Epic Real Estate Investing - Land Investing 101 and Beyond... Mark Podolsky | 547

Episode Date: December 20, 2018

Today, Mark Podolsky, a coach and a host of The Art of Passive Income Model podcast, explains why a raw land creates the best passive income. Listen to this successful raw land investor and learn what the pros and cons of a self-directed IRA or a QRP are, where he finds his comps and who he asks for professional help. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. The idea is that to be successful in life is kind of like coaxing a cat, right? And so you've got to create that environment. Like you can't just get a cat to jump on your lap. You've got to have these certain principles in your life to create success. Hello, I'm Matt Terrio of the epic real estate investing show. And welcome to another episode of Thought Leader Thursday. So today I am joined by a very successful real estate investor who has been

buying and selling raw land full time since 2001. He's completed over 5,000 land deals and his passion for investing in land for creating wealth efficiently and for helping others develop their inner geek entrepreneur has led him to do two things that he never expected to do in life. The first thing is he hosts his own podcast, multiple in fact, which we're going to talk about that in a second. And the second thing is he is and has come to love being a teacher, a coach, and a mentor to a growing community. and today he's going to make his case as to why raw land creates the best passive income. So please help me welcome to the show, Mr. Mark Podolsky. Mark, welcome to the show.

Matt Terrio, humbled, honored, delighted. Thank you so much. Yeah, you bet. Glad to have you here. And Mark, I want to talk all about what you're up to and how you do it. But before we get into that, what were you doing just prior to getting involved in real estate? So I was a really unhappy, miserable, overstressed, overworked investment banker, specializing in mergers and acquisitions with private equity groups. And it was so bad for me, Matt, that I wouldn't get the

Sunday blues anticipating Monday coming around. I'd get the Friday blues anticipating the weekend going by really fast and having you back at work on Monday. So my firm hires this guy and he's telling me that as a side hustle, he's going to tax deductions, he's buying up raw land, pennies on the dollar, and he's flipping them online, and he's making on average a 300% return on his investment. Well, I'm looking at companies all day long and a great company, a great company has 15% EBITDA margins or free cash flow. Average companies, 10%. I'm looking at companies all day long less than 10%.

So, of course, I don't believe him. And I go with him to New Mexico. I've got three grand saved up for car repairs. And I just do exactly what he says to do. I buy up 10 half acre parcels, an average price of $300 each. I put them up online. And over the next week or so,

they all sold for an average price of over $1,200 each. It worked, 300%. Right. I took all that money. I went to another auction where I live in Arizona. There's no one in the room. It's year 2000. I'm buying up lots.

I'm buying up acreage for nothing. And over the next six months, I sold all that property and I made over $90,000 cash. So I go to my wife, I'm like, honey, I'm going to quit my job and I'm going to invest in land full time. She says absolutely not. She's pregnant with time. So I worked land investing as a side hustle for 18 months until the land investing income exceeded the investment banking income. And then I quit.

I've been doing it full time ever since. How long did that take for you to get that to exceed? Did you just say that? It took 18 months, yeah. Okay. That's good. That's really good, right? Yeah.

Yeah. Absolutely. So you've got your own podcast. You've changed the, you're hard to follow because you've changed the title a few times. So what is the current episode that you're publishing to right now? Yeah. So I get bored with the podcast thing. So the first one was a Land Geek podcast, all about land investing.

I kind of got bored of that. Then I thought, well, why don't, I interview guys like you who are experts in the best passive income model podcast and put you on the spot, explain my model and say, Matt, do I have the best passive income model and see what comes out of that? And then I got bored of that. So now it's the art of passive income model. And it's myself and a co-host, Scott Tyler. Okay, good. I remember that episode. And you did. Yeah, it was fun, right? You did ambush me there. You know what I've listened to a few of your episode since. And it comes back to where people question you, who has had the best response and who has been able to challenge you,

who's been able to prove your position wrong. And I'm really kind of annoyed by your response to that because you always refer to Jay Massey said it because you get a tax differently. Right, because there's no depreciation. There's actually me that said that. Every time that episode comes on, I scream at it at the speakers. I don't know if you knew that. Okay. I will edit that now and say Jay Massey and Mattie.

Matt Terrio. Actually, I listened, I listened to Jay's, Jay and I was really good friends. And I listened to his episode. He actually said a different reason. He said leverage. You don't have access to leverage. No, I do have access to leverage. Okay.

Well, I just remember that's what Jay said, and I said the tax depreciation. And I just wanted to set the record straight. So that's really why I had you on here so I could ambush you. Well, no, it's a great ambush. And you're absolutely right where Jay is absolutely. wrong because you know raw land lasts forever you can't appreciate it and so I went out and I thought well how can I poke a hole in your argument and the way that we saw that issue was self-directed IRA or a QRP which is what I use right he gives you checkbook control there's no third party and you can

invest in your Roth or your SEP and put a lot more money away and really you know put your retirement on steroids. True. Okay. So I didn't know we're going to go here, but I have two comments for that. First thing is, you've got in a tax, tax-friendly environment, we'll just call it, because there's multiple ways that you can do that. But you can't enjoy it until you hit your retirement age. Correct. Correct. You can enjoy it until you hit your retirement age. Absolutely. Now, you can in the QRP borrow up to $50,000 from your retirement. So you could use that for other things, which you could enjoy. They just want you to pay that back every year.

They don't want to use it like a line of credit. So you can only do that like once every 12 months. Right. So you're putting off your financial independence for a period of time, right? Well, technically, no, because when your passive income exceeds your fixed expenses with our land notes, then you're really enjoying it. You're getting two bites of the apple. So you're getting your first bite on the passive income side.

you're getting your second bite on the retirement side so you don't keep hustling. Right. Okay. So you're saying, so this is a good point because this is what I always say. Your priority, although to put it in a tax deferred environment or a tax-friendly environment, that is what you should do to get those tax benefits, but get yourself out of the rat race first outside of that environment and then put it in the 401K or the IRA, the self-directed vehicle, right? Unfortunately, I can't argue with that logic.

Yes. I thought this was going to be like a throwdown, but no. No, I think you're actually going to be surprised where I'm going with this, but I do wanted to mention those couple things first. And then the other part about the appreciation or excuse me about leverage, you don't have that five times appreciation because you've got leverage real estate. Right. Yeah, yeah.

Now we can't use leverage in a variety of different ways. You just can't use it conventionally. You can't go to your bank. and say, you know, like you could have with a commercial building or a mobile home park and get a traditional financing on a piece of raw land. They won't do it. They're going to look at it and say, well, this thing doesn't cash flow.

Right. You get a construction loan, but that's different than my model. So you can certainly, when you're making it on average 300 to 1,000% ROI on your investment, you literally can get as much money as you want at any rate you want. So, and it almost becomes immaterial, like, get as much money you can't, 2%, 10%, 20%, it doesn't matter. Okay, good. All right, so I got that off my chest.

Okay, good. I'm waiting for years for that. I don't know why it took so long to get you on the show. That's weird. But we have a mutual friend and then we kind of connected and cross past, so here we are. So I'm really glad to have you here. And actually, since then, since I was on your show and we had this original conversation about Atlanta as introduced to it, I've actually become more of,

swayed more to your side than I was before in the sense that, you know, I've got, I don't know, I've got 50 houses or so. I've got, actually I had 100, but I have 50 that I kept and I sold 50 on seller financing. So I've got that. And after experiencing that for a little over about 18 months or so, I'm kind of enjoying the note income more because I have less of the headache, right? I see that I don't think there's a perfect strategy that accomplishes everything. there's pros and cons to everything. I think you should have a balance. You should be a little bit diversified there.

You're certainly with notes. You're vulnerable to the value of the dollar a little bit as well. But I really become a big proponents. It's been become a third asset class that we just started to pursue here about six months ago is we're becoming land investors ourselves. So great. You've got me there, buddy. All right.

I'm glad to rope you in there. Yeah. No, it's been interesting. We've only got one deal under contract so far. I remember we've got one deal closed. But we're documenting the whole thing. I'm not sure exactly when this episode is going to air, but on Wednesdays we're going to document our meetings here once a week

on just our land strategy. So we're just starting with something, show people how to learn something brand new. There's some overlap between houses and land, but it is really a different animal entirely. That's what I'm starting to learn and discover. So we're documenting the whole thing. And that you kind of planted that original seed.

So I'm just wanted to acknowledge you for that. All right. Great. Thank you. Totally. Okay, enough about me. So you got in the real estate. In 18 months, you were able to generate that income to replace your, your daytime job.

You quit that. And now you've been doing this for a long time now. So explain you, what did your business look like today? What does your situation look like today? So today, we're 90% automated with soft. software in systems and processes, both on the front end and the back end. So the front end is essentially, you know, when we break down the model, you know, the first thing you need to do is you got to get a list, right?

So either the county treasurer or the county assessor, you got to scrub that list, and then we're going to send out offers to people that own raw land. And the way that you do that, you way that used to do that was, you know, I'd get that list, I'd handwrite the envelopes, and I'd stuff them and stamp them. and stamp them and send them out. And I thought, oh, my gosh, this isn't what I got to business for. So I hired a virtual assistant, Janie in South Carolina, and she would do it. And I would pay Janie.

But now using an API called lob.com and our own proprietary software, you can use click to mail, there's letterprinting.net. There's no shortage of these. But you just upload the list, you do your mail, your mail merge, and the offers go out. Now, when they come back, we've automated. the due diligence piece. So we have an office in the Philippines, and these people are trained,

and we pay about $11 for due diligence, and they go through an American title company, they do the title search, they check for liens and encumbrances, make sure there's no breaks in the chain of title, they get us the GPS coordinates for the corners. So basically the whole checklist to make sure that we're buying a good deal, right?

Then we buy it. We use, again, Lobb to actually send a, check, I don't even write a checkout anymore, to our seller if we're not going to use a title company, right? Oftentimes, if it's $5,000 or less, we'll just do it directly. If it's $5,000 or more, we'll go through title. Lather to write a check. Yeah, it's amazing. I didn't know this, okay. Yeah. So now, so we've eliminated that. My acquisition manager handles all that. We have an intake manager. And so that piece is sort of automated. Now that we own the property, we automate the selling of it. And the way that we do that is our first and best buyer are the neighbors. So we

send out neighbor letters. If the neighbors pass, we'll do a deal of the week to our buyers list. If our buyers list passes, we can automate about 128 ads on Craigslist and Facebook groups using, again, software. That's the, it's called posting domination.com for us to land geek. Now, within 30 days, I'm going to sell that property. And the way that I'm going to sell it is I'm going to get my money out on the down payment or within six months of the down and then I'm going to make it as car payment say 449 a month 9% interest over the next eight years but to manage that note I want to do a set it and forget it system so I use a program that I created called geek pay.io and what that does is I get your ACH information but if your ACH

Cs Fails right the checking account let's say that it bounces I'll have a credit card on files of backup. So I've lowered my default rate from 8% to 4% now. It automates the notifications to the borrower. I don't get those calls anymore where they ask me, what's my current balance or can I make a prepayment this month? They can log in and do it. They have to change their payment information. They can log in and do it. So now, basically, I work about two hours a week in Frontier properties, just managing my team, looking at the numbers, and I've completely freed myself up time-wise from that business and really truly an entrepreneur. It's awesome.

Brilliant what you've created. Great. You'd said a couple things in there that I had questions about. It'll come back to me. But now, so you've been doing this for a while, and I know now that you actually teach people how to do this and you have that environment of where people can come and learn and access all of your wisdom.

What's the biggest mistake that you see people make as they're getting started into the land. Because when you, here's why I ask this question. Sure. I'm really good friends with Jack Bosch. Sure. I've become pretty good friends with Ari Tifster, Seth, right? And I listen to your podcast and now we're friends.

And I hear that it's really appealing. And the way you just laid it out is like, ooh, I really want that. And I think a lot of people to rush that, they're attracted to that. So when they go in and obviously you don't have 100% success rate, nobody does. But so what is that biggest mistake that you see people make investing in real estate? I think the biggest mistake that they make is basically listening to this kind of podcast and then trying to piece it together or do it themselves and not have that Sherpa sort of guide them up the mound because there's all these little

details that you have to sort of look out for. And I'd say, you know, not having proper mentorship might be, the biggest sort of mistake. Like, you know, like they'll go on bigger pockets and they'll read a bunch of Seth's blogs or, you know, they might watch Jack's webinar and like, oh, this is pretty easy, right? And they start doing it. Like, oh, wait, I've got a trust here. I've got an estate.

Like, now the devil's in the details. And so not having that, I think, is an issue. I think the other issue could be not doing proper county research from the get. go because let's face it, Matt, nobody wakes up and thinks of themselves, boy, I'd love to buy some raw land in Minnesota today. Unless you live in Minnesota. So, you know, there's certain counties that we want to focus on that are fast growing. They have an abundance of inexpensive raw land. And I think if you don't really mind those counties properly, if you get your pricing wrong in the beginning, because I don't want to be like the housing guy saying, I'm interested in buying

your house. Well, then the land people are like, well, I'm interested in selling my land. And now I'm in the appraisal business. I want to set out an actual offer. And so I think that could be a big mistake up front as well. Yeah, I think that's been our biggest hurdle or our biggest challenge is one is picking an area or a market that we're confident in. We've got some good ideas. Like this feels good.

But when it's not told that confidence isn't there. The second thing is coming up with the value of the land, like assessing the value properly. So good. I'm sure you help people out with that, right? that's that's old hat for you well man i'll help you out right now okay so i'm going to take the lowest comps okay and i'm going to divide by four where are you finding the comps i'm going to get from the assessor so i want to see from the assessor's list so are these comps or the assessor's value no no no no assess value because that's crazy yeah i want to see sold comps okay and how how long of a

time frame do you go back so it's not like you get five a month yeah 12 maybe 12 to 18 months depending on the area. Okay. Now, if I can't get value, I will, the quick and dirty ways to take the assessed value, divide by four. But your,

my response rate, if I'm doing it right, it should be three to five percent. If it's under three percent, I went too low. And if it's over five percent, I probably went too high and need to retrade. Is that response rate or is that acceptance rate?

That's response rate. Now, an acceptance to me is that I go through due diligence and buy it. And that's about one percent. Okay. Yeah. Because let's say that, you know, kids inherit the property, they'll accept that offer, but they can't deed it to me because there's been no affidavit of an airship or there's, they have to go through probate. And then when you go through the probate thing, it's like, you know, deals are like the bus.

So I'm going to go after the easy ones. It was just too difficult. Right, right. You know, every time I talk to somebody, it's always easy to separate those that talk to the good game and those are actually doing it. And I can understand you're doing it. And I appreciate that. And I appreciate you sharing with people. Looking back with so much experience under your belt now,

what's one thing that you wish you knew when you got started? I wish I knew about systems and processes, relationships. I was afraid of relationships. So when I first started, I was just flipping, flipping, flipping, cash, cash. There was no relationship. There was no list building.

I didn't have a list. I thought, oh, it was transatlact. section see you Matt so that was a huge mistake I started with a guy who kind of had a mentor from day one and got it and he did owner financing from day one um he got up to 250,000 passive started the same time as me. You know, I'm not there right. Right. I'm just kidding. Comparisons is a thief of happiness. But if I just, you know, developed a mentor for like him from the very beginning, I'd be so much better off today from a balance sheet standpoint. Yep. I'll confirm all three of those points you touched on. I mean, I spent over $50,000 a year now

on coaching and masterminds just because it's such a progress accelerator. That's one thing. The second thing you said was relationships. In the beginning, I didn't have a lot of money to start with, so I had to do relationships. But looking back, I wish I would have been, more intentional with creating those relationships. Because most of our deals now today come from relationships. But if I was more intentional and knew what that was going to bear in the future, oh my gosh. And then you said the system.

So I attested that as well. I mean, we didn't start really putting everything down in SOPs until about two years ago. And now we were almost completely hands off. So yes, perfect. Yeah. Oh,

I've got a great book for you, by the way, I just read. Speaking of relationships, how to never lose a customer, by Joey Coleman. And it talks about sort of creating that experience

for the buyer and having empathy for that buyer. Have you read it? The first 100 days program. The first 100 days. Yeah, we got that here in our office as well. Yeah. Oh, you got to give me some tips.

I love it. Yes. I mean, one of the things we do is we send out a plaque for our turnkey clients, right? So when they purchase a property, they get little trophies for each,

for each property that they purchase. And on their wall, they've got a picture of their house, a little plaque, and, you know, and they send in pictures, and they got their hallway lined up with, with trophies. And it's, that's been really cool.

And a lot of people have a lot of fun with that. So that's one thing. That's awesome. We do, that kind of goes off when I've read, Gary Vaynerchuk's book, The Thank You Economy. And he talked about the more high tech that business becomes,

the more old-fashioned your customer service has to become, right? Right. So we do a lot of personal, welcome in our community, welcome to being a customer or a client, whatever it may be. We do handwritten notes and we send out the Starbucks card with it and everything as well. But those are some of the things we do. What was your favorite poll from that? I mean, so I'm starting to do, okay, I'll admit it. Like, my, I can't even read my own handwriting.

So I'm like, I'm like, there's no way I'm going to handwrite my own cards. So I found a. company, it's an app called PunkPost. And they have artists that will write it. So I actually uploaded to them my actual signature. And I said, I want you to write like I write. Like it can't be so artsy and neat. So I've created an Evernote system, like write it like this.

And then I told them, have no marketing. I don't want to see punk posts. I don't see Land Geek. No logo. Like they're like, okay, well, we have to get our own station. Get your own stationery. It was like an extra 20 cents. So now when our customers, when I do a handwritten note, yeah, it's from me.

I write it, but I use my app, but there's somebody that actually writes it. And it sort of, it takes, it's joyful for them, but it's more joyful for me because it's something that I can, you know, make specific to them. And so it's not a template, but it's also, I'm not having to do it. Like, my handwriting is so bad. So that's been like a great system. that I've Punk post

Punk post It's a great app P-U-N-K P-O-S-T Yeah P-O-N-K P-O-S-C But tell them You don't want any of their marketing on it Got it got it got it Yeah

Have you looked into Bond Bond dot CO I did and the problem for me with Bond is I could tell that it was computer generated But it's not You were a handwriting it's a robot With a pen in its hand I know. I could tell.

You could tell. It was still a pen, though, okay? I know. All right, because you can upload your, your pen and shift to them as well. All right. Maybe I'll split test and see. Try it. Yeah, I mean, I just type a text now in my phone,

and they send it on my behalf, and it shows up, and it's nice and neat. That's awesome. Yeah. No, this technology is amazing, what it can do today. Amazing. All right. So let's see. What else is I have?

The best book you've read in the last 12 months. Was it the Joey Coleman book or something else? I mean the best book I've read the last four months? Hold on. I mean, the Joey Coleman book is great. Don't get me wrong. I enjoyed it, but to say it's the best book I've read last four months, I really, I really, I mean, I really like.

deep work by Cal Newport because I've got tech addiction and so to have that sort of reminder of focus was really good for me the subtle art of not giving a fuck was great got about one third way through it and I got sidetracked I need to go back to that I like that one a lot for negotiating never split the difference really good Chris Voss principles Ray Dalio I mean if I had to pick one if I was on a desert island I'd say the one that's probably going to be the most impactful, at least for me, was a subtle art. So how did that impact you? Well, it's really one of those books that, you know, kind of hits home on just how important

it is to take responsibility in life, right? And he tells stories and, you know, it's sort of unconventional, like, you know, if you're, you know, like the self-help thing, it kind of flips on its head. Mm-hmm. Got it. So we were talking about mentors and how important mentors that came up a few times. Who do you turn to for professional help? So, well, that's, I mean, selfishly for the podcast

is like my way of getting mentorship every week because I have a really fun, interesting guest. And then I like to get mentors outside of actual real estate because I want to sort of do a Blue Ocean type strategy with it. If you know what I mean by Blue Ocean. So, you know, if for the listeners, there's a book called Blue Ocean Strategy where you take two sort of industries and make it a whole new category. So here's two industries. You've got the theater and you've got the, let's say, the zoo, right?

Or not the zoo. What's Barnum and Bailey? The circus. Yeah. The theater and the circus. You've got two different clientiles. But what Cirque de Salee did was they combined them. And now you created a whole new category with no competition.

And they lowered their overhead because they got rid of the animals. So I tried to do that with my mentors as far as like outside businesses. So one of my mentors is guy, Ori, he sold his company for $360 million. He's a software guy. But his mentor is a billionaire. And so he's, you know, Silicon Valley. So he thinks very differently than typical people. And he's been great.

Awesome. It's great. Yeah, I think I get the most value from the mastermind that I'm in where I'm the only real estate guy in there. It's just amazing how it translates and the ideas come and the inspiration. Great. Right. So Mark, with everything that you got going on and the life you live and what's got you really excited about the future? Okay, so I just finished my first book. Oh, congrats. Dirt Rich. Oh, I love the title. Fantastic. Yeah. So that was really exciting. And then I'm working on my second book now. Yeah, the second book is more a thought leader book about, the idea is that to be successful in life is kind of like coaxing a cat, right?

And so you've got to create that environment. Like you can't just get a cat to jump on your lap. You've got to have these certain principles in your life to create success. And so that one I'm really excited about as well. and then we just started a fund for accredited investors. So we're sort of doing, we're helping people who are like doctors and these high income earners that don't have time to do it as a side hustle. That's been really exciting.

Learning all about, you know, managing money and a fund. And then, you know, working on the software has been a lot of, I wouldn't say fun, but I'm learning a lot. Sometimes that's the most rewarding, right, when you're learning. Yeah, yeah. It's, it's, it's, who you've been cut along the way, Mark, right? Yeah, I mean, talk about failing fast. That thing is just failure after failure after failure.

It works really well, but from a business standpoint, like, it's tough. Totally. We've taken a couple of stabs over here at different apps and all of a sudden we found it, oh, we're no longer in the real estate business. We are now in the software business and it wasn't what we thought it was going to be. Hey, there's, you can go to Upwork.com and hire a guy across the other side of the world and he'll do it for you for $4 an hour. this is going to be easy and it's not yeah totally well great it's been a pleasure mark um

let's do this again as based on everything you shared i mean i just kind of almost agreed with everything you said i think we're of like mine so we should hang out right well yeah i love it any anytime man i got to have you back on the podcast to formally apologize to my listen yes i want a retraction uh yeah um so if people want to get in touch with you mark what is the the best way for them to do that? I think the best way is to go to the landgeek.com. And I'll tell you what, if they email support at the landgeek.com and put in the subject line, Matt Terrio or Epic, we'll send them our $97 passive income launch kit course for free.

Okay. Is that cool? Perfect. So that's support at the landgeek.com. Right. Got that right? Perfect. And then also what I'm going to do is I didn't even know you had this book, Dirt Rich.

I love the title. It has a great looking. cover. I'm going to go pick up 10 of those right when we're done with this. And if you're listening and you enjoy this episode, go to Instagram, create a post about this episode. Share with us what you like the best about it. Make sure that you tag Mark and you tag myself and I will send you a free copy. How about that? Wow. That's super generous. Totally. Yeah, that's what we do over here. Talk about being Joey Coleman. You should write a book, Matt. That's amazing. Yes. How to podcast and give away free books.com. I got to get that domain name real quick. All right, Mark,

thank you very much. Like I said, let's do this again. Thanks, Matt. I appreciate it. You bet. All righty. So thanks for tuning in to the epic real estate investing show. God bless to your success. I'm Matt Terrio, living the dream. And I'll see you next week on another episode of Thought Leader Thursday. Take care. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com