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An Investor's Perspective: Land Vs. Houses
People
always ask me why I don't focus more on buying and flipping homes
rather than buying and flipping land? For me, the answer is simple. In
order to buy a good home for a flip, you have to find a home that
already has equity. So you work the short sale markets, foreclosure
auctions, REO deals from your bank or the for sale by owner
advertisements all in the hopes of finding that special deal. Let's
say you get lucky and find a home that actually has equity in it and
you were able to secure it from all the other professional investors in
your area (and that is a big accomplishment). Now, you have to do the
exhaustive analysis. How much is going to cost to improve the house? Do
you need to replace the appliances? Are you in a neighborhood that would
require granite countertops? Will you have to improve the
landscaping? Is the cabinetry old? Typically, the best investment /
improvement in a home for flipping is going to be in the kitchen and
bathrooms. If you aren't set up to make these improvements yourself,
you're going to have to find a few contractors to help you. And of
course you know what they say good help is hard to find… After you have
priced out the improvements now you have to hire a realtor to help you
market and sell your property within the comps. If you bought right, and
you did your financial analysis correctly after the realtors fees,
title fees and improvements hopefully there is enough of a profit to
make this labor-intensive venture worth your while.
Now let's compare this to buying and flipping land. First, you have to buy the property at the right price just like a house. However, since there are fewer professional land flippers there is an enormous opportunity to find deal after deal and typically it's just as simple as sending offers to out of state owners whom owe back taxes. Voila! You have a deal. That was quick! Now, you don't have any maintenance issues, no worries about a past tenant damaging your land or any other headaches... It's just raw land. You can choose to improve it inexpensively by hiring a surveyor and marking the boundaries or fencing the property. Plus, inexpensive land is just that, inexpensive. You don't have to worry about bank financing, and all the other fees associated with buying a house.
Now, you can inexpensively market the property yourself online via Craigslist, eBay classifieds and other free online avenues to drive traffic to your listing. Since the property is relatively inexpensive you also have a larger pool of buyers to choose from as you aren't hampered by a neighborhood, school district or a home owners association that will limit your pool of house buyers. As a result, I can make a strong argument your return on your land investment will be less time consuming, take less financial analysis and make you a better return on investment with less inherent risk.
Let me know if you think I'm delusional.
By the way, learn how to avoid the 3 Fatal Land Buying Mistakes I see land investors make everyday.
Comments (8)
Jon, Annual return is around 300%. Regards, Mark
Mark Podolsky, over 12 years ago
Mark, what kind of annual return have you gotten with this technique?
Jon Klaus, over 12 years ago
Could you share the details of a few of your deals?
Michael X., over 12 years ago
Michael, The land deals I do are extremely simple compared to buying a home. The due diligence is completed via homeinfomax.com (title work) expertgps.com and google earth. If It's a big enough deal I'll hire someone from wegolook.com to take pictures and create a report or I'll go myself. Then, I acquire property either at tax deed or using a letter writing system contacting out of state owners whom owe back taxes on their parcels. Then, I typically offer /buy at 50% below assessed value and then flip online via auction or advertisements. It's a simple formula, but it works. Call me at 800-428-3760 tomorrow and I can walk you through a few of my deals. Regards, Mark
Mark Podolsky, over 12 years ago
Charles, Thanks so much and I appreciate the comment! Regards, Mark
Mark Podolsky, over 12 years ago
You make some great points and it sounds like this working for you. I'll have to check out your other posts related to land investing.
Account Closed, over 12 years ago
You have had success at this?
Wes Strite, over 12 years ago
Yes. Consistently for 11 years. Regards, Mark
Mark Podolsky, over 12 years ago