Myths About Buying Land

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Mark: Hey, it’s Mark Podolsky, The Land Geek, with thelandgeek.com and the proud host of the REI Classroom. I want to talk today about some common myths about buying raw land.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Mark: The biggest myth that we see and you’ll see in books like real estate books, “Don’t buy raw land,” the number one myth is it doesn’t cash flow. And typically-speaking, if you buy a piece of raw land, compared to, say, a rental home or a apartment building, it doesn’t cash flow, but the way that we sell it, it does cash flow. And this is why I call it the best passive income model, because what we do with owner financing is we create this amazing passive income stream without the traditional headaches of real estate because we don’t have to deal with any renters, no rehabs, no renovations, and no rodents.
We typically get our money out on the down payment, and then we get these monthly payments every single month. It’s all automated using a software program called loangeek.io, a set-it-and-forget-it system, so we collect ACH and credit card payments every single month on an automated basis. And that’s how we make raw land cash flow. That is the first major myth.
The second biggest myth . . . well, it’s really not a myth, but there’s a creative way to get around it, is there are no tax benefits to selling raw land. So for example, if you own a rental home, you get the biggest tax benefit, which is . . . and in real estate, one of the biggest tax benefits is depreciation, right? But you can’t depreciate raw land because it lasts forever. However, if you use a vehicle, like a self-directed IRA . . . my favorite is a qualified retirement plan . . . and you use one of these vehicles using a Roth or a SEP or a 401 (k), yes, you don’t get depreciation.
But you can tax defer or you can even, tax-free, create these passive income streams in your retirement accounts, and they grow tax-free. And it’s better than depreciation because you’re not having to deal anything physical, no roof to repair after 30 years, for example. So that is also a big myth.
So the two biggest myths with raw land are going to be, number one, doesn’t cash flow, myth busted, and the second, there are no tax benefits because you can’t depreciate raw land, myth busted. I’m going to start another show called “The Land Geek Myth Busters.” All right, anyways, if you want to learn more, go to thelandgeek.com and check it out. Thanks so much.
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