Adjusting Your Offer Pricing Strategies To Succeed In The Current Land Market

Hey, it's Mark Puddles to get the Land Geek with your favorite niche real estate website, thelandgeek.com and on this week's roundtable, we have almost all the usual suspects. We've got the technician, Eric Peterson. Eric, how are things?

Things are good. Summer's coming to a close here. Kids are about to go back to school, Boot camp is days away and all is well.

Days away. I'm bringing you some fantastic barbecue rub for those ribs. I can't wait to see you.

Right on. I'm looking forward to it.

Dude, Buddy, the nightcap. Oh, gee. Scott Bossman, how are you?

I'm good. I don't think summer's over in Vegas, though. I think. Was it supposed to be 110, Thursday, Friday, Saturday during boot camp. So that'll be awesome.

You got ac. Don't stress it.

No, I'm not stressing exactly.

It's keeping off the Strip and out of trouble.

It's pool season.

It's pool season. I love it when you call me Big Papa. Tate Litchfield. How are you doing?

I'm good.

Yeah. Living the dream.

Living the dream. Last but certainly not least, the brain. The Professor. Your flights go Sherpa. Scott Todd from Scott Todd.net landmodo.com learn anything about anything. Investor ninjas.com Scott Todd. How are you?

Mark, you know what? The world is great. The only problem is it's getting expensive. That's the problem with the world right now.

Yeah, let's talk about the expensive world we're living in. Right. How do we get here? Should we do an Economics 101 lesson.

When you print countless dollars? Okay, wait, maybe no one wants to hear that.

Should we go into supply, demand.

Break out economics 101 and all the other stuff? Yeah, I don't know.

Yeah, so we'll just kind of make it simple. We're in an inflationary environment, which means asset prices are increasing at ridiculously high levels. If you are doubting us, put your house up for sale. It's crazy. It's crazy. You know it's crazy when you look at your own house values. You're like, I wouldn't buy my own house for that. And yet people are buying houses for that. It's insane. So what's happening then, in our land market? Well, Scott Bossman, we got a good topic. Let's talk about making offers and the response rate and how to solve that problem. You got a problem, I'll solve it. Ice. Ice. Bossman.

Yeah, you know, there's a lot of talk Lately, in the Facebook group, in the mighty networks group, among the coaching clients and the Facebook students, that response rate on the whole is low right now with our direct mailers, and I would agree we've seen a downtick in our accepted offers. We've seen more counteroffers than in the past, and people are a little bit more aggressive with their counteroffers. So, you know, I think the question is, how do we get around this in the land business? And I guess for me, a few things come to mind. You just the first thing, the most important thing is you just cannot stop mailing, and you constantly need to tweak your prices, and you have to do a really, really thorough analysis of the pricing in that area within the last couple months. And maybe you don't divide by four right now, maybe divide by three right now, but you need to keep. You need to dig into that area and not stop mailing that area and track your responses and tweak the prices accordingly. And just realize that mailing today may not result in, you know, a purchase two weeks down the road. It might be a little bit longer because you're constantly having to tweak the numbers and that type of thing. So I think people are just. They're a little bit more aware of the fact they're sitting on something of value than maybe they were a couple years ago. I mean, every night on the news, we're talking about the real estate market. And like Scott Todd said, I mean, everything is expensive, right? So that's going to trickle down to our business eventually, which I think it has this year. So I guess my advice is just don't stop mailing. You're probably going to have to mail more than you think. Your response rate. You know, we used to have a 3 to 5% response rate. Now our response rate is, you know, maybe 1 to 2%, and our purchase rate is maybe 0.5%. Right. As opposed to what it used to be. So just be persistent and don't quit mailing.

I think that's phenomenal advice. This is a great podcast. I want to thank the listeners. Oh, wait, let's go around and just make sure that there's nothing else.

There's a lot more to say that.

Let's talk to the technician, Eric Peterson.

Yeah, I mean, I. I agree with what Scott had to say. I think that probably now more than ever, it's really important to have current comps for the area that you're mailing. If you had your VA pull comps six months ago, when you mailed this area last. You cannot rely on those numbers because not only are the purchase prices going up when we're buying land, but we're reflecting that on the sales side. When we're selling this land, we're increasing the price in conjunction to what we're buying it for. So it's really important to know those numbers before you start mailing. But then, like Scott said, you've got to adjust on the fly or be willing to adjust on the fly if you're not getting the accepted offers you need. I think, you know, in our business, we're sending way more mail in today's environment than we were probably 12 months ago. We've continued to increase the amount we're mailing, and that's because we want to buy land. And it's. It takes more mail right now to buy land. It takes higher purchase prices to buy land. It takes, unfortunately, sometimes more effort in hand holding with the sellers to get some of those deals done. We're more willing to, to maybe do some deals that require a little bit more work, whether that be some kind of title issue or maybe even closing through title or accommodating some need of the seller because we want that land and we know that it's hard to get. So sometimes as our environment changes, we have to adjust. And you know, like Scott said, our margins might not be, you know, we divide by four, we might have to divide by three, but we've still got a huge margin in there. So this model allows you so much flexibility in what you can do because we have that huge margin, whether it's 300% or 200%, there's a lot of room there. So, you know, we'll pay a premium and often we're going to get a premium when we sell it. But if we can't, we know we still have the room to come down in price, right?

And if we're playing devil's advocate, Eric. So I'm listening to this and say, well, are these guys saying I should overpay for property? I sell it in 60 days, the market turns on me. Or that note, buyer defaults and now I'm going to lose money on a land deal. I thought Mark said he never lost money on a land deal. What gives? How do you protect yourself should the market turn against you?

Well, I mean, I think there's a couple factors. If we sell the property quickly, we're already reducing the cost of that land. So every monthly payment we get reduces our cost. So if the market does turn and our buyer defaults hopefully by then we've got six payments or five payments or whatever that number is. And now therefore, we're reducing the amount of capital we have invested in that property. Taking larger down payments is a little bit easier right now. Like people are more willing to do it so we can get more money up front and get to that.

Capital.

Coming back to us faster because we can ask for these larger down payments and even larger monthly payments too. So those can all have a, an effect on that and reducing the cost of that land. If the market were to turn, maybe the price reduces by 20%, maybe it reduces by 50%. But again, if we're, if we're buying right, we should still have room to rework those numbers and resell the property.

Yeah, that's a great answer. And the fact that we can be flexible like a yogi with our pricing gives us a tremendous advantage in the marketplace should it turn on us. So maybe let's just say we bought a piece of property for $5,000 and all of a sudden it loses 50% of its value one day. And you know, we bought it for five. This is a property you sell. We used to buy for 2,500. We sold it for, you know, 17. They, you know, we got our cost basis down now to 4,000 because they've made a thousand dollars worth of payments, they default. But now, okay, so we'll sell it for 16. And maybe instead of a thousand down like we were getting today, or 1500 down, we'll do 249,000 down. 249amonth. It might just take us a little bit longer to get our capital out. So what, where else do you want to put your money than this asset? I mean, I certainly don't want it in the bank, right? I mean, Scott Todd, am I crazy here? Am I forgetting something?

No. I mean, I think that as a whole, assets in general are costing more. I mean, it's just the price. I mean, people are holding onto their ass. I read a story the other day, used car guy had a used car, he owned it for about a year, and the dealership caught him up and said, hey, we'll buy back that car. And he sold the car. So he bought the car new. He sold the car used for $6,000 more than what he paid for it. New. Have you ever heard of that story? This guy is in the Wall Street Journal talking about just that I recently purchased a new asset. I mean, it's expensive. And everybody, if you follow like any forums into any specialized assets People are complaining about how expensive the world is and how the assets are costing more. That's just the way that it is. I mean, people are holding onto their assets. But here's the thing. Think about the guy that was out there with his used car. He said he had no desire to sell his car until they told him, hey, we'll give you $6,000 more than what you paid for. And then he's out, like, here, take the car. I'm not really using it like I. Like I would, right? He pocketed $6,000. He drove the car for a year and made $6,000. So the lesson here to me is that there's a price for everything. Now, you don't want to go and say, oh, well, I'm buying this land for $20,000. I'm going to go and offer $10,000 or, you know, $15,000. No, you got to keep your margin of safety there. But if the market will bear 20 today, well, then up your price. And that's what's happening to me. And it's a struggle because we want to buy it for the lowest price possible. But it's a market. It's ever changing. And, you know, I have the same conversation with people. I mean, I used to sell some properties. I mean, I would buy these properties in this one area, and I would pay, like, I don't know, I'd pay about $3,000 for them. Today, they're costing me six to $8,000. That's hard to put your brain around. Okay, like just last year, I'm paying three. Now I'm paying six to eight. But guess what? I used to sell those things for 10. Today I'm selling them for 18 to 20. You see, the price has gone up, and it's just the way that it is now. Let's just say. Let's just say tomorrow or next month, the market turns, and let's just see, I can only get 10, you know, 10,000 for it. Okay, well, then I have a decision to make. I can either hold on to it because any. Any market fluctuation will be temporary, and the price will go back up there. But ask yourself this question with. With housing prices and the lumber prices. The lumber is going through the roof. So with all of this stuff and inflation is driving everything up, that is why we buy land, because land is the greatest hedge against inflation that there is on the earth. It really is. Because as all the other assets go up, so does land. Land follows the inflation. In fact, it beats the inflation. So if inflation goes up 3%, land typically goes up higher than that, and it will stay that way. It will stay up higher. So the prices that you're seeing today, I don't think that they will come down. They might in an economic recession to where people want to unload it. But ultimately, guess what? The prices that you're seeing right now, my gut tells me these are the new prices. Welcome to the new world 2021.

It's a new world. But t, you know, you're a tough negotiator, and you're getting deals, so how come you're getting deals and maybe other people aren't?

Look, at the end of the day, money loves speed, right? And I can be tough, but I have got the experience and the knowledge to know that, listen, I've got really one choice in this market, and that's either move with the market or get left behind completely. This is not a game for me, right? This is how I make my living. This is what I do every single day. And like Scott said, it's hard to pay more for properties, but I do it because I know that, hey, look, even if the market verts back to 2018 pricing, I'm still not losing money on this. And I buy it at today's pricing.

Why?

Because what I can do is I can still sell them at the price that I want. I can get a lower down payment, I can get a lower monthly. It might not be ideal, but these properties are not going to become less desirable just because there's an economic correction. They're not making any more of this. It's where I want to have my money. In fact, I'm buying as much as I can at today's price, as much as I possibly can. Because all the signs point to upward growth and. And like, you know, like we've kind of hinted to today already, real estate tends to go one direction, right? Everybody knows what direction that is. Go look at your any price, any asset 10 years ago and compare it to today, five years ago, and compare it today, six months ago, and compare it to today 25 years ago, and compare it to, you know, five years after that. Like, real estate goes in one direction. If you have to weather a storm for a year or two, so be it. But, you know, at the end of the day, I'm buying land. And there's ways for you to buy land to mitigate your risk, right? If you're saying, oh, my mailing costs are getting too expensive, you should be buying wholesale, right? Go ahead. Not a problem with that. Look at land arbitrage. Look at these other opportunities to control assets for pennies on the dollar. Lots of options out there for you.

I love it.

Eric Peterson.

Yeah, I was just thinking, I wanted to add that in today's environment where we're seeing this inflation and the cost of assets going up, I just, you know, I would. I'm so much more comfortable having my dollars invested in an asset like land than sitting in a bank account not doing anything right. Because what's going to happen to those dollars in your bank account? They're going to get worth less and less money as time goes on and this, this trend continues. So if that means we're paying more for land, that's. That kind of helps me swallow that right, because I know that it's a much better investment to put those dollars into a piece of property and have that asset on the books as opposed to that $5,000 or whatever it is sitting in a bank account.

Yeah, absolutely. And I'm really risk averse. Every day I think about it, well, how can this all go bad? And not to be a negative Nelly, but I think that way because I like the game and I never want to put myself in a position where I could be out of the game. Scott and I, we always talk about shiny object syndrome. I was talking to a guy today, he's in four syndication deals and these deals are going to take him to 2025 before he gets his capital out. Well, he has no idea what's going to happen in 2025, but he's concerned because it's a good possibility that he's going to be in the middle of a storm by that time in real estate and won't have the time to weather it. So what we have here is an asset that lasts forever. We're not using leverage, so we're going to stay out of trouble with any kind of debt. And then it doesn't go to zero. It's not like a stock that could go to zero or the cryptocurrency du jour that could go to zero. I think as long as you are still buying at the right ratio. So even if you had to pay 100% more than you were a year ago, but you're marking up 100% more. Like Eric said, it doesn't matter because our hold periods aren't long. We're talking 30 days or less if you're marketing correctly. Even if you're not marketing correctly, it's maybe 60 days. If it's taking you more than 60 days go to flight school and learn how to get this stuff out of your inventory effectively. So get someone to help you and do this so you're really going to be covered. It's hard to imagine a scenario where you will actually lose money because I've lived through it. I've lived through the Great Recession doing this business. I lost 50% of my note portfolio. I still ended up very profitable in the business because I didn't have debt. And I just reconfigured my land portfolio. It just took a little longer to get the money out. I just had to make the pricing right to adjust. But the assets I bought in 2006 were very different price than 2008, but I still had two years of those people paying until they defaulted and lowering my cost basis. Tate.

Mark, wouldn't you kill to buy assets at 2006 pricing today?

Yeah, I would, actually.

Right.

But that's what I'm saying is like, when we buy These process at 2021 pricing, we think that often we're going to sell these properties and that's the price we're going to get. And there is defaults that they occur in our business. And every time that happens, it's kind of like this little home run. Like, I've seen your portfolio. You've got properties that you've sold eight times that you purchased in 2006. Right. And that's the other variable that's really hard to count on, or it's hard to explain. But you do have defaults in this business, and defaults aren't necessarily a bad thing. They're okay. They're part of running the land business.

He brings up a very good point, Mark, and that's this. There is an X factor in this business that we don't teach it because you can't rely on it, but the X factor here is the default. And like, I purchased a property, one of the first properties I purchased, an Arizona property, I looked at the comps. Now this, remember, these comps were based on 2015 prices, okay? So I purchased this property. The comps at the time were $2,000. I did the magic number. I ended up with 650. I offered 650. Guy comes to me and says, I'll take it. You can have it for 700. I said, okay, 700. Well, we sold the property for $2,000 on terms. And I sold that property three times. But every time I sold that property, the price went up because the pricing was moving up. So when we're looking at the comps and we're thinking through our math. That is a set point in time, but the pricing continues to change up or down. We haven't seen it go down lately, but it could go up or down. Okay. But the thing is, is I sold that property three times on terms and the down payments alone, and not even including the DOC fees. The down payments alone and the. And the payments, man, when you add up all the money that I sold this property for, I more than made my money back on the terms deals that went bad. But then I had somebody come into my world, and they wanted to buy at 20, 21 prices at $4,000.

Right.

So we sold that property for $4,000. It's a property that I had in my inventory for 700, but I let it age up. I sold it out. And when you look at all of the cash collected on that deal, and it's over $6,000 is what I collected on that deal from the time I got on a $700 investment. Now, could I plan for that?

No.

Could I financially forecast that? Absolutely not. But it happens, and it happens enough that you're just like, let it roll. And that's what helps to take the sting out of this whole thing.

Exactly. Exactly. Scott Bossman, any final thoughts?

No. I think, you know, I love. I love defaults. Now, I think when you're first in the business, you get those defaults, they sting, Right? But that is a definite benefit to this business. You control that asset for the life of the loan. And we've had more defaults lately. And I love what Scott. I mean, I love the fact that I'm able to, you know, take an asset that I purchased in 2016 and. And now price it at 20, 21 prices. There's something really powerful in that.

Absolutely. Tate.

Buy land, people. Buy land.

Eric, get rid of those dollars. Buy land.

Cash is trash. Scott Todd.

My thing is this. If you mail out a handful of offers, it could be a hundred, it could be a thousand offers, and you're like, oh, nobody accepted it. It means you haven't found the right price point. Keep mailing, people. Mailing every day. And if you're not mailing every day and you're complaining about your response rate, guess what? Your response rate is going to be zero when you stop mailing. That's all I have to say.

Yeah. You know what I learned from Scott Todd at boot camp? Don't be a chick fil a without chicken.

That's it.

So don't be in the land business without land.

30 is the new 20 when it comes to mail?

Yeah. 30 a day, not 20 a day. That's not a bad new metric either. And it's automated. I mean, Scott's how. We don't talk about LGPass probably enough publicly, but there's been so many improvements.

Now LGPASS is. I mean, it's. It's kind of. For me, it's really kind of cool to see how LG Pass was there, because, like, anything back in the day, it was a little rough, and it was a little rough, and we keep tweaking it. And, you know, the Japanese have a term for that, continuous improvement. It's also called kaizen. We continuously improve it. We continually look for ways that things that don't flow right don't work right. We continue to look at our own businesses and add functionality in there based on our own businesses. So, Yeah, I mean, LGPass is a different animal. And one of my favorite pieces in there is the drip function. You upload a list and you just let it go to town and work for you.

There you go. Yeah. What is it?

Funny story, guys. As Eric posted in the chat, better fit. Don't be Wawa without a doughnut. Let me tell you, what happened is I had a regular routine for a very long time. I'd go to Wawa and get my donut, and then I went there, and they didn't have any donuts. And I'm like, this is the beginning of COVID And I'm like, oh, my gosh, my world's been turned upside down. I'm out. So I go down the street, I go to another. I go to a Krispy Kreme. They have donuts. And I go there for almost a year daily. I'm a dedicated person. I mean, they could put my. My plaque on the wall. Hold me a donut, I'm walking in the door. I go there one day, there's no donuts. I'm like, what happened to the donuts? I said, oh, the guy didn't show up. I'm like, the guy didn't show up. What am I supposed to do now? So I found myself down at the. At the grocery store, Publix, and they have a bakery, and I'm like, gonna go there. So animal. Animal of habit. I started going there every day. Going there. Well, guess what? I went there last week. They had no dang donuts. I'm like, what gives, man? Four days in a row, no donuts. I'm going back. I'm like, the book who moved my cheese? They Moved the donuts. Like, what happened to it? They go, oh, well, the supplier is not making our ingredients now. And I'm like, there's only one donut supplier in America. What gifts? I don't understand. Makes no sense. So they don't have the donuts. So what happens? Change, habit. I go somewhere else. And I think that the analogy stands. If you're trying to buy land or sell land and you don't have any land to buy or to sell, then you have no business. Right? Like, so you've got to keep hustling, looking for land at all cost and don't stop at all.

And then I'm just so glad that donut story didn't take a dark turn. Like a bad Breaking Bad episode where Scott Todd can't get his fix. And next thing you know, you know he's building a super lab with.

We don't know if that's gonna happen, though.

We don't. You don't know.

You can't. That's the X factor. That's the Scott X factor. Like, he already has a hangar. Just saying.

Yeah.

Preparing for. In preparing for boot camp. Guess what I told him, hold my donut. I won't be here. You guys don't have to make it. I won't be here for a few days. So just don't even, don't even waste your money making it because I'm not going to be able to eat it.

Yeah, there you go. Well, I thought this is a really great topic. Hopefully you're getting value from it. A quick shout out to our sponsor, which is flight school. Learn how the next 16 weeks can transform your life. Start building up your passive income, because let's face it, most of us are probably solving our money problems, but we're not solving our time problems. You can always make more money. You can't get more time. Start learning how to use this one time sale. Start building up your passive income without renters, rehabs, renovations, or rodents. And have Scott Todd teach you step by step how to do that. He's going to take you up that mountain of land, investing quickly, safely, efficiently. Schedule a call.

Learn more.

Go to landgeek.com land invest training thelangeek.com training oh, that's right. Scott Bossman. What's that? Tuition for flight school. Yeah. It's cost nothing. We guarantee it. You're going to make back that money. 180 days or less. Cash, returns, deals.

Just show us your work.

Just show us you're doing it pretty easy. All right. This week's tip of the Week.

Can you hear me?

Yeah. So, AirPods, Scott.

We can hear you, Tate.

Looks like you've got the tip of the week.

No, I don't have the tip of the week because before this podcast started, I wrote in writing.

At 3pm frozen, my AirPods died.

I can't do anything in writing that I did not have the tip of the A week. However, if you need to lean on me, I can pull one up really, really fast. And here it is. Know what it is?

What is it?

Go to your favorite app store and Download for, like, 9 bucks. Download this app. And I know that's expensive for an app, and it might not even be nine bucks. It might be six bucks. That's still expensive. Do yourself a Favor. Download the 10B II financial calculator. Learn how to use it, learn how to calculate yield, and you'll see, like, when you start to calculate yield, all of these problems about, oh, my response rate is whatever. Response rate doesn't matter when yield is through the roof. So learn how to calculate the yield, buy yourself the calculator, and enjoy the rest of your life on the beach.

Great. Great tip. All right, well, Eric Peterson, are we good?

We're good, dude.

Buddy.

Yeah, we're great.

I think we lost Tate, Scott, Todd, we're good. All right, well, I want to thank the listeners. Remind you that the only way that I'm going to be able to convince Tate Litchfield to ever give another tip of the week, because he was. He. He was so adamant against it, he actually dropped off the Roundtable podcast is if you do us three little favors. Follow the podcast rate, review it. Send us a screenshot of that review to supporthelangic.com we're going to send you a signed copy of Dirt Rich by yours truly with arguably the worst handwriting you've ever seen. If you have not seen my handwriting, it's worth writing the review just to see how poorly I write. There you go. What do you think, Tate?

Yeah, ditto. Not sure what happened, but yeah.

Did I give a bonus tip of the week?

No, Scott gave the BII calculator tip.

Oh, good. Financial calculator. If you're not using it, change your life. Download it, buy it.

I'm gonna give a bonus tip of the week. Okay, Mark, this is bonus. Here's the bonus, Tate. Buy yourself some wired headphones, and you'll never have this problem again.

That wasn't an AirPod issue. That wasn't an AirPod issue. That was a Mac issue.

Is it a Mac Issue.

Oh, man.

All right, goodbye. I'm out of here. I don't have to do this. I do this out of the kindness of my heart. I have a technical issue and all of a sudden it's like, you know, I should have just said the computer died and just gone out to lunch. That was my original plan. But I came back. I came back because I care about the listeners.

Wait until. Wait until Tate sees the. The cup, the drinking cup that I'm bringing from for boot camp. Wait till he sees this thing. He's gonna love it. He's gonna want one of his own. Mark, you've seen it.

I have, I have.

Well, now I got cup envy.

What?

Tell me more about it.

You'll see it.

You'll see it A couple days, but.

You know, you wonder, you know you won't have, though, is Surface envy. I mean, I have to go out today and buy a backup laptop just for Scott Todd. Because it's. It's that unreliable.

Well, first of all, that's not true. And second, I won't be using a Surface.

That's. Cause you never do. You never do. You're always on a Mac.

You're bringing the Mac.

Of course he's bringing a Mac.

Right here, Right here.

He uses his Surface for its video camera. That's it.

Are you using that M1 in that bad boy?

I have the M1. I have the M1 because that's my. My laptop.

Preferred laptop of choice.

And the only thing I'm really, really missing right now, Mark, is on the Surface. When I present, all you gotta do is. Cause it's got that Surface pen like this. You just double click this and it moves the slides. So I can be anywhere in the room and move the slides versus I have to run back to the computer and touch the mouse thing. I don't know. That sounds like a nightmare to me.

I think you can get a remote control for that, Scott.

Oh, wait, I gotta hook something up to like another dongle.

No, yeah, yeah, really easy. Wow. With.

With what? With what? With PowerPoint.

PowerPoint.

Does that Kindle Keynote. Do you use Keynote?

Okay, theoretically, I could.

You could, but you don't.

Oh, man. You know, I'm. You know, he starts like this. We gotta.

We gotta.

He's like Elon Musk. We gotta like, watch Apple shares.

Yeah, that's right. Yeah.

We have to short the stock on these negative comments. It's crazy. All right, well, thanks, everybody. We ready to do this? 1, 2, 3. Let's let freedom. Not bad.

I already did that. And I was already in the after show stuff, so we're good.

There we go. There we go. See you guys in a few days. Can't wait. By the way, are we gonna elbow it out? We can't hug it out, can we? The elbow thing.

No.

Got a fist. Six feet. The six foot fist bump rule is in effect.

Eric's ready for hugs.

Eric's Eric.

I'm over it.

He's over it. Eric's got the fatigue. This is. This is why I don't watch the news. You know, I don't have any fatigue because I don't know what's going on.

There's nothing real in the news.

Okay, well.

Oh, I'm afraid to even comment. All right, see you guys.

Yeah. Yeah.

Thanks for listening to the Art of Passive Income podcast.

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