Just googled myself and found this...
To answer your questions @JJ W.--
1. You made this niche sound cheaper than it is. In order to effectively have enough leads for this, you have to spend money on direct mail campaigns, which aren't cheap. Neither is getting the lists from counties, or the capital needed to outsource and systematize this business, etc. ( this isn't even including the exorbitant fee for your course). That adds up to thousands of dollars with no guaranteed return. The "1,000 % return" you claim clearly hasn't calculated all of these costs.
Answer : We get lists for free either directly from the County or a local title company. Yes, there is an expense to mailing, but the ROI on a mailing is massive. As far as exorbitant fees for the course and a guaranteed return I guess you shouldn't get the course, but we do have a 30 day money back guarantee and a 180 day success guarantee. I can't link outside of BP, but if you google "The Land Geek" you can to my site and click on student success and see example after example of success. Perhaps its just not for you... Which is all right and there is a TON of free information out there so you don't really need a course. It just saves time... If you have more time than money start testing to see if this is right for you...
2. There's no amortization - it's difficult to obtain loans and private money for land, so you have to have substantial up front capital to make enough profit to live off, let alone get "rich". There isn't enough hedge against risk to make most lenders to provide leverage. If it's too risky for a bank to take on, is it not risky for the novice investor?) The fact that you have to use your own money not only limits the amount of transactions you can do - it also makes this niche MUCH more risky, and increases the chances of failure. Not to mention, this is one of the primary ways that people build wealth - using amortization to buy properties that they could't otherwise afford, in order to quickly build their net worth. Tell me who's wealthier: The guy who spent $30,000 on land, or the guy who syndicates an 8 million dollar apartment deal with NONE of his own money and 45% of the equity and cash flow? Yeah… That’s what I thought.
Answer: Since competition is so low unlike housing, its very easy to lock up deals with no money or just a $50 option. We have many clients sell properties no money out of pocket just by delaying the closing, finding the buyer, the buyer paying for the property and having a dual closing no money out of pocket and an infinite ROI. You are correct traditional banks don't like to loan on land, but private investors would be happy to partner or loan at a nice return given our margins are so large. You can listen to the Best Passive income model and current and past students that have executed on this strategy and discuss how they did it in detail. In your example, the guy whom syndicates the $8MM apartment deal is wealthier...
3. It isn't really THAT passive, unless you make hundreds of thousands to millions (like most gurus), to provide you the seed capital to outsource all of this. You constantly have to obtain leads, manage the notes, negotiate with the sellers, etc. It's not really an investment technique - it's a business.
Answer: I agree... Nothing is really that passive. Even if you inherit a billion dollars you still have to expend some effort to manage the money, pay the income taxes create estate planning strategies, etc. So I agree. You have to do something at some point, but I do like the passive results once I sell a property and get the monthly cash flow like a rental unit, but without renters, rehabs, renovations or rodents.
4. There IS competition - you've made it sound like there's little, which simply isn't true. Even if there aren't people doing exactly what you do, there are land realtors - professionals who will list the property for more than you're offering the seller.
Answer: I agree. There are other people buying and selling raw land and doing phenomenally well. I think if I was the only one doing it we wouldn't have much of a model... Nevertheless, with over 3007 counties and billions of acres of land to acquire, since working in this business full time since 2001 I've never lost a deal due to competition nor has my business not grown due to competition. I say it on the podcast all the time, but since there are no private equity groups, hedge funds etc. in this space we will all run out of money before we run out of deal flow.
5. There's inherent risk involved: People need a roof over their head. No one NEEDS raw, undeveloped land. Real estate is cyclical, and land is one of the first asset classes to feel the sting of a recession. It's inherently more risky than many other asset types - especially during a recession.
Answer: You are correct. Nobody needs raw undeveloped land. However, if you look around your own home, including your home, you don't need 99.9% of the things you own. We could all survive on a beach in eating beans and rice. However, people do want to invest in raw land so I would consider it a market.
6. You have to do a high volume to make a significant profit. This means more capital, time, and energy is needed to make substantial profits from this niche.
Answer: Define high volume... Jeff Akstin is a full time fire fighter and just flipped a $15k 40 acre parcel for $150k. That moved the needle in his financial life. I'm not sure how to answer this question as it would be different for everyone.
7. There are few, if any, tax benefits. There are four primary ways to make money in real estate:
Answer: You are correct. You can't depreciate raw land. However, you can take advantage of our huge margins in a self directed IRA, Roth IRA or Qualified Retirement Plan and grow and compound your returns in those tax free or tax deferred accounts.
8. This, by far, is what bothers me the most about this niche. At the end of the day... YOU DON'T EVEN OWN THE ASSET!!! Like seriously, how could you even consider this the best income model? You're basing your future on internet randoms to do the right thing and pay you a few hundred a month for an asset they don't even need (which is a horrible business model by the way - there is a reason that the financial sector hinges on creditworthiness standards. Can you imagine if Wall Street followed your model and just took people at their word that they would pay you? We'd enter the Apocalypse! lol). There are many other forms of real estate that provide cash flow, little maintenance, appreciation, tax benefits, AND allow you to actually own the tangible asset. The cash flow you would make from one piece of land lasts how long, 5-15 years? You can hold onto an apartment and generate cash flow from it FOREVER. There are other property types that you wouldn’t even have to deal with tenants and toilets the same way you would in residential – industrial buildings, for example, are pretty low maintenance.
Answer: We do own the asset. We sell on a land contract and once the contract pays off then we deed the property to the new owner and make about 1000% return on the investment. If they default, we have no costs of foreclosure we simply resell the property and keep all monies paid in. I'd prefer to own an asset that I don't have to maintain, protect and not deal with renters rehabs renovations and rodents. Just because the cash flow expires doesn't mean you can't keep adding to your cash flow. That means you would never sell a home or any other asset?
My general impression is this model is not right for you and that is all right. Its not for everybody. I love it and it fits well with my lifestyle and I like the fact I can run my business any where in the world, automate it, scale it and keep growing my passive income in real estate without the typical headaches of rentals, etc. For those reading this thread learn more and make your own educated opinion. Thanks for your thoughts @JJ W and sorry for the late reply, but as a professional land investor I focus on my deals and just don't spend enough time searching for what people are writing about me. Best of luck in your future investing endeavors!
