The Evolution Of Deal Funding / Overcoming Capital Limitations

This is episode number 2217. We talk about the easiest way to fund your land deals without using your own money. Huge fan here. Talk about something that was never available to us.

Yes, or our members. Back in the day, I remember selling things quickly. “I need to hurry up and sell this so I can buy that. I’ve got to string this seller along so I can afford to do this, and then this is going to work out.” It was tricky. Now you don’t have to do that. It was hard because sometimes 10 great deals were at me and I’m like, “How am I going to buy all 10 of these? I’ve got to figure out a way.” Now, it’s not that hard.

Exactly. It’s a glorious benefit to start in this business now versus a long time ago because deal funding and access to capital really stopped scaling a business like this. You had to buy a property, sell it, and wait for the money and then go buy another one and on and on.

Maybe borrow the money. There are all kinds of horrible things, but we’ll talk about that.

Each day on the show, we answer a question from our Land Academy Member Discord Forum and take a deep dive into land-related topics by popular request.

Okay, so this is from our new member section.

This is a long question. As you go through it, if it’s all right with you, I’m going to answer their little sub-questions.

Analyzing Single-Family Residences (SFRs) For Investment

Okay. “Hoping someone with experience with SFRs can provide some guidance. It’s a long post, so apologies in advance. I’m trying to get ready to mail for SFRs and have a few questions after reviewing the House Academy and Land Academy materials.”

SFRs are Single Family Residences.

“For the SFR red, yellow, green test, so the sole to listed ratio isn’t discussed unless I missed it. Is the 2 to 1 ratio still ideal? I’m finding the ratio is typically much higher for houses. For those mailing houses, are you aiming for a higher ratio?”

No. That’s a very good question. What you want, quite simply, is to find a market where, if you analyze it, let’s say there are 100 properties that sold in the last 6 months and there are 100 properties for sale, you can work up from there 1 to 1. That is what you want.

Ideally, you want 100, 50 for sale or 20 for sale.

It’s a little bit more complicated because you want to check the velocity. You want to make sure that it’s always like that and trending. It’s not complicated at all once you get through it. This is a very good question.

Also, days on market will smoke out things like that.

If you do the red, green, yellow test as I do it in the program, the answer is heck, yes.

I know there are still parts of this question, but tip. Houses are easier. “Scrubbing out houses with mortgages, I understand how targeting owners without a mortgage makes it easier for deals with the higher likelihood of owners who can sell below retail, but my question is regarding the idea. What if there’s a 3 to 1 and a 5 to 1 ARM loan from the pandemic boom, and they’re adjusting now, then how do we target those owners?” It really does come down to equity.

It’s massively advantageous.

What does TLDR mean?

I don’t know.

“Does sold-to-new listing ratio matter in SFRs? Do I still avoid mortgages on SFRs for easier deals or does a hyper supply and recession market cycle change their approach?”

These are very good questions. The sold-to-new listing ratio really matters for SFRs, but it matters about as much as land. Here’s the deal. With houses and SFRs, you have a lot more data. There’s way more data. You have hundreds and hundreds of units to sift through to come to some conclusion about what should happen. In a land market, if you’ve ever done a mailer, you have to struggle to find data and extrapolate and maybe force you to look for non-like, kind comparison values both on the buy and the sell side.

You don’t have to do that in most housing markets. Again, I come back to the red, green, yellow test is designed, almost literally, and there are three questions here to address these three things. If you run the actual red, green, yellow test, like I talk about in House Academy, just run it and it will address all these things. Your questions are fantastic, by the way.

How To Get Your Deals Funded

It’ll smoke out these concerns. You’ll see it. Our topic is the easiest way to fund the land deals without using your own money. That would be deal funding. You know what’s interesting? Over the years, word has gotten out how smart our community is, so we started deal funding ourselves.

You need to have a great deal. Don’t bring me a 50/50. It's got to be a smoking deal you just don’t have the dough for. Share on X

We started that on the internet.

We started it on ourselves, funding deals within our community. Other people said, “Wait a minute. I can throw my money in there too after I get some more deals because some stuff I can fund within the community, right?” We’re like, “Sure. This is your community. Do with whatever makes sense for everybody. We can all fund each other’s deals or however it works out best.”

What’s interesting is word has gotten out. It’s always been that way. Since we launched, people said, “This group is smart.” I’m like, “No kidding.” Even based on this question, “What do you mean you’re running a red, yellow, green test? What do you mean you’re pulling this data? What do you mean you’re comparing against that?” Those are things that most of people in the real real estate world don’t even understand, nor do they do like, “It looks pretty. I’ll buy it.”

Whatever. “I think I can sell it for this. I’m going to update the pool or the backyard. It’s going to make that much more money.” How do you know? You’ve got to buy it right. Anyway, that’s not how we look at things. The point is we have attracted a healthy amount of people that are coming into our little world with a lot of dough just because how smart this is.

The point I want to make is that if you have a great deal, there’s no shortage of money within Land Academy, in our community, but you have to have a great deal. Don’t give me a 50/50. I’m being like, “Let’s see what Jill thinks,” or these three people didn’t like it. I’m looking at one right now that I’m not sure I’m the first person they ran it by. I’m like, “I shouldn’t be the last person.” I should be up there on the list too. It needs to be a smoking deal that you just don’t have the dough for. You’re looking at what you can sell yourself to fund it. I might even sell my car and take the bus if it’s that good of a deal, because then I’ll buy myself a new car later, kind of thing, then you put it in front of us.

Sell your car and take the bus kind of deal.

It’s because it’s that good. Getting funding within our group is great. The whole point is it just has to be, like I said, a screaming deal. It has to be like, “I can’t believe it. We’ve got to hurry up and buy this deal.” What do you do? The easiest way is I have LandFunding.com. Just go there and there’s a little form, fill it out.

Give me the address, give me the APN, give me all the information you’ve got to this point. “We’ve agreed upon this price. This is what I think it could sell for based on these two people I talked to,” all of that, just your initial, “This is why we’ve got to move on this deal,” information and then give me 24 hours.

My team will get it to me. They’ll get all the questions. They’ll make sure I have all the stuff I need and then they’ll get it to me and then we’ll see if we’re going to move forward. Maybe I have some more questions. That’s it and we roll forward. We’ve done it on other shows, so I don’t need to go to all the nitty gritty of how escrow works and whose name goes on it and all that. There are other episodes that you could go back to for that. It’s happening right now. My point, I’ve got some deals coming at me that are not that great. That’s why this topic is important to me. It is easy to get deals funded without using our own money. It has to be a great deal.

Some of the deals come to me are iffy deals and I won’t fund them. We talked about this a lot. The previous was giving an example. When it’s retail $120,000, we can sell it for $75,000 easy. Arguably, maybe it should be a little bit higher so it doesn’t look like there’s something wrong with it. We should be buying it for $30,000.

When you’ve got the guy who says, “I’ll give it to you for $15,000,” then you’re like, “We’ve got to run and buy this.” That’s the deal. That’s what’s going on right now. That’s what you should be looking for. It might take a little bit longer to find them right now in this environment. Maybe people are a little hesitant of even selling anything, I don’t know, but that’s what you’re looking for.

Your job, if you want it, for the rest of your life, is to do one thing. Locate and secure amazing real estate transactions. Everything else after that is just semantics and you’ll become incredibly wealthy. Your personal wealth that you create will be tied to that talent. If you want to come up with thirteen deals a day, done. We can do all thirteen of them. If you want to come up with thirteen a month, sure. Thirteen a year? Yes. It all has to do with having the talent to find amazing real estate deals.

I’m going to end my thing on this. Every time someone has asked me, “What are you talking about?” I say, “Let me ask you, what are you into?” “Cars.” “Awesome. What car would you like to have today if you could have any car you want?” “I want a McLaren.” “Okay, you want a McLaren. Great.” What’s that? I don’t know, like $400,000? Let’s just say $500,000.

I don’t know. $300,000, probably.

All right. $280,000, whatever it is. “You’re buying it. You’re buying a nice one. It’s $400,000. Let’s just say you’ve got your eyes on this $400,000 car.” “I already actually have it picked out.” “Great. What if you had the opportunity to buy it for $200,000? What would you do?” “I would buy it right now.”

You would find the money.

That’s what I’m talking about, that kind of deal.

Jill asked me in a haze a few mornings ago. She looked up at me and said, “Why are you up?” I was in a haze still from getting up. I said, “Because the sun’s out.”

That was his answer. I’m like, “That’s all you got?”

That didn’t make sense to her. It made complete sense to me. I didn’t even know what time it was. It was just that the sun was up.”

“The sun was up, so I got up.” Okay.

Sun comes up at 5:00 in the morning, by the way.

I think I made my point. Smoking deal, the money will come. That’s it. Join us next time where we discuss the role of persuasion in land buying and selling.

You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.