40 Acres is Better than 2 Acres most of the time – Not Always

Would you rather own 2 acres in Newport Beach California or 40 acres in Northern Arizona?

It seems like this statement doesn’t need explaining. But the nature of the topic goes back to Location, Location, Location (three rules of real estate).

The process to purchase both properties is exactly the same: Identify the market(s) as a place where you want to own, rent, control, flip, or develop undervalued property, access the accessor data, and send written offers to the property owners in the mail.

Here’s the difference; we regularly purchase 40 acre properties in Northern Arizona for $4,000 using the direct mail methodology and sell them for $8,000. 2 acres in Newport Beach can cost $500,000 to $20,000,000 depending on the area so sending offers for appropriate wholesale amounts is a little more complex, but none-the-less very accomplishable. Our colleagues do it regularly.

Given that point of view, would you rather have an acquisition and sales machine in place that buys and sells 40 acre properties each week for 100% margins (double your money) or try to hit a home run once a year on a single property in a place like Orange County? Or both?

We choose both. In fact, we machine-like wholesale land as well as SFRs using direct mail and the home runs find us.

So 40 acres is better than 2 acres for us, most of the time because all of the systems are in place. In the time it would take to turn the Newport Beach example we will have completed several hundred whole sale deals if not a thousand. For sake of example, each deal makes nets about $2,000 so at 500 completed transactions, that’s $1M in generated equity “machine style, day in and day out, year after year.” In our case its without incurring debt or paying realtor fees or any other related variable costs except the purchase price. Tons of small simple real estate turns vs. one large one.