What do you say to the people that go, “That was 2000, that wasn't now. There are no deals to be had now. Nothing can be bought cheap. There are no auctions and COVID moratoriums.” What are your answers to all those questions?We're doing deals every day. I agree, what I paid for, I'm paying 25% more than I was in 2020 for the same property, but the ratios are the same now. I'm marking it up 25% more than I was selling it for. The ratios are still staying the same. Shannon, let me walk you exactly through the model and then you'll see how this works. Where do you live?
I live in Boise, Idaho.I'm going to pretend that you own 10 acres of raw land in Arizona, where I live, and you owe $200 in back taxes. You're advertising two important things to me. Number one, you have no emotional attachment to that raw land. You're in Idaho. The property is in Arizona. Number two, you're distressed financially in some weird way because you're not paying your taxes and we don't pay for things. We don't value them in the same way.
All I'm going to do is look at the comparable sales on that 10-acre parcel that you own for the last 12 to 18 months. I'm going to take the lowest comparable sale. I'm going to divide by four, and that's going to get me what Warren Buffett would call a 300% margin of safety. I'm going to send you an actual offer on that 10-acre parcel. Let's say it's the lowest comp is $10,000. Rescind your offer for $2,500.
Now, you accept the offer because this entire time, you've paid your property taxes. The county treasurer keeps sending you a noticing, “Shannon, if you don't pay your taxes, we're going to auction off that property to a tax deed or tax lien investor,” so you accept it. In reality, 3% to 5% of people accept my “top dollar offer of $0.25 a dollar.”
Now that you've accepted it, I'm going to go through due diligence or in-depth research. I'm going to confirm you still own the property. I'm going to confirm that the back taxes are only $200. I'm going to make sure there have been no breaks in the chain of title. I'm going to make sure there are no liens or encumbrances. I'm going to find out what's compelling about the property. Is there legal access? A big checklist that I outsource to my team in the Philippines that's connected to an American title company.
If I am spending more than $5,000, I'd bypass that process and close through a traditional title company, but for $2,500, I'll trust these guys. Everything checks out. I'm going to buy the property from you for $2,500. Here is where it becomes fun. I'm going to sell this property, three days or less. I would make a cashflow like a house. Shannon, I have a built-in best buyer. Do you know who it is?
I have no idea.The neighbors. I'm going to send out neighbor letters saying, “Here's your opportunity. Protect your view, protect your privacy. Know your neighbor.” Oftentimes, the neighbors will buy it. Now, if they pass, I go to my buyer's list. If my buyer’s list passes, I'll go to a little website you may have heard of called
Craigslist. It's the tenth most trafficked website in the United States. I'll go to even smaller one, Facebook, the Buy-Sell groups, Marketplace and then I go to the lands,
LandModo.com,
LandAndFarm.com,
LandsOfAmerica.com,
LandFlip.com,
LandHub.com, all these platforms where people buy and sell raw land.
The way that I'm going to sell it, I'm going to make it irresistible. I'm $2,500 into your 10-acre parcel. All I'm going to ask for is a $2,500 down payment for you to control that 10-acre parcel. Let me get a car payment, $449 a month, 9% interest over the next 84 months. It's a one-time sale. I'm going to get my capital out on the down. I might go 6 to 10 months out.
I'm then going to get $449 a month, 9% interest over the next 84 months. No renters, no rehabs, no renovations, no rodents and because I'm not dealing with a tenant, I'm exempt from Dodd-Frank RESPA and the SAFE Act, all this owner’s real estate legislation. The game that we play is to create enough of these land notes, where our passive income now exceeds our fixed expenses, and we're working because we want to, not because we have to.
Can you offer the no road and guarantee, or maybe in Arizona, it's the jungle rat, the horned toad or something like that?No roads because it's just raw land. What do I care?