Flipping land , who are the Major buyers, and Flippers?

Question

I came across some information regarding flipping land ,  building lots to resell to builders, or investors who build spec houses. I would like some opinions from those who are involved in this area of real estate.

Karl James · Answer

@Chet Freeman

I recognize there is a wide range of opinions on the topic of flipping land.  I applaud you for seeking input from multiple folks, both experienced and newbies.

Proverbs 15:22 Plans fail for lack of counsel, but with many advisers they succeed.

I wish you well regardless of where you decided to focus your RE investing. I completely agree with @Jay Hinrichs  and @Ashley Pimsner  - the sell side is the scariest (at least it has been so far.)

For me, I am blessed the land flipping thing is working.  But, I am so very early in my land flipping career and recognize things could turn on a dime any day.  Here's how it's gone for me, having closed my first deal at the end of December 2014:

Deal #1 - Bought $13,500 / sold $38,500, cash to cash 11 days.

Deal #2 - Bought $28,000 / under contract to sell for $150,000, cash to cash will be 60 days.

Deal #3 - Under contract to buy $46,000 / under contract to sell $61,000, Cash to cash < 1 day (closings scheduled for same day.)

Deal #4 - In progress with both a seller and a buyer; to be an assignment with assignment fee of $20,000+ if deal materializes.

How?  @Seth Williams 
PiggerPockets podcast #39  and his REtipster site

Seth Williams · Answer

That's amazing to hear about your continued success @Karl James - I applaud you for getting out there and making it happen. It's so exciting to see people putting this stuff into practice!

I think @Dooreuhn Cee is partially right about the construction market. A robust building industry certainly helps, but I wouldn't say it's a necessity. I sold dozens of vacant lots in a in the middle of the worst recession (09 - 11), in the worst state in the country (Michigan) - and most of them sold in a matter of weeks. Of course, if construction had been hotter, I probably could have sold them for even more...  but a slow building housing market didn't mean I couldn't find success. It just meant I had to work a little harder and offer better terms to find the buyers who wanted what I was selling. A little extra creativity and push can go a long way.

I would definitely agree that finding cheap land is usually the easy part, it's the selling side that takes real patience and persistence. That being said - I've almost never had a property that didn't sell eventually (and make a decent profit along the way). The right buyer is always out there somewhere, it's just a question of whether you can reach them with your promotional efforts and make them aware of the opportunity to own your property in the first place. It doesn't always happen in one month, two months, or even six months, but it always happens eventually if you're persistent and responsive to the market.

Case in point - I just sold a property last week that I had owned for over a year. I paid around $5K for it and sold it for $20K (and I never actually saw it with my own eyes). I never stressed out or worried that I'd find a buyer eventually. Why? Because I've done this long enough to know that it always happens in time. As long as I can afford the holding costs (property taxes were $66/yr) and I'm reasonably certain about the property's market value (I had estimated it to be worth $20K - $40K), there's nothing to worry about.

Richard D. · Answer

@Chet Freeman if you consider flipping raw land, make sure you understand that the risks are great and the rewards can be greater. Like @Karl James has so pointedly painted a pretty picture; the question I would ask is who do you know? I've bought and sold raw land with moderate success, but never that fast.

I will agree with @Jay Hinrichs that location is key. Acute shortages, not so much. Simply because in Texas there isn't such a thing. Even in Austin, there is still enough land for sale, that a builder can go anywhere they pretty much desire to build. Heck even here in DFW, there is raw land in Downtown Fort Worth that consistently sells for under appraisal value.

Yes, I said raw land in the downtown of a city with 750,000 people; that is bought under value. This is largely because of out of state investors who have 99 problems, and no means to fix them so far away from home ( @Dooreuhn Cee ). Can you make money on raw land, of course; but you can also lose it. Especially if you don't have knowledge about your niche, market, location, and exit strategies.

Sometimes bulk is better you make a smaller profit, but you do unload properties faster.

I hope this helps Chet; Best of luck.

Jay Hinrichs · Answer

@Chet Freeman

this is not the same as flipping houses... very thin market unless you can wiggle yourself into deals in the very HOTTEST markets in the country.,  IE the SF BAy ARea

New York,, Chicago,,, Atlanta,,, Portland Seattle. Austin etc etc.. your wasting your time if your working in an area that does not have an acute shortage of lots.

Mark Podolsky · Answer

Hey @Chet Freeman my niche is the same as @Seth Williams  and I've been investing full time since 2001 flipping over 5000 parcels.   I've never been stuck with a property and I get stories all the time similar to @Karl James where people are getting crazy high returns on their land flips.

You can learn more at my 2 podcasts- https://itunes.apple.com/us/podcast/best-passive-i...

and https://itunes.apple.com/us/podcast/the-land-geek/id643447398?mt=2

You'll find our approach is simple, but it does take effort.  This niche has a huge market, low competition and requires very little capital to get started.  This is why I think it's the Best Passive Income Model.

I hope my information helps you and of course retipster.com is an AMAZING resource for learning about land investing.

Best of luck!

Ashley Pimsner · Answer

@Chet Freeman

Are you familiar with the investment pyramid?

At the bottom of the pyramid are the most liquid investments like money markets, and at the to of the pyramid are the most illiquid investments.

Raw land is considered the MOST illiquid investment, even more so than stock options and futures, so if you think you are going to easily "flip land" you are in for a rude awakening.

The land could be worth 10x what you originally paid, but it might take you 10-20 years of monthly carrying costs before you realize your gain.

If you have deep pockets go for it, otherwise tread carefully.

Dooreuhn Cee · Answer

I flipped lots of vacant lots in Chicago in the 2007 time frame.  There are investors that buy taxes and eventually foreclose vacant the lots in times like now when owners have no motivation to pay taxes.  Once a deed is obtained, they sell off the lots in bunches by auction to other investors like me, at a discount.  Then those lots can be flipped to builders or speculators.

This market works when construction is hot (e.g., 2007) and when land is short (e.g., Silicon Valley).  Once the market cools, you got 99 problems: taxes, grass and weed maintenance, fence construction, city tickets, neighbors wanting you to cut trees down, illegal dumping, slip and fall, and etc.

Chet Freeman · Answer

Hi Mark, thanks for the info. I am always interested in learning about investing in land for profit.

Walter W. · Answer

Chet,

Did you listen to Seth Williams on podcast #39?

http://www.biggerpockets.com/renewsblog/2013/10/10...

Best,Walter

Chet Freeman · Answer

Thanks for your opinions.

Flipping land , who are the Major buyers, and Flippers?

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