I created this topic because I'd like to hear from the guru himself - @Mark Podolsky aka "The Land Geek". He boasts on his podcast that he has the best passive income model, and even forces his "guests" to declare that he has the best income model, but I couldn't disagree more - this definitely isn't the BEST passive income model or even the best real estate model. I'm holding your feet to the fire just like you do your guests, Mr. Podolsky, and I welcome you to refute the points outlined below:
1. You made this niche sound cheaper than it is. In order to effectively have enough leads for this, you have to spend money on direct mail campaigns, which aren't cheap. Neither is getting the lists from counties, or the capital needed to outsource and systematize this business, etc. ( this isn't even including the exorbitant fee for your course). That adds up to thousands of dollars with no guaranteed return. The "1,000 % return" you claim clearly hasn't calculated all of these costs.
2. There's no amortization - it's difficult to obtain loans and private money for land, so you have to have substantial up front capital to make enough profit to live off, let alone get "rich". There isn't enough hedge against risk to make most lenders to provide leverage. If it's too risky for a bank to take on, is it not risky for the novice investor?) The fact that you have to use your own money not only limits the amount of transactions you can do - it also makes this niche MUCH more risky, and increases the chances of failure. Not to mention, this is one of the primary ways that people build wealth - using amortization to buy properties that they could't otherwise afford, in order to quickly build their net worth. Tell me who's wealthier: The guy who spent $30,000 on land, or the guy who syndicates an 8 million dollar apartment deal with NONE of his own money and 45% of the equity and cash flow? Yeah… That’s what I thought.
3. It isn't really THAT passive, unless you make hundreds of thousands to millions (like most gurus), to provide you the seed capital to outsource all of this. You constantly have to obtain leads, manage the notes, negotiate with the sellers, etc. It's not really an investment technique - it's a business.
4. There IS competition - you've made it sound like there's little, which simply isn't true. Even if there aren't people doing exactly what you do, there are land realtors - professionals who will list the property for more than you're offering the seller.
5. There's inherent risk involved: People need a roof over their head. No one NEEDS raw, undeveloped land. Real estate is cyclical, and land is one of the first asset classes to feel the sting of a recession. It's inherently more risky than many other asset types - especially during a recession.
6. You have to do a high volume to make a significant profit. This means more capital, time, and energy is needed to make substantial profits from this niche.
7. There are few, if any, tax benefits. There are four primary ways to make money in real estate:
a. Appreciation (which is risky and speculative in nature, and you're not enjoying the benefits of that because you don't even own the land if you follow your strategy)
b. Cash Flow (which is quite limited in this niche - I listened to one of your youtube vids and the examples you gave were not only pretty unrealistic, but also pretty low profit)
c. Tax Benefits ( there's no depreciation for land, only for real estate assets on a piece of land)
d. Amortization ( as mentioned above, this isn't one of the benefits that land flippers like yourself can enjoy, either)
8. This, by far, is what bothers me the most about this niche. At the end of the day... YOU DON'T EVEN OWN THE ASSET!!! Like seriously, how could you even consider this the best income model? You're basing your future on internet randoms to do the right thing and pay you a few hundred a month for an asset they don't even need (which is a horrible business model by the way - there is a reason that the financial sector hinges on creditworthiness standards. Can you imagine if Wall Street followed your model and just took people at their word that they would pay you? We'd enter the Apocalypse! lol). There are many other forms of real estate that provide cash flow, little maintenance, appreciation, tax benefits, AND allow you to actually own the tangible asset. The cash flow you would make from one piece of land lasts how long, 5-15 years? You can hold onto an apartment and generate cash flow from it FOREVER. There are other property types that you wouldn’t even have to deal with tenants and toilets the same way you would in residential – industrial buildings, for example, are pretty low maintenance.
Anyway, please feel free to respond. I feel like you’re kind of being deceptive to impressionable people out there, and since obviously you weren’t going to bring any of this up on your podcast, I felt compelled to.
