The Science of Flipping - Episode 96: Ask The Expert With Mark Podolsky | Real Estate Investing Podcast

Episode Date: April 17, 2017

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. What is up, everybody? What is up? And welcome back to the Science of Flipping Podcast. I am your host, Justin Colby. And today, we are doing another episode of Ask the Expert. And before I bring my man on, before I, as you guys can see him, if you're watching on YouTube, let me just say, if this is your first time to the podcast, if you have been listening for years,

either way, I would urge you to get over to thescienceofflipping.com. There's a bunch of cool stuff there. Number one, download my book, my real book. This isn't just an e-book. I sell it every day on Amazon for $10, but I give my listeners the opportunity to download it for absolutely free. They will email it to you, so it will become an e-book, but it is the exact same as my actual hardcover that sells on Amazon for $10. If you are interested, after listening to this incredible mastermind series I did,

if you are interested in joining one of our masterminds, go to the website, The Science of Flipping, hit the mastermind application, fill out the mastermind, be honest, be genuine, whether you're just starting, whether you're making 500 grand a year, it doesn't matter. We have something for everybody,

but at the end of the day, it doesn't matter how much money you have. You have to fit the mold. You have to be approved. Myself, Kent Clothier, and Sean Terry all approve every member individually. Go over there and fill that out. Or if you simply want a 30-minute coaching call with my team for absolutely free, there's a tab there too. Free coaching call, mastermind application, or just get my free book either way,

go to the science flipping.com, check it out. Um, and that is that, right? This is all about systems. This is all about processes, all about tools and implementation and strategy. And who better to have on my call today than Mr. Land Geek himself, Mark Podolsky. What is going on, my friend? Justin Colby. It's great to talk with you again, my friend. Yes, yes. We've been on each other's podcasts over the years, and unfortunately, we lose contact,

but I'm glad that we've been able to reconnect here. Yeah, same here, same here. I'm honored. I'm thrilled. And after that intro, I'm signing up for the mastermind. Talk about stacking the value. That's right. That's about it, man.

We got back from Cabo. So Sean, Kent, and I run three different levels of masterminds. And one's a billionaire boardroom mastermind. So that two times a year, we go to an exotic place. So one was in Cabo. I think in October, we're going to Napa, which may not be exotic to some, but, uh, is very cool place to be in mastermind. So those people have to be doing north of a million dollars a year to be in the mastermind. And, uh, it's a lot of fun, man. It's, uh, you'd absolutely deserve to be there, but that's, that's where

a lot of the business really does get done. I love it. I love it. So tell me about what's going on with you, man. It's been a while, and you're on the Ask the Expert, and you do something veered off from what I do, and obviously you have the Land Geek podcast, and I'm assuming it's landgeek.com as well. Landgeek.com, yeah. So I'll refresh you on the model. Yeah.

And then we can kind of dig in deep on that. Let's do it. So basically what I do is I buy raw land, 20, 30 cents on the dollar. And then I can flip it at about a 300% return on investment for cash. But my favorite way to sell it is owner financing, right? So it's this one-time sale. I get my money out either on the down payment or within six months of the down payment. And then I've got this recurring passive income without a renter, without rehabs, without renovations, without rodents. And because I'm not dealing with a tenant, I don't have to worry about

Dodd-Frank or RESPA or the SAFE Act. Land is exempt. And that's why one of the podcasts, the one that you're on, is called The Best Passive Income Model. And then we have the Art of Passive Income Model podcast as well. But that's the model, Justin. It's very simple. Very simple. Yeah. Well, so I think the majority of my listeners are typically used to single family homes, condos, townhomes,

possibly multi-units. So give everyone a little insight on how do you even acquire or find the land? Because you know our business is direct mail or maybe PPC and we're going after a list that you might pull from listsource.com or find motivated sellers now, or even your title company, right? And we're targeting a certain demographic, right? It might be age of home. It might be length of ownership. It might be, uh, you know, year built, right. Um, and any and all of those all at the same time, but obviously you're buying land. So what, how do you find it? What is the demographic? How do you, you know, what do you do there? Okay, so the first piece is, first of all, there's 3,007 counties. Which county do you even go after? So nobody wakes up, Justin, and thinks to themselves, boy, I'd really love to buy some

raw land in Minnesota today, unless you live in Minnesota. Totally. So we look at the Southwest, a little bit in the Northwest, California, and Florida. So the Sunshine States, because that's where the growth is. That's where there's tons and tons of raw land available and can spur the imagination, right? So then we've got to get like what you said, the list. Now we can go to listsource.com or agentpro247.com. But if you just contact the local county and ask them for the list of all the real property owners or even their back tax list, that's ideal. So you get this list and you go to fiverr.com and you get some ninja kid in the Philippines who can scrub Excel.

And we take out all the industrial property, we get out all the agricultural property, we take out all the commercial property. And the next thing you know, we got use code VL for vacant land, right? Then we're going to batch those offers by acreage, right? And so what we're going to do is we're not going to send them a blind letter that says, hey, I'm interested in buying your all land. I don't want to be in the appraisal business. So what we'll do is we'll look at the comps and we'll do the Warren Buffett method of margin of safety. So we look at the comps, we'll divide by four, and that's how we come up with our offer, right? So now we've got a 300% margin of safety. So even if we make a mistake even if we make a hundred percent

nobody's going to get mad at the land geek right so that's what we're going to do um and so we're going to send out an actual offer that says we want to buy your land at this price three to five percent of those people are going to accept if it's under three percent we are too low on our offer if it's over five percent uh-oh, we got to retrade. You're probably too high, right? Then we go through our due diligence. What's the title search look like? So we go and we have a guy in the Philippines, and for $11, he runs our title search.

We have Google Earth. We have GIS maps. We have a whole property report. The team fills out. We go to a Craigslist gig. We have somebody actually walk on the property, take pictures, shoot video. And then we close on that property with the seller. And now we own the property.

And then we're going to start marketing the property. Guess where the best place to go is to sell that property, Justin? Where would that be? The neighbor. So we've got this built-in best buyer, the neighbor, because they've got a fear now. Oh my gosh, who's going to buy it right next to me? Right. Right? So either one of two things are going to happen typically. They're either going to buy it or if they pass on it, they're going to say, oh my gosh, would you buy my property too? Now you've got a larger tract to sell.

Even better. Right? So let's say the neighbors pass. Then the second best place to go is our buyers list. So we're constantly marketing to our buyers list and emailing out a deal of the week. Right? The buyers list passes. There's this little website, Justin, you've probably never heard of called Craigslist.

Yeah. Small. There we go there, and we have an automated posting program called postingdomination.com forward slash land geek. I press one geeky button, and I get 124 ads generated for me. So we blast Craigslist, right? Now, if Craigslist passes, there's this other little website. I mean, I know you've probably never heard of it.

It's really unknown, but it's called Facebook. There's like a billion people. Yeah, yeah, yeah. It's got Facebook buy-sell groups, right? If no one buys the buy-sell groups on Facebook, right, there's all these other sites called landsofamerica.com, landandfarm.com, landflip.com, landhub.com. I mean, the lands, right?

Now those are usually paid sites, but typically you should sell this property 30 days or less and make it irresistible and just start building this massive passive income cash flow. And then once that passive income exceeds your fixed expenses, Justin's free. He's working because he wants to, not because he has to. And that's really the goal of our training program. That's free. He's working because he wants to, not because he has to. And that's really the goal of our trading program. That's awesome. So let's just use a million dollar land property. Okay. So your offer is going to be 300,000.

Well, no. If it's a million, we got to divide by four, 250,000. 250,000. And your offer, your paperwork's relatively the same? More difficult? Less difficult? It's really simple. So it's a one-page offer. One-page offer.

It's not sweet. It says, this is what we're going to pay for your property. And a little legalese getting us out of the deal. We always have an out. Okay. Right? And then it's just very easy. Yeah.

So what is your out, you know, for a house, we have a contingency based on inspection. So I'm assuming something very similar. Yeah, exactly. Our contingency is based on due diligence and onerous back taxes. They owe too much back taxes, can't make any money, we pass. Absolutely. And so you have your out, is your out probably a little longer? We usually give ourselves 14 days. Yours probably is 30 plus, 45 plus. Our out's forever. Yeah. So at any point.

Until. Because it's not competitive. So if you go to a REIA meeting, right, and there'll be 100 people in that room, 99 of them will be house flippers. Yep. You'd be the only land guy. Right. So as a result, the sellers don't have a lot of action. We might be the only game in town. So you get this massive market of billions of properties

and a handful of people doing it. And there's no private equity groups. There's no hedge funds. There's no real big money. So you and I and a million other people that could do this, we'll all run out of money before we run out of deal flow, which is really a nice little niche. The builders are your competition depending upon how much acreage you have. If you're picking up an acre or two, you probably don't have to deal with big builders. Big builders, they typically want something that's gone through the entitlement process first. They're not going to go out and they're not going to land bank. Right?

So if there's going to be anyone like with real deep pockets, it might be a land banker that's buying that up, going through the entitlement process, getting it shovel ready, and then selling it to a builder or developer. Right. Right. Yeah. So when you do take it and you do a seller carry back, who is your buyer typically?

Besides, let's say it's not your neighbor. So the buyer is somebody, it's, you know, a prepper, you know, it might be somebody

hoping for the best, preparing for the worst. Sure. Or a landmaker, probably. A landmaker. It might be an investor, someone from the military.

A lot of times they call it man jewelry, right? They just want to own something cool. Yeah. Yeah. And they like the paper and they like the idea of being able to go out there, do whatever they want. They can build, they can use it recreationally. There's no restrictions.

They can hunt, they can fish, they can hike, they can camp. What's the biggest acreage that, I mean, will you go after an acre and a hundred acres or will you, is there like a parameters that you usually stick to? I mean, if I could pick one acreage size, it'd be 40s. 40s so great. But I bought everything from a postage stamp all the way up to 640 acre sections

and subdivided them. So it just depends on the deal. But again, it's just like anything. If you're buying any asset, 20, 30 cents on the dollar, there's someone on the other end of that deal. Of course, of course. Every time. I mean, you make your money on the buy, right? Like they always say. Yeah, absolutely. What is the, I know you don't need your own capital, but what, you know, a lot of, again, people who are unfamiliar with what you do, is it a very wholesale-ish, friendly type thing

where you can go and contract it and find your end buyer? Yeah, I buy from wholesalers all day long, absolutely. Super easy to wholesale, yeah. And they make about 100% ROI. So if you contract it at $250,000, they'll sell it to you at $500,000 and it's still a deal. It's a great deal. Absolutely. That's great, right?

And so, and again, where do you find that list of, you go to the county recorders? No, not the county recorder, the county assessor. Assessor. Or the county treasurer, yeah. You know, our lowest hanging fruit is going to be somebody that owes back taxes and lives out of state, right? They really don't have any emotional attachment to that property. Of course. I'm assuming your title company could pull a very similar list, right? Title company can do it. Absolutely. Yeah. So give someone some secrets, something that

you want to get in this game. Because again, to your point, there's not a lot of competition out there, right? And so many people are like, oh, Phoenix, you can't flip homes anymore. And I'm closing like nine deals this month and whatever. And it's their own head garbage, right? They can't get out of their own head and they can't believe it works. But for that person who's just so skeptical about single family homes or just uncertain, what would be your advice right now to kind of get in that game, you know, to obviously you want to be educated. So for anyone who is interested, you need to start following Mark at thelandgeek.com. That is number one, because you always want to get educated. But beyond just that, if you could give someone

a golden nugget, what would you suggest? I would say make 20 offers a day. Okay. Right? Because if you make 20 offers a day, that's 140 a week. That's going to move the needle. Right? So if we do the math on that, what's 140 times four? Let's just make it 100 a week. Right? Yeah. So 400. Right? That's four deals, four to eight deals a month. Right? So if you do 48 deals in one year, and let's just take our average note at just a car payment. Let's just say $349 a month. Let's see. Calculator.

So, you know, 48 times $349. So we're at $16,752 in passive income in one year. I mean, for a lot of people, Justin, that will be enough passive income where they will see their fixed expenses and they can do a lot of things, right? So I hear this all the time from clients who are like, you know, I made $100,000 as my side hustle this year and I was able to retire my spouse, right? Rachel and Sean Mueller are going to Europe this year. They're a couple.

They're like, you know what? Screw it. What do we need to be here for? They quit their jobs. They're going to Europe. And they can do it from anywhere in the world because it's such a scalable model. All you need is an internet connection and you're in business. And with our software, we got it 90% automated.

So it's really kind of a cool little thing there. But that's what I would say is the secret is just doing it in bite-sized chunks. You don't have to be Justin Colby your first year in business. And don't even compare yourself to Justin Colby. But if you can just do it in little bite-sized chunks, 20 offers a day, four deals a month, that's really doable. Go to a tax deed auction and buy up five properties. That's how I started, right? Yeah. So now you're actually taking them down.

I would say no one needs to be Mark Podolsky, right? I mean, you're at a level, just like you're mentioning. I mean, I've been eight years into this game, and I've seen very good times and very tough times, and I'm sure you've also gone through that. I've been doing this full-time since 2001. I've done over 5,000 land flips. Look, I mean, right?

So let's not just... Yeah, I mean... Don't go out there and be Mark right now. But as Mark's standing there, the first thing I'm going to say is no matter what you do, whether you're in land or in your single family homes, taking action and writing offers is like number one. You have to take massive action, right? Because that's the best way to learn.

That's the best way to, you know, motion creates emotion. Things start happening. You start learning. You get put in a position that, oh my God, someone accepted my offer. I don't even know what to do next. And then you have to figure it out and you start going. Right. Um, but I would agree a hundred percent that you got to get, just get going.

You got to just start making offers. Now, my question to you is you don't call them. You don't send them a postcard. You literally mail them an offer. I literally mail them an offer. I don't want to be in the appraisal business. I don't be on the phone. Yeah. Where I was going with the next part is now you fund the deals, correct? And that's how you're able to do a seller carryback where you fund it. You then sell it on a seller carryback. They re-give you that $250,000 that you spent on my million dollar example.

So they refund your $250,000, probably plus a little extra here or there. And now they're leasing it from you slash renting it from you at a rate of what? What would you typically do a seller carryback for? You know, our carryback will depend between, it could go 0% if it's a slow moving property, all the way up to 12.9%. But our margins are so high, we don't really care about the interest as

much. It's a lever. It's a marketing lever. Right. But you're increasing your number, right? So you put down 250, you'll sell it to them for 500. Yeah, yeah. I mean, I used to be an investment banker. So, you know, the old saying is if you choose the price, I choose the terms. If you choose the terms, I choose the price. Exactly. So give me a traditional deal. Let's just use me. You have this deal out in Arizona, let's say, and I'm like, Hey dude, I'd love to buy this from you. Sell or carry back Mark. And you, what you would have it at two 50, what would you likely sell that to me at? All right. So here, let's go through a real deal. One of my clients just emailed me.

So here is the story. Okay. It says, the 40-acre property I ended up paying $7,500 for, including back taxes and title, was sold last month with $8,000 down, $500 a month for three years with the remaining balance due on last payment. After submitting the down payment, the buyer flew out to inspect the property to make sure everything checked out. I was so nervous during the three-day period, you don't even know. Turns out he loved the property and told me if I come across another one that he would definitely buy it. It's been long enough that the 30-day guarantee has passed, so I keep it down no matter what. I already got the first month's payment, so I'm feeling really good that

I got my money back and then some, plus $24,000 over the next three years. This deal is amazing. That's a good deal. So he sold it for $32,000. He got his money out. He bought it for $7,500. He got $8,000 down. So he made $500 on the down and then he's getting $500 a month for three years

with the remaining balance due on the last payment. And you go and do, like you said, you get four of those a month. Four of those a month and move the needle, right? Move the needle. I mean, to your said, four of those a month. Four of those a month and move the needle, right? Move the needle. And you don't, I mean, to your point, I mean, he could be working full time. I mean. He is working full time.

See, there you go. Yeah. How did I know that? I just, I know the business, right? Know the business. Yeah, absolutely. Yeah. I mean, listen, at the end of the day, I think there's a lot of people that are out there

skeptical of what's going on with housing market. Skeptical is going on with the economy. Skeptical is skeptical is going on interest rates dude your model alleviates all that right i mean at the end of the day you don't for the most part you don't really have to handle that type of wave i mean there's you know no i mean you know from a from a macroeconomic perspective those things don't uh affect my business now what't affect my business. Now, what will affect my business is if someone doesn't have a job, right? So let's take a look at 2008 to 2010, right? So a lot of defaults, a lot of defaults on those notes. Now, we were able to quickly resell those properties, but it's full transparency. Look, look again it ain't easy it's simple but it ain't easy and

you know none of us can control what's going to happen the economy right so is there there's always a risk i i would say that in today's world the biggest risk is probably having a job and not having some other income stream, whether it's from real estate or a SaaS business or even doing an e-lands gig. I don't care what it is. You've got to start preparing because huge swaths of the economy are going to go away with technology and artificial intelligence. And if you're not prepared for that, and if you're not looking for other sources of income, you're going to be in trouble. No doubt. You're going to be in trouble. So I would say that overall, from a general business and real estate point of view, this is a really low risk, high margin niche, but it's not zero risk. No doubt.

Sure. And there's nothing that is zero risk. And from the guru perspective, I know people look up at you and look up at me and look up to our friends and the people that we all know. There's a lot of that, oh, zero risk, zero money down, zero every... At the end of the day, there's a level of risk. Even at this simple level, if you're going to put your time up for money, you're risking your time. Yeah. And I would make the argument that money doesn't even exist, right? It's not real.

It's something that you and I and the whole world just agrees, okay, it's got value. But if we look at it, it's just a piece of paper. It's an idea, right? What's real is a real house is a real thing. It's a real asset. Raw land is a real asset. And your time is the only non-renewable resource. So if you're not thinking about your time in that way, you're real. I mean, honestly, Justin, I will spend any amount of money to save me time. Any amount of money.

Because I can always make more money. I can't get more time. I'm vicious with my time. It's the same thing with I won't do layovers. I just don't care. I don't care how much more it is. I'm going to spend it because I don't have the time, patience, energy,

effort to land, get off the plane, go to a different gate, have to go wait around for another hour. I mean, that's a three hour land, you know, the whole thing. So I'm with you. I'm about convenience. Um, but with that said, you know, comes a cost. So I'm willing to put in the time to save my time. Yeah, absolutely. Absolutely. And then, yeah. And you'll find that your, your ROI on your time is, is massive compared to saving a few bucks. So listen, I like to try to wrap these up in 30 minutes. I really appreciate you spending your

time because it's so valuable to you with me and my listeners and giving my listeners another avenue of this game that a lot of people probably don't know about. And if they are aware of it, they're probably a little timid. I would encourage anyone who is aware or is interested in finding more information, you need to get with Mark. Tell them where to find you, best way to get a hold of you or whatever. Yeah. I mean, the best way to get a hold of me is thelandgeek.com. And we're going to have a special site. I'll send it to Justin, but it's going to be just for Science of Flipping Listeners. Cool. site. I'll send it to Justin, but it's going to be just for science of flipping listeners. We're going to give you for free the $97 passive income launch kit.

Then you get access to our podcast, free membership site, the e-book, How to Avoid the Three-Faith Land Buying Mistakes, and our passive income blueprint. Because what Justin does in the beginning of the podcast, I feel really competitive now to stack the value.

There you go. Are you dropping the mic? I'm dropping the mic, I feel really competitive now to stack the value. There you go. Yeah. Are you dropping the mic? I'm dropping the mic, Justin. Well, listen, again, I appreciate you, man. I really do, really value you being able to come and inform my listeners. Send me over that website. I'll get it to them in their hands.

If you guys are out there listening, email me. Info at the signs flipping. Say, hey, Mark had this website. Give me that website. I'll get it to them in their hands. If you guys are out there listening, email me. Info at the signs flipping to, hey, Mark had this website. Give me the website. I'll get you there. But man, I really appreciate you. Hey, my pleasure. Thanks so much for having me. I really appreciate it, Justin.

Always great catching up. Always great catching up. Keep doing what you're doing, man. That's really impressive what you got going on. I'm really happy for you. That's all, man. We are out. I appreciate you guys listening again. This has been ask the expert. Um, hopefully you know a lot more about land deals than you did before and, uh, make sure Mark, you follow Mark at the land geek and, uh, we're out of here. Peace everybody.