This is Episode 2119. Jill and I are talking about the role of land due diligence in avoiding costly mistakes in your land acquisitions. Jill and I are talking about helpful land acquisition roles we didn’t realize that we live by. We asked one of our staff members to come up with the titles of the topics that Jill and I are going to talk about and they are good topics. It’s stuff we do automatically. I didn’t realize it.

The Importance Of Due Diligence

It’s like we always say we run on making this look easy, and it’s not that easy. There are a lot of moving parts. You have to know that, and due diligence is so important. This is where, if you screw this up, it could make or break your business seriously. You overspend on a property and you start losing money because you overspend. Think about that. You are not going to survive.

Due diligence is crucial. If you get this wrong, it could make or break your business. Share on X

I realized after years of instructing Land Academy that due diligence is a big mental block for a lot of people. I didn’t fully realize that. Each day on the show, we answer a question from our Land Academy member Discord forum and we take a deep dive into land-related topics by popular request.

Strategic Approach To Mailers

Mark wrote, “I wanted to get some feedback on a mailer approach. If you have a target of, let’s say, 10,000 units for a given month, would you hone in on a location and send all 10,000 to a single county/area, or spread it out and send 2,500 to 4 different counties in 4 different states for example? Has anyone found a higher conversion rate in one approach versus the other, or does it not matter how scattered the mailers are, assuming they all pass the red, yellow, and green test?”

“It’s about the total mailer quantity. My strategy has been to send weekly mailers targeting a different county each week as the responses trickle in and I get some deal flow in a particular location, which further increases my knowledge there, the relationships with brokers and title companies, getting smarter about a certain area and then doubling down there with additional mailer volume.”

“I’m curious about how that compares with others, what’s worked, and what might be spreading too thin. I like to think that if I send a mailer, that doesn’t work for that area, I haven’t wasted as much brain damage or dollars on it, but my concern is if I spread the mail too thin, I might not be giving that area a strong enough chance.” What a smart observation and questioning this to make sure I’m focusing and looking at this the right way.

You are doing everything right, Mark. At the beginning of this portion of your career, I would spread it all out like you did. Diversification is one of the pillars of investment. Diversify, this is exactly what we did under the guise of I didn’t know I was doing it. Many years ago, I sent out tons of mail all over the place, and then naturally, certain places became more profitable and easier for us to deal with. What you are doing is duplicating that in modern-day times with great numbers. If you continue to send out the mail that you are sending, you are going to do incredibly well.

You are happy with at least 2,500 in an area.

What’s going to happen is that 2,500 in one area is going to yield a lot of deals and 2,500 in another area might yield none. You don’t know how it goes. Over time, you can get better at one area and develop it, expand on different acreage sizes, move into different ZIP codes and product types, move into mobile homes, and stuff. Jill and I probably make the majority of our land each year in about four markets.

What we have experienced and you’ve done over the years is there are a few areas that you are going to stumble across, Mark. You are going to hang out there for a while. You’ll always keep doing your fill-in-the-blank ZIP code because that’s been so profitable and your team is so great, then you are going to then you are going to do the other three areas in new areas. It’ll happen.

Jill and I joined forces several years ago, and there are markets that you mentioned because we are always trying new areas. There are markets that we have developed since she was completely in control of handling the phones and the sell-side piece of it all, and we still send mail there, and I don’t know what goes on. She buys properties and resells them. She’s much better. There are some markets that I have been doing this for many years and I know a little bit more about.

It’s funny how that happens, things that we don’t know what goes on. Truth time. I’m right now going, “What the heck? How much volume did you send to fill in the blank area?” What I thought we did and what got sent were very different numbers. I’m catching up with that right now. I’m going to send as much, and then here’s what comes.

There’s a little bit of a disconnect at times between that moment when I say, “This mailer’s done,” and that may or may not get communicated to them to my business partner.

No. Thank goodness. I can rally.

It feels vaguely describing something that she’s going through right now on the phone. Will we do a deal?

Yes, but right now, it’s more than I thought was coming at me. It’s going to be fine. It’s good. I will see you in about a month. Maybe that’s it. Jack’s ulterior motive is, “I will keep Jill busy.” Not that I would ever say no to any camping, motorcycle, or fishing, you fill in the blank weekend you want to go. I heavily encourage them. You don’t have to make my phone ring off the hook so I cannot participate. Good one.

The Eight A’s

Our topic is the role of land due diligence in avoiding costly mistakes. Here are the rules that we live by with land due diligence. Jill and I together devised something called the Eight A’s over the years, and it was something we did. We put the A words to associate with what we were looking at from a due diligence standpoint.

The first A is Alive. The person that you are talking to on the phone needs to be the person that’s on the deed in general. It’s very common to have the daughter of a deceased person on the deed say, “It’s in the will. My dad left me everything.” We have to undo that from a legal standpoint. Alive is a big issue, it doesn’t seem like one.

Adjacent is when you are looking at an acquisition candidate, and you are staring at it with all the computer screens and maps open. What’s going on with the immediate properties around it? In general, this is going to tell you what the highest and best use is of your target property, and it’s also going to tell you, from a value standpoint, if you have a ranch over here, a vacant piece of property over there, and a little subdivision nearby, the values of all those properties make it it’s telling you what the value of your acquisition target is. Adjacent is important. It’s also super important. If nothing is going on from an adjacent standpoint, you should be a little bit concerned about the resale of the property.

When I’m selling properties, adjacent is important because I can point out to the new buyer, “Look at all these ranches all around here. They have already solved the water. They have already solved the power. They have already got all that figured out.” You can see it. It’s nice. Access legal and/or physical. Preferably, when you are new, you want both. Legal access, is there a road? Is it plotted? Is there legal access to the property? The physical is like, “There’s a road there, but no one’s driven it for a hundred years.” It was plotted, but no one even finished the road or filled it in.

Access is “Can I get to the road? Can I get to the property?” Acreage. Larger is better. Almost always.

I always look at it like did you mail? When the acreage comes back, is it what you were looking for? If you were doing infill lots and you got 10 acres, it’s not going to work.

Affordable is my way of saying do the economics of the deal generally work? If all the other properties around it have been valued at $150,000 and you have a signed offer in front of you at $30,000, it is affordable. Attributes. What’s cool about it? Is there a stream running in the back? Is it close to the Grand Canyon? Some of those things. I used to explain attributes like this. If an average family in Japan can understand when they read the posting, when you go to resell it like, “It’s close to Las Vegas,” or “Amazing ranch in northern Wyoming,” something that’s identifiable to a large audience in general, that’s what you want. Attributes.

The last two are about you, not necessarily about the deal, and we added these. Are you afraid of the deal? I put this in there because every single deal that you review from a due diligence standpoint makes you a little bit better at reviewing deals and better at due diligence. If you are afraid, you should be afraid of your first deal. That’s why you have us, that’s why you are part of the Land Academy crew because you are a little bit afraid. You don’t know. That’s what this whole opposite is about avoiding costly mistakes. Finally, abundance. Abundance is one of my favorites. Jill, you can explain it better, I’m sure, than I can.

Every single deal you review from a due diligence standpoint makes you a little better at reviewing deals and improving your due diligence. Share on X

When you have twenty deals coming at you versus two deals, you are going to make different decisions. That’s abundance. Abundance is, “It’s going to be easy for me to spot and pick the best ones,” versus when I have two, I’m looking at it. I don’t have abundance. I’m like, “Between the two, this one’s better.” You don’t want to be in that situation.

I always tell people, as crazy as it sounds, I know it’s going to be hard, but trust me, it’s so much better. You want a fire hose coming at you because then you can’t screw it up. You will make sure you line up these properties, and this is what we have done, and we have a template. We have an Airtable template that we share within Land Academy that has all the A days in there so you don’t miss one.

When you are filling in the properties, then the calls have come in, and you are reviewing them all now, doing your due diligence, you can easily, at a glance, see, that the cream will rise to the top. This one has all the 8 As, this one has 7, this one has 3, this one has 1. You are going to make good decisions because you have that many to choose from.

The Risks Of Subcontracting Due Diligence

One of the points I wanted to make that I see a lot of people doing, and it concerns me is subbing out due diligence. There’s a ton of that going on in social media like, “Do you have a good due diligence person?” Why would you do that? This is very scary for me. I can see parts of it. They can check boxes about access. No kidding. They can check boxes like, “Alive.” Like the seller’s name, you got and the deed lines up, and all this stuff. Get it.

When it comes to the nuances, they could probably do adjacent if you give them some parameters and say, “Give me a screenshot of what you saw as adjacent,” but a lot of the other ones, I’m concerned. Acreage, they could do it, but the whole point of it is it’s too easy for me. I wouldn’t sub it out. When you get going like an experience. I know we are. We have been doing this for decades now. It’s easy to say, “I’m five minutes on the property.” I’m like, “I see it or I don’t.” After that first initial five minutes, now I move forward to phase two due diligence. That’s where I spend some time on it.

Phase two due diligence is used. I love the deal. It passed my test from phase one due diligence, which is the eight A’s, and now I’m going to move on to phase two. Can I use it the way I can? If so I can build on it. The utilities are there. Those are my phase two due diligence, and now I know I can sell it for what I think.

If there are some things that you need more clarification on, that’s phase two also. The zoning allows whatever, I will figure that out in phase two. That’s part of what you are saying, or I think they are alive, and I can do this. I will figure that out in phase two.

Let me tell you a story. It’s a regurgitation and Jack’s interpretation of a story from one of the members of the Career Path alumni. Career Path is the name of the mastermind class that Jill and I teach once or twice a year, probably twenty or so people. A few years ago, or a few sessions ago, a person joined Career Path, and he was a very successful land wholesaler. Jill and I don’t condone this, and I don’t agree with this approach, but I want to explain to you how the role of due diligence forces some people into a different place, a place where you shouldn’t go.

This person sends out hoards of mail, which we all should do, and it comes back. The mail comes back. He does not perform due diligence. He signs, he gets the property for the price that he sent out in the mailer as we all do, and he then has the seller sign a purchase agreement or an option to purchase. In his case, he doesn’t buy the property, and what he does is he has a machine that he has set up where it sends out the, “We have got this property for sale.” He doesn’t own it. He has an option to purchase.

If somebody ends up paying what he’s asking on the sell side, then he goes ahead and puts it all together and makes $10,000 on a deal. Could have been a $100,000 spread, could have been $18,000. It’s wholesale. If you are in this business, you know what it is. I hate this. I hate wholesaling. I know Jill does too.

It’s quite a team though, too. I wonder, I’m like, “That gets expensive,” because there’s a big team doing all this behind the scenes.

Jill and I had the opportunity as instructors of Career Path to ask a lot of questions about why, and after asking and asking, this was his response. “I’m not comfortable with my skills in doing due diligence. I don’t know if the land is worth it or not. I let the market decide. All I want to do is make $10,000, $12,000, or $15,000 in the triage, and I want to get in the way of the real estate deal between the actual real buyer and seller.”

If you avoid this, if you avoid learning what due diligence is, and how to do it, it’s not good. It’s not as hard as you think, and it’s one of the main reasons I believe people join Land Academy so they don’t make costly mistakes. Every week on Thursday, Jill and I host our Thursday member call where we invite people to do what we call now, “Would you do this deal?” We assess the deal. We say, “Yes, we would do it.” “No, we wouldn’t do it. Here’s why.” In great detail for a couple of hours every week.

Also, “This is the new price, then I will do the deal.”

Fantastic piece of property. You’ve got it signed at $50,000. It needs to be $20,000. Join us next time where we discuss why emotional decisions can kill your land deals. I love this topic. You are not alone in your real estate ambition. We are Jack and Jill, information and inspiration to buy undervalued property.