Roberto Chavez started his raw land flipping side hustle a little over a year ago, and with persistence, has already built it into 5-figures of monthly revenue.
This is a business model that was first introduced to me by Mark Podolsky, from TheLandGeek.com, in episode 108 of The Side Hustle Show.
He called it “the best passive income model” because it avoids “the 3 T’s” of traditional real estate investing: tenants, toilets, and termites.
How the model works is you:
- acquire parcels of land on the cheap because the owners don’t want them anymore
- re-sell them either for a quick cash flip, or more commonly, as an owner-financed sale.
This is where the passive income comes in as you collect monthly payments for a period of 3-7 years, or whatever terms you agree on.
For example, buy a $10,000 parcel upfront for $2,500, and resell it for $199 a month for 5 years. In that scenario, your total payments collected would be almost $12,000, and you’d breakeven on your initial investment after about a year.
Where the persistence comes in, is the initial seller outreach. It’s very much a numbers game, as you’ll hear Roberto explain. I think that’s what separates those who have success in it from those who don’t.
Tune in to learn how Roberto finds parcels to buy for 25 cents on the dollar, how he figures out how much to offer, the due diligence that goes into these deals, and how he re-sells them for profit.
Note: Roberto is actually a student of Mark’s. When I told Mark we were recording this episode, he offered his book, Dirt Rich, and a free strategy session with a Land Geek coach to Side Hustle Show listeners. I’m also an affiliate for his paid program; use code “sidehustle” for $500 off.
How Do You Find Land to Flip?
The parcels of land Roberto buys are not usually listed for sale. Instead, he ends up making unsolicited offers on the properties after finding areas and owners that may be interested in selling.
The first step, Roberto said, is to look where other land investors are selling land and focus on these areas.
There are a few websites that can help you do this, including:
Once you find an area with movement (people buying and selling land), the next step is to reach out to the county and start doing some due diligence.
Some of the key things you’ll need to find out are:
- Who to contact at the county
- Who is in charge of assessing property values
- What department can give you a delinquent tax roll list
Some counties have a lot of information on their websites to get started with, but Roberto said in most cases he gives them a call or sends a letter asking how to get their delinquent tax roll list and how much it’s going to cost.
He said you can expect to pay anywhere between $70-$300, and you’ll usually be emailed an Excel spreadsheet to work with.
The “low hanging fruit” on the list are raw land properties where the owner owes back taxes, and their mailing address is in a different state.
“The theory is it’s more likely that those people are willing to sell their property than somebody who doesn’t owe back taxes and lives in the same county where the property is located,” Roberto explained.
Contacting Land Owners
Once Roberto has a list of properties, he prices them up so he can send an offer to the owner and get a conversation started.
He does this by looking at how much similarly-sized properties are selling for and offers a quarter of that price. For example, if a 5-acre property is selling for $10,000 in that county, he’ll send an offer of $2,500 to the owner.
Roberto acknowledges this is a low offer. “It’s a conversation starter more than anything,” he said. He sends out more than 600 offer letters a month and gets a response rate of 1-3% with people interested in discussing the offer, making counter offers, and opening up dialogue to work out a deal.
From that 1-3% of people who get back to Roberto said he closes on at least half of them. So, for a 600-letter mailshot that’s about 6-10 purchases that go through.
As far as the wording for the offer letter goes, Roberto said he just sends a 1-sided letter with a basic outline of:
“Hey, I’m a land investor…if you’re interested in selling your land we’d like to offer you x amount for this [property ID] of x acres.”
Due Diligence on Raw Land
Roberto pointed out that his offers are contingent on him doing some due diligence.
First, he finds out the exact amount of back taxes and if the sum is significant, deducts this from his offer. Sometimes the seller will contest this, and he may negotiate on the amount he’s willing to deduct.
He also verifies the person he’s speaking to has the authority to sell the property, which can either be done by seeing the property deeds from the seller or through the county.
Roberto then takes a good look at where the property is located. If it’s near a town center he can expect to pay a little more than a property in the middle of nowhere for example, and he checks there is easy access to the property.
Other things to check include:
- making sure there are no liens on the property
- checking for easements or if it’s part of an HOA
- looking how close utilities are to the property.
All of these things change how much he will pay for the property and market it when flipping it.
I asked if he ever goes out to see the properties he’s buying, and he told me that 95% of his raw land purchases have been sight unseen. It’s almost like trading paper, in a sense.
Occasionally he’ll hire someone close to the property from Craigslist to go and take pictures to help when he’s selling it, but that’s as close as he gets to most of his purchases.
Why Are People Selling Land for Less Than Market Value?
If property owners owe back taxes, a quick cash offer can be appealing. Roberto points out to them that they can have the money in as little as 3 days if they work out a deal.
It’s also a much quicker and easier way for the landowner to sell than going through property websites and doing a lot of the work themselves. “It’s an easy, fast way for people to get rid of land they’re not interested in holding anymore,” Roberto said.
Flipping the Properties
This is a side hustle that requires some upfront capital to buy these property parcels, and interestingly you’re not typically making a quick cash flip.
Most deals are on an owner carry agreement, meaning your buyer will be making monthly payments over the next 3-5 years. That’s something to keep in mind when raising or tying up capital in land deals.
When it comes to marketing properties for sale, Roberto said the land sale sites like Lands of America, Land Watch, and Land Modo are great as people are already browsing these for properties, but he’s seen much better success using Facebook and Craigslist.
Roberto puts a listing on Craigslist and waits for people who are interested to email him.
On Facebook, he finds all the buy/sell groups for the city/county where he’s selling a property and adds listings to as many of them as he can find. I thought it was a creative way to make money on Facebook!
In his sales copy, he points out that for a small low down payment of $250 or less and for a low monthly payment of $199, the buyer can become a landowner. That’s usually compelling enough to start getting inquiries.
The Logistics of Managing Dozens of Land Flipping Deals
This is what Roberto calls, “the hardest part of the business.” Roberto still works a full-time job, he’s sending out 600 offers a month, and balancing the purchase and sale of those deals.
He’s recently taken on a virtual assistant to help manage the buying side, so he can spend more time on flipping his inventory.
He has also automated some of the processes in his business. For instance, he recommended GeekPay as a tool to collect the monthly payments on land he’s sold, which saves him from chasing checks every month.
Roberto has also started using Pipedrive to help keep things organized. Pipedrive is a sales tracking tool and helps by setting reminders to reach out to people you haven’t heard back from, streamlining workflows, and lots more.
Managing the Land Flipping Cash Flow
When Roberto started this land investing side hustle at the end of 2017, he did a couple of cash flips. Those injected some quick profits into his business, and used that capital to finance other land purchases.
He’s now at the point where his monthly revenue is enough to finance his other purchases. He’s not taking cash off the table yet, but instead re-investing it into systems, his team, and of course, more land.
When I asked him what his worst deal was, Roberto said it was a deal where he only “doubled his money on terms.” The key is buying at a steep enough discount.
Land Flipping Alternatives
If this sounds like a lot of upfront work, it is. But there are a few ways to invest in land–and real estate–a little more passively.
Here are a few options to consider:
- Fundrise – Fundrise offers a variety of commercial real estate REITs, targeting different investment goals and areas of the country. I like the quarterly cash flow, low minimums (just $10), and being automatically diversified in not having to pick-and-choose individual deals. Disclosure: I’ve been a Fundrise investor since 2015. When you join through my referral link, I receive compensation. Opinions are my own.
- Arrived – Arrived lets you buy fractional ownership of cash-flowing rentals for as little as $100. This allows you to add the benefits of tangible real estate to your portfolio — without the headaches of managing it yourself.
- GroundFloor – Pick and choose the short-term real estate rehab projects you want to lend on, with just $10 minimums. Returns have averaged 10% since 2015.
- AcreTrader – Invest in America’s farmland, starting with $5000 minimums. Since 1990, farmland investments have seen an 11.5% annualized return (according to the site).
- FarmTogether – Accredited investors can buy portions of farmland offerings, with $10,000 minimums. Target returns are 7-15% and holding periods are at least 5 years.
- RoofStock – Roofstock is a marketplace for “turnkey” rental properties. If the “no tenants” aspect is what attracted you to raw land, this one probably isn’t for you.
Be sure to check out our full list of alternative investments for more.
What’s Next?
Roberto can see this side hustle becoming a full-time job in the future. “I love the passive income aspect of it,” Roberto said.
He’s currently putting in 20-30 hours a week, and is working on adding more help to his team.
If you want to learn more about Roberto and his business, he was kind enough to give out his personal email and said he’d be happy to talk with any of the Side Hustle Nation listeners about land investing. You can contact him at rchavezacosta [at] gmail [dot] com.
Be sure to grab your free copy of Mark “The Land Geek” Podolsky’s book, Dirt Rich. I’m also an affiliate for his paid program; use code “sidehustle” for $500 off.
Note: A Side Hustle Show listener / land flipper put together a training course of his own that might be worth checking out.
If you liked this episode, I recommend checking out these 3 as well:
- 108: The Best Passive Income Model?
- 168: The Best Passive Income Model: Raw Land Investing Update (Part 1)
- 169: The Best Passive Income Model: Raw Land Investing Update (Part 2)
Roberto’s #1 Tip for Side Hustle Nation
“Take action!”
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Thank you. As is often the case, this is US-only relevant info. No applicability to Canada from what I can see from the 3 included land for sale websites :(
https://www.landwatch.com/Canada_land_for_sale/Land
This is great. I realize it might not be for everyone in that it requires some cash to get started but I look forward to learning more. I could see this as a goal to work toward as I get started with “smaller” hustles. (My 19 year old son was just lamenting the cost of property and that he may never be a home or land owner. I am going to show him that it IS possible and may just make him a decent income too!)
Hi
Is there any way this can work in the UK?
Thanks
Anne-Marie
Excellent interview many thanks
With regards to baseball, I believe striking out 70 times out of 100 is considered good and 97 out of 100 not so good : )
It’s a good analogy though.
Is there any contact info for Roberto?
There is. He gave his email out during the interview. Check the “What’s Next?” section above to find it.
Excellent show Nick. I’m not an attorney or CPA, but it sure seems the capital gains would hurt your bottom line, but with the built-in financing, maybe I’m not correct. I bought one home years ago, flipped it to double my money – and lost 30% of my gain to capital gains. My CPA told me to quit giving my money away.
Death and taxes.
I always chuckle when people complain that they are giving their money away when they pay capital gains tax. If you buy a capital asset (look up the definition) for $25 and sell it a year or more later for $100 you gross $75. The highest long-term capital gains tax rate in 2020 is 20%. 80% of $75 is $60. So instead of whining that you had to pay a tax, be grateful that you made a 240% ROI!
BTW, a competent CPA should know that when you flip land for a living you may need to treat your gains as ordinary income because in the eyes of the IRS and states you may be considered to be a land dealer (look it up).
If you sell your land on a contract for payments, a portion of each payment may be considered as interest income even if your contract doesn’t state that because of what’s known as “imputed interest.” (Look it up.)
If you buy and sell anything regularly that you don’t use for personal reasons – land, homes, cars, appliances – you will probably be considered as a dealer and your gains will probably be considered ordinary income – from which you can deduct ordinary and necessary business expenses.
The hidden tax secret of being a side hustler is that you can legitimately deduct expenses that might otherwise be considered personal and non-deductible if you are treating your hustle as a business (which you should be doing) where you intend to make a profit, and not treating your hustle as a hobby. (Look up “hobby losses” on irs.gov.)
I am not an attorney or CPA but have been self-employed since 1985 and know the ropes. I also have been a business tax preparer and have taken graduate-level tax courses, something that most attorneys and some CPAs have not done.
The bottom line is, a competent business advisor will tell you to keep your business and personal income and expenditures separate and keep meticulous records.
So before you take the plunge into asset flipping or any side hustle, get some advice from a competent business advisor. It will be money well spent.
I heard all 4 podcasts related to this topic of flipping land. I believe all of them have a link to a course that a Side Hustle Show listener / land flipper put together. Have you considered interviewing him on his course to get more information? It might make it easier to pull the trigger on buying his course and helping a listener out.
very good Roberto
Hi sirs,I want information on how to flipped land thank you.
$2K for his course is much steeper than I expected. Looks like I will have to learn the slow, hard way.
I have to say, it’s one thing getting a list from a county, but it’s quite another being able to make any use out of it. You get parcel ID numbers for land with delinquent taxes but then… absolutely no easy way to use those ID numbers to find the actual parcels of land they refer to. It’s like there is no readily accessible registry where you can enter a parcel ID number and get an actual address or map showing the said parcel, so in short order to can end up with some expensive but worthless lists.
I think the first step in this process should be, rather than looking for areas where land is being sold, to find out which counties are operating in the 21st century in terms of online user-friendliness and which are still in the Dark Ages. Or am I missing something that only those willing to pay $2000 for the online course are privy to?
Replying to myself (for the sake of others struggling with the same problem), the critical thing is to ensure the county for which one acquires a list has GIS mapping, as this is a user-friendly, point-and-click free resource that shows property boundaries, assessed value, owner details, etc., via a parcel ID lookup feature.
Great article. I tried to use Geekpay but had issues because you need to sign up for a merchant account to process payments. I saw someone else in the comments recommend https://sellerservicing.com and am super happy with it so far. Super modern and affordable software for servicing my loans.