Posted on: September 03, 2021
WI 768 | Land Investing

 

When you look at the various wealth segments, you will notice that the wealthiest people have real estate business on their repertoire. So if you spend a significant amount of time reading about successful investors and you still have not taken action, now is the time. Take it from Dan Haberkost, our guest for today. He came from a low-income family, and now, at only 24 years old, he has built massive success in different facets of real estate.

In this episode, Dan discusses how being a competitive bodybuilder has kept him disciplined throughout his real estate career. He explains why land investing is an appealing market to generate cash flow and talks about the importance of tracking your lead measure to improve the quality of deals.

Leveraging an Inefficient Market to Generate Explosive Profits in Real Estate

Episode Transcription

Welcome, land sharks. I have a special guest. His name is Dan Haberkost. Dan, how are you?

I’m great. How are you, Brent?

I’m good. I’ve got an amazing story. I met Dan at my real estate meetup a couple of years. He’s a young guy. I know he’s in land development. He’s got mentorship from a couple of builders and I’ve just been fascinated with his story. He’s successful and everything he does. He’s in phenomenal shape. For fun, he runs up fourteen-mile mountains. Dan, tell us a little bit about yourself. Do you have a real estate background? Do you have a master’s in business?

Thank you for that intro, Brent. That’s nice of you. Thanks for having me on the show in the first place. My name is Dan. I’ll be 24 years old in 2021. I’m originally from Ohio. I started working when I was fairly young. When I was fifteen, I was managing a farm and managing a small portfolio of rental properties. That was my first foray into real estate. I managed about six rental properties for my boss when he was out of town for about half the year.

That first experience with rentals definitely did not get me interested in real estate investing. I ended up working there and managing those in the foray throughout high school. In college, I had a number of different sales jobs and also ran a landscaping company. In the last couple of years of college, while I was doing that, I was going to school full time, and a 45 to 50 hours work week plus school is not a lot of fun.

I came from a lower-middle-class family and money was always a big concern in our family. I did not want that to be the reality for my life. I had met other people that were successful in various businesses and saw that financial freedom and stability even were possible. It didn’t have to be like that for myself. When I was finishing up college, I started reading about all kinds of different businesses and investing and I came across a chart that I will never forget. This impacted me and drove me in the direction of real estate.

It was in CNN or one of the major news outlets, an article on different types of investing. It showed where the different segments of society had their wealth. For poor people, it was just a car, maybe. In the middle class, you had a car, stocks, and maybe their house. When it got to the wealthy people in America, it was almost entirely real estate. It was like 90% real estate. That stuck and motivated me to start looking into real estate investing. That’s how it all started.

I ended up buying my first duplex before I even graduated college. I was from Ohio and didn’t want to stay there. I ended up moving across the country to Colorado, to be somewhere a little nicer as far as weather. I enjoy the mountains and snowboarding and that thing, so I moved here to build a business and climb mountains and that’s exactly what I’m doing.

To answer some of your other questions, Brent. I’m a single guy as of 2021. What I’m doing is working on building my portfolio. I’m developing houses and small multifamily properties and then that is what got me on the land. Every development project starts with the right piece of land. I got some experience contacting owners off-market for our development projects.

I then started to see what Brent was doing knowing him through the meetup and I thought, “I should look into this land investing a little bit more because I’m already doing it in a sense.” I wasn’t buying and selling the land on notes but I was buying off-market parcels at a discount for my development projects. That’s what got me to contact you, Brent. I learned from you and started the land-investing segment of my business.

90% of the wealthy people in America have wealth invested in real estate.

Maybe two months in and I’ve already gotten 7 or 8 parcels. I’ve purchased here and resold and some of them are notes. Some for cash. It’s amazing how little time, effort, and money this has taken. The returns are just absurd. I know I tried to cover a lot there. It’s a general overview of my background and how I got to where I am.

Thank you so much for giving us your background and sharing that because I have a lot of questions. I want to dive deep. I’m sure you said you came out to Colorado to build businesses and climb mountains. Is that the same thing, climbing mountains and building a business?

It all goes back to the same personality or characteristics. One thing I didn’t mention, I started weightlifting when I was eleven years old. All throughout my teens, I competed in bodybuilding. I will tell you, that was the hardest thing I’ve ever done. Anyone who knows about that world knows it’s intense. I’m much smaller now. The small events are for about fourteen years old. I don’t do that anymore.

The drive, the motivation, and the pursuit of extreme goals like that have always been something I’ve enjoyed when I was young. It was a different sport. Throughout my teens, it was bodybuilding. Now, climbing the hardest mountains in the state and building businesses, neither of which are easy, but I always go back to the lessons I learned from my bodybuilding days. When you’ve been dieting for 8, 10, 12 weeks, and you’re doing an hour and a half of cardio a day, weightlifting, and eating a little more than vegetables, it’s miserable.

Few things are harder than that. I’ve always enjoyed those kinds of extreme pursuits, climbing mountains, snowboarding, and building a real estate business gives me the same satisfaction that did. That was a long way to answer your question. They are similar in what they require to be successful, and the enjoyment I get out of them is similar.

It’s fascinating. One day, I’m going to see if you can coach me to teach me how to body-build and get this type of shape. I keep thinking to myself. I need a coach for personal fitness. I’ve talked to you a little bit about that in the past. We have to address that if you have any interest in that. How old are you?

I’m 24 years old.

You’ve done a lot in 24 years. That is amazing. What did you manage as far as on the farm? What type of farm did you manage?

This is a fun experience. It was a Christmas tree farm. All kinds of pines and spruces and such. That was an awesome experience because the owner of that farm had a portfolio of rentals. He owned all these different businesses. He was probably the first business person that I got to know intimately and learn from because I came from that post-World War II depression mindset of extreme conservatism. My parents were always worried about money. My grandparents are the same way. Everyone worked blue-collar jobs. Investing was something they were terrified of. That’s what I was raised on. It is more of a scarcity mindset.

Meeting a business person when I was fifteen, I started working there. It was helpful because he showed me some of what he did in his various businesses. He got me thinking in that way, and got me away from what I was raised on. Yes, it was just a Christmas tree farm. The owner of that farm taught me a lot because he owned all kinds of different businesses. That was impactful at a young age, seeing the way he orchestrated all these different businesses he had.

WI 768 | Land Investing

Land Investing: You pay your mortgage note every month, which is you repaying the principal on the house with interest. There’s no reason you can’t turn around and do the same thing with land.

 

It’s amazing the lessons you can take from each opportunity. That weightlifting, climbing mountains, running a Christmas tree farm, that’s interesting. Let’s turn to land. You said you’ve been in the program about and started doing your land investing. The biggest question is, how long did it take you to get your first land deal when you first started?

As far as buying the first one, that took, I want to say, three weeks maximum. It might have even been two because the land is just an inefficient market. I write blogs. I wrote a blog on this. If you try and go find a deal on houses, you told me you spend $5,000 or $6,000 in mailers to get one wholesale deal on your houses because it’s competitive. It’s a far more efficient market because there are so many people looking for houses that are discounted, so it’s harder to buy in.

Land, on the other hand, is more esoteric. It’s not near as many people know about it. It’s inefficient. There is mispricing everywhere and people will sell their land cheaply. In fact, in a lot of areas, there are all kinds of parcels that people have not paid their taxes on. They’re just going to let the county take it from them.

They’re anticipating just losing the parcel. If you tell them, “Brent, I’ll give you X amount for your parcel land,” and you were expecting to just lose it for $0, then you’re excited. It’s a win-win. It can happen quickly in land, whereas that’s a lot harder than trying to go find a discounted house. It took about 2, 3 weeks to get that first deal purchase.

I’ve got to steal these words from Tom Krol. He’s like, “Land is so amazing. Everybody is focused on the house, and they’re just looking right past the land. It all starts with land and then comes the house. Not everybody, hardly anybody knows how to make money from vacant land.” It’s like the best-kept secret. How did you find this first parcel of land in three weeks? How did you find out to be able to buy this parcel? How did you find the sellers?

I used PropStream. I know you’re familiar with that brand. If you’re going to be sending out mailers regularly or needing to pull any public data on homeowners or addresses or that thing, it is an excellent program. I went on PropStream, and I picked my market. It was a market that’s close to where I’m doing a lot of my business, and I knew it pretty well. I knew it wasn’t super-hot. It was much in the early stages of development but there was some development going on there. Some people are interested in the market, but it’s not hot like Colorado Springs is.

I went on PropStream, and I picked an area that was on the outskirts of the development I saw in the city. I pulled lists in an area that had homogenous parcels. We’re talking about every parcel within a few 100 square feet of the next one. They all were the same as far as utilities. I then went with homeowners that had owned it for a minimum of twenty years. I’m looking for individual owners. I got rid of all the LLCs and other entities’ trust just to make it simple.

I started sending mailers and I used the land offer letter that I got from you, Brent, which worked well. It weeds out the tire kickers or the people who want a ridiculous price for their land. It just makes the offer right to the owner. It simply says, “Hi, my name is Dan. I’ll give you X amount for your land if you’re interested, sign and return.” When you get calls, they’re people who are serious. It eliminates a lot of wasted time, if you just go the route of sending not an offer, but just sending a mailer saying that you want to buy their land. That’s how I got in contact with the owner.

The old LOL, Land Offer Letter. I’m happy you mentioned PropStream because we’ve been using this more and more lately. It’s a great and wonderful service. We just started using it for some other investing things as well. It came in handy. There’s a lot of list-pulling services out there. PropStream is one of my absolute favorites. This first deal, about how many mailers would you say you had to send or how many LOLs, Land Offer Letters did you have to send to get these guys, or actually to purchase the property?

That’s a great question. I’m going to sit down and analyze this a little further. My skillset is not being organized for tracking these sorts of things. In the first three weeks, I sent out 600 mailers, so 200 mailers a week. I bought 6 or 7 parcels from that first 600 mailers, so if you break that down, we’re looking at about 100 mailers to get one deal. For those of you that have tried to mail for duplexes or single-family or a traditional rental, you need to add a couple of zeros to that number to get a deal. That was awesome.

Every development project starts with the right piece of land.

I was talking to a wholesaler and a home flipper. He does both. He’s at 7,500 mailers in his market. It takes them about 7,500 to 8,000 postcards to get one deal. How many phone calls did you have to take off those 600 mailers?

I set it up because I already had the development business. There are a million other things I’m doing when I went into this. I set it up, so I didn’t ever answer the calls, initially. I would carve out a time every day where I’d get back to anyone that email, I call her and fax me. I wasn’t answering in real-time because I’m just not good at taking those calls if I’m not sat down and prepared for it.

I would always let the call go to voicemail, and then I would carve out about an hour every day to return them. I bought about 30% of the responses I got. Probably about two phone calls for every parcel I bought because I also got some responses via fax and, or just the mailing the land offer back to me or email it to me. It’s not that many.

Are you telling me that people fax you back?

Yes. It’s funny. I have a fax in my inbox from the most recent mailing. I have to look at it. As much as someone my age likes to think that faxing is not something anyone does anymore, in fact, it is. It’s worth spending $10 a month to set up fax that you can just get online.

I’m the same way though. You touched on you like to be in the zone, basically. Yes, carve out a time block. I love time blocking. I have to be in the right state to talk to land sellers or land buyers. I can’t just take a call on the fly. I just have to be in that zone. It’s not carving out a huge amount of time. In 30 minutes, you can make tons of phone calls.

That’s exactly what I had to do when I was starting out. I love the fact that you haven’t gotten the voicemail. You set the time when you want to work. You’re not on a roller coaster. We’re not here because we needed another job. We’re setting up passive income. One thing you had mentioned was 7, 8 parcels, some on notes, and some on cash. Explain what you mean by note.

Simply think of what your bank does when you have a mortgage. You pay your mortgage note every month, which are you repaying the principal on the loan on your house with interest. There’s no reason you can’t turn around and do the same thing with the land. The way I’m doing it, I’m not charging any interest. I’m just having to repay the principal because it’s already marked up. It’s such a premium compared to what I paid for it because I don’t want to deal with managing interest.

You and I, land investors in general, are just doing the same thing as the bank, where let’s say I buy a parcel for $1,000. I turn around and sell it to Brent for $4,000. The down payment I take is $1,000 with the other $3,000 finance on a monthly basis. There are a number of advantages to doing it this way. Number one, passive income. We all like passive income.

Number two is its tax advantage. You talk to a CPA if you want the specifics, but I can’t say for a fact that if you buy a parcel for $1,000, and sell for $4,000 next week. The tax consequences of that are going to be more significant than if you buy the same parcel for $1,000, sell it for $4,000, but then take $3,000 off it on a note over the next couple of years.

WI 768 | Land Investing

Land Investing: It’s important to get your capital back immediately so you can recycle it over and over again. That way, it allows you to progress much quicker.

 

It’s a cool way of creating passive income. You think all these people talk about buying rentals and having $200 a month in cashflow as a good litmus test for a successful rental property. That’s $200,000, $300,000, $400,000 house we’re talking about. Here, you can do the same with several thousand dollar parcels. It’s pretty amazing what you can do with land.

Are you saying you became the bank pretty much in eight weeks?

The court is large but yes, absolutely. It’s the same idea. Another thing I meant to say that’s important is getting your capital back immediately. One of the most important things, when you’re starting out, is the velocity of the capital. If you put money into something, and it’s stuck there, and you can’t do anything with it, it’s hard to scale quickly.

Whereas if you buy something for $1,000, sell it for $4,000, get the $1,000 off immediately or maybe over a couple of months, then you get your initial capital back. You can just keep recycling that money. It allows you to progress much quicker. You then have an infinite cash-on-cash return on that original parcel of land. It’s a good way when you’re to get started because it doesn’t require as much capital and you can recycle the capital over and over again.

Turning the money is simple, just to break that down velocity. It’s getting your money back. You can deploy or send it out once again, to buy another parcel of land. In the beginning, I wouldn’t let my team sell it unless we were making at least a 300% return on our investment. To break that down, if you spent $10,000 or $5,000 for the land, I wanted to make sure I got $15,000 back.

People would come to us with say, $13,000 cash and I would be hesitant against that because it wasn’t quite fitting my 300% model but I now take those because it allows me to get my $5,000 back quick with profit and send it to another piece of land, so always turning money. I’ve barraged you with so many questions. The most important question that the readers probably want to know, in eight weeks’ time, I know you sold several for cash, but what are you earning on average per month, and passive income in just a couple of short months?

In passive, I’ve sold more of them for cash so far. I don’t have that many notes yet. I’m signing up for a second note with a buyer all on a parcel that I had as a package. I’ve been more agreeable to cash deals because I’m in the early stages. I don’t have a ton of cash on hand. I want to expand my rental portfolio as well. I’m meeting a guy, whenever he’s better, to sell a $150 parcel for $2,000. It’s COVID. We’re supposed to meet but his wife ended up calling me.

I’ll have turned 5 or 6 parcels depending on what happens with him already. We’re about eight weeks in, so when you think about taking a $150 parcel and selling it for $1,000 or $2,000, you know that’s a way to scale your money quickly. This is on the side of the development work I’m already doing, so it’s been a good little ancillary income. Over time, I want to continue to scale it.

I’m super huge on Roger Bannister in The Four-Minute Mile. Most people, before Roger Bannister ran the four-minute mile, people have been trying to get below five-minute miles. When he hit that four-minute mile, several people beat his record within a short amount of time just because we now know this is possible. We believe this is possible. You mentioned something so lightly. I’ve got to bring it up again. You bought a piece of land for $150, and are you selling it for $2,000?

Yes. I’m almost regretting that because I got so many responses so quickly on that because that one’s especially ideal where it is, the views and everything. I almost think I should list it for more. I told the guy I was selling it to him. I’m not going to go back on that.

Stick with one thing, master it, and then move on.

I’ve had some of those as well. I’ve shaken hands on the side of the road for the land. The next day, I got a $7,500 higher offer. I called my buyer that I shook hands with and already agreed, I was like, “Do you want just to split the $7,500 because I just got a way higher offer than what we agreed to?” He said, “No, we have a deal.” I had to honor it. You’ll see that. It’s amazing how much higher of a price you can get for these parcels of land whenever you offer the financing as well. It sounds to me like you’re wholesaling as well. You’re buying wholesale, and selling wholesale.

Speaking of wholesaling, but separate my land business, one of our clients who were building a duplex for wanted another duplex built immediately after and there are no lots on the market. I went out and I took a lot of the principles that we’ve talked about here and got a parcel under contract relatively cheaply and wholesale it over to her.

I’m using this for my development business, too. I got another one that I consider separate because we’re not talking quite the same margins here. We got that under contract for $8,500 and immediately selling for $13,000. It’s amazing what you can do with land and it goes back to, is it an efficient market? The answer is no. There aren’t a whole bunch of eyeballs on it all day long.

It’s not like the stock market where the ticker updates every second for the prices of all the different stocks and the news comes out 24 hours a day, and there are millions of people watching the price. It’s hard to find mispricings in stocks, whereas it’s easy to find mispricings in land because people are not looking at them all the time.

You just briefed over that $8,500 a piece of land, selling it for $13,000. I’m no mathematician but that sounds like $4,500 in your pocket.

That was just a result. It was taking the principles I’ve learned from land investing and applying it to my development business because I’m selling that to one of my builder friends who needed a lot for another spec. I’m like, “I might just have one for you.” This is symbiotic with what I’m doing in development. That’s what I’m trying to say.

Dan, I can’t wait to see where you’re at when you’re 34 years old. Builders and developers are going to flock to you because you might be using this skill to buy $150 parcels of land, but it’s no different from buying $1.5 million of land and subdividing it. I see the sky’s the limit for you. I’m excited to see this journey. I can’t wait to read your biography one day. Here’s the last question. What advice would you give to the person who’s thinking about getting started, building a passive income through land, or even buying land at $150 and selling it for $2,000?

At the end of these conversations, you’ll find people who are successful tend to give the same answers over and over again. That is, do it. Take action. Stop thinking about it. If you sit there and oscillate between “Should I try and be a wholesaler? Should I invest in land? Should I do this or that?” No, you have to pick something, focus on it intensely until you’re successful, and then move on. When we’re new, we listen to podcasts and read books. We hear about 50 different strategies.

We try and do a little bit of all of them, and then we fail at all of them generally, unless you’re exceptional. If you’re thinking about it, stop thinking about it. It’s amazing how quickly that you can make money doing this. It’s not that hard. Take the steps necessary. Get your market picked. Send out the letters. Decide what you need to pay for. Run your comps. See what they will sell for, and just do it. There’s nothing more to it. This applies to anything. If you’re trying to buy a rental, or start working out, or getting in shape, then just do it.

The other thing that I want to re-emphasize is sticking with one thing until you’re successful. The only reason I made the move to include this land investing is that it fits with what I was doing in my development business. I was already sending out some mailers, but I wasn’t doing it properly. This has improved my systems in my existing business. It’s opened up a new avenue for income. Stick with one thing, master it and then move on. Don’t wait. Do it right now. Waiting is the most toxic word around. Patience is not a virtue. There you go.

WI 768 | Land Investing

Land Investing: It’s very easy to find mispricing in land because people are not looking at it.

 

Do it, take the action. Pick one avenue and laser-vision focus on it. Do not do anything else. There will be shiny objects. The more successful you become, the shinier objects are going to come at you. The reason why they put blinders on horses, they want that horse to go exactly where they want it to go. It’s the same thing with you. Put your blinders on. Keep your head down. Stop getting educated. Time block, do it. Do the action steps and you’ll be successful, whatever it is. I don’t care if it’s writing a book. I don’t care if it’s building a house. Get off of YouTube, but use it to your advantage.

Focus on the actions that you need to take to get the result. Focus on the lead measures, not the lag measures, because it takes time to get results. In something like land investing, where we already know what you need to do to be successful, eventually, everything will regress to the mean. The law of large numbers. Maybe, at first, you don’t succeed, if you focus on those lead measures and continue to do the things every day you need to do to be successful, you will get there in time. Everything regresses to the mean. Don’t focus on the result at first. Focus on first learning what the actions you need to be doing, which most people aren’t, and then executing those things, then the results will come.

Give a quick example of what a lead measure is and what a lag measure is.

A lead measure would be, “Brent, how many mailers did you send out this week?”

I got 300.

That’s a lead measure. It is the action you take to get the result you’re looking for. It’s not the result itself. The lag measure will be, how many parcels he actually bought? Depending on how you’re looking at it. How many parcels does he turn and sell? Sometimes the results or the lag measures don’t show up immediately.

If you know you’re taking the right action, which with any of these real estate investing strategies, it’s easy to find out what the right action is. If it’s wholesaling, you want to be a wholesaler, how many cold calls did you make? How many mailers did you send out? Those are the lead measures, and then the lag measures would be, how many deals did you get under contract?

My lag measure now is $100,000 per month. We’re backward planning from there. Basically, how many letters do we have to send out to get this many accepted offers? How many buyers do we have to speak to get this many accepted notes and build these many sales? Dan, thank you so much for joining me. If you’re interested in getting started on your way to generating passive income through land, head over to WholesalingInc.com/land, and schedule a call with me. We’ll hop on a short call together and discuss your real estate investing goals. If it sounds like we’re a great fit, I’d be honored to help you on your land investing journey, and I’ll see you next time, land sharks. Thanks so much, Dan.

Thank you.

Talk to you later.

Sounds good.

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About Brent Bowers

WI 623 | Wholesaling LandBrent Bowers is an investor and coach with a focus on buying and selling vacant land. As an Army Officer with over 8 years of service, Brent was spending a great deal of time away from his family, and he knew he needed to make some changes in order to be more present with his wife and children. In a short period of time, Brent was able to expand his business,  hire a team, and (most importantly) spend quality time with his family while still working hard and helping others.

While Brent invests in many different types of real estate, his favorite investment strategy deals with buying and selling vacant land, and he enjoys sharing his expertise in this area with his coaching clients. Brent chooses to live his life based on Bob Burg’s quote, “Your influence is determined by how abundantly you place other people’s interests first.” He is passionate about helping other people find success in real estate investing, particularly in land investments.

 

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