What Is The Importance of A Market Analysis in Purchasing Land

Hey, it's Mark Ponolski, the Land Geek, with your favorite niche real estate website, thelandgeek.com and on this week's roundtable podcast, Land Geek Nation, we have almost all the usual suspects. We've got Dude Buddy, the Nightcap og, Scott Bossman. Scott, how are you doing?

Well, thanks.

Good to see you. We got your partner in crime, your partner in crime, the Zen master. Breathe in the mailing. Breathe out the marketing. Breathe out the marketing. Mike Zaino. Mike, how are you?

Great, thank you.

I want to apologize to all the Bostonians listening to this for my.

It's pretty good, though.

Well, I appreciate it. I appreciate it. I've been working on it. I love it when you call me Big Papa. Tate Litchfield. Tate Housing City.

It's good. Happy to be here. Thanks.

Good to see you. Last but not least, you know him, you love him. The brain, the professor, your flight school sherpa. Scott Todd. Scotttodd.net landmodo.com Learn anything about anything. Investorninjas.com Scott Todd. How are things down in beautiful Tampa Bay, Florida?

Great.

Now, Tate, are you happy to be here or are you happy to be there? I was a little confused.

Oh, yeah.

I'm going to leave that up to the listeners to discuss. Okay. All right.

Well, Mark, I'm happy to be here, not there.

I don't know how to even respond intelligently. Who does? I do think we have an intelligent topic, which is. Tate Litchfield, what is our topic today?

Our topic is in today's market, which we can all agree is pretty exciting. How do you know if you're overpaid? Can you overpay for land? Especially when you're buying wholesale? At what point do you sit back and say, oh, I'm the one who's paying too much money for this? So that's kind of the question. It's come up a lot on office hours, which is our Monday night call that we have for our coaching students. And I just wanted to get the geeky opinion of our experts.

Well, I mean, to not start with our resident wholesaler would be just a crime. Just terrible. Zen Master, what do you think?

Well, of course, yes, you can definitely overpay. You know, first off, I tell people when they look at any wholesale deal, treat it as an accepted offer. So you still have to run your due diligence. The market does shift. I think it's our responsibility to keep track of the areas we're working or we're going to work and make sure that the current market at the Time of purchase, that we're safe in with whatever that price is. There are people that do put wholesale deals out there that I think are very close to retail. So you have to be very careful. The way I judge it, the way I try to set up wholesale deals, is I want you to be able to double or nearly double your money cash and make a 300% return. You know, I think if you can structure it that way or if you buy it that way, you're safe. Right. So it's, you know, that allows, like if you buy it 25 cents on the dollar, you could sell at 50 cents on the dollar because somebody who has a buyer's list there doesn't have to play pay for all the acquisition. They have someone ready to go. It just works out. So I don't want to shift topics, but yeah, you can definitely overpay if you're paying so much that you can't, you know, you don't really have any margin to sell it cash and, you know, or if you can't make a healthy return on a terms deal. So I think you have to do your own due diligence and your own market analysis at the time of purchase and make sure that. And I tell people that buy. People buy from me. Oh, I'm fine. I know you. I'm like, no, no, please. That makes me nervous. Don't, please, please. I always say no before you do it. Do your due diligence. I don't, I don't want. Yes, I'm trustworthy, but I don't want you to buy. I want you to. You should still do your research and make sure it's a good deal.

Okay, so let's unpack a little bit of this before we even move any further.

Okay.

What's our definition of overpaying?

I would say in this instance, if you can't, like I said, I want you to be able to double and nearly double your money wholesale. If you pay for $500, you should be able to sell it for close to a thousand with a DOC fee. $1,000. Right. But if you're paying 500 and you're going to sell it for 700.

It'S.

Not very good, right? I don't like it. I mean, it's still money, but I don't like. I want to have a, you know, I'm as an example, right. If I buy for 500, let's sell for 1500. Turns.

The Mike Zano metric is if you're buying wholesale, if you can't double your Money you can't see definitively based on the current market. You're not buying it.

I guess I look at it more, Mark, from. I do a lot more of selling than buying in the wholesale market, and I really struggle with that pricing to make sure that people can do that, because I want repeat customers. It's not a one deal. I don't want that. We hear all the time, and we've heard from other people, too, that you know from. Bought from other people on this call. But we want them to be like. I remember Tate saying was one of them. We had a boot camp, right, Tate? And the guy was like, I don't want to tell Mike what I just made on this deal. And he's like, what do you mean, tell him? He'll sell you more like you want them to make money. So I look at it from the side of selling it, I guess, Mark, more than buying it. So maybe I'm not. Maybe I'm a little bit. I don't know what the word would. Prejudice on that side of things. I'm trying to. I want you to make money. So that's how I define it. I want you to be able to double your money or nearly double your money, cash, and then make a nice 300% return on terms.

Okay, Tate, what's your definition of overpaying?

You know, it's tricky. I can tell you that the price that you probably bought at three months ago is not today's price. And that's just because I think there's not as much. You know, there's not as much inventory floating around because people don't feel this anxiety to clean. Clean house, right? Like, they're not looking at their properties and saying, oh, this is aging. I've owned this for 60 days. I have to get rid of it. And that's just because we are in a seller's market. If you've got the land and you're doing good marketing, it should sell. So, you know, when I look at wholesale deals, for me, I'm not really worried about the price of the property, but what I'm interested in is the capital recovery of that property. I want to know, since I'm a term seller, I only sell on terms primarily. I want to know if, when I sell this property on terms, how long it'll take for me to recover my investment, which is that cost of acquisition. And I have a parameter of what I like to be in an area, number of months. And as long as the property is within that. That area that I've Deemed acceptable. And I deem that number acceptable based on the yield that I need to make for my investors and myself, I'll do the deal right. So for me, that's what it comes down to. It comes down to the numbers. I'm not really getting overly analytical about the low comps or the high comps or the outliers or anything like that. What matters to me is how long will it take me to recover my investment? What will be my yield on that? I run a couple different scenarios. I want to know. Best case scenario, it sells for 250. Worst case scenario, we have to let it go for 200. What does that look like? What does that do for me? And when I know that I'm comfortable, when I buy property, I buy it because I want it. And that's not going to change if it takes me 60 days or 6 months to sell it. I still want it. I still believe in that property. And sometimes it's just a matter of finding the right buyer. So can you overpay? Absolutely. I looked at a deal the other day. The guy wants $14,000 for a property that's worth 22. That's not a good buy for me. It doesn't make sense. But I'm also, you know, I bought some property the other day. The going rate on these is around 2,500. And I bought six at 2,800. I overpaid by $300. But did I? I mean, for me, no.

Well, certainly not in this market. You did not in an inflationary market. I mean, think about the properties you bought a year ago. They're on terms, and let's just say you have a 10% default rate. Well, now you're right. You're great, though. You love those defaults. Now you've got a whole new pricing structure, and your cost basis has gone down, increasing your Yield, increasing your ROI. Dude. Buddy. NetCap, OG, what are your thoughts on this? It's your turn to talk anyways.

Well, I agree with Mike and Tate. I mean, when I look at a wholesale deal, I really would like to be able to double my money cash. Now, in this market, there's a little wiggle room there, right? Like, land is an inefficient market. And I can maybe push the price up on the sales side a little bit. In this market, you got to remember, too, when you're buying property wholesale, you are saving costs on mailing. I just bought a wholesale property last week. It had beautiful pictures. Like, somebody probably charged this guy $150 to take these pictures. He had a due diligence report. And I got this property at what I would definitely consider 50 cents on the dollar or less even. So it was a great buy for me, and I didn't have to, you know, I don't have other costs associated with acquiring some of these properties sometimes, but that's. That's what I look at. And on a terms deal, I agree with Tate as well. You got to play with the numbers a little bit. You guys say, okay, if I'm buying this for 3,000 and I'm going to sell it on terms, how quickly can I get my money out and what's the yield look like, and am I comfortable with that? Ideally, 10 months or less is what we want, but I'm not afraid to go up to 12 months, even 18 months sometimes if the numbers look decent.

Yeah, we're so spoiled, aren't we? Because we're talking about overpaying. Well, we're still making money. I can't think of any other thing. You can overpay out a stock and lose money, right? I'd love to know, has anyone ever lost money? When's the last time you lost money on a land deal? Tate?

I got one that we're not going to lose money, but it's not going to be a huge payday. Right?

And that's because you lost money. You lost $150 1000. It was just a bad. You overpaid. It was a bad deal.

I don't track that, Mark. I track the properties where I don't make a huge return because, like, I don't.

I don't know.

Even my worst ones, I've been able to make something on it. Right?

Okay.

I don't know.

I don't. I don't know.

Let's ask somebody. Lost money on a deal. Zed Master. You're thinking about it.

Great question, a great point. I'm sorry. And the answer to that question is no, I have never lost money on a property. So you're just basically recalibrating our expectations. Like, even if you have a bad purchase, you still can make money. It's just. How much money did you make? I have not lost money.

Scott. Bossman. Dude, Buddy. Nightcap.

OG I have not lost. I've lost money on a deal because of a clerical error. I was out a couple hundred bucks, but otherwise, no.

I mean, we're talking. This isn't like we've done a few deals. This is hundreds and thousands of deals. Wait till we get to Scott, Todd, Scott, Todd. What do you have to say about this topic?

Never lost money. Came close. Never lost money.

We're talking thousands of deals, right?

Yeah, not a factor. But see, Mark, the thing, I almost.

Lost money on a deal actually, just sidebar, it had back taxes. So we let it go for the taxes and we made like 16 grand on the overage when it went to auction. It was crazy.

Hey Mark, here's the thing too, that a lot of people don't realize is a couple of things. People that have been doing this for a little while who are accustomed to buying it at the old price, then they go and they see the reality and they get sticker shocked. So it's no different than you go to the gas station. You haven't been to the gas station in a while. I went to the gas station today and for the first time in forever, I saw that the highest octane gas was 408 a gallon. I can't remember the last time it was 408. It's sticker shock.

Whoa.

Right. So you go to the gas station and you could easily say, well, I remember when, I remember when. Yeah, you remember when. And that's yesterday, it's not today. To Tate's point, the market changes, the market goes up. And I think that it's a constant thing to say. And this goes back to what we teach in flight school too, the pricing matrix.

Right.

Just because you sold properties for X dollars yesterday, or even if you sold one today, it doesn't mean that your price is right. You have to keep looking at the market. The market is changing out there. You might have your price here and you can say, well, I just sold a property for $16,000. Well, that was yesterday's price. Honestly, like today, you know, the entire market might rise. And so if you're not dialed into the market, you could easily look at that and say, I'm overpaying. Or it's also a self doubt because you don't think that you're going to sell it for the 18,000, the new price. And so then you walk, you think everybody else is crazy. Meanwhile everybody else is making money and you're walking and going to another county. I've seen that happen too. It's like, oh, well, I can't get it for what I used to get it, so I'm going to go to somewhere else. Yeah, but if you have all your buyers in this one county, why like just raise the price? They're not going to go anywhere else. That's the price, that's the Price of land. And I think that that's part of the problem. The other thing, too, to remember is that about 15% of the notes will not go to term. 15%, on average, of the notes will not go to term. Therefore, you're going to resell this property. And maybe not all your properties, but there is a portion of those that you will resell. So I think that you have to kind of factor that into it. Like, yeah, I might resell it, I might not. But as long as you can at least double your money and you believe you can do it, and if other people are doing it, you can do it too, then I don't see the problem. I don't think that the price is driven by what you sold it for yesterday or it's too expensive. It's based on what the market will pay you.

Yeah, I mean, that's the crazy thing about this model and this business is that it is an inefficient market. So nobody really knows the price.

It's funny, I was late to the podcast today because a customer called me and he's been paying on a note for four and a half years. And he called me. We check in every so often. And he said, hey, look, that area where I bought this property. I said, yeah. He goes, I want to get another one. I said, no problem. Yeah, I've got options for you. He's said, okay, cool. What's the going rate on them? And so I pulled up his note, pull it up in geek pay. And I was looking at. He bought the Property originally for $175 a month, right? That was what he was paying us. And he has been paying us. He said, look, I've got another property. It's the same area, same size, same everything. He's like, okay, cool. Any way you could cut me a little bit of a discount? And I go, for you. Yeah, we'll take care of you. The new monthly payment on this property is going to be $269 a month. And he looked at me and was like, wait, what? I go, look, man, the market's changed. Four years ago, you should have bought two of these. And he's like, think we could do it at 250? And I'm like, yeah, let me. Let me get back to you. I got to get on a podcast with Mark. And apparently that's more important than making a sale real quick. So I got to call the guy back. But he was kind of shocked. The property had appreciated by 30% in four years. And he looked at Me and was like, well, if that's what they cost, that's what they cost. I go, yeah, and in three years, you're going to call me and wish you had bought two more of them because the price of land is really going one direction, right?

Yeah, no, absolutely. Scott Todd's point about gas prices. I remember being a kid and my grandfather. I'd worked summers with my grandfather, my dad at this wholesale grocery store. They all worked together. And I'd go in the truck and I'd make deliveries, and my grandfather would give me five bucks and he'd be like, bring me back some lunch at McDonald's. I want a quarter pounder and fries and a Coke. Well, I'm losing money on this deal, and I didn't have the heart to tell my grandpa I got to pull out money in my own pocket on this thing. It's like, he didn't stay up with pricing because McDonald's keep raising their prices every year. So I don't know why I told that story.

Because the price is going up.

Because the prices are going up.

And you can either get on board with that or get left behind. You got two options. You can pivot or you get left behind.

Yeah, exactly. Exactly. Scott Todd, you want the final word on this?

I think we killed it.

I think we killed it. Well, I want to thank the listeners and remind them that the only way that we're going to get Scott Todd to do the tip of the week this week is if you do us three favors. Follow rate Review the podcast. Send us a screenshot of that review. Supportalankic.com I'm going to send you a signed copy of Dirt Rich. Today's podcast is sponsored by flight school. Learn how the next 16 weeks can literally transform your life. Go up that mountain of land, investing quickly, safely, efficiently with Scott Todd as your sherpa who's done it thousands of times. He's never lost money on a deal. He's going to teach you exactly how to do that. And that flight school tuition ain't going to cost you nothing, Guaranteed. You're going to make back that money 180 days or less. Just follow the recipe. Show us your work schedule. Call Learn more. Go to land geek.com training the land geek.com forward slash training Scott Todd. What is your tip of the week? We had a resource the book something else actionable.

We had this conversation last week. I gave three.

Should have given two.

All right, fine. Should I get. Should I get the tip of the week or you.

You do it, man. You do it.

Me? Yeah, you. No, I don't do tips.

Nobody goes around here. Nobody comes prepared. Let the host do it.

Look how. Look how Mike and Scott have their. Their. The thing on mute. Like talk.

Talk about being respectful, Mark. That's how you listen.

Bailing out of it. Just listening. Do you guys have a tip of the week?

I like the Blinkist app.

The Blinkist. Okay. That's a good.

It's actually pretty awesome.

Seventeen called its tips back.

Yeah, exactly.

Come on. It's really awesome because these people, they write these books and you don't have to. It's so much fluff. Just get to the point blankest. I got the relevant.

All right. Scott's got a good.

Forget boxer. Go to Bali. It's the new. The new boxer.

Let's just check this out because I'm tired of hearing about Valley Valley dot com.

How is it going to make my life better?

Yeah. Inspire prospects with personalized outreach. We help B2B companies talk to their prospects by scaling personalized hyper relevant outreach. Is this it?

B O L L E Y. Yeah.

Supercharger funnel of volley. BDRs research and intent data.

Video messaging.

Video messaging.

Volley video messaging.

It's volley app.com. volleyapp.com.

You think your team wants you to see them? Like if they're in the pajamas or whatever they're doing? I don't know.

It's boxer with video.

I'm not in. I'm out. I'm out.

Why I don't always comb my hairstyle? I don't know. Now I have to boxer as video.

You can do. You do video on voxer garbage.

You can also use something called facetime garbage.

I'm usually not very comfortable with my hairstyle. I don't want the team to see me like all disheveled and we're not listening to him.

Okay. Scott, honestly though, like, why is this awesome for teams?

Well, because voice is one level. Eye to eye contacts another level. Think about that. Eye to eye contact is a whole different level than voice. So when you can see someone's face and you can see how they. Their reaction to things or you can see how they're delivering the message, it's a much better communication style than just listening to somebody talk because you can't hear or see. You can't. You can hear what you can't see. So now you get to see. Now you get the entire experience with somebody as opposed to, hey, yeah, what about this? What about that?

I know you don't really love vox or hat. You've talked about that before. So if we got volleyball, I can volume you all the time. That's okay.

I'm still not doing it. Listen, you guys need a tip? I gave you a tip.

What do you want?

I'm going in now. I'm signing up.

I'm not going to sign up.

Is everyone going to do this?

No, I'm not going to do it. And the reason I'm not going to do it is I want to do.

It to volley Scott.

Yeah, if Scott does it, I'll do it.

Listen, maybe I should be on volley and then, like, kill Boxer, because I hate that sound.

What does Wally do?

Garbage. So, worst sound ever.

The thing that's interesting about cell phones, Scott, is you have the ability to turn the volume off. I'm not sure if you know that.

Yes, I can turn the volume, but you know what you can't do? You can't change that stupid tone on Voxer. So I shut it off completely. Now people send me messages, and it shows up as a notification, but I might have my phone here and be working back there and not know that anybody sent me a message for hours.

And then I just text your airplane phone number, and then I just text you directly.

It's all right here, man. Yeah, see.

You might as well just use signal at this point, right? At least that's encrypted.

Yeah. Signals is a great app.

Really.

It's encrypted. It's privacy.

Yeah.

I don't know if this is good for teams. Okay, it says something went wrong. Please check your connection and try again.

What's the pricing?

I can't even register for this thing.

Oh, it's free. All right.

You know what Mark says about free apps.

Yeah.

What is asynchronous versus synchronous? Like, what does that mean?

So asynchronous means that, you know, I can follow you and send you, like, a video message, and then when you receive it, two hours later, you can respond. As opposed to Synchronous is a phone call, and unless you're available, we can't. We're not synced up. I don't know.

I feel like I'd be using that, thinking I'm using Voxer, not really paying attention to what I'm wearing. And then it would be really embarrassing. I don't know.

I'm out.

I think we should try it.

I'll try it.

Be fine.

I want to volley Scott. I want to see what noise it makes on his phone.

All right, so are we all agreed? We're all going to be volley voliers now instead of voxers.

I'm not.

No.

I told you I needed a tip. You asked me for a tip. I gave you one. I mean, I'm not standing here telling you you got to go do it.

It's a tip.

Maybe you want to talk to your team, maybe you don't. Maybe I'll join it, maybe I won't.

I don't know.

Here's my tip of the week. Register for boot camp. Go to landgeek.combootcamp. it's coming up in April. All right, great. Great podcast, everybody.

Thanks, guys.

Thanks, Park.

We ready to do this? 1, 2, 3. Let's let freedom ring. Never gets old. All right, thanks, everyone.

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 free consultation@thelandgeek.com forward slash training. Let freedom ring.