Introduction

This is episode number 2032. In this episode, I will talk about the difference between funding a land flip deal and a house flip deal. This is one of my favorite topics because there are pros and cons to each, but they’re very simple pros and cons. You probably will choose which one is right for you based on this conversation if you’re new.

We do both.

We do both on both sides. That’s why we’re here.

What does that mean, both sides?

Real Estate Analysis & Investment

Sometimes, we’re the funder. Sometimes, we are the person who finds a deal and seeks funding. The theme this week is everything you need to know about funding your land flip or your house flip transaction. Each day on the show, we answer a question from our Land Academy Member Discord forum. We take a deep dive into a land-related topic at your request. Jill, we have a question.

James wrote, “A particular ZIP code in the county that I’m studying has a ratio of 36 properties sold to 25 active or listed. I’m not running any filters other than viewing lot/land over the last twelve months. In 12 months, 36 sold and 25 active. This ZIP code passes the Red Yellow Green Test. My adjacent ZIP code has 48 sold and 24 listed/active and also passed my Red Yellow Green Test with flying colors. All other factors aside, do these numbers seem too light when testing for a reason on a particular ZIP code?”

These numbers seem amazing to me.

Two to one is like, “Ooh.” He said, “This is my first time getting this far in our analysis process. I would appreciate any feedback from anyone on our channel. Thank you in advance for the pointers.”

James, you understand the Red Green Yellow Test. What you’re looking for is 1 to 1. In case number 1, you have 25 over 36. If it were 1 to 1, you would have 25 over 25. Your situation is better. Case number two is 2 to 1. This is a good thing. If you had to choose between the 2, you would choose number 2. In real life, what happens, and Jill and I always agree on this, is to mail them both and knock yourself out. I would go so far as to say if these two adjacent ZIP codes are like this, then what are the other ZIP codes that are around it? If they’re as good or close to performing like that, mail them all. You found yourself a little gem. This is great work. I can tell if you understand this and you’re asking this level of question and wording it well like this, you’re going to do fantastic in this business.

You got this.

Funding Land Flip Deals Vs. House Flip Deals

This episode’s topic is the difference between funding land flip deals and house flip deals. Here’s the deal. For a week, Jill and I have been saying, “Let’s say we buy a piece of property or a piece of land for $10,000 or $20,000 and sell it for $60,000. We make $50,000 and we split it. I get $25,000 as the funder. You earn your $25,000. You found the deal, bought it, and sold it.” Houses are way more cash-intensive. You’re going to buy for $300,000 and sell for $400,000. That’s a typical deal for us on both sides, funding and seeking funding.

It’s very easy, in my opinion, to value and price houses. You know if every house in the whole subdivision sold for $425,000 and you’re buying this $300,000 house, which you’re going to do nothing. You’re not going to renovate it, paint it, and carpet it in almost all situations. You’re just going to resell it to somebody who’s going to go do that. You sell it to somebody who’s going to clean it all up. The renovator, we call them. Your buy time and your sales time are typically very quick in that situation. It’s usually you put it up for sale, it’s under contract in a week, and all cash in and cash out in 30 days. It’s simple and very low-risk.

You have a home inspection. You have real estate agents who are pounding your door down because they sold houses across the street or down the block. Buying and selling a house like that is simple. We have funders that understand houses and they line up. They will line up to make a certain percentage even if it’s 10%. Wouldn’t you get 10%? That’s the peaches and cream house example. With land, you can make as much money. It’s way less cash-intensive, but the deals are a little bit more risky because people don’t run around buying and selling land all the time. They do run around buying and selling houses.

With land, you can make as much money. It's way less cash-intensive, but the deals are slightly riskier. Share on X

It’s easy for everyone to say, “Every 3-bedroom, 2-bath in this ZIP code with a carport and no pool or whatever it is and built between 1985 and 1995 in this subdivision all go under contract within 24 hours of being listed.” You have those real numbers, which is great. It’s very easy for people to sign off on and jump into.

These are some of the things I love about houses. One of the other things I love about houses is that I’m often skipping the realtor phase. These acquisitions, when you’re in a market like that that’s so hot, you could drive it yourself or ask somebody to drive it and count the ten dumpsters in the area. Get those guys’ phone numbers and you text them. I wouldn’t give it to them ahead of time in this situation, but the day I close though, you better believe I’m texting all ten of them the address, and watch how fast they text me back and say, “I’ll take it.”

There’s a real perceived and real different risk scenario. When you’re buying and selling houses, there’s no real risk in my opinion. It’s fast. They’re very much more difficult to locate. By tuning in to this, you might say, “Why don’t you guys buy and sell houses all the time?” The fact is we do. We do buy and sell houses all the time. We don’t talk about it a lot. It’s very mechanical and pretty easy. Also, when you’re buying and selling houses, you’re removing your opportunity to hit a home run.

With land, once or twice a year, Jill and I buy a property for less than $50,000 and sell it for $200,000, $3000,000, or $400,000. We get huge profit margins pretty quickly. They’re different animals from a risk standpoint. One is cash-intensive in buying houses. It keeps a lot of people out of the business. Both are good. They’re just different.

Submit your deals to us at LandFunding.com. I would encourage you if you are part of the Land Academy community or in this business at all to add buying and selling houses to what you’re already doing with your land business, especially at this time because the market is a little bit down, so to speak.

Join us in the next episode where we discuss highlights of using partnership funding for your land and your house flip deals. We’re going to recap what we talked about here. You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.