Is buying raw land and seller financing it the holy grail of real estate investing? Mark Podolsky the “Land Geek”, tells us all the benefits of investing in ‘raw land’ today. If you hear ‘raw land’ what comes to mind? Pretty much anything that comes to mind is something that Mark would buy…at the right price. Truth is, through all the things that come up in life, there are a lot of people and families that own land…but don’t want anything to do with it. This allows investors like Mark to purchase it for a song…which is where the arbitrage opportunity comes in. It’s a fascinating topic that you owe yourself to check out! Only on FlipNerd.com!
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Hey, it’s Mike Hambright of FlipNerd.com. Welcome back for another exciting VIP interview, where I interview successful real estate investing experts and entrepreneurs in our industry to help you learn and grow. Today I’m joined by Mark Podolsky who is an investor. He’s a fellow podcaster that actually just launched his show “The Land Geek,” so we’ll talk about that a bit and you should check it out.
But Mark teaches others about real estate investing in his podcast with heavy emphasis on his area of expertise, investing in raw land. Considering that everyone and their brother is a real estate investor these days or wants to invest in real estate, it’s really shocking how few people there are that discuss investing in raw land. And there are ton of advantages to it and quite frankly, a very low competition. So I know Mark is going to tell us more about that today. Lots of potential for profits for sure. So Mark is going to tell us all about his favorite investment today which is land. Before we get started though let’s take a moment to recognize our featured sponsors.
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Now let’s start today’s show.
Hey Mark welcome to the show.
Mark: Mike, thanks for having me.
Mike: Yeah, yeah.
Mark: Great seeing you again.
Mark: Great seeing you again.
Mike: Yeah. Oh absolutely. I was on your show obviously just last week. Hey, before we get started, I forgot to bring this up the last time we talked. So you’re the Land Geek, I’m a Flip Nerd. I need to ask you, is it better to be a nerd or a geek? Or are we ultimately just one and the same?
Mark: I think it’s one and the same. Honestly I think nerd has a more pejorative term than geek. But either way I think you have to fully embrace what you are and I’m definitely geeky with technology and all the weird cultural references that I’ll throw out there are very geeky.
Mike: Being a nerd or a geek, it’s in fashion these days right?
Mike: We’re cool again, I got my glasses here actually we are not ashamed to admit what we love to do and talk about it right?
Mark: Exactly but you have to be authentic Mike.
Mike: Yeah. Absolutely. And let me tell you what there’s nothing nerdy or geeky about making money.
Mark: No there’s not.
Mark: The ladies love it Mike.
Mike: Awesome. Well hey tell us a little bit about your background. I happen to know you’re also a corporate refugee, stopped working for the man at some point. But tell us about your background and how you got into investing, and specifically investing in land.
Mark: I have a really strange story because I had absolutely no real estate background except for buying my house at the time. I was doing investment banking, merges and acquisitions. We were working with private equity groups, just mid-market stuff, 50 to 500 million in enterprise value and I’m analyzing companies all day long.
Mike: Who did you work for Mark?
Mark: [inaudible 00:05:18] a boutique investment banking from out here. Basically we were working with these private equity groups and were analyzing companies for them and putting deals together and it was miserable. A lot of pressure, long hours. I had a 45 minute commute to work and back. You felt micromanaged, just no control. The sale cycle was very long. About 18, 24 months to get a deal.
So we hire this guy and we start talking and he’s telling me that on the side he is going to tax deed auctions buying up raw land for next to nothing and flipping them online and his returns were over 300%. So Mike I’m looking at companies and here I’m talking about a great company, really great company had EBIT margins, free cash flow of 15%. Your average company had 10%. So he’s selling me 300%. So of course, I’m from St. Louis, we’re “The Show Me State.” I don’t believe them.
So I go to a tax deed auction with him in New Mexico and I’ve got like $3,000 saved up for car repairs. I tell my wife, “Look, I’m going to buy some land and I’m going to flip this land like this guy is doing.” She’s like, “Absolutely not, you’re not doing it.” I said, “Look, worst case scenario, we own land. We have an asset.” So she’s like, “Okay fine, but it better work out.”
So I go and I think I bought like 10 parcels of land. Ten half acre parcels at this New Mexico tax deed auction for an average price of like $300. Three hundred dollars Mike and sure enough put them up online and a week later I sold them for over $900. So now I’ve got over $9,000 and I told my wife, “Look, here’s the $3,000 back for car repairs. I’m going to do this again.” So I go to another auction and there is no one there. This is in 2000, no one’s at this auction. I’m buying up properties for nothing. In the next six months I flipped up all those properties and I made over $90,000 from my $9,000 investment.
So now I’m telling my wife, “Look I hate my job.” I wouldn’t get the Sunday blues, I would get the Friday blues. And the weekend going by fast and Monday coming. So she’s like, “Absolutely not, you are not quitting your job.” So I said, “Fine, I won’t quit my job.” So for 18 months I literally immersed myself part time into buying and selling raw land in flipping. Eighteen months later that income exceeded the investment banking income and I quit. And I’ve been doing it ever since 2001 full time.
Mike: That’s awesome. That’s great. Tell us a little bit about what that means. Because I think when most people hear you’re investing in land they think of generally one or two things. Infill lots that are in pre-existing neighborhoods or massive grasslands that people are driving past and they think, well this is just wasteland nobody would be interested in this.
Mark: Right. I’m opportunistic. I’ll buy anything if I can buy it right. So these are the people I target. This is basically the model. I want out of state owners that owe back taxes and I want to send them a low ball offer. So I get lots of angry phone calls but I do get an acceptance rate of between 3 and 5%. So we have amazing deal flow and then we can quickly flip those properties and our returns are huge Mike. I mean 300% on cash flips, over 1000% on a land note. So it’s a one time sell.
You get recurring revenue and its passive income. And I say this a lot because on the podcast, I’ve named it one from the Land Geek podcast to the Best Passive Income Model Podcast because I think it’s the best passive income model. There’s no physical inventory, no renters, no renovations, no rodents. One time sale, recurring revenue, and you have a phenomenal asset that you don’t have to maintain and look after.
Mike: Yeah. Tell us a little bit about who owns this land? Do they tend to be inheritance type deals that’s kind of handed down and some family member is like, “I don’t want this swamp land in Florida,” or whatever it might be?
Mike: So that’s typical. They inherited something, now they’re on the hook for the taxes and they are like what in the heck did my dad or grandpa leave me with here. Why couldn’t I at least get that brass toe ring he had or something.
Mark: Yeah, exactly. We get those calls and emails all the time. “I don’t know what to do with it” and they owe back taxes and eventually if they don’t pay their taxes, they’re going to lose it anyway. We’re able to quickly buy it and then quickly sell it.
Mike: I know you’re like me. You’re an opportunist people have asked me before to give you my response. So people are, “Do you buy houses at this level or that level or this part of town?” And I usually say I’ll buy a tepee if the numbers are worth. Ultimately most real estate investors you’ve got to be in the opportunity business, right?
Mark: Yeah. You’ve got to be in opportunity business and you’ve got to be flexible like a [inaudible 00:11:09]. Because when I first started no one was doing it, no one knew about it and I could go to these tax deed auctions and the room was empty. After a few years of this and people start catching on, the rooms are full. I’m not paying retail at an auction for land. So then we started going directly to the source and that’s working great. Then 2008 hits, nobody has money anymore, you go back to the tax deed auctions. So there’s lots of creative ways to do it but you have to be cognizant of the fact this is a market and the markets are constantly changing and you have to change with them.
Mike: Yeah. If there is a typical kind of transaction, can you talk about whether they’re kind of residential areas or are you buying stuff that’s truly in the middle of nowhere? Probably a little bit of everything but is there anything that is difficult that you can capture?
Mark: Yes. Basically I buy infill lots, I bought a subdivision that went under from the Property Owner Association and I’ll buy property that you’d consider in the middle of nowhere. Mike, I don’t judge, right? Because I probably wouldn’t want to live there doesn’t mean that someone else wouldn’t love the vast open space, the clean fresh air and there are a number of people out there that don’t want neighbors. You and I would consider the middle of nowhere the prepper movement is a real thing. People love that property.
Mike: You’re talking about this like they’re all residential owners that want to use that land to live on it. Is that typical or is it people that want to sit on land for someday we’re going to do something with it or . . .
Mark: I think 90% of my investors are exactly what you just said. Almost like buying a nice piece of jewelry. They just like the idea of owning the land and the idea of getting a great value on that property. They don’t necessarily go out and use it at all. I’ve got one customer who bought a 40 acre parcel from me and every year for 4th of July they go out, they drive 30 miles out and they camp on the land and they call me every year they say Mark it’s unbelievable. You’ve never seen a night sky like this because it’s pure unadulterated darkness.
Mike: Wow. That’s cool.
Mark: It’s just nothing out there.
Mike: That’s cool. Then the back end of your model, I presume, is to sell it with seller financing. Is that right?
Mark: Yeah. And that was one of the big, big mistakes I made when I first started was, I didn’t even think about seller financing. I was just flip-flip-flip-flip-flip, pay taxes, flip-flip-flip, pay taxes and it didn’t occur to me, “Hey where’s the passive income on this?” So then I started putting a note on each property and building up that note portfolio. Now, there’s nothing better than making money when you sleep.
Mike: Talk a little about, maybe give a recent example, what you’re buying it for, because I know you’re buying it a discount. Then typically when you offer seller financing you’re able to get market value or much closer to it because you’re the bank, you’re providing the financing. Is that right?
Mark: Exactly it’s very easy money, very easy terms. We try to keep it at a car payment so it’s affordable for just about everybody. And again the properties we’re buying, these are not $100,000 properties. This is a volume business. So you might do one house flip and I might have to do 10 land flips. But it’s so much easier for me to acquire this property. We’re talking about I bought 10 five-acre parcels in Colorado for under $1,000 and then I can flip them for $6,000 to $10,000 depending on what’s going on out there. That’s a typical type of deal. We’re talking real, real money here.
Mike: I’m kind of curious, for those that don’t know, I know it’s all over the board. But talk about when people are buying land typically way outside of town the taxes are significantly less than what they might pay for what their home is, right?
Mark: Oh it’s unbelievable. Three bucks, 10 bucks, $100 and less. Again, the numbers work for just about everybody.
Mike: Which is crazy because you said you’re targeting people that owe back taxes.
Mark: That’s right. But they’re basically just advertising to the world they don’t value it anymore. It’s not that they can’t afford to pay those back taxes typically. It’s that they don’t want the property anymore. It’s just like what you said in the beginning of the show maybe they inherited the property and they don’t know what to do with it anymore and they get the tax bill and they’re like what is this? So it’s not brain surgery.
Mike: No for sure. Can you give an example of what a seller finance deal looks like? I assume you get a down, just like all seller financing, you’re getting some down payment which my guess is it might cover a decent size portion of your purchase price.
Mark: I like if I can get my money out on the down, that’s a good deal. But even if I can get my money out in six months, that’s fine with me. The longest I’ll go is a year.
Mike: I think we need to say that again. Basically if you purchase a property, you may purchase it for, make it up 5,000 bucks. And then you’re going to finance it and part of your terms when you sell it to somebody is that they have to put $5,000 down or close to it to where effectively at that point you are just collecting a seller finance note, a payment every month for what’s a typical number of years that you’re collecting payments for.
Mark: It depends on the full purchase price, but I have some notes that are five years. I have some notes that are 15 years. I have some notes that are 30 years. So there’s not a real strict model there but again I’d like to get all my investment out within 12 months. And make it easy. I want to flip these properties in 30 days or less so I want to keep it at a car payment. I don’t deal with even doing credit checks because they can flip them so fast, even if they fall out, I just resell it again. It’s almost like a bond.
Mike: What is your rate of default that you have to take a piece of land back?
Mark: It’s higher than average the way that I do it. Some of my competition and some of my students, they do it differently than me because they don’t want to deal with the defaults. But mine are about 30% which is really high. Some of theirs . . .
Mike: Can you explain why? What are you doing?
Mark: No credit tracks.
Mike: I see. You’re not doing credit tracks and stuff like that.
Mark: Plus you’re charging like 40% interest for over 30 years? No I’m joking.
Mark: No. The interest rate may not be very high but because of the time value of money, we’re making over 1000%.
Mike: Right absolutely. And the fact that you’re getting most of your money back on their down payment.
Mark: Right exactly. So at that point it just becomes . . . things happen in life too Mike. They might lose their job.
Mark: They might move and what they thought was going to be their dream parcel, they moved and no longer want that parcel. I’m like great. We’ll take it back and we’ll sell it again.
Mike: I’ve heard you mention a few different states of where you bought deals. Talk about geographically where you focus or if you’re agnostic to geography or how you pull that off.
Mark: I’m not agnostic to geography. I get this question right. I’m from the Midwest, but I don’t like to buy in the Midwest. Even if I can buy at pennies on the dollar, I want to go in the Southwest, California and Florida. I want to be where the rest of the country wants to be, right?
Mark: Think about it. If you’re in New York and you can buy a 40 acre parcel for $40,000, that’s like nothing. Just the idea of that, getting that mindset is, they’re like “Wow.” It’s an incredible value it’s huge amount of acreage. For someone from New York, 40 acres and it’s affordable. But if I said here is 40 acres in Arkansas, well it’s Arkansas.
Mike: Maybe share a little bit about what the transaction cost. It sounds like you’re buying a lot of really low dollar properties. Do you get a . . . I’m in the house business so it’s hard to close on a deal without spending a few thousand bucks. By the time you pay title policy and escrow fees and a whole bunch of other fees that you don’t even know what they are. But if you’re transacting in small dollar stuff, talk about the importance of the fees.
Mark: Yeah that’s really interesting because unless it’s $5000 or more, I don’t close through a title company. When we’re doing our due diligence we might hire an abstractor for about 80 bucks to pull the docs. Make sure title’s clean and everything is free and clear of any liens or encumbrances. And we’ll just deal directly with the seller. Then we’ll do the same thing with our buyer. So it’s very rare that we have these frictional costs because the prices are so low. If I have a buyer that insists on using title I say, “Fine. Then you just pay the title fees.”
Mike: So Mark why do you think more people don’t know about this little secret, little jewel in the rough?
Mark: Because I think if you read typical investment magazines, raw land is highly speculative, illiquid. It is typically the playground of billionaires. So when we’re talking about raw land like if I’m reading Fortune for example I’m reading about Ted Turner and his productive land. I think he’s the largest land owner in the U.S. Jeff Bezos owns half of West Texas. John Malone who owns Red Sox and Red Emmerson.
These are billionaires that own the majority of the productive land, timber land in the United States. And then you’ve got big raw land bankers and developers who come in, they’re going to buy in the path of growth and they’re going to entitle it. And they’re going to take lots of risk and they’re going to do a phase one environmental and a phase two and they’re going to put millions of dollars in infrastructure and sell to a developer. It’s high-risk, high-reward model. That’s not my model.
They can do that, that’s great. I’m looking for Joe and Mary Smith who have a 10 acre parcel that they don’t know what to do anymore with that property and we solve that problem for them. And then we solve an ownership problem on the other end of it for an asset that somebody thought that they couldn’t afford. Now they can afford a piece of land that . . . look it’s the only thing that lasts. It’s the only asset that’s going to last forever.
Mike: Talk a little bit about how you find deals. I know you said you target out of owner folks with back taxes. So are you going into local counties, cities, states and pulling information on back taxes or are you purchasing the list that kind of give you that information?
Mark: Yeah, getting the list is always a lot of fun. First place I’ll go is the county and try to get the list from the treasurer of who owes back taxes. A lot of times they’re like, “What? We don’t have that list.” Then I’ll go to the assessor and I’ll try to get the assessor parcels list. And then we’ll do some fun geeky things with iMacros if the information is online. If we can’t get that then we’ll get real geeky and we’ll creatively figure out how we can get the list. And there are companies out there that can help you with the list. AgentPro247.com. But what I found is that a lot of times that information is not always up to date. Listsource.com is fantastic as well printing a list. `.
Mike: So how do people get started in this space Mark?
Mark: I think a great place to get started is first go into your local county tax deed or tax lien auction and just be an observer. Drive around town, take a look at that tax auction list and get a feel for what types of properties those are. If you’re really drawn to land investing, I’m going to shamelessly plug come to my site.
Mike: Yeah, where do they go and where do they go on your site?
Mark: Yeah, www.thelandgeek.com and you can download for free our passive income blue print. You can get our eBook “How to Avoid The 3 Fatal Land Buying Mistakes” and then you get our podcast delivered each week to your email inbox. Then you guys look at the Land Geek podcast as well, the archives. But the new podcast that [inaudible 00:26:02].
Mike: So I’ll share the link to my episode. The other stuff people are kind of on their own of finding out.
Mark: Yeah, exactly I mean no one really [inaudible 00:26:11].
Mike: I know there are a number of students you’ve had that you’ve taught this to. Do they tend to be people that were like you that started with no experience or more of people that were maybe in single family space or other kind of types of investing in real estate and just said, “Wow, this sounds a whole lot easier than what I’ve been doing. So let me check that out.”
Mark: Yeah, it’s so funny my people have so low economic dependency. So if they’re not working, they’re not making any money and they don’t necessarily . . . Some of them have tried to do house flips and be a landlord they just hated it and they didn’t want to deal with the tenants. So this model was attractive to them. Some of my students, I’ve got psychiatrists, I have pilots, I have engineers, I have a lawyer.
Typically these are high income people trading dollars for hours and they’re looking down their horizons like “Where’s my passive income going to come from?” Here’s a way for them to do it that they don’t have to bump across, say hedge funds, or other bigger players in single family homes or whatever it is in their area that it could be highly competitive. They don’t want to do that and this is a non-competitive niche with a huge, huge market of the land.
Mike: Sure. Absolutely. So what’s your limitation on doing more? Like what would it take for you to . . . does it come down to your personal bandwidth to scale up your business significantly from where it is now.
Mark: For me personally we’re raising money for another fund with the credit investors. So we give them a great return and invest money for other people. We can do joint ventures. I think that you can wholesale in this business if you don’t have any money. Again the real value in any real estate transaction is the deal, right? If you get the deal there are lots of opportunities in different ways to structure that deal.
Mike: Yeah, to monetize it.
Mark: To monetize it, yeah, absolutely. At some point like when I first started I used all of my own cash and then once we started doing owner financing, there will be like a cash flow crunch. So we would go out and we would invest other people’s money and give them a nice return. Or we would just lock up the deal on an option and we would double close as well which is the strategy I really love. I’ve got students that they’ve run out of money and they lock up the parcel and then they immediately sell that parcel right away and then they double close and it’s like magic.
Mike: So Mark tell us where folks can learn more. I know you’ve obviously got your podcast, you’ve got a couple of sites. Tell us one more time where people go and we’ll make sure we get all these links down below the video as well.
Mark: I think the best place to go to get started is thelandgeek.com and then subscribe to The Best Passive Income Model Podcast as well and there’s tons of information out there. I also do Coffee Talk Videos, I love coffee Mike.
Mike: Coffee talk. Coffee talk, coffee?
Mark: Coffee talk. It’s happening all the time. I’m completely wired right now and . . .
Mike: I was shooting Red Bulls before we got on so . . . joking.
Mark: I can tell your eyes look a little . . .
Mike: Yeah. It’s one of those days, no.
Mark: So you can go on youtube.com/thelandgeek and you can get just really sick of looking at my face. You can watch me give you tips and drink coffee.
Mike: Tell us again, what is the Coffee Talk? That’s just like the separate show that you do or you’ve done in the past?
Mark: Yeah, it’s a separate thing where I just come on and I’ll talk about a book I read or a land investing tip.
Mark: And drink coffee. Two to three minutes because I have the attention span of a ferret on a double cappuccino. I can’t go any longer.
Mike: Awesome. I had another guest a while back that talked about land, doing some of the same things that you do, it’s very intriguing. For somebody that deals with tenants and toilets and has bought hundreds of houses and ultimately, don’t get me wrong it’s been a fantastic business for us financially, very rewarding in a lot of ways. But if there is a harder way to do it, I don’t know if there is. We’ve done it the hard way for sure and so there is a lot of appeal in not having to deal with tenants and toilets and termites and all sorts of other stuff.
Mark: Yeah, I call this my dream free real estate investing.
Mike: I encourage people to go check out what Mark’s got. It’s good stuff and his show The Land Geek is awesome because I was on it. Tell us about your show. Were you going to do something, very similar format to mine? I know it’s primarily audio but are you interviewing other real estate investing experts?
Mark: Yeah, I’m just interviewing other experts like you and not necessarily just in real estate real estate. I had efficiency expert on. I had a social media expert on, because let’s face it, at the end of the day this is still business and you still have to understand marketing, especially in real estate. I think that if you’re going to devote 90% of your time on marketing and deal flow in real estate. When my students tell me, “Hey, I want to get a website and a logo.” And I’m like that doesn’t make you any money. Let’s get deals flowing first.
Mike: Cool, cool. So check out thelandgeek.com and we’ll add the link down for those of you that can’t remember thelandgeek.com. But we’ll have it there. Hey Mark thanks so much for joining us today, definitely appreciate your time and thanks for sharing your experiences with us.
Mark: Mike, thanks so much, appreciate you having me.
Mike: Good luck and good luck getting that show off the ground.
Mark: Thank you.
Mike: All right buddy take care.
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