Posted on: January 21, 2022
WI 868 | Land Deals

 

The real estate business takes you through many tough times, and you find yourself in different circumstances all the time. Your resourcefulness will determine how well you adapt to these situations.  As an entrepreneur, it is vital to understand that success is not about what you have but rather how good you are at dealing skillfully and promptly with new situations.

If you are ready to build a reliable passive income machine, we can help you get there! In today’s episode, we will be sitting down with Dan Haberkost as he spills the tea on how to scale your land business and understand how markets progress. Let’s also find out how he can flip lands and average $14,000 on sales in a month!

How One Resourceful Wholesaler Closed 70 Land Deals In 18 Months With Dan Haberkost

Episode Transcription

I have a guest on this episode. He is a returning guest. Our first episode was episode 768. His name is Dan Haberkost. He was getting started in land. He was already building homes as a builder but now he put his land knowledge to work. He has built a team and got a lot of systems going on. Dan, how are you? Give us an update on what is going on.

Thanks for having me. I was excited to do a follow-up here. Since the fall of 2020, a lot has happened since then. I scaled and systemized the business from when we started. Before taking your course, I was flailing around trying to do a bunch of different things at once. I had a couple of builds going. I bought and sold a couple of parcels but I didn’t have a systemized repeatable business. I was giving away way too much on both the building and the land because I didn’t have much cash.

When we did our first interview, for those who haven’t read, I was getting started with Brent’s system and I was flipping a lot of lots but they were small. I bought one for $1,000 and sold it for $4,000 or $5,00 or bought one for $200 and sold it for $2,000. That was a great way to learn but that is not a very significant amount of money. Fast forward to now, the average profit on a lot of flips is right around $13,000 to $14,000. I don’t do any of the acquisitions dispositions or transaction coordination and then because I have this assembly line of land coming in at $0.30 or $0.40 on the dollar, I sell some for cash some on notes and then I build on the parcels that make sense.

In the current environment, I can build a house with a $240 basis and sell it for $380 in net well over $100,000. It makes sense. It’s a great way to scale off of what I’m already doing off of the system I already have. Once you get the business set up, it’s so passive. You don’t have to do much on the building side once the permit is pulled. That’s what the active business looks like. At the same time, I have been buying more rentals and have quite a bit of marketing going out for that as well.

I have so much I want you to deep dive on. First off, you started doing onesy-twosy lots, buying them for $200 and selling them for $2,000. That’s great money but you saw a way to scale that quickly and then you went to $13,000 profit per deal. How long would you say you have been in land purchasing by doing the actual land when you started with the Land Sharks?

The Land Sharks were in the fall of 2020.

How many parcels of land would you say that you have either purchased, wholesale, designed or built on?

I’m in the 70 in less than eighteen months if you include all that.

With business in general, getting started is the hardest part, but it gets so much easier once you’re a few years and you have your systems and the right people in place.

It is four purchases of lots a month. The other thing that you said was cool was it sounds like you have a team and no acquisition. For the reader, the acquisition is you are purchasing the land. Disposition is another word for selling the land and then transaction coordination, which is a boatload of work. Have you farmed all that out? Are you not even having to do any of that anymore?

Yes, believe it or not. I have a primary acquisitions manager locally in The Springs where we live. She was fresh out of the Army and had a tremendous work ethic then also wanted to learn about real estate. It was a good mix. At the same time, I gave her a personality test and she’s a less extreme version of me. I needed to be careful as far as she is running off on her own. I started by just giving her acquisitions and she picked that up overnight. From there, she goes, “I want more responsibility.” I gave her transaction coordination and she took that over. She’s like, “I’m bored. I need more to do.” She’s now doing the dispositions for me and granted a number of them just go to realtors to sell.

There’s a certain area in my markets where it makes sense for the realtors to put it on the market because we can get $1 on the dollar every time. Disposition is less on her but she’s handling everything. I’m just doing the actual marketing and helping with the decision-making as far as sales prices, which even that I’m getting the point offloading to her.

Additionally, I have a guy. It’s a long story how I met him but in Texas, he is functioning as an acquisitions manager. He has got me a couple of deals because he wants to learn about real estate. I’m giving them lists to cold call. As far as other employees, the realtor sells a lot of the land. My GCs are just contracted. I don’t employ them. It’s a very low overhead business. That’s another part I like about it because it’s easy to pivot if needed when your overhead is low.

What stuck out to me is how you were able to train someone that wasn’t even in the real estate industry that came from the military industry and overnight you had her buying land. You must be a phenomenal teacher. I love the fact that you can train someone fairly quickly to buy the land.

It’s simple. I’m sure you say that on every show but it’s true. There is so much less to it, especially when you know your markets very well and you pick the right markets where there are fewer factors. It’s as quick to pick up relative to other asset types. At the same time, it’s just much less competitive. It’s not like trying to go wholesale houses. It’s very easy, relatively speaking.

I want to pull out another thing that you had mentioned. You didn’t sit long at making $1,800 profit when you buy a piece of land for $200. Who believes that? People don’t believe me when I say I bought my first piece of land for $285. You beat me, you bought it for $200 but now you’re making $100,000 net profit. That sounds like a lot more work. How are you doing that? How are you pulling off $100,000 net profit on one deal and you told me you have done 70?

Those are the builds. On my land flips, I’m averaging 13 and 14-ish net. I’d flipped in the low twenties. That was great. Those are the new builds and there are more subtleties and risks to that. I told you when you lived here still some of the issues I had with a few of the GCs. The number one thing is picking the right general contractor because I made a mistake a couple of years ago of not picking the right general contractor. I had a bunch of projects fall apart. Thankfully, my primary investor was in the business a long time. He had dealt with these sorts of things. We were able to get through that without any lawsuits or anything major but there is more risk.

Once you have the right general contractor in place and you have the right floor plan. Maybe you already have a 3D walkthrough and pictures of that finished floor plan then it does become much easier. For example, I’m building a house right now. I bought the lot the day they repaved the street because there’s a big development going around it. I’m benefiting from the bigger developer on cabaret. It will probably take me 10 to 12 hours, all in from having been involved in buying the land, getting the plans to communicating with everyone.

WI 868 | Land Deals

Land Deals: Mitigating risks is one of the most important things. If you are consistently building and growing, the power of exponential progression of compounding interest starts to take place as long as you don’t lose.

 

There are certain things only the owner can do, paying the tap fees and dealing with the municipality, which is the Metro District in my case. I’m probably only going to have 10 to 12 hours into that thing by the time we get the permit. From there, I don’t do a whole lot except check-in. I have my realtor, who’s already got pictures in a 3D walkthrough of the finished product. GC and I have worked together on the one you and I have done, along with a couple of others. It becomes a simple system. With business in general, getting started is the hardest part. For anyone who’s reading, it gets so much easier once you are a few years and you have your systems and people in place.

There is a longer window of exposure. It takes about from the time you buy the lot to getting the permit and building. It’s 7 or 8 months. At the end of the day, if your numbers are right, if you have the right people in place, there’s a healthy margin for error because if the market tanks tomorrow, I can drop the price to $100,000. It’s an entry-level, 3 bed, 2 bath, 1,500 square foot house. Who does that appeal to? The largest demographics in our country.

That is very intentional. That appeals to retiring Baby Boomers and first-time homebuyers, which are especially big in my market because you have all the military families, which are a lot of young people buying their first houses. That was a little bit of a rant but I guess there’s a little bit more risk and work in getting it set up. Once you have your pieces and parts in place, especially the right people, it is pretty simple. If you build the right product and the right markets then you have a very healthy margin of safety.

You are not only purchasing the land at less than $0.40 on the dollar. You are leveraging the real estate agent that has proven herself. Is that Sarah? I assume you’re selling these before you’re even done. You’re very low risk on that, as well as leveraging a good general contractor. It’s multiple people like you who had your acquisitions, dispositions and transaction coordination. You’re not just relying on yourself. You’re relying on many. You have a lot of things. You’re leveraging a lot of ways that you’re kind of mitigating risk.

Having spent a lot of time with a number of older investors is always on my mind. The people that are successful in the long-term are able not to lose it all at every market turn at every recession. Leveraging up your eyeballs all the time, I don’t think is the smartest thing. I’m not touching any of the equity or any of my properties. I’m probably going to pay off one of my houses.

In some ways, that might seem irrational but the mitigating risk is one of the most important things because if you consistently are building and growing, the power of exponential progression of compounding interest starts to take place as long as you don’t lose. That’s how I look at it. That’s a very high-level statement but in general, with investing in a business, we are doing the downside first.

Random question, I know you had purchased quite a few rental properties in 2021. How many have you purchased in the last twelve months?

Just 2 in the last 12 months. My investing has got to catch up with my income. That’s a big focus for 2022. I’m finishing a huge rehab. I lifted a house 4 inches and completely redid the plumbing. That was the one where my contractor got arrested in the middle. That’s a whole other story. I have got some work to do in 2022.

I see where all your money is going. To lift the house for 4 inches, I can only imagine what that costs. What would you say from the time you purchased the land to the time you sell the property to make about $100,000 profit? How long does that process take?

That’s about eight months for a build.

From the time you get that land under contract to the time you’re paid at closing, you are walking away with a check. Let’s go back to the land flips of getting an average of $13,000 to $20,000. From the time you get that first initial conversation, get it under contract and paid, how long does that timeframe look like usually for you?

We usually close within two weeks. For the nicer lots especially the ones that generally net more, they move crazy quick. 1 or 2 months sometimes a few weeks because I have a big buyer pool but usually, we list those nicer ones on the market. They go for full price. The way I think of my land business is getting me 50% to 100% returns on my cash over and over again in 1 to 2 months. Occasionally, longer, shorter or the deals aren’t as good but that’s what I see the land business as a way to aggressively multiply my capital.

I love to see the numbers break down and the calculations. I pulled out my calculator while you are talking. I took that two months from the time you get that first initial call to be paid on that $13,000, the lower end of that average that you mentioned and that’s $6,500 a month on just one deal. We are only talking only one deal. If you look at the $100,000 that you’re going to make if you buy the land and build the house, that’s roughly $12,500 a month if you look at eight months’ time. Going the extra mile in building and you are only putting 10 to 12 hours in it, it seems like a massive leap and return on investment too, if you have got the means. How many houses are you building at one time?

I have three but an important back to the mitigating risk, I only want one in my name at a time. There’s a certain income goal I’m trying to hit. so I broke down and worked backward. “I need these many houses and these many lands.” We are working on getting a few more going but I am much more comfortable having a bunch going where I have partners like what you and I did on the Mustang Drive and the Olympus Drive houses.

On those ones, depending on how it’s set up, I might give them 50% of the profit depending on the work and who’s taking on the risk. I have three houses going right now. I’m looking to get two more going here by the end of January or early February 2022. Only one of them is going to be completely in my name and 100% profit for me. I’m fine with that because I sleep very well at night with fewer construction loans in my name.

When I look at my bank account and it gets low, I blame Mustang Drive. For anybody reading, me and Dan are doing a project together. That’s what he’s mentioning, Mustang Drive. Let’s break that deal down if you don’t mind for the readers.

It’s important guys to take a step back and look at the big picture to understand how markets progressed. There’s a time to build and a time when it doesn’t make sense. There’s a little town called Colorado City about an hour and twenty minutes South of Colorado Springs. I first went down there in 2018.

At the end of the day, if your numbers are right and you have the right people in place, there’s a healthy margin for error.

It was the first time it was over and we did a few deals in 2019. It was very sleepy. There are a couple of listings on the market for land. Nobody was building. It was not the time to build. I started doing my land deals there in 2020 like we were talking about. Those are the very low-dollar deals. At the very end of 2020, I got a lot on the golf course, all utilities for $1,000.

I thought, “I’ll flip this one probably for $10,000. This will be a great deal.” I remember driving down there. I hadn’t been down for months to look at it. All of a sudden, there are houses being built all over. It’s a small market but it was overnight. It made sense because, in Colorado, the path of progress comes right straight down the front range, right down to High 25.

Colorado Springs was the first one after Denver to blow up then the town of Pueblo and Pueblo West started to grow. Now Colorado City even is growing. In talking to some of the builders, they were pre-selling everything for very high-profit margins. I said, “There’s an opportunity maybe to build on this lot.” Brent and I were at the gym one day. He’s like, “Let’s build on it.” We were talking through it.

I don’t know why I haven’t sold because I remember I was selling the buildable lots for $9,900 on financing, and I would pay $1,000 for them. You got to be careful in this area because you can get a non-buildable way because there’s no sewer or electricity. I remember you saying, “I don’t know why I haven’t sold it.” I was like, “What are your pictures look like? Can you send me your pictures?” It had snow on it. I was like, “Just build on it.”

That’s exactly what we did. That was Brent and I’s first one together. We closed another one around the corner. We’re going to build on that as soon as this one sells but it’s under contract to sell the 24th at $350,000. There are some concessions in there. We only had it listed at $340,000 so we will call it a $340,000 net on what we come in. I would have to go look at the spreadsheet but with realtor fees and everything, we’re going to make close to $100,000 on that one.

It’s a smaller market. The market North of it is where I’m building, where there’s an easy $100,000 spread. For a $1,000 basis in the lot and then Brent put up some money just for the soft cost, plan, survey and that sort of thing, it’s not so bad because we’ve got a construction loan to finance it. That will be closing here and then we’re just going to duplicate it right around the corner on Olympus.

That is if we can get the contractor to finish it before closing. It’s keeping me up at night. He’s a great contractor, by the way. He’s a blessing from God and this guy is amazing. I want to break something down because if you take the sales price of this house, let’s just call it $340,000, even though we’re getting $350,000 with some seller concessions and all that. Generally, what does a builder pay for a lot? For instance, if a builder could sell it for $340,000, what percentage of that sales price on a brand new house does a builder pay for a piece of land?

WI 868 | Land Deals

Land Deals: There’s a time to build and there’s a time when it doesn’t make sense. So it’s really important to take a step back and look at the big picture to understand how markets progress.

 

My perspective is skewed because of what we do but I believe the norm is like 15%-ish. It’s somewhere between 10% and 20% for sure. That’s a big spread but I’m doing some math in my head. It has got to be around the 12% to 15% mark. I’m thinking of what people are building here in The Springs or in Pueblo who paid the full market price for land.

I know some areas are 20% or 25%. Let’s just call it 15%. That tells me 15% of $340,000 is $51,000. The builder would have paid for that $0.15 on the dollar for the sales price. Let’s say that you got it at $0.50 on the dollar. You could have paid up to $25,000 for the lot that you paid $1,000 for. It’s a massive discount.

This is why having your land system set up is synergistic with building. Most of the people buying my lots at full market value are builders and they are still going to make money building on. We are adding to that spread quite a bit by buying the land $0.30, $0.40 or $0.50 on the dollar. It’s very synergistic. That’s why it works well.

How can people find out more about you? I know there are some readers on here that are interested in building. We’ve got some Land Sharks students that have built on a few of their parcels of land. How can people get in touch with you?

Instagram or Facebook, @DanHaberkost. I’m posting about some of the builds I’m doing quite a bit on there and rentals. I’m going to be putting out a consulting or educational course on how to buy land off-market at a discount and then build on it. I dislike all of the mindset and woo-woo courses. I’m very much a pragmatist and this will be a simple turnkey system from A to Z of what I’m doing. If you need motivation, do not come to me. If you don’t need motivation but you need a system, this will be for you, as far as building houses and buying land cheaply.

I know you got the system for it because I was expecting you to tell me you had about 10 or 12 houses going. I know when I met you a couple of years ago, you had a few going. That’s amazing. I interviewed Dan Haberkost on episode 768. Rewind back to that. See where he was starting to do 70 deals in less than 18 months. He has 3 to 5 flips going. I’m excited about another project. I know you found another parcel of land that’s even better than the one we’re building on. In this one, you can see the lake, mountains and the golf course. I can’t even imagine what that one is going to do this.

It is on Olympus Lane. The name is cool.

Here you have it. If you are interested in getting started in land, schedule a call on WholesalingInc.com/Land. You’ll book a call with me and my team. We’ll see what your real estate investing goals and what your goals are. If we feel like we’re a great fit, I’d be honored to coach you. Thanks for jumping on with me, Dan.

No problem. Thanks for having me.

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About Brent Bowers

WI 623 | Wholesaling LandAs an Army Officer with over 8 years of service, Brent Bowers 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. His interest in real estate began in 2007 when he purchased his first home, so Brent began exploring real estate investing as a way to support his family while being able to enjoy more time with them as well.

In a short amount 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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