Quick Flipping Raw Land
Most people believe that when investing in raw land that the property has to be in the path of growth or it has to have some development potential. The truth is that there is a niche in land investing that very few people are taking advantage of. Before I get into the niche itself, it is important to understand what I am talking about when I say raw land. I am talking about land that has NO development potential and IS NOT in the path of growth. I am specifically talking about property such as farms, ranches, mountain land, timber land, hunting land and just recreational land in general. I have been involved in over 1,000,000 of raw land transactions and focusing on these type properties usually means there is virtually no competition from other investors. Why is this? Think about it this way. If there is a person who has a 1,000 tract of land that is 1 hour outside of a larger city and they are asking $2,000,000 or $2,000 per acre for the entire property, how many potential buyers do they have? It is a very small buying pool because most owners do not want to split the property up because they could be left with pieces and not sell enough to actually “get out” of the property. So, what the seller is looking for is that one person who is willing to spend $2,000,000 to have a place to get away to on the weekend or to have a place to hunt. Now do you see what I mean about a small buying pool?
SO how can you quick flip a property like this and make money when the owner hasn't been able to sell it a year or more? You are not going to look for that one buyer, you are going to find around 30 or so buyers that can spend about $85,000 each. Now, look what you have done to the potential buying pool. You are no longer looking for just millionaires because we have structured the property so that someone with $85,000 can buy a piece.
How do you structure the property to get these buyers? There are 3 simple key principles we use to accomplish this. First, we are not going to buy the property because we want to limit our risk and not everyone can afford to purchase a $2,000,000 piece of land. We are going to control the property using an option. So let’s assume we can option the property at $1,800,000. We will then do a dual or simultaneous closing when we sell the property so that we won't have to take cash out of our pocket to do this deal. Second, we are going to split the property into smaller tracts (only on paper, no surveying) and offer it to the public in different sizes. This allows potential buyers to buy what they want. They can combine several tracts together to buy even more. Third, we are going to do this using an auction. This accomplishes several things. It will allow us to offer the property in multiple tracts like the 30 mentioned above but also lets the buyers decide on how much land they want and they have to compete against the other bidders in order to buy it. We also get offers on all the parcels in an hour period at the auction.
When you total up the prices bid at auction (example: as referenced above, 30 tracts at $85,000 each average) that comes up to $2,550,000. Your profit is the difference between your option price of $1,800,000 and the total sales price of $2,550,000 which totals $750,000 in profits. Not bad considering that in many cases you will have less than $1,000 at risk. Large tracts of raw land are one the last untapped real estate investing opportunities left, so why not take advantage of that.
What happens when you auction off this property you do not yet actually own, and the proceeds from the auction are less than the cost of the property?
How do you subdivide a property that you do not have an ownership interest in? And do it in the amount of time a "less than $1000" option buys you?
That said, I also have taken advantage of the low price per acre that large parcels offer. However I have found it more practical to put the parcel in an LLC or trust, and sell interests in the entire parcel to end users. Then the "subdividing" can be accomplished through an operating agreement or other private agreement between the parties; or actual legal subdivision can be tackled once your group has the title and the time.
But I guess my method isn't exactly a quick flip...
Chris
Hello Chris,
I am Chuck Herb, one of the principals in The Land Institute. I am replying for Mike because he is on the road looking at some property.
If we hold an auction and our auction proceeds do not cover our option price, we simply do not exercise our option.
In answer to your question, we do not "subdivide" the lots at all. We simply put lines on a sales map giving approximate acreages. At the auction, we will sell the property "as mapped", and in order to close the parcels will have to be surveyed prior to closing. At that time, we can provide clear title to the buyers. As far as timing is concerned, it generally takes us around 60 days to do all the work and marketing necessary to hold one of these type sales, it is fairly quick and straight-forward as long as you have the necessary tools.
If you have any more questions, please feel free to shoot either Mike or myself an email at mike@thelandinstitute.com or chuck@thelandinstitute.com and we'll do our best to answer your questions.
Chuck Herb
How are you going to give clear title to the buyers when you haven't subdivided the lots?
Hello, I am Chuck Herb, one of the principals in The Land Institute. I am replying for Mike because he is on the road looking at some property.
In answer to your question, we do not "subdivide" the lots at all. We simply put lines on a sales map giving approximate acreages. At the auction, we will sell the property "as mapped", and in order to close the parcels will have to be surveyed prior to closing. At that time, we can provide clear title to the buyers.
If you have any more questions, please feel free to shoot either Mike or myself an email at mike@thelandinstitute.com or chuck@thelandinstitute.com and we'll do our best to answer your questions.
Chuck Herb
First thing is that we don't subdivide anything until the property has been auctioned. We then know how the property has to be surveyed so that a legal description can be written. We then exercise our option and convey the properties with a new legal description for each new parcel. It is important to note that we are not subdividing anything, as defined by most counties, but merely breaking the large tract into smaller tracts while staying outside of subdivision regulations. This insures that we will not have to get approval from the county.
This is an intersting concept but I am curious as to what the reality of a deal like this would be. The article makes it sound so very nice and easy.
Mike and Chuck, how many times have you successfully completed this type of transaction and what is your success rate (how many parcels that you look at do you proceed with and how many that you proceed with do you successfully auction off so as to exercise your option)?
I don't know how many deals I have done but I know that it is over 1,000,000 acres. Our success rate is over 80%. We sell over 80% of the properties that we offer.
Also, what is the fallout when you don't exercise your option and follow through on selling lots that you've already auctioned off? Additionaly, suppose you auction off your "sales map" lots then hit snags during your process for actually sub-dividing?
I'm thinking about this as I type but there seems to be a lot that could happen to leave a bad reputation in the wake of one of these deals.
You have to understand that nothing is sold at the auction until the seller confirms the prices that have been bid. The seller being the person that has optioned the property. If the prices brought at auction exceed the the option price then the seller confirms the bids and the property is sold. If the price does not exceed the option price then you negotiate with both the buyers and the owner and try to arrive at a final price that works. As far as snags in the sales map, we will not hit any because we already have had discussions with the county to know what we can do as far as sizes of tracts and road frontages that falls outside of subdivision regulations. By doing this, there is no approval process which means no snags.
I am seeing this done all the time in South Georgia.
The property is sold in single tracts, in combinations of tracts, and as a whole. Whichever method yields the most money is the winning bid. Also the auction can be a reserve auction with an unstated reserve bid so that solves the problem of not getting enough money for the land to pay off the option price.
I have thrown away most of the brochures that I had, but I also believe that the tracts are sold subject to final survey which solves other problems which may arise due to the land not being officially subdivided prior to the auction.
You are right on track. Everything you said is exactly correct but I need to add one more comment. It seems that many people are confusing breaking up land with subdividing. We define subdividing as breaking up property in a manner that requires approval from a governing body. Our program is designed to stay outside of subdivision regulations so that there is no approval to obtain after the auction.
Obviously every real estate deal is different, and reginal influences always apply, but have you found a 'sweet spot' as far as total acreage on the initial purchase/option?
There isn't really a sweet spot on total acreage but we suggest focusing on properties over $750,000 because you will find less competition from other buyers. Large tracts over this price level usually take longer to sale than lower priced properties which means the owner is more likely to sell at a reduced price and more likely to accept an option.
What are the 2007 dates for your bootcamps?
Can you list the "bonus" items included for those that were on your conference call tonight? The price listed on-line is the same one that was told to all of us on the call...usually there's a break for the people that were on the call.
Thanks - enjoyed the conference call.
Steve
If you go to www.thelandinstitute.com you will see that the price for the course is $2495 but we are offering the course to the callers tonight for only $1995 if you purchase the course through TCI.
Bonuses include a $1995 dealmaker award where if you have The Redfield Group conduct your auction we will reimburse the entire $1995 cost of the course at closing.
Number 2 is you get to attend our 3 day raw land bootcamp for free which has always sold for $3495 or more. Also, TCI is giving a one year platinum membership to everyone that orders the course and that is a $250 value.
So you can see that we have packaged a ton of bunses for the members of the TCI (The Creative Investor) community.
The Bonuses TCI was giving out tonight is a yearly subscription to TCI's Platinum Access. To see what you get with that, click here:
http://www.thecreativeinvestor.com/modules.php?name=SignUp#details
I logged into the telecall late and did not get any info as to how to proceed with or contact Mike's company on how to proceed with the program. I am in an area Tupelo, Ms that recently landed Toyota's next N American production facility due to open 2010. This area being rural and all the commensurate industry / growth that should ensue, Any help on how I can contact him or his company is appreciated as well as feasability of this program for what I have just described.
You can reach me by email at mike@thelandinstitute.com
If you are interested in learning the techniques to apply on rural land in your area or any area of the country, you can order the course right here on TCI.
How do you qualify all the bidders/buyers?
For instance how do you prevent a portion of your bidders from backing out and leaving the deal high and dry?
Did I hear you right about if you meet the county's minimum requirements for lot divisions, they will have to approve the division? (I'm from CA so I know things are definitely different in the rest of the country)
How soon does the cash come in from the auctions? Is it immediately upon getting all the buyers lined up or do you have to have the property surveyed and divided first?
How long after the auctions close does it take to finish the deal to the point you walk away?
How much does your auction service cost for each auction?
We require every bidder to bring certified funds just to register to bid which qualifies them.
They will put down 10% hard money on auction day which is hard for them to walk away from.
No, we are going to stay outside of their requirements for subdivision which means no approval. There are exceptions to this rule but in most cases we will not need approval.
Usually the closing will take place about 30 days after the auction. We need that time to complete the surveys and get new legal descriptions for the tracts we have sold.
You walk after closing which is usually about 30 days.
It depends on the location of the property and advertising costs for that market. What we recommend is that you partner with The Land Institute on your first couple of deals. The Land Institute will front all of the marketing costs to do the auction and partner with you so that you have no risk at all. The auction company gets its commission from the buyer, so there is no commission charged to you.
Hi!
I just heard Mike speak and I ordered the Home Study Course. On the phone call, some additional bonuses were mentioned: One was the Dealmaker Award (a refund of the Study Course fee when the Redfield Group sells my first property), another was the 3 day bootcamp, and the Creative Investor offered a $250 first-year subscription. The Dealmaker Award and the year subscription were not mentioned on the ordering info. I just wanted to clarify that those are included?
Thank you! I am very eager to get started!!
Please see the Follow Up Email we just sent out. It provides the list of all you receive including all our BONUSES we gave out tonight.
Can you provide contact Ph #'s and or web site address for ordering of the course?
Thanks
You can click here:
http://www.thecreativeinvestor.com/Product362.html. Or you can call Sales at 703-778-5755
How would one get in touch with you about auctioning a land deal who is not a student of yours yet??
Is this property that you currently own or is this just a general question?
This is property that we own.
You stated:
We require every bidder to bring certified funds just to register to bid which qualifies them.
They will put down 10% hard money on auction day which is hard for them to walk away from.
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Are you talking about deals at 10k or will they still bid up to say 75k?
How will they finance these deals? mortgage on the property or hard money for the remainder of there bid?
How do the roads get put in? Or do we even have to worry about this?
Are the buyers/bidders future home owners or investors?
Sorry for all the questions, been investing for quite awhile but I like to find new ways to invest.
They will bid whatever they are comfortable in paying. I have had one man bid $6,700,000 and buy every tract at one time.
Cash or bank finance. I have never had someone close with hard money.
You have missed the entire concept. No development and we will use the existing roads to split the property. We do not want to invest cash or have any risk.
The vast majority are end users although their could be a small percentage that might be cash investors.
I like the concept.
I have been buying and selling land for several years and have a good track record of finding willing sellers with land to sell.
Is there anyone who has purchased Mike Fisher's course and would like to maybe partner up on some deals?
I have several websites and know how to find sellers with land and negotiate terms and low-down payments.
Let me know.
I found the information in the seminar very interesting as I am trying to save my home.I have 40 acres with mx track, shooting range and it has a goose blind , pasture, hay barn and corral. I have 5 months to redeem out of foreclosure. I would love to get your assistants in working this property. please let me know if your interested.
thank you, derwood
Landexpert,
Do we need to physically visit these remote sites?
No you do not. Once you have followed the steps outlined in the course, the auction company will do that for you.
In Hawai'i this isn't going to work as advertised- I don't know about the rest of the country, but in Hawai'i just because the property is zoned AG40A (Agricultual, 40 acre lots) that doesn't mean you can split it up into 40 acre lots without subdivision approval, which will require infrastructure improvements (roads at a minimum) and payments to the county to offset infrastructure costs they will incur. There is no way you could do this as described in Hawai'i- you would have to purchase first, apply for subdivision approval, get approved, put in infrastructure, and then sell lots- and they can take 180 days just to respond to your initial application.
However, you can form a "hui" (loose organization or group) to purchase the land together with pooled funds, and then seek subdivision approval or just agree on how to share the property as long as it doesn't constitute a "de facto subdivision". I have done this several times with various structures. But the idea of auctioning off membership in a hui is something I don't think has been tried and I doubt would be succesful. But you never know...
Chris
Chris,
We do not build nor plan to build any roads and we are not going to ask for the county to do so either. We only use existing roads to determine how we split the property. If there is not adequate existing roads to split the property into say 10 40 acre lots then we might only split it into 4 lots because of the existing road frontage. I hope this explains it better. The important thing to remember is, no matter where you are at, we are never going to split off of any thing except existing roads.
Even using existing road frontage, in Hawai'i you will have to get subdivision approval. And infrastructure assessments are for motre than just roads to the property- more lots means more houses, which will require police and fire protection, classrooms, water, wider highways to accomodate additional traffic- the list goes on and on. While in some areas the additional taxes are considered to pay for all this over time, Hawai'i has been growing so fast that the need for these things is immediate with increased population, and existing residents don't want to pay to provide them for newcomers. Increasingly, the burden has been shifted to developers through infrstructure assessments for new subdivisions. And to turn one parcel into more than one parcel is considered subdividing, period.
However, I am quite interested in this concept where it is unregulated. I am currently residing in Michigan; do you have a list of areas/counties/townships in Michigan where a large parcel can be broken into smaller lots without govenment interference?
Thanks,
Chris
Are you planning on doing any land deals in Hawaii. If so let me know.
Hello Mike and Chuck,
2 questions:
1 - If proceeds are sufficient at acution and it is decided not to exersize the option, what happens in the event that one of the auction purchasers is not able to provide full funding of their purchase?
2 - Can you provide me with contact information of one of your students who I can talk to and see their results? If so I am all for the deal.
Thanks - Mike
1. If you do not exercise the option then there will be no purchasers.
If you do exercise the option and one of the purchasers fails to close, then if there is still enough proceeds to exercise then you still exercise the option but retain ownership of that tract until you sell it again. 99% of the time we will be able to sell it to the backup bidder or another purchaser that was at the auction for a reduced rate and still close it with the others.
In the event that the purchaser was a big purchaser and they fail to close, which has never happened because they have to put down 10% hard money, then we have a clause in the purchase and sale agreement that all monies will be refunded in the event that seller (you) can not provide clear title to the property.
The same holds true for California, and I've seen in a couple cirumstances where even where a "legal" big lot to smaller lot splits were halted by environmental concerns - lot splits, parcel maps, are not easily done nowadays, not to mention a subdivision. It can be like pulling teeth.
But, I'm still trying to figure it all out on what's being presented here. Mike and Chuck seem to have a uncovered a new approach, I just don't know if it would work in CA. (Zoning is already pretty restricted with existing minimum acreages set in stone)
When we have attended your 3-day Training, & if I find the deal, negotiate it to your standards for your being willing to do the Auction, Do we owe you any monies toward the Marketing/Other Costs, after the sale? Or do you just receive the 10% Buyers premium from the end-buyers?