In this episode, Jill and I talk about whether we should be buying infill lots in this down market.

That was an interesting conversation on the Thursday member call. There’s been a lot of talking in my world. A lot of things, it was fun. If you’re reading and you were on that webinar I did, I did not know it was going to go that long, but I wanted to answer everybody’s questions. I looked up and was like, “What happened to the time?” That was fun. I’m still a little worn out from it.

We’re both used to it because it’s natural at the end of the year and the beginning of the year to make life decisions about where you want your life to go. Buying and selling land is an expiration time.

There’s a lot of talking, so that’s why this came up on the member call. One of our advanced members shared some good insight about his experience working with builders and big builders. I can’t run the name of them, but it doesn’t matter. It’s cool.

They’re in the market and buying. That was my takeaway.

I had no idea.

Before we get into it, let’s take a question posted by one of our members on the Land Investors Online Community. It’s free. Before we get into all of that, I hope you know that Jill and I have a full-blown commercial printing company called Offers2Owners.com. We set this up several years ago because we were frustrated with the level of service and understanding we were getting from normal, right out of street commercial printing companies who print catalogs and stuff. What we set up is a printing company that sends mail for sellers.

They have a special going on, and it’s for four more days. It’s 11% off mail and 16% off concierge data, which is awesome. Check it out on Offers2Owners.com.

A lot of our members prepay for their mailers for 2023 for tax reasons. If you feel like you’re in that category, give those guys a call. They’ll explain it.

The Rule Of Quarters: Calculating Land Value Based On Home Value

Kay wrote, “I’m new to land acquisitions. Please correct me if I’m wrong or misunderstood. If I work backward, the home value in an area is $100,000. Land retail price will be around $25,000. We try to send offers for about 50% of the retail price. $25,000 divided by 50% is about $12,500. Should we send an offer at $12,500 per residential lot? Please advise. Thank you in advance.”

Kay, your math is completely correct. It’s what I call a rule of quarters. You have a $100,000 house. A builder is usually willing to pay 20% of the value of what a new house would command in that market. Let’s say 20% to 2%. With $100,000, they’re willing to pay $25,000. You need to be half of that at $12,000, let’s say. You buy it for $12,000 and sell it to the builder for $20,000 or $25,000. You can’t build a house for $75,000.

I’m wondering if you’re going to address that. I was waiting. I’m like, “What is this going to look like?”

You can buy a tent for $25,000.

Can you imagine? When the number’s a little bit higher, it works. This low, I don’t think it’s going to work.

The conventional wisdom among the group is, and I concur, that you don’t want to play in an infill lot market at a good time or bad time, where the top retail value is lower than $300,000. That will probably go up because of inflation and supply chain issues.

Finding workers and stuff.

Take a look at what HUD or the feds will insure from a new mortgage standpoint. That’s where you want to be. It’s closer to $400,000.

That’s what I think. I wouldn’t do it for less than $500,000, even to have some wiggle room.

Your math is correct. Do the complete, and we’ll talk to you in a minute about whether we should be doing it at all.

Kay’s saying, “Thanks a lot, Jack. This is good. I don’t have $12,500. Now you’re telling me I need to buy these for $50,000 and sell them for $100,000.” Kay, I can hook it up.

Jill’s got the money.

I got the dough. Don’t worry about that at all. Your job, Kay, is to find those deals. I’ll be your bank until you don’t need me, which will probably be about three deals.

All kidding aside, we fund a lot of people’s deals. It’s not just us. There are people in our group that fund deals.

They’re deal-funding machines. That’s why they’re there.

We have a Discord channel for Land Academy and a sub-topic channel called Would you fund this deal? Every time I look at it as I put together these topics.

The deals are snatched up.

Buying And Holding Infill Lots For Future Profits

It’s like, “I’ve got this deal. I would like to do it. Here’s why.” I wrote a book about it. Three people say, “I PM’d you,” and then there’s silence. Everybody was going off getting rich, and no one needed to talk about it anymore. Should we be buying infill lots at all in this down market? This is why you’re reading.

That came up in my talk. Everybody’s like, “What’s this monthly membership cost?” That’s worth it right there alone to get access to these people. People pay big bucks to have access to people with deals, a lot of money.

The question we should get, which we don’t get too often, is, “How can you guys afford to do this, Land Academy itself, as inexpensively as you do and survive, keep the lights on?” The answer is because we do other people’s deals. We fund real estate transactions and form partnerships with some of the shining Land Academy members. We have lots of partners we do deals with. That’s why it’s worth it.

This discussion we fell on our member call, which surprised me. I’m glad you included this.

We have a Thursday call where many of our members submit their deals. We talk and laugh about it. Everybody else gives their opinion. We say, “We should probably do this deal, or you shouldn’t do this deal, and here’s why.” For the first time in probably three years, we received two houses to review. Jill and I have a company called House Academy. It’s got its members and all of that. If you’re interested in taking a look at that, especially in downtime, it’s all out there just like what the Land Academy is on the internet.

In both of the houses we received, we agreed that we should do the deals. That tells me this is a time where you should sit down and think with yourself and maybe your business partner about whether you want to buy infill lots real cheap and hold onto them until the market starts to uptick again. When people are willing to sell houses at such a deep discount that you can make $100,000, both of these houses that we looked at, I believe our members are going to make $100,000 net. This is without ever going into the house or renovating it.

If you’re new, you don’t know this. Jill and I are hardcore non-renovators. We don’t want to pick up a hammer or do anything to these assets. We’re just good at buying and reselling. Yes, you should look at buying infill lots inexpensively, knowing full well that you’re going to put it up for sale and it’s going to take 1 year to maybe 2 years to sell it, which is the original definition of land banking.

I love that.

Use Kay’s math. It’s my math.

I was going to add what Carl shared with us. Do you want to add anything about that? That was impressive to me. You helped me remember because I might break. It’s a little foggy. He is a property manager. He has a company that manages properties for very large developers. I sincerely asked the question, “Carl, are you worried? Is your company shut down?” He’s like, “It’s quite the opposite.”

He’s a property manager/heavy lifting handyman licensed contractor. His customers are Wall Street-type companies like BlackRock that went in and bought whole subdivisions. They’re leasing them all out as if it were an apartment building. That’s how these huge companies are looking at it. Instead of an apartment building where everybody lives in the building, they’re looking at an entire newly constructed subdivision. They’re renting it out separately to a bunch of tenants and treating it that way as an investment vehicle. Jill asked him, “Is this slowing down?”

Huge companies are looking at entire newly constructed subdivisions and renting it separately to a bunch of tenants. They are treating it as an investment vehicle. Share on X

“Are they not building anymore, so you’re not expanding?” He’s like, “Are you kidding?”

The building has dramatically slowed down and, in some cases, halted, but everybody’s still buying, selling, renting, and all of that. That’s not going to stop. Wealthy people wait for these downturns. Not just people sitting around sipping cocktails. It’s a huge private equity company. Private equity is largely made up of wealthy individuals and corporations where they dump a bunch of money so they don’t have to manage it themselves.

They don’t have to look for investment places, and they expect a return for that. That’s what private equity is. They live and die by acquisitions and finding great deals because their cost of capital is a little higher. Now more than ever is a great time to buy infill lots, but you have to buy them way cheaper than you probably are used to buying them if you’ve been buying and selling land pretty hardcore.

It’s pretty cool.

We are.

Assessing Your Professional Life And Real Estate Ambitions

I love it. I’m happy you could join us.

The next episode on the Land Academy Show is called Assessing Your Professional Life at the End of 2022. You are not alone in your real estate ambition. I love the end of the year and the beginning of the year. Do you like it versus June or July? Does it matter?

The end of the year gets people really excited about possibilities. Share on X

I have to think about that. I think I do. I’m motivated. I’m usually pretty motivated in general, but the end of the year gets me excited about stuff and possibilities. I’m looking forward to 2023 with Land Academy and what we’re going to do.

Me too. Like Jill said, our printing company, Offers2Owners, is taking pre-orders at a deep discount for all of 2023. Please take a look if you want to plan for your mail. If you want to plan for your mailing schedule in 2023, give those guys a call or send them a note and ask how it works.

The special ends on Christmas Day, whatever day that is, but you can still prepay for 2023 through the end of 2022. That’s what you want to do.

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