How To Turn Raw Land Into Passive Income Through Solar Leasing

Hey, it's Mark Podolski, the land Geek with your favorite niche real estate website, thelandgeek.com and on this week's Art of Passive Income podcast, I've got a great guest. A different guest. My guest today is Dakota Malone. He is a sustainability entrepreneur and he's here to discuss solar leasing as it relates to land investing. His company, community solar authority.com has qualified over a thousand acres in 2023 for solar leasing and is coming today to teach us and teach you how to turn your raw land into passive income. And look, we all know passive income is great, but what we don't get with raw land investing are any tax benefits. But with solar, we do. Dakota Malone, welcome.

Thank you so much for having me, Mark. It is a pleasure to be here. Very excited. And just a note that my now co founder and business partner was also a past and previous guest on the podcast. So when we were kind of internal communicating for where I wanted to go and where I wanted to speak on, he's like, you got to go talk to Mark over at the Land Geek. And I said, cool, let's do it. So super honored to be here and thank you for having me.

Yeah, absolutely. I'm a huge fan of Nat Bruno, your partner. He's been in the LAN geek community for years now and what you guys are doing with raw land is so exciting. So, you know, let's rewind the tape and kind of learn more about how you even got involved in solar.

Yeah, happy to. And I think really it's funny because I obviously love Nat as well, but I think he'd serve as a great case study for someone who's coming from the land investing space, transitioning into the solar space, and then understanding how to kind of intersect the two and monetize it. But a brief background on myself, as you had mentioned, I'm a sustainability entrepreneur. I've been in the energy space for over a decade. At this point handed my parents my two year associate's degree and I said, please leave me alone. I want to go figure out entrepreneurship at a young age. And so ever since I've really been kind of working and understanding the energy space community. Solar Authority I helped co found about six years ago, at this point, five and a half years. And we serve as consultants to some of the most significant solar developers in the country who essentially have a streamlined interest in deploying renewable access. And so we do full service consulting, which looks like sometimes working with end users, large consumers of electricity who have a need to lower their electricity costs or increase their sustainability commitments. But on the very, very first piece of that mark is actually building these solar assets. And of course we'll work with municipalities and investors, but the everyday Joe Land, land owner, land investor can actually take advantage of solar leasing and the trillion dollar clean energy economy coming behind it. And so over the last five and a half years, we've been working on the land side, on the on site side, and again, just really working to serve as a bridge between landowners and those solar assets that need to be built. The reality is solar is climbing in terms of its growth rate, especially in the US and so really the opportunity is just starting to get very hot in all 50 states, primarily the 48. So minus Alaska and Hawaii, we don't play there. I'm sure there's definitely solar going on there though, but the opportunity is now. And so again, I just really appreciate you having me on to kind of dive into some of this stuff.

Yeah, yeah. So educate me on just why solar. What's so great about solar?

Yeah, well, it depends on who we're talking to. So from a landowner's perspective, solar is actually nothing more than an exit strategy. So I've been on a bunch of land investing podcasts, happy to talk about some of the success stories that we've had so far. And really what happens is sometimes land investors are just looking for an additional way to monetize. Lots of times people will come to us and they'll say, hey Dakota, I've got all of these parcels, I've been sitting on them. They're not necessarily selling. Some are much bigger than the classic infill lot when it comes to a typical land investing perspective. And I don't know what to do with it and I'm not sure can you help. And so the great part about commercial solar is that it's a perfect exit strategy for someone who has 30 plus or 100 plus acres as it relates to the solar development. Again, what's happening is mostly at a state level, Mark. These states are coming in and they're saying, hey, we've got to clean our energy grids, we're going to be 100% sustainable within the next five to 10 years. And so really instead of putting solar on every single person's house, which is impossible for many reasons, they came up with legislation like community solar, which is essentially shared solar models. And so solar developers will come in, they will build off site solar farms, typically on 30 plus acres, and essentially residential accounts, small commercial accounts and large users of electricity can participate in this Solar legislation lower their electricity costs in exchange for helping clean the energy grid. So it's doing a whole bunch of things. It's obviously adding jobs, helping the economy, cleaning the energy grid. But again, as it relates to the everyday landowner, there is an opportunity to turn that raw land into an otherwise massive income producing asset for the next 20 to 25 years.

Wow. Okay, so walk us through some sample numbers or a case study on. Yeah, on what that could look like.

Yeah, happy to. So typically what we see and I'll give you across the board numbers. And by the way, for everybody listening, I always like to under promise and over deliver. So if these numbers seem mellow, which I don't think they do, just know that I'm under promising so that when you do bring us back land, I can say, hey, I got you so much more. But my intention is, you know, we help people get an average of around 875 to $1,000 per acre per year as it relates to solar leasing. Now of course we can dive into the process, the lag, you know, what that actually looks like to get that point. There is a lot of work. This is not a fly by night strategy. This is not something that you execute overnight per se. It is a much more longer term exit strategy. But the benefits are, you know, there's a very large ROI associated with it. Again, a lot of land investors are potentially buying parcels for pennies on the dollar. And I'll just give you an example. We were reviewing stuff in Arizona just yesterday with one of the co development partners that we're working with. And based on where you're at in the country, your local utility could essentially have a highly incentivized renewable energy program where if you have a solar asset, you can sell that energy back into the grid for a premium, which ultimately means. And again, the landowner is not responsible for figuring out any of that. We do everything turnkey. But in exchange that would raise your land lease because you are on a premium spot that would help us fulfill our job. And so I think part of what we believe in is obviously fair business practices. And so as consultants, not only are we working as a full service, like the entire value stream from the actual landowner all the way to the end user working with the solar developer, but we're employing and deploying fair business practices all the way at the start of the value chain, which means a landowner can know nothing. They can, you know, partner with some of the most significant energy companies in the country, but most importantly, they can have the peace of mind knowing that they're going to be taken care of, they're getting a good deal and they're beating, they're being treated fairly in the space, which I think is a greater part of what sustainability is actually all about. To go back to your original question.

No, absolutely. And so what is the average, say, investment that the landowner would need to make and what would be the average time horizon and what would be any risks if, if there are any.

Sure, yeah. So breaking that down, essentially what it looks like is, you know, we'll, we'll, like I said, we do lots of podcasts so we'll tell people, you can go to lease.communitysolarauthority.com you can enter your information, you can get free access to our guides and essentially we'll take up to seven days to review any parcel that's submitted. And so within seven days we have our own internal GIS and LAN team ran by Nat and he'll basically look at those parcels and he'll say, hey, this looks like a good fit or hey, this is never going to work. So, so within seven days for $0 and no time spent other than emailing us, you know, the parcel ID and address, landowners will instantly be able to know if their parcel is potentially a good fit. So that's a seven day window. And then from there, if it is a good fit, we'll check everything, substations, capacity lines, policies, you know, everything that we need to do, zoning, everything that we need to do and then we'll bring it to our network of solar developers. And again we're partnered with literally the largest solar developer in the world, co development partners that build hundreds of megawatts of solar farms. And so very much we're connected in the space with the top players. And what we're actually doing, Mark, is bringing those potential land deals to these guys and saying, hey, we've pre qualified this, it looks good to us. Is this something that you would want to explore further? And essentially so seven day window from the first review and then typically 30 to 60 days to get a couple proposals back if it's a good parcel. Again we never really go with the first option because we always, we always want to get the landowner the best opportunity. And so, you know, typically 30 to 60 days we'll bring back again, it's a zero dollar investment on the landowner's end, just really waiting and you know, typically within 60 days we'll come back with some sort of lease offer and in between that time we'll sign a non binding loi, which is just hey, let us know that you're open to collaboration. This doesn't mean you need to take the deal that we bring back. This doesn't mean that you need to choose to work with us exclusively. It's just saying, hey, if you want to work together, we'll do a bunch of the work on the front end, but just let us know you're actually willing to collaborate. And so, you know, seven days and then the 60 days and then from there, you know, again, this is a long term play. So it typically takes 12 to 18 months for a solar developer to run what's called their studies. Those could be environmental studies, interconnection studies, soil studies. And they're basically ensuring that that's a good site. They'll put engineers on it, walk it, check the drainage, the slope, et cetera, and they'll essentially take the next 12 to 18 months to qualify that parcel. In that period they'll give what's called milestone payments. So not the full lease payment, but a small payment, typically 5 to 10 grand. Just saying, hey, we're just going to do studies on your land. So worst case scenario, if they come back, they gave you money to do their studies, you can't necessarily do anything with the land during that time, but you would get paid to do that, to basically hold on to that parcel during that time. Best case scenario, and the more likely one because we do all of this pre work, is that they'll come back and say, hey, looks good, we submitted our interconnection, we've got the solar asset approved and now we're either going to go ahead and sell that to someone who's actually going to build it or keep it ourselves and then build the solar asset. But in either case, after that incubation period of the 12 to 18 months, then that owner would then receive the full term of the passive income lease, which again is typically a 20 to 25 year agreement. 875 to $1,000 per acre, and again that scales up. So if you've got 100 acres, fantastic. You're talking about really solid passive income. And if it's just a 30 acre parcel, that's okay too. You can, you can generate amazing returns. And again, you know, any sort of tax appreciation on that site, the solar developer covers and there are a whole bunch of other options that you now have as far as, you know, investing in tax, depreciation and just common knowledge on renewables from there.

Interesting. And so is there more money out of pocket for the landowner to develop it, Typically, no.

Which is the great piece. And so again, you know, we're coming in with a zero dollar opportunity. We're saying, hey, you know, if you have 32 acres, 30 to 100 acres or 100 acres plus pending on your state and pending on the utility zone, we'll take a look. It'll cost you nothing within a short amount of time. We'll let you know if it's qualified. And again, that's just part of our business model, which is to streamline sustainability. We know that solar asset owners are going to keep developing. We need to find more and more land sites and rooftop sites. You know, we just did 400,000 square feet on a mall in western New York not too long ago. We're looking at $400,000 in a parking lot in Rhode island on another large mall. But typically we're looking for land sites because we know these assets are in need, we know that they're coming, we know that there's incentives to be able to develop them. And so really we're just trying to make it as easy as possible to kind of bridge the gap there.

Awesome, awesome. And walk us through if you were going to pick some areas or a site that is more likely to be approved than not approved, what would that look like?

Sure.

What would the attributes be?

Yes, and I know you told me that I was going to have a daily tip in this, so I may give it a little bit early, but we have a free guide. It's called the landowner's guide to investing how to turn your raw land into passive income. It's available on our site, community solar authority.com you can go there, download it and it will give you all of the qualifications I'm about to tell you. So what we're looking for is again, above 30 acres. And the reason why is because we like to build these in 5 megawatt facilities, which is just solar talk for a fairly large size solar farm. And that's basically the a good sized farm per application into the grid essentially. And so that typically takes up about 30 acres. They're not going to build on all 30. They need some kind of wiggle room around it. So 30 acres plus, or you can have 100 plus acres and we'll do what's called utility scale solar, which is a little bit different from community solar, but works the same exact way in terms of land investing. So 3200 acres. Another really big consideration, Mark, is going to be what's called the substations, which is where these things connect into the grid. And so typically these need to be less than a mile from a substation. The greater the distance, the less likely you're going to have a home run of a lease rate because of the costs associated with trenching and wiring, etc. If you have to go past a mile, it can start to get pretty costly to build these assets. Now the good news is there are substations everywhere. And so many times the substation location is not the problem, it's actually the capacity. And so you have a substation, but there's only so much solar that could be put onto one specific substation before it needs to be upgraded. And oftentimes this is the largest problem to really ramping up commercial solar and solar farms in general is that the utilities have not upgraded their lines and their substations and they're usually relying on solar developers and other parties to do that for them. Now because we're coming in very leveraged and working with, you know, literally the largest solar developer in the world, they're willing to pay a couple million bucks to have substations upgraded. So that's, that's not a total be all end all, but it's definitely something we check for. So we check the substation, we check to see if we can even install solar on site. It's called hosting capacity. So we see how much hosting capacity is available. And really that aside, Mark, we're looking for mostly flat land. We can, you know, deforest if we need to, but that's never something that we like to do. And you know, of course it needs to have a basic slope. So nothing too crazy, nothing in wetlands, nothing zoned residentially. Those are usually the hardest to kind of rezone. Anything else is fine. Agriculture, etc. But I'll give you a real world example. I just did a podcast a couple weeks ago with Seth Williams over on the retipster podcast. Had someone reach out. They are currently out of state. They have a 100 acre farm in Illinois, I believe it was. 20 acres of it is currently being leased out for hay. And you know, it's interesting, that comes at maybe 2 to 500 bucks. We've done our research. You know, people can lease their stuff out to farmers for maybe two to $500 for them to till it or farm it or use their hay. And so they're currently doing a small portion but they wanted the 80 acres to just be looked at for solar. And I said no problems, you know, we'll take that. It's in southern Illinois, so ameren Illinois, which is, you know, my utility where I'm at, I'm in St. Louis, Missouri but right across the river there.

Oh, St. Louis. How funny.

Did you. Awesome. Yeah, awesome. Yeah. So I'm currently living in St. Louis and you know that we put under LOI. It looked like an amazing property and it's submitted to solar developers and I've got a follow up next week to talk about co development and bringing that project to life. So fingers crossed that that turns into a winner. But again, that was an off site owner, they used to live in Illinois, they rented out a small piece of it for farming and otherwise it was just sitting vacant. They're paying taxes on it and they didn't really have an exit strategy. And so that's just one small example. You know, Illinois is great. New York, Maryland, California, there are specific states that have community solar legislation which is like that 30 plus acres that we're really looking for. But again for anybody that has these 100 acre parcels, these make great for utility scale farms. And that's really why we keep a wide funnel. We'll look at everything, we'll do all the work for you. So you're still not wasting any time, effort or energy. But you just might have the parcel that we're looking for. And so that's why we encourage people to go to the lease.community solar authority.com we'll look at the land and we'll let you know.

So what percentage of submissions then get approved? And then that you're like, okay, this has got a shot. And then once it goes through due diligence with your partners, how many of those get approved? So for example, if I've got, if I have a hundred different property portfolios, 30 acres each, 10%, 20%, 1%.

Yeah, it's a metric I wish we had more data on Mark. And the only reason why we don't is because really we've only started accepting land from other people recently. Really what we do is just like land investing. We'll send direct mail campaigns, we'll do our research on the front end, go parcel by parcel, look at the substations, follow the map, find the landowners that we want for these golden parcels and then we'll essentially send them the direct mail and reach out. I wouldn't do it justice if I were to give the metric because it's not fantastic. You know, people submit a lot of parcels that are just like, hey, I've got five acres. I know you said 30, but we look at it and I'M like, sure, we'll look at it, but most of the time, you know, we're really looking for 30. And I've made the mistake of saying, you know, 10 to 30 before because we can technically develop on smaller sites, just build smaller solar farms. But in the spirit of what we're trying to do and the developers that we're trying to work with, again, those like 30 acre, 5 megawatts are really like the bread and butter of what they're trying to do. But if they're in good utility territories, if they're in the right states, if there's room in the capacity, you know, again, not every project gets approved and in fact more probably get submitted and locked up for lease than ever really get developed simply because the grid is so behind with these updates that need to be made. So, you know, again, there's, there's a good chance that we'll use a parcel as long as it's falling into our parameters and we'll definitely get it, you know, put, put under that loi and get the land lease going. But I just don't think I'd do it justice if I were to give you some percentages right now. I don't want to scare people away. Just be just for that soul fact alone that people send us all sorts of stuff.

Yeah, yeah, yeah. So what about the tax benefits?

Yeah, so when it comes to the tax benefits, and I think that this is important really, unless you are actually investing in that asset yourself, just like any other, you know, commercial real estate, you know, when it comes to the actual tax benefits, really the only piece here for landowners is that if a solar asset ends up being developed and the taxes end up going up, predominantly the solar developers that we work with will cover any sort of tax increases. So really what's happening, Mark, is not a direct tax benefit for that landowner, really what's happening is they are now increasing their income on a low tax piece of property that was otherwise, you know, not having this large ROI that is now able to. And the solar developers are kind of covering the difference there because it's their asset that they're building. So not as directly of a benefit as you might think. Again, unless you were investing in that asset yourself or you were taking on the power yourself, then it starts to kind of change the way you structure those deals, which we do. You know, we work with corporate style companies and do big rollouts for national retailers and international transportation companies and global hospitality groups. But like throwing all that aside and just really staying focused on the Landowner and the benefit to them, it's really just the ability that if those taxes go up, they're not going to have to deal with that.

Okay. So I'm a professional land investor and you know, my model. Right. I'm sending out offers, I'm buying land every day, I'm selling land every day. I'm flipping it, but I'm flipping it on a land contract.

Yep.

So I still own the underlying asset, but someone's making payments to me. So I'm getting passive income every single month. Yet at some point they, if they pay off their note, they're going to own that property. Given the fact that, let's say the average note's five years, I could submit my 30 acres to you. Correct. And then if it gets approved, I could then make a deal possibly with the new landowner.

Yeah. Call them back and call them back.

And say, hey, look, you know, do you, you know, we did all this for you, or there'll be some type of negotiation because we just increased the value of their land doing that. But because of the speed of which we're flipping, it doesn't seem to me, I don't see how we bridge the gap of like, okay, this is a great piece of property, but I don't want to hold it for 12 to 18 months and hope I can get a solar farm on it. So how do you reconcile that piece of the puzzle?

Yeah, a lot of the land investors that I've spoken to, and, you know, some of they're from all different types of podcasting communities, you know, original land investing groups. And a lot of them, you know, I'd say 80% of it actually doesn't work. And it's, it's kind of facing that. You know, a lot of it is the infill lots, flipping them quickly, getting them around into a note type situation where, you know that you're doing the seller financing. So I'm very familiar with the whole world. And, you know, the reality is, is that most of the time that won't work for people. This is really for the people who, again, they may just have these types of parcels in their portfolio beyond it. Typically, what I've seen in the conversations that I've had is all of the ones that are being flipped are usually like these smaller lots, not necessarily like the 30 or 100 plus acres. And so, you know, I would agree with you is that of course, you can kind of put it on a note. And really, I mean, you can either even structure it from the beginning, like, hey, we want to see if we can generate this and then make you a partner in it and give you half of the, like, whatever it is there. I'm sure creative, you know, creative financing is very popular these days. I'm sure there's ways to creatively set that up. But in my experience, you know, I'll talk to a lot of land investors from these communities and they're like, hey, yeah, like normally this isn't going to work because of that exact reason alone. I'm flipping this stuff fast. But I do have this, you know, random 75 acres in Arizona that I've just had and I'm like, cool, send that one to me and we'll, and we'll look at that.

Okay, Okay, I got it. I got it.

All right.

Well, Dakota, this has been really educational and your mentorship has been invaluable on the whole world of solar. I had no idea. But now we're at that point in the podcast where I'm going to put you on the spot again and ask for your tip of the week. A website, a resource, a book, something else actionable for the autopassive income listeners to go improve their businesses, improve their lives. What do you got?

Amazing. So again, I want to let people know they can go to communitysolarauthority.com right on our website we have what's called our Landowner's Guide to Investing. Mark, I will send you the PDF so we can just link it to the show notes. If people just want a one click link, it'll open it right up. And then of course, if you have these 30 plus acres of land or 100 plus acres, you can go to lease.communitysolarauthority.com you can input your land and we'll be able to review that and that will be able to get back to you within a week. And then lastly, I am a creating content every single day on LinkedIn. I encourage people to connect with me on LinkedIn. It's LinkedIn.com indecotamillone. Talk about all things commercial solar, from land investing to on site, everything in between. But really, you know, I have a passion for all things sustainability, which in my mind is human, social, business and environmental. So if anybody wants to understand deeper, deeper ways of embodying sustainability principles to improve your life, to improve your business, to improve anything under those four pillars, I would love to connect on LinkedIn and have some offline conversations.

Awesome. Awesome. Well, my tip of the week again is going to be community Solar authority dot com. Check out what Dakota is doing. And just a reminder, today's podcast is sponsored by Flight School. Learn how the next 16 weeks can transform your life. Go up that mountain quickly, safely, efficiently. Start building that passive income without renters, rehabs, renovations or rodents. If you find 30 to 100 acres, maybe you're going to put a solar farm on it. And I know what you're thinking. What about the tuition? It ain't going to cost you nothing. Guaranteed you're going to make back that money 180 days or less. Just show us that you did the work. Learn more. Go to land geek.com forward/training and if you're getting value from the podcast, give us some love. Follow rate. Review the podcast. Send us a screenshot of that review. Supportlandgeek.com I'm going to send you for free a signed copy of Dirt Rich Dakota. We good?

We're good. Mark, thank you so much for having me. It's been a blast and I really appreciate you having me on.

Awesome. All right, let freedom ring. Thanks, everybody. Bye, guys.

Thanks for listening to the Art of Passive Income podcast. Are you ready to learn how you can start building a passive income without renters, rehabs, renovations or rodents? Schedule a few free consultation@thelandgeek.com forward slash training. Let freedom ring.