How I made 1k-5k a month dividing land.

General Landlording & Rental Properties
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How I made 1k-5k a month dividing land.

Adrian G.
Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes

Ok first off I would like to say that I am not a land dividing professional nor do I claim to be, I am simply posting what I have learned on my own and done myself. For all of you who try this please make sure to due your due diligence before purchasing land and BEFORE you try to divide it. Certain cities do not like this but it’s your obligation to research this….again. (Common sense here). This is only a brief overview and I will not be going over every detail in depth so please keep everything positive or at least constructive. Some of you might have even seen me asking questions recently in regards to the subject but its only for my researching to see what other creative investors thought and to see how NEGATIVE comments could affect your thinking.
After years of rehabbing properties and becoming incredibly lazy, I find myself wanting to start investing in land but I figured that I never had enough cash or credit to be investing in huge deals in major cities where I would be happy with the kills (its not always about money). So I came up with another plan that has worked for me…….Purchasing land with the plan to divide them in to smaller sizes.

How I started:
RESEARCH RESEARCH RESEARCH

Apparently, when you own a property you can sign it over to anyone, this even works in percentages of ownership …..3%.....5%.....25%...85%.....etc etc. I used this to my benefit by doing the following (for example) I purchased a 5 acre parcel that was only used for hunting and camping for $4,000k. I took my 5 acre property and turned them into lots sizes of .10. Now 5 acres divided by .10 leaves me with 50 lots. Now Im sure your asking how I turned them into .10 which is how WE MAKE MONEY, I sell them as undivided interest.

What is undivided interest?
Selling land as “Undivided Interest†is when you sell or trade or issue a lot that is not a parcel on its own, it has been issued from the owner who purchased it as a hole. You can also look at it as someone who DID NOT go through the city, zoning, surveyor, etc to actually subdivide your large parcel, acres, land/lots. You DO NOT GET YOUR OWN PARCEL NUMBER OR TAX ID. What you do get is your very own DEED stating you are the owner and the approx size of your lot…..WHICH HAS NO SPECIFIC DEFINITE LOCATION.

Back to the 5 acres example: So I am turning my 5acres into 50 lots sized .10 each undivided interest..
Which means who ever purchases a .10 lot becomes an owner of a .10 lot but has no specific location so they have access to ALL 5 ACRES.

I had a lawyer write up a deed which I copied 50 times haha and pretty much filled them in one by one (again, I am skipping a lot of technical details so don’t take me words for being easy). Anyways, Im in the hole $4k right now and with 50 lots that are being sold “undivided interestâ€. We are not done…lets talk about how I sell these.

How I use ebay to make MONEY MONEY MONEY.
For some reasons there are a lot of guru’s out there that make money on ebay because they say EVERYBODY will buy ANYTHING on ebay, so I put this to the test on a larger scale.
There is an UNWRITTEN rule for selling (land) on ebay, its that the average closing costs are about $195-$300. This is where you have the potential to make money on top of your auction, The fees that certain states/counties charge are minimal (at least the ones I prefer to do business with). 90% of the time I charge 300.00 for closings costs minus ebay fees for selling is 70 bucks, This leaves me with approx 230 dollars for me.

Ok now Im still in the out the $4k and have 50 lots BUT the potential to make $11,500 in profit from CLOSING COSTS ALONE. (230 X 50=$11,500). I have had some auctions sell for 5 dollars and some sell for 250 but over all your still seeing a higher profit then the original $11k that your expecting. (auction winning bid +closing costs difference=YOUR PROFIT)

Questions about buying before or after the sale….
Well this is the most difficult part that people don’t seem to understand, they become your co-owner or tenants in common. The easiest way I find to sell these lots undivided interest is to be COMPLETELY HONEST AND UPFRONT ABOUT EVERYTHING. I tell them that sometimes I make the lots so small that its no longer buildable, or that they are not the only owner, etc. Most of them just buy the lot to keep in there portfolio or to resell at a later date or to just have something they can go camping on or hunting etc.

Now you want to know how much much I have actually made doing this...??
Well my first month actually putting this plan into action (I own other lots that I have done this with some making more money and some making less) But Already Im seeing a massive profit.

Actual deal:
-Feb: 5acre parcel for 4k……50 lots at .10
-As of 06/08 I have sold 26 lots
-26 lots x $230= $5,980
-26 lot auction prices ranged from $3 to $260= $2,900

$5,980 + $2900 = 8,880 (approx)
$8,880-$4,000= $4,880 (PROFIT)

This one deal brought me in $4,880 in profit (approx) and I have about 8-9 deals going on right now, This just goes to show you with enough researching and motivation that anything is possible.

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Most Popular Reply

Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y

Hi, Y think I brought this up to sell and undivided interest, however, I never said to divided the area up into lots. You stated that you mad the lots so small that they are unbuildable/ OK,

Did you check with an RE attorney before you did that? In many states, to provide a legal description (dividing property by setting property aside with a newly created legal description) may only be accomplished by a licensed survey engineer or an attorney. If you broke up the whole and conveyed title, you're likely in violation of the law.
Also, there may well be limitations set by presidence. Deeding an undivided interest to 3, 5 or maybe 8 people is ohne thing, 50 or 100 seems to be another. Effectively, while you don't care because you got the money from the transfers as if you sold the property, you have destroyed the property as to having good title in the future, with title being insurable. When on of your buyers dies and the interest goes to their estate, it may be settled amoung two or twenty people and if one is not found in that estate there may be a problem, now multiply this times 50. Years down the road the property may not be insurable without perhaps 300 people signing off on it, that just won't happen. Wrecking title may have other consequences. Now, had you held the property in a corporate name and admitted memebrs to the entity, title never would have been put in that state.

There are proceedures for dividing property and selling off partnership interests, several means as a matter of fact. Using e-bay may have other consequences as well, as to charges that might be applicable from buyers.

I'm not saying that laws were broken, I'm saying there may have been and I rea;lly doubt it if your would be aware of it, in fact, I would not be surprised if you talked to an attroney and that attorney did not recognize these tranasctions as wreckless to title. Think of it this way, someone can own property and sell it and pass it on. It is an asset, not only to mthe person in titlre, but also to the state. Placing title in a situation where it can never again be passed in it's legal described manner as a whole, simply makes the property useless, to it's current owners, future owners and the state. There are illegal subdivisions, to cure these problems someone may go to court to have it correccted, like a title company, and when that happens, the party that was responsible, years ago, have been held liable for costs and damages. Say the government needs the property for a highway, sewer line or whatever. In the event of eminate domain, the property is appraised. My opinion would be that the property would be almost worthless, perhaps a liability. Where would comparable sale be to judge value? There aren't any, and no, you can't use the subject property sales.

It's interesting to see what will happen in the future, and depends on how you went about breaking up the title to sell the interests off. It may even come under SEC regs as well. Depends on the state, but before anyone tris to do this I wouold suggest that they get with a good attroney and be advised all the way through the transactions.

Congrats on the creative thought process.

Creative thought is good, but it doesn't mean you can do anything your imagination can dream up, just because you can put it in a contract. Good luck, Bill

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  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    16y

    Seems like a ton of work for $5k in profit. How does the time for dollars trade in this exercise compare with your rehab projects?

    BTW...Thanks for sharing.

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Well the learning process always takes time in the beginning but now that I know what to do its actually pretty simple . I check it a few times a day and answer a trillion and one questions from buyers, I feel this is soooo much faster and easier and less stressful then doing a rehab. No contractors to worry about, no major unexpected costs, most importantly......THE HOURS ARE AMAZING and I get do most of this from my home.

    0Reply
  • Tod R.
    Investor · Southlake, TX · Member since 2009 · 950 posts · 338 votes
    16y

    Hi Adrian. You have a very interesting strategy working. I have a few questions.

    1.If I buy a "lot", don't I own 1/50 of 5 acres?
    2. What can I do with my interest? How does access to the site work? if I want to go hunting, do I need permission from all or majority owners?
    3. I don't know eBay very well at all, but can't you put a minimum bid price to increase winning amount?

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Thank you very much Tod and to answer your questions....

    1. If you buy a lot YES you own 1/50 of 5 acres, but you are allowed to use the WHOLE 5 acres since its undivided interest. (no EXACT location).

    2. Most of the land I purchase has access to the lots through easements or deed access, If you go hunting you do not need permission from the owners but YOU MUST follow state/federal laws (vests, 450 feet from all homes etc) You can hold or sell your interest whenever you want without permission from other owners.

    3. YES, you can set minimum pricing, you can set reserves (if it doesnt sell for a price your happy with then you dont have to). I choose to sell with no reserves so if it goes for a $1 or $400 then thats it I still make a profit.

    1Reply
  • Tod R.
    Investor · Southlake, TX · Member since 2009 · 950 posts · 338 votes
    16y

    Good work! I'm just curious as to why someone would buy this.

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Well its a cheap, small investment, and potential good deal for people who want to use the land for hunting/camping or etc. Actually about half of the people who have purchased from me have purchase undivided interest before and had only good things to say about it.

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Hi, Y think I brought this up to sell and undivided interest, however, I never said to divided the area up into lots. You stated that you mad the lots so small that they are unbuildable/ OK,

    Did you check with an RE attorney before you did that? In many states, to provide a legal description (dividing property by setting property aside with a newly created legal description) may only be accomplished by a licensed survey engineer or an attorney. If you broke up the whole and conveyed title, you're likely in violation of the law.
    Also, there may well be limitations set by presidence. Deeding an undivided interest to 3, 5 or maybe 8 people is ohne thing, 50 or 100 seems to be another. Effectively, while you don't care because you got the money from the transfers as if you sold the property, you have destroyed the property as to having good title in the future, with title being insurable. When on of your buyers dies and the interest goes to their estate, it may be settled amoung two or twenty people and if one is not found in that estate there may be a problem, now multiply this times 50. Years down the road the property may not be insurable without perhaps 300 people signing off on it, that just won't happen. Wrecking title may have other consequences. Now, had you held the property in a corporate name and admitted memebrs to the entity, title never would have been put in that state.

    There are proceedures for dividing property and selling off partnership interests, several means as a matter of fact. Using e-bay may have other consequences as well, as to charges that might be applicable from buyers.

    I'm not saying that laws were broken, I'm saying there may have been and I rea;lly doubt it if your would be aware of it, in fact, I would not be surprised if you talked to an attroney and that attorney did not recognize these tranasctions as wreckless to title. Think of it this way, someone can own property and sell it and pass it on. It is an asset, not only to mthe person in titlre, but also to the state. Placing title in a situation where it can never again be passed in it's legal described manner as a whole, simply makes the property useless, to it's current owners, future owners and the state. There are illegal subdivisions, to cure these problems someone may go to court to have it correccted, like a title company, and when that happens, the party that was responsible, years ago, have been held liable for costs and damages. Say the government needs the property for a highway, sewer line or whatever. In the event of eminate domain, the property is appraised. My opinion would be that the property would be almost worthless, perhaps a liability. Where would comparable sale be to judge value? There aren't any, and no, you can't use the subject property sales.

    It's interesting to see what will happen in the future, and depends on how you went about breaking up the title to sell the interests off. It may even come under SEC regs as well. Depends on the state, but before anyone tris to do this I wouold suggest that they get with a good attroney and be advised all the way through the transactions.

    Congrats on the creative thought process.

    Creative thought is good, but it doesn't mean you can do anything your imagination can dream up, just because you can put it in a contract. Good luck, Bill

    5Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Bill,
    I did have a RE attorney write it up and we did not SUBDIVIDE it in to individual parcels, we simply sold off interests in the property. Not lot # 105-106 -107.....but simply sized lots (Im using the words lots bluntly), which from a few attorneys I talked to and used they said I am not doing anything illegal as long as everyone knows what there getting them selves into upfront and in detail. I spoke to the counties and certain state departments and not only do they do it THEMSELVES but they also promoted the fact that these sort of opportunities bring more to the areas.

    Now I will agree with you that I am making the property useless "IF:" someone wanted to come and purchase it as a whole then they would have to go to each owner and try and buy it from them. In the other case I look at is a way for people to acquire ownership rights of a property at a very low costs and for them to use the property to its greatest and highest use. What you can consider useless we can consider a small investment that gives the opportunity to use great land for multiple purposes.

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Ok, good man, but highest and best is as of today, who knows what it might be 10 or 25 years from now. Forever is forever, or like I mentioned, if it is set aside. Glad it worked out for you, it may not in other states. Take care, Bill

    0Reply
  • Steve L.
    Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes
    16y

    I think it is definitely a creative strategy to raise some initial funds. I don't know how re-creatable or scalable it is.

    How'd you decide on selling 1/50th? Why not 1/100th?

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Well Im always up for making money :)
    In regards to the size...for me, it all depends on how big the original land is. Im not going to make 200 lots out of 1 acre and I dont want it to be so small that people wouldnt want it, for some I end up doing .05 or .10 or even .30. I guess in reality I can do whatever but then it just becomes a hassle with the paper work so I figure lets not be too greedy and just make reasonable sizes for everyone and so I can make a great profit :)

    0Reply
  • Account Closed
    Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
    16y

    It will be interesting to follow up on this in the coming years. Definitely a very creative way of selling a property.

    1Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y
    Originally posted by Charles Perkins:
    It will be interesting to follow up on this in the coming years. Definitely a very creative way of selling a property.



    Thank you Charles for the POSITIVE feedback and yes its very creative.
    0Reply
  • John C.
    Real Estate Investor · Hilton Creek, CA · Member since 2009 · 31 posts · 4 votes
    16y

    Thanks for taking the time to put your technique out there. I'm going to give it a try by using a corporation and selling partnership interests. I have the feeling it will be fairly involved (and ex$pensive) but my family will be a part of the venture and co-owners.

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Give it a try John, let me know if you have any questions or hit any bumps along the way.

    0Reply
  • Dan Krause
    MI · Member since 2009 · 289 posts · 14 votes
    16y

    Adrian: Do you think your idea would woork in a "war zone" real estate market like Detroit-where values are cheap (commercial, industrial and residential)? Thanks Dan

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Dan,
    I believe it would work in a "war zone" or Detroit in general, I mean getting it done is 1 thing and selling it at auction is another.

    I have purchased small lots from 300-700 bucks before and still made a pretty good profit off of them so anything is possible.

    0Reply
  • Matt Mathews
    Real Estate Consultant · yucaipa, CA · Member since 2008 · 233 posts · 109 votes
    16y

    I don't know who your Attorney is, but you better find another one. What appears to be a creative idea turns out to be a TIC! Tenant in common shared ownership. This transaction falls under Fed. IRS statues. Must be less than 35 participates to be border line-non security. Usually these types of offerings entail large commercial cash flowing properties. What you are doing, quite frankly is totally Illegal. Not necessarily the concept, but rather the over all structure of the offering. Not to mention Ebay makes it a public offering/Interstate RICO rules are in effect. Go to Jail-Do not pass go!! I've sold these types of Investments all my life as a Registered Investment Advisor/CFP. I can assure you that this one doesn't cut the mustard!!!

    1Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    Hey Matt....I appreciate your feedback, Yes I did state (in a previous post) that this does create a tenant in common shared ownership. I spoke to quite a few different RE attorneys and with the states and counties I am doing business in regarding this subject and with my plan and I have yet to have one who said it was illegal or even frowned upon. Now Im not saying to people that they shouldnt do there own research but anyone can realistically and LEGALLY sell fractional interests of there property. Not only am I doing it but there are certain states and counties doing this as well.

    0Reply
  • Dan Krause
    MI · Member since 2009 · 289 posts · 14 votes
    16y

    :D Adrian: If you could tell us how you solicited the investors-what method of marketing to find them?

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y

    I actually have only been using Craigslist and ebay and to my surprise its been doing quite well. I basically just state the facts and answer questions the best I can.

    0Reply
  • Dan Krause
    MI · Member since 2009 · 289 posts · 14 votes
    16y

    :D Adrian: The land you bought was recreational land-out in the country? Away from the city? For those of us who live closer to urban areas-to buy a plot of land, for say $1,000.00, and divide by 10 parcels you would need 10 investors. But given the downward price trends in so many urban areas (even war zone areas no matter how cheap) why should 10 investors buy even 1 "interest" in a plot (your or my property) if there is no telling when we will see a return? I mean you or i would get upfront payment from "10 individual investors" but have no way of letting the investors know if they might ever see a return. Thanks, Dan

    0Reply
  • Account Closed
    Real Estate Investor · Los Angeles, CA · Member since 2010 · 67 posts · 3 votes
    16y

    @ Dan


    I think in this case, the buyers don't necessarily have to be investors looking to make money on this deal, but people who want to use the land. (I dont know how much it costs to go camping, but if its say, 30.. you go ten times, and you got your money back).
    Like people who buy a timeshare, they're not looking to make money on it, but want to use it. When and if they want to sell, they can.

    And my question sort of relates to Dan's, in that I'm wondering if this would this only work on land that has value (non-monetary.. like the possibility of hunting or camping) to the buyer?

    Because, then, I might agree with Dan, that it may be hard to sell interest in land that has no use and is just sitting there, where no one can build.

    Interesting though!

    0Reply
  • Dan Krause
    MI · Member since 2009 · 289 posts · 14 votes
    16y

    :D Thanks Misia. Dan

    0Reply
  • Adrian G.
    OP
    Real Estate Investor · Chicago, IL · Member since 2008 · 318 posts · 30 votes
    16y
    Originally posted by Dan Krause:
    :D Adrian: The land you bought was recreational land-out in the country? Away from the city? For those of us who live closer to urban areas-to buy a plot of land, for say $1,000.00, and divide by 10 parcels you would need 10 investors. But given the downward price trends in so many urban areas (even war zone areas no matter how cheap) why should 10 investors buy even 1 "interest" in a plot (your or my property) if there is no telling when we will see a return? I mean you or i would get upfront payment from "10 individual investors" but have no way of letting the investors know if they might ever see a return. Thanks, Dan

    Dan,
    I see your points, but isnt that the real estate game??? Do we ever know what kind of profit were gonna make off a property or if our property will even sell in ANY market?? No but the only thing you can do is research as much as you can and be honest about the intentions of the property and move forward. Also the way you phrased your questions make it seem like your going to investors using the parcel maybe as security (that is not the case here and if I misunderstood it I apologize). Im simply selling fractional interest in my land that is used to its highest and best use which is recreational (example: camping or hunting). Just because you cant build on it doesnt mean its useless.

    0Reply
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