Investing in land is a great way to diversify your investments.
Residential or commercial development, livestock or row crop land, and small farm investments are some of the most common ways people invest their money into land. It all depends on how much budget you have, the time you have to see a return on your investment, and how much risk you are comfortable taking.
If you’re looking for a low-risk way to invest in land with little money where you can start seeing your returns almost immediately, the most profitable and most overlooked land investment niche—vacant land investing-is where you want to start.
You can learn about vacant land investing from several free resources, podcasts, in-person coaching and courses.
This model is low-risk, low competition, and the market is huge.
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What is Vacant Land Investing?
Simply put, you find those who are want to sell their vacant land, purchase it for $.25 on the dollar, and then sell it at market value to people looking for land. In addition, you can offer owner financing to make the dream of land ownership easy and affordable for your buyers while generating passive income for yourself.
Why Vacant Land?
Vacant land doesn’t come with any of the headaches that you get with traditional real estate investments, like leaky pipes, renovations, lawn care, tenants, etc.
It’s a low-risk investment. Vacant land often has fewer restrictions and codes than houses and buildings. Without tenants, you are not faced with common onerous real estate legislation like Dodd-Frank, RESPA or the Safe Act. The worst-case scenario is you are stuck with a parcel of land that will most likely appreciate in value over time.
There’s little competition. Big money like private equity groups and hedge funds all avoid this niche because they have too much money to invest.
It is a huge market. There are 3007 US counties and billions of land available. Plus, you are not confined to work in your local area.
It doesn’t take a lot of money to get started. I started in vacant land investing with only $3,000, but I’ve seen people get started with as little as $500.
Do People Want Vacant Land?
Vacant land is an exciting opportunity for millions of people. It opens up a whole world of opportunities to have a spot to stretch out, explore, hike, and recreate without the nuisance of crowds or oversight. It could be the dream site of a person’s house or cabin, or respite. It could also be another investor!
Why Sell Vacant Land?
There are several reasons someone might want to sell vacant land.
Perhaps the current owner inherited it from their relative and otherwise has not interest in the the land, does not live near the land, or they aren’t interested on keeping up with the taxes. Perhaps the current owner has moved away and can’t frequent the property as they used to. Perhaps some extenuating circumstances have come about like health, divorce, etc.
Just because someone is looking to sell their vacant land does not mean there is anything wrong with it, instead it may just no longer fit into their lifestyle. In addition, since the land is not occupied by the owner at all times, it can often be easier to find a motivated buyer.
How Does Vacant Land Investing Work?
Let’s break this process down with an example.
The first step you’ll take is to decide the area in which to work. A great place to start is the “sunshine states” like Florida, Arizona, Colorado, New Mexico. Within those places, you’ll want to look for an area with vacant, recreational land.
Tip! I recommend looking where other land investors are working. That means there is a healthy market.
After that, you will want to find an owner who is behind on paying property tax. This is an indication they’re not very interested in keeping the property because they have not kept up with the payments. Because of this they’re more likely to be a motivated seller.
The next step is to make a purchase offer to the owner. But first, you will want to calculate the offer price. To calculate your offer, start with “comp research” for the sales of similar properties in the area from the previous 12 months. If most properties are selling for approximately $8,000, then you’d offer approximately $2,000. This way you have given yourself a good margin.
Now I know you’re asking “why would someone accept $2,000 for a property that has comparable sales of $8,000?” It is because you helping them by taking it off their hands without having to go through the process of selling it themselves. In fact, I usually will up to five percent acceptance rate.
When you have calculated your offer, you will then mail the landowner your “top-dollar” offer of $2,000. And let’s say for this example that the owner agrees to your $2,000 offer.
The next step is to do due diligence on the property before purchasing it. It is important to ensure the seller is the legal owner, that there is legal access, and the existence of any liens etc. If the property passes due diligence, we are ready to close the deal.
Tip! While due diligence can sound overwhelming, there are plenty of resources out there to guide you through the process. I’ll share some later on, so be sure to read on.
Now you are the owner and need to secure a buyer.
There are many places to find buyers, but your first stop should always be the neighboring properties. Neighbors can be a good place to start a neighbor frequently has an interest in protecting their land, access, view or privacy. I’ve even had neighbors get their relatives to purchase surrounding properties so they can all camp and recreate by one another.
If the property’s neighbors aren’t interested, then you can promote the property to various internet sites like Landmodo, Lands of America, and Land Flip. Other great places to sell the property are places like Craigslist, Facebook Marketplace, even eBay! As you become a more seasoned land investor, you will even build a “buyers list,” an email list of past purchasers and potential buyers.
When it comes time to sell your property you can decide how you want to sell it. One options is for a buyer to secure it for cash at $8,000. Alternatively, you can sell using owner financing wherein you request a $1,000 down payment and a low, ongoing monthly payment. Keep it around a few hundred dollars. This makes the property irresistible and much more affordable to potential buyers.
The best part about selling the property with an ongoing monthly payment is-don’t look now-you now have generated passive income.
And that’s it! After you’ve done one deal, you’ll turn around and do it again and again. It’s a great way to build up your retirement savings, cut down on debt, and more.
For some, land investing is such a lucrative opportunity that it fully replaces their income and they are able to quit their jobs or retire their spouses.
What Does It Take To Get Started?
The great thing about land investing is that you can bootstrap it to get started. If you just want to get the taste of how it works and get the proof in the first deal, then you do not need to set up an LLC right out of the gate or build a website right away. However, there are some essentials you’ll need at the beginning to successfully make your first deal.
Here are some things that will help you when doing your first land deals.
Delinquent Tax List
If you recall, your first step was to find a motivated seller, which often comes in the form of someone who hasn’t kept up with their property taxes. There are a couple of different approaches to getting a tax delinquent list. Either you can call the county treasurer yourself to get the tax delinquent list, or you can use a service like DataTree that will provide a tailored list for you. The option you choose will depend on how much money and effort you’d like to spend.
Direct Mail Service
While in the example you only mailed one offer letter, in reality, you will cast a wider net. This means you may be sending out 500-1,000 mailers. It’s helpful in this instance to use a direct mailing service like Lob to assist you.
With all that direct mail going out, it’s also helpful to have a business mailbox for anything you get back instead of using your personal address. There are even virtual mailbox services so you do not have to make unwanted visits to the post office.
Photos of the Property (Or Surrounding Area)
When it comes time to sell the property, you’ll want to entice potential buyers with a great ad and that includes photos. You may be able to get photos from the previous seller. If not, you can find a photographer or someone to go to the property and snap some photos for your use.
The most important thing you can do when getting started is to educate yourself on the ins and outs of vacant land investing. While it is a simple business model, there are lots of moving parts to master.
There are a bunch of free resources out there that can help you get started, like podcasts, Youtube videos, and blogs. These are great to help familiarize yourself with the process, get comfortable with the terminology, and pick up some great tips from fellow land investors. Every week on The Art of Passive Income Podcast, I guide listeners through ways to use land to grow their passive income.
To speed up your learning curve and avoid costly mistakes, I recommend investing in a step-by-step guide to vacant land investing, like The Investor’s Toolkit. This do-it-yourself online course walks you through every step of vacant land investing from county research, pricing, due diligence, marketing, closing sales, and more. Plus it includes ready to use templates and paperwork so you can quickly start sending offers. It also teaches you how you can automate and outsource various tasks so that your land investing business becomes a machine.
Coaching is another great option if you are someone who thrives from live training. While this is a more expensive option, it’s a great way to provide you with accountability, tailored learning for your needs, and direct access to successful land investors.
When I started vacant land investing over twenty years ago, there were no classes or training like these available. In fact, when I got started I had no real estate investing experience whatsoever.
I was stuck in a job that I hated as a business broker with long hours and an overbearing, micromanaging boss, and I was the sole provider for my wife and six-month-old baby. That is when fate intervened, a new hire at my firm told me how he was making money hand over fist buying land at county tax foreclosure auctions.
I took the last $3,000 out of our savings, went to my first auction, and bought 30 parcels of land. Within 30 days, I sold all 30 parcels for a total of $12,000—A 300% return on my investment.
At that moment, I was hooked! Over the next 18 months, I set out to master every detail of the business. I kept finding great deals and making even greater profits, building systems along the way.
I will freely admit, I made plenty of mistakes along the way (some pretty costly). But with every mistake, I revised my systems and strategies so that I wouldn’t make them again.
But you do not have to make the same costly mistakes I made, because now the tools exist to shortcut those. So I encourage you to make the upfront investment in your education so that you can save yourself time, headaches, and money.
Vacant land investing is the best way to invest in land. It is a simple business model that can generate passive income so that you can build on your retirement, cover some bills, or even quit your full-time job. While this land investment method is not totally hands off like some others, once you put the systems in place you can create a passive income machine. If you’d like to learn more about vacant land investing, you can learn more at thelandgeek.com and chat with our team.
About THE AUTHOR
Mark Podolsky of The Land Geek, is one of the most trusted authorities on buying and selling undeveloped land in the U.S. He has completed thousands of transactions with his A+ BBB real estate company. Mark authored the book Dirt Rich and is the host of one of the top-rated investment iTunes podcasts. Mark coached, mentored, and lectured hundreds of land investing entrepreneurs over the past two decades.Read More About Mark Podolsky