Today we are joined by Mark Podolsky, The Land Geek. Mark has been investing in raw land since 2001 and has closed over 5,000 transactions in his business, Frontier Equity Properties. Mark is also an author.
Originally working in investment banking, Mark specialized in mergers and acquisitions with private equity groups. He felt micromanaged and unhappy. He heard about the market for raw land through a colleague and was motivated to learn more after hearing the returns he reported.
Mark decided to give it a shot at an auction in New Mexico, buying several parcels of land with the advice of his mentor. After reselling the land online at a gain, Mark took the proceeds and bought more lots. After seeing success, Mark decided to begin the transition into becoming a full-time land investor.
In a nutshell, Mark looks for plots of land and makes an offer of an amount designed to leave room for a healthy return. When an offer is accepted, Mark and his team conduct their due diligence. After confirming there are no liens or encumbrances, breaks in the chain of title, or additional back taxes, the payment is made. When closed, the land is advertised for resale on various platforms to many groups of people. Ideally, the land is financed with a relatively low payment over a few years.
The big mistakes are investing in the wrong county with the wrong pricing. In this niche, improper due diligence is the biggest pitfall. Checking back taxes and the current value of the land is important. Additionally, doing deals for cash is generating money but not building wealth. Starting with terms deals avoids paying taxes on the cash and having to reinvest the money, and instead can help you build passive income and shelter some wealth.
Mark also advises to loop in the professionals from the beginning, especially a CPA for taxes. Many mistakes have been made using a CPA without intimate knowledge in real estate. For example, full time buying and selling raw land makes you a dealer. There is an exemption for raw lands dealers where you only capture gains when you receive payment, but not all professionals or CPAs are aware of smaller, niche-specific bits of information like this.
From software on the front end, virtual assistants and an acquisition manager in the middle, and geekpay.io automating the collection on the backend, Mark estimates that 90% of his business is automated. Understanding and creatively applying technology is important for efficiency and there are an abundance of potential solutions available, such as hubdoc, filethis, zapier, airtable, and dropbox, to list a few discussed in the episode.
Your business model is very important for determining where and how you could automate. Some things just don’t scale, and not every potential solution will perfectly fit with your business. It’s tough to automate relationships, and too much forced automation will bog you down.
At The Real Estate CPA, we’re turning more to automating the accounting process because it’s very time consuming and there are custom solutions out there. We will have you walk through your process from start to finish and identify pain points. We will begin by adding solutions to fix these pain points. Over time, as more solutions are implemented, operations will become increasingly passive.
In applying this to your business, build this until passive income exceeds fixed expenses. At this point, you’re working when you want to, not because you have to.