Have you ever wondered how someone can buy a piece of land for $300 and sell it for $1,200? It seems almost too good to be true, right? Let's dive into the process, understand the framework, and see how you can get started in this seemingly inefficient market.
Let's use Caleb as a case study. He's our hypothetical seller living in Denver, Colorado. Imagine Caleb owns five acres of raw land in Arizona and owes $200 in back taxes. This situation suggests a few things:
The county treasurer keeps sending notifications, warning that the property could be lost to a tax deed or tax lien investor. At this point, I'll step in to assess the value of Caleb's land using the lowest comparable sales from the last 12 to 18 months. Say the lowest comparable sale is $10,000; I'll offer Caleb $2,500 for his parcel, ensuring a significant margin of safety.
Caleb, seeing $2,500 as better than nothing, accepts. My acceptance rate is generally 3-5% for such offers. With the offer accepted, I'll begin the due diligence process, which includes:
This process is outsourced to a dedicated team in the Philippines, connected to an American title company, costing me about $11.
Once everything checks out, I aim to sell the property within 30 days or less, ensuring cash flow akin to rental income. My first approach is the neighbors, as they're often interested in protecting their privacy or enjoying the expansive views.
Should the neighbors pass, I'll tap into my buyer's list. Beyond that, I'll utilize platforms like Craigslist, Zillow, Meta (Facebook Marketplace), and specialized land websites such as:
The magic is in how I sell it. I ask for a $2,500 down payment and then offer affordable financing at $339 a month with a 9% interest rate over 84 months. This way, buyers can own Caleb's five-acre parcel without hassle.
This setup provides consistent monthly income without the typical landlord headaches such as tenants or property maintenance. Plus, being free from tenants means exemption from real estate legislation like Dodd-Frank, RESPA, and the SAFE Act.
The ultimate goal? To create enough of these land notes where our passive income surpasses our fixed expenses, allowing us to work by choice, not necessity. It's a simple game with high potential for financial freedom.