Making Passive Income by Flipping Land
In this video, I’m going to show you how I started a vacant land flipping business to generate passive income and profit.
I’ve been interested in real estate investing for the past ten years or so, but the main hurdle to get started can be tough. I didn’t have enough money to buy a rental property or enough money or know-how to flip a house, and wholesaling can be difficult as well. So for a long time, I just sat on the sidelines trying to learn as much as I could.
And then I heard about people buying vacant land for below market value and then selling it for a profit. This was interesting to me for two main reasons: 1 – the barrier for entry is much lower, as vacant land can be bought for as little as a few hundred dollars and 2 – they weren’t doing any improvements to the land before selling it, so you don’t need any construction or renovation experience.
Essentially, this is a business of finding opportunities and creating win-win situations for the people involved.
Who is Selling?
So let’s get on the same page with a few things. Who is selling vacant land to you below market value and why? Well, a lot of people buy vacant land with dreams to build a home to retire in or a place to vacation to… and of course, life doesn’t always go according to plan and for whatever reason, the owner never builds on the land. Sometimes major expenses come up, or the land is hard to build on, or the construction costs are too expensive, or for whatever other reason you can imagine.
There is a lot of vacant land in the United States, so selling it at market value isn’t always easy. It can take years. And that’s years the owner continues to pay property taxes on the land and not really utilizing it to its full potential. So when they get an offer from someone like me, they may be inclined to just take the money and get the property off of their hands instead of hiring a realtor and waiting months or years for it to sell and paying that realtor a 10% commission.
It’s just quick and easy to sell it to someone like me.
Who is Buying?
So the next question is who am I going to sell the land to? If there is so much vacant land in the US, what’s going to make someone want to buy my lot?
So in addition to the people that want to build a home on the land, some people want to have vacant land for recreational purposes such as off-roading, camping, hunting, whatever.
If a buyer goes the traditional route of purchasing land – by having an agent send them listings off of the MLS or by searching themselves online, they either have to get a loan from the bank – which for vacant land can be hard to do – or they have to just pay for the whole thing in cash. And that right there is a huge barrier for most people, and it’s what you can offer that will convince them to buy from you.
Finding Sellers - Direct Mail
If you want to buy land and then turn around and sell it for a profit, you really need to find off-market deals – and there are a few ways to do this.
A popular way of doing this is by doing direct mail. Where you get these lists will all depend on the area you’re targeting. But, for example, you may be able to go to the county and put together a list of tax delinquent parcels. The idea here is if someone is behind on their property taxes, they may rather just sell the property than pay the bill or face repercussions from being tax delinquent. So when they get your letter in the mail offering to buy their property, they may be more receptive to it.
Since property data here in the US is public record, there are sites like ListSource and CoreLogic that will source all of this data based on your criteria to help you put together people to email. This of course, comes at a cost… the cost for the list itself and the cost of mailing, but it is one option you can try. You can essentially automate the entire process, having your letter to the owner fill in with their name and parcel number. You can even make a cold offer in the letter by taking the assessed value of that parcel and offering maybe 40% of that value. Of course, the offer is contingent on you completing your due diligence, so if an owner accepts your initial offer, you can then do your research and decide whether you want to go through with the purchase or not.
There are all sorts of different styles of direct mail you can do – like here’s a yellow letter example that Rachel and I received in the mail the other day for land we own that we are planning to build on. It’s supposed to look kind of handwritten and personalized.
They didn’t give us an actual offer, but their contact info we could hit up if we were interested in selling our land.
Usually every month or so, I do get a piece of direct mail with an offer to buy our land, usually so far below market value I just laugh it off. But once when I owned a parcel of vacant land in Arizona that I was having trouble selling, I got a piece of direct mail offering to buy it for $900. Since I purchased the land for $300, I figured I might as well, so I sold it.
The downside with direct mail is it can be a huge expense that yields poor results if you don’t do it correctly. It’s best to do a small test run of mailers – maybe a few hundred or so – to see if you get any leads before dropping too much money.
There is a ton of free info out there for direct mail on sites like BiggerPockets and ReTipster, so check those out if you want to learn more.
I ended up sending out a few hundred postcards to try it out, but I didn’t get any leads from it.
Finding Sellers - PPC
So when postcards didn’t yield any great leads, I decided to go a different route. I wanted sellers to find me instead of the other way around. I built a simple website with a form where they could submit all of the information about their land I may need to know in order to make them an offer.
Most of these real estate investor sites seem so plain and generic. They usually make it sound like they are a big investment firm when really it’s just Billy Bob doing it part-time. I decided to give mine a little more personality. I bought the domain danbuysland.com and made it pretty clear who I was and what my goals were. All too often real estate investors get a bad rap for ripping people off or being dishonest or doing bad work – and I didn’t want people to feel that way about me. My premise was I could buy land from people who no longer wanted it for a price we both felt was reasonably fair and then sell it to people who wanted it by either offering affordable payments or just taking the risk of ownership until it sells for a price I was okay with accepting.
The form on my site was quite long and detailed – you had to be pretty interested in selling to spend 10 or 15 minutes filling out a form – and that’s what I wanted. I used a platform called Podio to create the form, which is a customer management system. Any time someone filled out the form, it went into the platform where I could keep everything organized.
I would then look up the person’s parcel, find out about the area, what kind of zoning it had, if there was road access, etc.
Part of the form has the owner fill in what they estimate the land to be worth. Then below that, I ask for how quick they want it sold and how motivated they are. This also warms them up to the idea that I will probably offer something lower than they expected.
Ideally, I want them to answer a 5 for both because if they feel it’s worth about $19,000, but I can only offer $4,000 – they will be more likely to accept my offer.
For ads, I mainly ran a pay per click Google Adwords campaign. I targeted the keywords
“Sell vacant land,” “buy my land,” “how to sell my land,” and “sell my land.”
This would bring me 2-3 leads per day, which was actually really good.
I would then go through and do my research and usually email them an offer.
If they accepted my offer, I would get someone in the area to run a title search to make sure the title was clean, and then I’d go about closing the transaction.
What Kind of Profit Can You Make?
Some people are easily able to turn land flipping into a very lucrative full-time career. I used it to make some side income. My best deal was buying a 5 acre parcel in Los Angeles County out in the desert for $5,000.
Since it was a 2 and a half hour drive from me, I hired someone on Craigslist to drive out and take photos of the land for about $100.
Then, I posted it to Craigslist, offering seller financing. This way, if you have a few hundred dollars, you can start using this land worth way more, and I get a good return on my investment over time. And within three days, I found a buyer. The down payment I set was $500 and I also charged $250 as a document prep fee, because there’s deeds that need to be notarized and other costs associated with closing.
The payments were spread out over 8 years at $166 per month. I charged a $9 note servicing fee which covered almost the entire cost of using FreshBooks to invoice the buyer every month.
And just like when you get a mortgage on a home, the buyer is responsible for property taxes too.
So over the 8 years, I’d make a profit of about $11,000.
He ended up deciding to sell the lot earlier this year for $19,000, so he paid off the remaining amount he owed me, and he also made a small profit for himself.
Most of my other deals were smaller since I didn’t have a lot of cash on-hand at the time. For instance, I also bought a residential lot in Virginia for $1,000. I actually didn’t find a buyer for it for 2 years, but finally sold it for $2,000. After property taxes and closing costs, I made a small profit, but nothing to write home about.
The Arizona desert parcel I bought for $300 netted me about a 100% return of about $400 – so nothing too exciting, but all of this helped me gain some pretty valuable experience.
Since my first deal was the $5,000 parcel, I didn’t really have much left over to buy other parcels with, and it’s something I should’ve definitely considered more before offering seller financing, because I’m sure I could’ve sold it pretty easily for $10,000 without financing.
The Downsides
Now let’s talk about some downsides. First, it can be risky – especially if you are buying parcels sight unseen – which you often have to do since most vacant land tends to be in more rural and remote areas. The land could be unbuildable for a multitude of reasons. It could be 4-wheel drive access only and severely limit your pool of potential buyers.
You could buy a lot for more than you can actually sell it for and lose money. You could buy a lot and not find a buyer for a long time and end up losing money. You could buy a lot and find something wrong with the chain of title down the road and lose money.
One thing that I did that I wouldn’t recommend is I bought land nationwide. I wasn’t exactly sure which particular area I should focus on – so I didn’t. This made it really difficult as every state and every county has different ways they record the deed and pay property taxes, and it just became a major headache really fast. If you’re interested in doing something like this, I definitely recommend narrowing your target area to one state and then counties that you’re familiar with in how they operate with real estate.
Final Thoughts
Flipping land can be a daunting business to start, but in terms of real estate, it is fairly simple. There is, of course, plenty of risk involved, so you really want to make sure you do lots of studying and research before you get started. Again, I recommend checking out Bigger Pockets and ReTipster.com for lots of educational content.
The low barrier of entry and potential for passive income through seller financing is really cool, though.
That’s all for this video, if you would do me a favor and hit that thumbs up button, that would really help this channel out. Consider subscribing if you haven’t already and I’ll see you in the next one.