Interview with Land Investor Mike Ferreira : A Pig in Every Barn
We are extremely excited to have a real star in the land investing community on the show. He is way too humble to admit to that. But the numbers speak for themselves. We are here with Mike Ferreira. Mike has been in the land business full time since 2015 and was doing it part time before that. He's got a tremendous amount of experience and knows how to succeed in this industry.
Mike does around 10 to 20 deals per month. Most of those are term deals though he does flip properties as well. Mike is based in Florida and that is where all his business takes place.
One subdivision in Florida can have as many properties as some counties in other states. It’s a perfect place to be a land investor.
Mike likes to cater to the impulse buyer. He will get new clients reaching out to him randomly at 2 AM after visiting his website. He funnels those new clients to his website or Facebook pages with online advertising. His preferred places to advertise are on Facebook and a few other land investing groups.
Most of the Mike’s deals cost a couple of thousand dollars. Sometimes he will pay more in the range of $9 thousand but those are in neighborhoods with actual houses, power and even water.
He is not interested in hand-holding his clients. A tour of the property is time-consuming and does little to add to your knowledge of the place. Mike is in a wholesale business and so customer service is not at the top of his priority list. He makes sure his clients know that and is upfront about the higher interest rates he charges.
People are generally trusting and Mike reciprocates that in his business. He’s not interested in trying to get one over on someone. The business is so trusting that sometimes people will just sign-over the deed to their property without having received a cheque yet. It’s kind of crazy. But Mike isn’t interested in ripping people off. He always sends the cheque because protecting his reputation is incredibly important to the long-term success of his business.
Interview with Jaren Barnes on How He Invests in Vacant Land
I am super excited because we have a phenomenal guest today on the show. His name is Jaren Barnes. He's just got a deep background in many facets of the real estate industry - most prominently as a key person in the success of Bigger Pockets. He started out working in pre-foreclosures where he was knocking on doors, finding opportunities for his employer in that market. He's since become a very active and very successful land investor. And because he hates to be bored, he's also now the creative director over at REtipster.
Jaren has built a business based on incredible volume. He sells on average between 20 to 30 properties per month. That is a jaw-dropping number. He believes that the land business has all the perks of wholesaling houses and none of the drawbacks. Direct mail is still so much more affordable in land investing. It's just amazing because the land business is the only asset class that I know of where you have people that literally do not care about the property and want to give it to you for pennies on the dollar. When you deal with houses. There's just a lot more emotion involved.
Recently he bought a property for $500 and sold it for $25,000. That's not a typical deal. That's definitely a home run. But what other type of real estate class has deals like that?
Jaren is hugely impressed by the growing role of technology in the land investing business:
“I am shocked at the amount of technology it attracts a lot of engineers and software engineers,” he says.
With houses, because it's such a localized market you can fly the seat of your pants. But most land investors will never see the land they are buying. To make informed decisions you need lots of data. And that’s why there is such a wealth of information out there along with software tools to glean powerful insights. Leveraging those tools is the real secret to Jaren’s success. And it can be for you too.
What to Expect from the New Land.MBA Land Investing Podcast
Does the land investing community really need another podcast? I'll give you a hint. The answer is yes. I'm Howard Zonder, CEO and founder of Land Speed with my good friend David van Steenkiste CEO and founder of Mile High Rural Land.
What I'm really hungry for is a podcast that focuses on much more advanced topics. There are so many investors out there that had been in the business for a while. They've demonstrated to themselves that this is a legit business that they want to pursue. This podcast is for those people seeking a higher level business skills that can be applied into their land business.
So what does that mean? We're taking business principles, like marketing, sales, logistics, and due diligence - and applying them to land investing. We've been at this a few years now. And I think we have a lot of experience to add for people. Not just the fluff but the realistic side. You can create a nice income from this niche. But we're going to tell you straight-up and talk about the troubles and bumps in the road that we've experienced. And hopefully give you some nuggets of wisdom to help you prevent stepping on those same landmines.
There's a difference between having a regular regular deal flow that's generating some income and achieving your dream. It's an interesting thing that working in big companies is not the same as being an entrepreneur. The requirements for those jobs are actually different. Fortunately, for me, I have a lot of friends that were very successful entrepreneurs that I was able to latch on to and create my brain trust. Most of that advice was just basics about a business. How to take an entrepreneurial idea and grow it into a thriving enterprise. That was the missing piece that I needed to get past that plateau. And it’s that kind of advice I’m excited to share with you.
Size Matters When Selecting Counties for Vacant Land Investing
In today's podcast, we're going to talk about market sizing and ask that all important question. Does size really matter? In business? You bet it does.
We want to go where the opportunity is. Understanding how to do market sizing is really important. You want to get this information right. There's three concentric circles you need to consider.
The biggest circle is the total available market. Sometimes this is also called the total addressable market. How many people or how many businesses are there that could potentially buy what it is you're selling in total?
Then there's the circle in the middle, which we call the service available or the served available market. This is the subsection of the marker that is interested in your product.
The smallest concentric circle in the middle is what we would call the share of market which is okay within that market of people who would actually buy it, what share of the market can I reasonably get?
When you go to size a market, there's two ways that you can do it. You can do a top down analysis or you can do a bottoms up analysis. The top down analysis depends on secondary research. You're looking at big, broad based numbers to come up with your answer.
The bottoms up analysis is much harder, but it's actually much more accurate. Using Census Bureau information you discover in detail all the relevant information you need. Using that data you create lists of all the sub-markets you want to go after. Then you add them all together and that's the total available market.
Using a service like Zillow you can look at the size of the county. Look at the total number of properties available. Then look at how many are for sale and how many were actually sold. If there's a reasonable balance, that might be a county you’re interested in.
As you're starting out, you know, it takes a while to develop all the skills. There are people in the industry who keep their portfolio diverse, but make a lot of money by really focusing on a certain area. Maintain a diverse set of areas and property types because then you've got a broader audience to market to. You should always be selling something if you've got a diverse inventory.
Interview with Roman Northcut - How to Scale Your Land Investing Business
The Land.MBA tagline is “Think big, start small and scale fast”. So have you thought big and started small? What about scaling? When it comes to scaling, you really need that CEO mindset so you can build a highly efficient organization that manages the day to day for you. In this episode, Dave and I are going to speak with Roman Northcut, who has built an organization with dedicated full time employees. Now his seven figure land business is growing faster than ever, and he's looking for new challenges to fill all of his available time.
As Roman grew his business burnout became a serious issue. When you're in the start-up phase you tend to do everything yourself. But when it comes time to scale, a lot of people can't break away from that. And so they can't grow more than incrementally because they are the bottleneck in their business.
Roman is a big believer in adding team members that can remove that bottle-neck. He brought on people who are full-timers. Not just freelance VA’s. Building that team can be difficult. In the end it all comes down to extensively vetting every new hire. Now he has built a team that allows his business to grow fast. And it all started with his decision to let go.
Time is money. It’s cliche but it is absolutely true. Roman know that every position he hires free up his time. And his time is far more valuable. It shouldn’t be wasted on the minutia of running the business. That's how he looks at every member of his team.
Cash-Terms-Margin-Velocity in Vacant Land Investing
They say that the goal of business is to maximize shareholder value. In the typical land business, we are the shareholders. So the question is, should we seek the maximum price we can get when selling a property? What about cash deals versus terms deals? What's the right mix?
The best way to get the results that we want out of our business is to set the right goals and to set the right plan in place to achieve it. Otherwise, we're just the little rowboat on the ocean letting the ocean take us wherever it wants to take us. That’s where margin versus velocity comes in.
The question is, do you want to hold out for the maximum price? But low and sell high means selling at the highest margin possible. But what if you want to turn your money around quickly? Then buy very low and sell low. That’s velocity. There can be more work in velocity. And it depends on the size of the deals you're doing. And it really depends on your preferences. Do you want to hold out for more money or do you want to keep turning that money around quickly while building your war chest?
Time equals money. If it takes longer than your money is not working as hard for you as it can. I had a property a couple years ago. I think I paid about 30 for it. I tried to hold out to get 60-70 for it. And I ended up having it on the market for nine months. And I eventually sold it, I think for like 49. Well, if I had just not been greedy and dropped my price initially it would have sold much more quickly. Had I been more aggressive on my pricing, I would have ended up actually making a lot more money at the end of the year.
By going with the lower price, but selling it faster, we could potentially increase our profits. Sometimes by as much as 40%. That's a pretty substantial increase by selling low. And when you look at the math, it's pretty standard.
There's nothing more risky than just depending on a single source of income from an employer. You got to have another income stream. I don't care whether it's investing in land or it's some sort of e commerce business. How can you really feel confident in your ability to always be able to support your family, knowing with one income stream from a single company. There's no loyalty. You got to have that side hustle.
The Hook: How to Sell Vacant Land
You've picked your county. You've priced your list. You've mailed your letters, and then finally, you bought some properties. Inventory is great, but it's all for nothing unless you can sell it. Wouldn't it be great if you could get the customer to sell themselves? Marketing is like throwing bait into the water to attract the fish. In this episode of Land MBA podcast, we're going to talk about setting that hook and reeling that fish into your sold folder.
Sometimes you buy a piece of land and you think it's gonna be great for a particular purpose. Then you find out that something's wrong with it. What are you going to do with it? There's always a market you just got to find the right use for the right market.
Maybe a buyer might call you thinking one thing about the property you have and be totally wrong, but you've got another property to sell them. You always want to have a diverse inventory.
There's one golden rule to live by. And that is you have two ears and one mouth use them proportionately. Your job is to get your client talking. And too many times we want to jump and tell them about this attribute and that attribute, but we don't take the time to find out what their dream is. You need to build a trust. And then, as you let them talk a little bit more, you ask some really good questions that really make it apparent to them that you care.
Here is the golden piece of advice. If you haven't read, Never Split the Difference by Chris Voss yet, stop what you're doing right now. It is a life changer in every regard, but particularly, it's useful in the land business. The techniques in that book are absolutely phenomenal. And one of the key techniques that he talks about is mirroring. Basically, you just repeat those last three words and then silence. Never be afraid of the silence because silence is uncomfortable.
Make an Extra 12k Per Year in Land Investing with One Simple Hack
How would you like to add an extra $12,000 per year straight to the bottom line? Don't think it's possible? Well think again. On this episode of the land MBA podcast, we will show you how to increase your land profits with one simple trick.
This is a pretty provocative topic for a podcast. Adding additional $12,000 bucks a year without increasing my deal volume. It definitely sounds too good to be true. There's always pressure on every business to increase revenue and profits. If you're in a public company, the pressure is even higher.
There's really only three ways that you can increase profits. It starts with either increasing your revenue, reducing your costs or increasing your deal volume. The best way to reliably increase your profits is by reducing your costs.
When you are negotiating your deals there is simple trick to maximize your success rate. Whatever you ask for, you must come across humble. It must be presented as a very reasonable thing. You have to explain why you're asking for that price and why it's reasonable.
So what about this $12,000 we keep talking about. Where does that number come from? If you are currently doing 10 deals a month, that would be about 120 a year. Your goal should be to average about $100 decrease per property in that final negotiation between due diligence and closing. Sometimes it doesn't work out at all, or sometimes you do less. But if you can average $100, and you're doing 10 properties a month, that's $1,000 a month, that's $12,000 a year. Obviously if you're doing a smaller deal flow, the number is smaller, but proportionally, it's the same.
When you first start to do this in your negotiations, it may feel a little bit uncomfortable. It may feel like you’re pulling a bait and switch. But after a few times, it'll feel perfectly natural. It’s important emphasize this point . What what you're doing is ethical. It's appropriate. It is a natural part of business, which is price discovery. And at any point in time, if they don't like it, they can say no. And if they say no, you could still do the deal. I mean, there's no reason you can't change your mindset.
What is Your Land Investing Strategy?
'm a data geek. I like to understand things so that I can feel more confident in my decisions. Too much analysis can be the death of dreams. Because in the pursuit of perfect knowledge, we delay taking action. In this episode of the Land.MBA Podcast, we're going to talk about the role of analysis in the land investing business. And knowing when you cross the line into analysis paralysis.
At heart, I'm a military guy, I fall back on some military principles. As George Patton said,
“A good solution applied with vigor soon is better than a perfect solution applied 10 minutes later.”
It's got to be action. So if you're looking for 100% confidence, you're missing the market. Bill Gates says when he hits 80% certainty he takes action.
We can see this principal in the development of product. It used to be that when you develop a product, you would go out and you would do market research and you figure out what the market wanted and you build your product plan from there. But it doesn't work that way anymore. Now, you create something called the “minimal viable product”. You get it out there and you let the market give you feedback. The market tells you what they want. You don't have to guess anymore. So it's all about moving fast and getting something out there so the market talks to you.
So how much analysis is the right amount? It depends on the situation. But again, if you're waiting for 100% confidence in a decision, you're waiting too long.
These decisions aren’t always easy. Take, for example, pricing mailers. It can be a little bit nerve racking trying to figure out the right price. You can essentially kill your model because of spending so much time doing it. Conversely, being too flippant can also spell disaster. So if you're using a tool like Price Boss, you can bring a lot of data into the model and turn out an analysis based on a lot more data than you could copy and pasting it onto a spreadsheet.
But how much do you really need? The two words you need remember are: “diminishing returns”. At some point, you're just putting more information in there, but you're not getting a real return on the level of effort and time that you're investing in that additional information.