019ve already bought probably five to 10 different six figure lots, which is big in this space. We weren\u2019t doing that a year ago.
We were buying 20, 30, 40, $50,000 lots. This year so far we have a lot of different six figure lots we\u2019re buying. And a lot of the times, they\u2019re that much more expensive because one, the area, but two, a lot of times we\u2019re just buying bigger. Tomorrow we\u2019re closing on Sumter County, South Carolina, we\u2019re closing on a 75 acre lot for I think around 70, 80 grand. So we\u2019re really looking for more expensive properties. It\u2019s still cheap compared to the Seattle market, what you\u2019re seeing, 700 grand for a lot. But for us, we\u2019re trying to scale our numbers up and we\u2019re doing that by doing more projects and buying in more desirable areas.<\/p>\n
And so you guys are going to be developing those out and that kind of blows my mind. You\u2019re saying, \u201cOh, we can make these subdivisions in a quick amount of time.\u201d For us, it takes 12 months to get a permit for a single family house, nine to 12 months in Seattle. Town homes are like 12 to 18 months. So when I hear buying a raw lot and doing a subdivision, I\u2019m naturally like, \u201cUgh, this is such a long deal.\u201d What is the timeframe for that? You can take 70 acres, let\u2019s say you want to split it up into four parcels, what does that look like and how long does that take? Because the debt cost can erode a deal very quickly. What\u2019s the timelines on that?<\/p>\n
Typically, you\u2019re on the surveyor. You\u2019re just waiting on the survey and then you just need to file. That\u2019s why we\u2019re focused on low restriction areas because of that. We don\u2019t want to have to get all the permits and do all that work, like you\u2019re saying, and wait 12 months. We\u2019re waiting on the surveyor at the time. So right now, six to 10 weeks to get a survey done and then you need to file and do all that. So usually, within eight to 12 weeks, we can have a full survey done. A lot of times quicker than that. It\u2019s just really depends, the area and the surveyor\u2019s availability.<\/p>\n
And then how long does it take for those cities to issue those lots? Because that\u2019s where we get jammed up. We\u2019ll have our surveyor out to a site in five days, but then it goes into this abyss of waiting in the city. Do these counties just really approve it that quickly?<\/p>\n
Yeah. Typically, no, there\u2019s not much hold time on that. Within a couple weeks, we should have that all ready to go.<\/p>\n
Are you jealous, James?<\/p>\n
I am extremely jealous because the timing and the waiting is what kills you on these deals.<\/p>\n
Absolutely.<\/p>\n
We have a town home site that we\u2019re doing, and we got a good price on it, but it\u2019s so expensive. We paid 4.7 million for this site in Bellevue, Washington. We\u2019ve been waiting on permits for three and a half years.<\/p>\n
No.<\/p>\n
And granted, if it had permits, the site would\u2019ve been worth 8 million because it\u2019s in a prime, prime location. But it\u2019s like when you get to that two, three year mark, you\u2019re like, what is going on?<\/p>\n
That blows my mind because I\u2019m not used to the\u2026 And that\u2019s part of the reason our business models outside of cities. The people that come looking for this business model are the people who want quick cash flow, quick way out of their nine to five. And you\u2019re not going to do that by repurposing and rezoning. You can buy these. That\u2019s why we\u2019re so focused at first on buying the 40,000, selling them for 80,000 because it was a quick way out of our jobs, quick way to get good cash flow and all of that. We\u2019re not used to the city ordinance like that, waiting on city.<\/p>\n
There\u2019s a lot of politics that go on there. And so it just goes slower and honestly, I think I need to get into your land business because I think every year that goes by with a permit, it knocks a year off your life too, because cause you\u2019re just so frustrated. I was at the city yesterday like, how do we get this moving forward? And it\u2019s been even worse lately because with the labor market issues, these cities are having problems hiring people too.<\/p>\n
I\u2019m sure.<\/p>\n
So it\u2019s like they\u2019re understaffed, it\u2019s taking forever and it can become very detrimental to your deal. If you think it\u2019s going to be a year and a half permit and you\u2019re putting 50% down, it turns into three, your cash on cash return just drops dramatically over the life of that deal. And so I\u2019m extremely jealous right now of your timelines.<\/p>\n
Dan, thank you so much for joining us. We really appreciate you teaching us a little bit here. Is there anything else you think our audience should know about land investing before we get out of here?<\/p>\n
Like I said, it\u2019s really for the people who are stuck in their jobs and want a quick way out, or just want a way out. It\u2019s a cash flow heavy. Rental properties, you\u2019re in it for a long term investment. You\u2019re not going to get out of your job first year, generally. For me, land flipping was that income. It was that way of doing that, getting out of my nine to five job. And I think that\u2019s who it\u2019s for, for the people looking for a nice, steady, really, really lucrative way out of their nine to five job, looking for that freedom. And that\u2019s kind of what we preach.
Now, from this podcast, it might sound a lot easier than it is. For every 2,000 mailers we send out, we get one deal back. So that\u2019s about 12 to $1,400 cost to acquire one property. Given our average profit on a deal is about 20 to $23,000. But that\u2019s the biggest hurdle, Dave, is people who come in and they\u2019re scared to spend money. But how do we get in front of these landowners? We have to send them mail. We have to target them through marketing aspects like mail and texting and that\u2019s where the biggest hurdle, is people fearing to put out that money for that.<\/p>\n
Well, thank you so much, Dan. If people want to learn more about you or your business, where should they do that?<\/p>\n
You can learn more about the land investing business model on my website, landinvestingonline.com, or I\u2019m very active on Instagram. It\u2019s @DanielApke. DM me, I\u2019m happy to help with any questions you guys have.<\/p>\n
All right. Thanks, Dan, so much for being here. We appreciate it.<\/p>\n
Thanks for having me.<\/p>\n
Thanks, Dan.<\/p>\n
James, what\u2019d you think?<\/p>\n
Man, I think I\u2019m working too hard fighting with these cities. And I have experienced that before. I remember we actually did a big site where we were working with the builder. We were doing a big 1031 exchange for one of our clients and we bought five raw lots that had permits the builder was going to build out for multi-family, and it was a great cash flow deal. And I remember walking out with the builder and I\u2019m talking about the planning and we really wanted to change two units. And the guy\u2019s like, \u201cWell, we can get that change done.\u201d I\u2019m like, \u201cIs that going to be nine months out?\u201d He\u2019s like, \u201cNo, no, no, just give me one day.\u201d He goes over to the city, walks in this more rural area, they approve the plans right there on the spot. He comes back, he goes, \u201cNo problem.\u201d And I was like, I am working in the wrong markets. We have big spreads in our markets, but there\u2019s big headaches to come with it.<\/p>\n
Yeah, no one\u2019s buying two or 3 million flips in these rural markets. You\u2019d have to cut out that<\/p>\n
Business. No, but I do love the model because it\u2019s very scalable as a wholesaler or investor because it\u2019s really a numbers game. There\u2019s so much raw lots in middle America. You\u2019re just targeting, you\u2019re going out, you know what your spread is, you know what your target is. And then people are, like you said, there\u2019s less competitions, so you can just name your term. And if the guy\u2019s ready to sell at that time, he\u2019s really going to entertain that offer.<\/p>\n
Yeah, I guess the part that gives me some hangup is the demand side. I know Dan was saying people just want raw land. But I\u2019m curious in an economic downturn if people are still going to be buying raw land at the same price and with the same fervor. If you\u2019re buying it 30 or 40 cents on the dollar, it\u2019s probably not that risky, but I would just be curious how this unfolds over the next couple of years.<\/p>\n
Yeah, I think it would be good to have a backup plan for each site if I was doing that model, like okay, I\u2019m buying this thing raw, I know what my spread is. But as financing and all these small banks are having a little bit more issues, I think the lending requirements are going to tighten up even harder.<\/p>\n
Especially on stuff like this.<\/p>\n
Yeah, so if you\u2019re selling $100,000 lot, people are going to have to come up with 50 grand, and that might be a lot for that specific area. And if it was me, I\u2019d put a backup plan with maybe you\u2019re just putting a mobile home on the property, septic, well, mobile home, and at least have that in your back pocket. Because even if the lots are 30 to 40 grand, but you buy 10 of them, that\u2019s 300 grand you got a service and cheap can get risky really fast as well.<\/p>\n
Yeah, I would just be worried about getting stuck holding the bag for longer than I want to. When you buy land in Seattle, is it mostly for your own development or are you flipping it also?<\/p>\n
We do both. Because builders, like in infill, we stick to what we know and we build based on what our resources are. So your typical builders in your metro areas are going to be your town home, density guys, which that\u2019s what we buy. And then you have your single family, the one for ones building a brand new house. And then now with all the upzoning and the density chasing, there\u2019s, we call them a three pack where people can build a single family, an ADU and a DADU, all on the same site. And so if it hits our buy box, we buy it because that\u2019s what we\u2019re good at building. But if it doesn\u2019t, we work with other builders. But the reason I like the metro is we\u2019re not buying based on speculation, we\u2019re buying based on performance.
So we know what our bill costs are. When we\u2019re targeting land, we\u2019re acquiring it for this. We know we have to build. Our average bill cost is 325 in Seattle. We can build this product for this and this is what it will sell for. So I think it\u2019s a little bit more of a package. And we know that that will always trade. In addition to if we build that out, let\u2019s say the market comes down, we at least can rent it out, we\u2019re not sitting on a raw lot. Because the problems with raw lots is they don\u2019t pay you money and your income goes down. And so that\u2019s why it can be a little bit riskier to just land bank. I always say land banking\u2019s for rich guys. They don\u2019t care about the return.<\/p>\n
It smells like speculation to me. I know if you know what you\u2019re doing, there\u2019s more to it than that. But isn\u2019t that what land banking is, just speculating that someone\u2019s going to pay more for it in the future? There\u2019s no real fundamentals behind it, is there?<\/p>\n
It\u2019s 100% speculation. And I think as the market gets harder to get financing, you\u2019re going to want the biggest spread. I may buy a piece of raw land just to sit on it, but I\u2019m going to want to pay 15, 20 cents on the dollar because I like income coming in and I like to know what my disposition is.<\/p>\n
Yeah, exactly. Yeah, that\u2019s why I think it is a little bit, that\u2019s probably why there\u2019s less competition because with wholesaling, like you said, yeah, there\u2019s competition, but you know what the dispo is, so there\u2019s a lot less risk for you than there is in this model.<\/p>\n
Yeah, it\u2019s when we\u2019re buying land, it\u2019s a buildable plan in the next 12 months, no matter what. And when we\u2019re sourcing to other builders, they\u2019re businesses, so they have to keep their engine going. And pricing just comes down to what the market conditions is. And so in metro areas, the land kind of follows the market more. What\u2019s the availability of capital? How are things selling? What\u2019s bill cost? Speculation is you\u2019re just buying it cheap and you\u2019ll sell it in the future at some point for more.<\/p>\n
All right, cool. Well, this was fun. I learned a lot, and I think honestly, this kind of model is not what I invest in personally, but I think it\u2019s really interesting for people who are trying to earn more of that transactional type income, like flipping or wholesaling. This is a really interesting option with less competition than probably either traditional like house flipping or wholesaling has. So yeah, check out, learn more from Dan or it sounds like there\u2019s some information on the Bigger Pockets forums about this as well. So if you\u2019re interested in learning more, you should check out those resources. James, thanks a lot for being here, man. We appreciate your time.<\/p>\n
Always.<\/p>\n
All right, well, thank you all for listening. We\u2019ll see you next time for On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn Bennett. Editing by Joel Esparza and OnyxMedia. Researched by Pooja Jindal, and a big thanks to the entire Bigger Pockets team. The content on the show on the market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.<\/p>\n