Why Is It Land Investors Understand Houses, But House Investors Don’t Necessarily Understand Land?

By Jill DeWit & Steven Jack Butala, co-founders of Land Academy & House Academy

[Jill] Having been in the property wholesale business for over 25 years, we have bought and sold every type of property imaginable. We never shy away from a great deal and have gained the reputation of being acquisition experts. Yet over the years we have noticed some types of properties get attention, while other considerably profitable asset types do not.

Our two main focusses for the last several years have been rural vacant land (RVL) and single-family residences (SFR).

[Steven] Here’s why: Land and SFRs are valued as “assets,” and nearly all other property types are valued with Capitalization Rates (based on how much money they generate after operating expenses but before debt service). This spells higher profit for an outfit like ours. We double our money on land deals and generate about 33% margin on SFR deals without leaving our desks.

[Jill]The crazy generality we have experienced is that the land wholesale community understands the value of houses, but the many in the house wholesale community cannot wrap their heads around the value of flipping rural vacant land.

[Steven] House People say things like “why the hell would anyone buy property way out there?” “Or there’s nothing you can do with land that will generate cash flow.” To which I say, so you wouldn’t by 40 acres in Tucson for $3,800? You can image this response and debate this sparks.

Land People seem to accept both as data driven profit centers.

[Jill] This all came to light for us as we were creating House Academy. We thought that we would have one large online community with a combined support suite of tools and resources but as we dug deeper into the mindset of house investors (“flippers”) we realized the two are quite different.

So what is everyone getting hung up on?

Hard to find sales figures for land transactions.

Many land transactions are completed outside of the MLS and not necessarily accurately reported. We commonly transfer properties among our different entities and are not required to report any sort of transfer valuation.

Also, most have not heard examples of individuals creating wealth buying and selling undeveloped land, yet it happens all the time. Since is it difficult to obtain a loan on vacant land, most parcels are 100% owned and often have been in families or businesses for years waiting for some action to be taken. We purchase these undervalued properties for cash and quickly resell online for more.

[Steven] Most people don’t know that you don’t need a license to buy and sell any kind of real estate including SFRs if you are representing yourself. House deals have historically involved licensed real estate agents and the MLS. And this is where the lies and deception begin. The national association of realtors is consistently one of the top five spenders in Washington to make sure that false perception remains prevalent.

Poor information about the value of unimproved land.

[Jill] We still hear real estate professionals call vacant or unimproved land as “junk lots” or “middle of nowhere dirt”. Many feel that property is only worth something once it has been improved or built upon. Being acquisition pros, we know how to find and buy vacant land extremely below current market value which therefore makes it immediately valuable.

Not HGTV worthy.

[Jill] We have yet to see a show about buying and selling vacant land for a profit. We are all engrossed with houses that make little (or no) profit, take a lot of time, and energy. It’s funny because having successfully done both types of transactions, we have made WAY more profit with individual land transactions over houses.

(Houses may be “sexier”, but our bank balance reflects otherwise.)

[Steven] People don’t understand math (although licensed agents seem to be able to calculate 6% of any number in their heads).

[Jill] OH – that math quote is classic!

[Jill] This month the long-awaited House Academy is being released and we could not be more excited. We know that the investors that join our House Academy community have a different mindset and we are here to share our experiences and access to professional resources. We do not intend to try to convert house investors to land.

[Steven] Here’s the truth in numbers after you take away all of the varnish and discussion: For every 300 blind offers sent to owners (correctly), you will purchase a parcel of land at about half of what it’s worth. For every 3,000 offers you will purchase a SFR for about 75% of its current value.

Both efforts work consistently and with predictability, so Jill, as always, is correct. There is a place for both Land and House Academy. However, they seem to attract different personality types.

[BOTH] You get it.