Transcription
What is dispo? So dispositions. There's two different sides of this business. One of them is the acquisition side, when you're either doing mailers, cold calling, email blasting, uh, direct to seller and negotiating with the seller to get the property under contract. But what happens after, right? We, in our business, there's this up-and-down roller coaster, which is, you know, you're you're busy getting these these properties under contract, and you're spending so much time getting getting that funnel, that pipeline full of properties that when it comes time to sell it, people tend to struggle on that side of the business. So therefore, having a good understanding on who is the buyer for your properties, you know, there's different demographics, whether you're working on big uh ranches or rural, smaller rural land or infill lots, you have to understand who's your buyer, where is the target market that you're at, and also what is the land selling for in that particular area, subdivision. How long does it normally take for those parcels to sell? That's another consideration because you have to think about that when you're doing uh your acquisitions. You know, there's some areas where properties just fly off the shelf, and there's some areas where the average days on market are 200 days on market.
So with the disposition side of the business, you have to to first look at where is your target market. So let's say, for example, I'm cold calling or sending mailers in a certain subdivision, before you send any type of outbound uh mailers or calls, is there any buyers in that certain region? That's something that people don't take into consideration. They see an area that seems to have a good population of of growth, but when when they go and get a property under contract, there's no buyers. So that's you always have to work with the end in mind. So who's your buyer? What are they buying? How big of a parcel are they buying? And this works for houses too. You know, what type of single-family home are they buying? Are they looking for a minimum of two bedrooms, minimum of three bedrooms? But we're going to stick to land here, right? So basically, you're just kind of turning it around and uh you know, not buying in Leehigh acres in Florida, some of the desert squares and what have you, where there's not really an end buyer available, or people are buying there, but maybe just talk about how how you determine if they're buyers in a market area before we go ahead and start working a market area.
Yeah, so you can use different service providers. For example, I really like using PropStream. PropStream has been pretty reliable, and if you want to do it the freeway, I I did a video on ChatGPT, and I think I used PropWire in that video, video. So pull a list of the last 90 to 120 days and see who's purchased lots in that certain area. Start with a city, start with a zip code, or start with a county, and then you can start going to the macro and then work down. I like to start with the micro and work my way out. And so what I do is I pull the last 90 to 120 days on PropStream and I see, okay, what is this builder? Who are these builders? And who are the heavy hitters, right? Most of the time it's going to be somebody in an LLC. There's two different types of demographics: just people buying land just because they want they don't want any neighbors, and people buying land because they're looking to build on it. So every there's a buyer for every single piece of land, even land that's uh landlocked; there's people that that specialize in buying landlocked properties, and they hold it for a long period of time, and then they negotiate with the neighbors over time. So just see who is your demographic and what are they doing in that certain region.
So what I like to do is I pull a list off PropStream, and if I see maybe three or four builders that keep coming up on that list, I I compile their information all in one spreadsheet, and I see, okay, I'm seeing this guy, ABC Home Buyer, is buying 0.2 to 0.4 acre lots, and they're they're buying lot lots that are not in flood zones; they're buying lots that are pretty flat. And also note if if a builder is okay with buying wooded versus flat lots, because there's completely different pricing on that. In my area, builders are buying uh wooded lots at 12% of ARV, 15% of ARV; they'll they'll buy just a cleared-out lot at about 20 to 25% of ARV. So what type of lot do you have? Also look look at what the builder's also doing with their septic. A lot of times a builder is okay with putting a septic uh system on the property; most of the time they're not. So look at the property that they currently bought, see how far the sewer taps are, the water taps, and and niche them down in that criteria. Okay, this guy's only buying properties that are near all the major utilities, and you you you'll kind of notice who who's who in that certain region. And what I do is I simply call them up. So I'll call them up, introduce myself, don't hound them down with a bunch of questions if you don't have a property in hand. It's best to have a a good general understanding. So maybe call three or four builders and just ask them, "Hey John, uh hey Stephanie, I'm and I'm pretty honest in telling me I'm brand new to the business. I just sent out 177,000 mailers, and I'm trying to figure this out. Can you please uh let me know what is a general rule of thumb for this certain area? I know you're in this market; I know that you probably know the intricacies of what the county typically requires when you're when you're uh pulling a building permit. Can you kind of just give me a a two-minute or a 30-second pitch of what you're looking for?" And that's what I do, and I and I'll call maybe 30 or 40 builders until two or three gives me that information. I do have a list of questions that I typically ask builders. I don't like using scripts; I think scripts just sound very ingenuine. So I just kind of touched a couple points here: "Hey, my name is Jay. I'm newer in the market. I really want to learn it. I see that you are a heavy hitter," and compliment them. People love talking about the things that they do. If I call Michael, let's let's act like you're a builder. Ring ring. "This is Michael." "Hey Michael, how are you? My name is Jay." "Nice to meet you." "Nice to meet you, Michael. I saw you did that beautiful property, that 332 that you did over on Nelson Way. By the way, Michael, I thought that was absolutely outstanding. How can I make you richer this year, Michael? I want to get you more lots like that." "Yeah, I could actually; inventory is really difficult to come by. Um, always willing to have a discussion with you and uh find out a little bit more about you and see if it may be something that would make sense for us." "Yeah, well, Michael, a little bit about me, I spend my days on the phone and sending out mailers, uh talking to sellers and negotiating lots, and I really want to partner up with someone like you that does great work like the one you did over on Nelson Way, and I just just want to take a couple of minutes just to pick your brain and see what type of lots are you looking for, Michael, and how can I make it super easy for you? How can I serve these lots on a silver platter for you?" "Uh, typically quarter acre to a half acre. I would prefer that uh sewer was available as opposed to septic. You know, that's just an additional cost for me." "Okay, and you said it's an additional cost for you. Typically what are you what are you seeing at the moment when it comes to septic uh systems? What what's your average allpar of what you're paying for that?" "It's it's really just increased actually. Uh, to tap into the sewer is typically about $5,000, and a septic is typically $15,000 and up." "Okay, and are you typically holding it for quite some time and then building later on in the future? Are you are you just buying one lot, building one lot, building, or how do you typically like to work?" "Typically two to three a year, so I've got one right now uh we'll get ready to start, so I'm looking for additional inventory." "Okay, and so typically, Michael, how it works with me, I'll get a property under contract, and I'm looking to assign it over to you. Have you ever worked with uh uh someone who assigns properties or AKA a wholesaler before?" "Yeah, I just actually did an assignment uh and I was very uh satisfied with the wholesaler making a profit. I think he got it for 115, and we paid 215, and oh, it was a win-win, phenomenal." "Well, Michael, I'd love to be that other wholesaler that you have a great experience with." "Well, I appreciate that. I'd love to see you know if if it makes sense for us, makes sense for you, uh win-win situation. So I'd love to see anything that you have." "Love it, Michael. Like I said, I'm newer in this particular market that you're in. Do you have a specific closing attorney or title company that you that you know that uses that works with the people that uh wholesale? Do you have a someone that you can recommend?" "Yeah, I do. Um, it it depends on the transaction. We have a title company that needs to disclose to all parties involved that there was an assignment, and we have another title company we use that will do what's called a blind HUD, and that way it doesn't necessarily need to be disclosed to the original seller and find out that uh you're making $110,000." "Okay, well, Michael, I think you gave me enough information to get my gears grinded, and is it okay that I give you a call or do you prefer that I text you when I get something? Because once I get these properties under contract, I'm looking to offload them in 48 hours." "I'd prefer to give you a call on the phone. Phone, phone would actually be better. We can be a little more interactive, and uh if it's something that makes sense, we'll jump on it." "Yeah, that's perfect. And one thing, Michael, I don't I don't go and shop you around with other investors. You tell me, Jay, I love it, or Jay, buzz off, and that's all I need to hear, and then we can do business together. How's that sound?" "I appreciate it. Thank you." "Thank you. And that's how I that's my pitch with uh with builders. It's pretty simple; there's no script, and I'm just really looking for a couple of different key points because once I start getting properties or uh interest, I can call Michael back up. Hey Michael, I have this property that fits on what we just talked about maybe a few days ago, uh can you take a look at it? Can you run your numbers and let me know what you need? This app and that's that's how I do it, and then I just build a relationship with Michael, and you know, once you start feeding that one builder once, twice, three times, they're they're going to answer your phone relatively quickly, and they're going to be able to give you feedback fast."
"Great technique. I appreciate that. Uh, and we've we've done this before, but the way that you talk to sellers, buyers, sellers, builders is just genuine and and very straightforward. Well, they can tell like you know, you know if when you have like a list of all the questions, they can tell when you're reading off of a script. And if you just hit on two or three main points where you're looking at uh what does it cost for a septic for you, like you know a couple questions that you you know that you really should be asking, you you choose top three or four, and then you can get the rest later. You really want to know what size lots, what you know how you you want to see if they want lots that are very squared or maybe they want big parcels or and also ask them, uh Hey, do you are you okay with subdividing properties? I I'm marketing bigger parcels that could be subdivided. Is it are you okay with going through that process or maybe even partnering up with me on that process?"
"Mar, do you use like Redfin, Zillow, or other tools as well just to kind of verify?" "Yeah, so I'll use I'll use Redfin. I really enjoy using the Redfin feature, and I have I Tai on the call with us as well, and he does a lot of that as well. So with Redfin, what we do is we pull the last 90 days, and we look at the land tab, and we since you've already told me you're looking, let's say for example you told me you're looking between 5,000 and 15,000 square feet, I just use that criteria, 5,000 and 15,000, 5,000 and 20,000 square feet within the last uh I probably go back a year actually, go back a year and see where is the hotspots, you know, where where's all the little clusters, and Redfin's really good at that. You see those little I think Redfin is a maybe blue, those little blue dots, or is it yellow? I don't even remember whether it's Redfin or Zillow. And so you'll see the clusters and where those little clusters of uh uh land parcels that sold, and just narrow it down, and you could use ChatGPT uh to download that list because Redfin allows you to download all at the bottom; it says download all, and then you just pop it into ChatGPT, and you ask it, 'Hey, what is the number one zip code? How many transactions happened in the last year or on this list? And also what is the most common lot size?' Those are the three questions I mainly ask: most common lot size, how many, what's the top zip code, and how many transactions in that zip code. And that's a good guideline, but once you already talk to someone like uh like uh Michael or any other builder, you know, you don't have to go into the nitty-gritty. You're looking for what that specific builder that you connected with wants."
"Jane had a question, uh call big builders or smaller boutique builders?" "I prefer smaller uh boutique builders. The big builders, they they they like to buy in bulk, big volume. The smaller boutique, they're going to give you um the more more time of day; they're going to give you uh more opportunity to be be able to learn the business. And once you get in good with a few small boutique builders, you're going to really understand the process because most of the time they'll walk you through it, like you can ask them questions. They're not as busy as Ryan or DR Horton or Lennar because you you can't ask those people that question, and most of the time they don't know that question because you're dealing directly with one of their one of their reps, one of their agents, and they just have limited uh understanding; they just kind of know exactly they have like a a sheet with uh prices on it: this is what you can pay, and this is what you should offer. And so that's that's exactly how uh the big companies do. I prefer the smaller builders, spec builders. And oh, also one thing to know, custom home builders typically don't buy the land; they they'll you're typically selling that that big five-acre parcel land to uh somebody that wants to build on it, and then they will go and hire the custom home builder. So I typically don't spend my time marketing to custom home builders; I spend my time mainly um marketing the smaller spec builders, the boutique builders."
"Yep, big builders most times would want you to close on the property before they buy it, so that's another consideration. Is there enough spread in that deal where you have to double close it? Actually, some big builders they want they don't they're not okay with you double closing either; they want you to hold it for let's say 30 to 90 days uh before you resell it to them, so it depends on who it is. Like I know hedge funds do that a lot uh or you know the bigger the Lennars, the DR Hortons, they want you to close on it maybe in 30 days, then they'll buy it from you. And also the bigger builders they'll tie you up as well. The bigger the bigger builders are put you under a due diligence period, and sometimes it could be lengthy." "Yeah, we we just sold one to a larger builder. Typically I deal with a smaller boutique; it's a much cleaner uh more pleasurable experience. The big builder, it's a 90-day escrow, you know, wetland study, surveys, you know, quite a bit of due diligence, so we have the time to do that on this transaction, but the boutique ones, it it's typically a very quick process."
"How do you dispo with rural land? So rural vacant land where the buyer will most likely be an individual and not a builder?" "So first look to see if there's any builders in that particular area where it's uh rural, but I like to put it on a flat-fee MLS or list it with a uh with a land specialist broker. So just like you do with the Redfin, look at the last transactions, look at who are the agents that are actively selling only land, and get become really familiarized with them, talk to them, and just tell them, 'Hey, this is what I specialize in, and I know that you just did you know one, two, three Main Street, 246 Nelson Street, and you know I I really want to work with someone who's doing a lot of volume, and it looks like you're doing volume this area, uh if you if you don't mind if I have something that comes in, can I send it over your way so you can make the commission on it?' And so they could either nego you could either negotiate with them to put it on the MLS, and they can charge you a flat fee, or they'll charge you just a commission, commission basis; they'll have like a you'll be the one assigning the listing documents, and they'll put it around the MLS and do the do the entire work for you. Now, if you decide to go to the flat-fee MLS listing, you're going to be the one that has to vet those buyers coming in. It's like pay-per-click, and it's like pay-per-click on steroids. If you're not ready for the phone, do not put it on a flat-fee list service. I highly recommend if you don't have that time, list it with a land specialist broker, mainly for those for those rural vacant lots. For the smaller infill lots inside of a city where there's a lot of builders, I prefer to go directly to the builder. Don't don't sleep on Craigslist; there's still a lot of people that buy on Craigslist, a lot. I would say I would post just as much on Craigslist as I will on Facebook Marketplace. At the moment, I'm noticing a lot more more conversations that I'm having on Facebook Marketplace. What you will see is that on Facebook Marketplace, you're going to get a a variety of people, people that are interested in seller financing and people interested in you know it's it's a it's a bargain, it's a bargain app, so you're also going to get those people that want to buy it for a dollar. So I I recommend using, utilizing a combination of the flat-fee MLS or an agent. Uh, a lot of times if you're listing it with an agent specifically, they don't want you listing it on Facebook Marketplace, uh just want to be clear with that agent what you're doing, what your intentions are, and just let them know this is exactly how I market all my properties. I personally would list it on the Facebook Marketplace, and if you have the means, I would offer financing all day on it too. It just depends on what your exit is: are you looking for more passive or you're looking for a quick assignment? I would just comment on Craigslist, um as a realtor, we've run into just don't put the property address. Yeah, there's a lot of land scams going on at least here in our area, and Title Company mostly picks up on it, but um they'll try to end run you, just you know, make it make it re you know, real as you can, but don't put the don't put the address. I I would suggest yeah, so the the lot size, the general area, so you could poss maybe you could put like a a side street or near this street, or you could just put the zip code, the lot size, and the buildability factor on it and a couple of the highlights. That's what I would do; that's what I do with all my listings or even even on my personal Facebook page; I still don't I I don't put the address on it. There's a lot of people that you know they they just don't want to either see your win or they'll try to sell your deal behind you, and it turns into to a nasty uh daisy chain that you know most of the time it it gets too late, and now there's legal trouble. And yeah, I would that's a good that's a good uh recommendation, James."
"So it's very important to see what these builders are paying for, and so like for example, if you know uh the builder that you've connected with, they're paying between $20,000 and $30,000 for a for lots under uh half an acre, make sure that you're very competitive. Also look at properties that are on market. If there's if you're trying to sell a property at $50,000, and then there's other properties on market at $45,000, $40,000, you're definitely not you're gonna have a hard time moving that deal. So you always want to be I personally think you always want to be $5,000 to $10,000 under anything that's on the MLS. Well, think about it; you got to factor in you know these buyers are going to think about, okay, it's off-market, so I don't have to pay a realtor, so you have to discount that enough for for them to to make it make sense. Um, so think about think about any real commissions, think about uh what's it going to take uh to put in a septic system in there too, because there a lot of times and I see it all the time that people compare their lot to another lot, and your lot probably needs a septic system while the one that just recently sold for $50,000, and your lot you're to price it at $50,000 as well. You're seeing that the lot that sold for $50,000, but you don't take into account, hey, I need a septic that's going to cost me $6,000 to $12,000, and I need to I need to run a line to tap into the the public water. So factor that in too, and factor in perk testing, um you know the other lots that recently sold, they probably already perked, and they're great, and they they're approved for a certain size house, and your lot probably doesn't perk, so factor that in as well. We typically price ours uh a little bit below market, and when I introduce myself to an a builder initially, I just let them know that I I get lots you know quite a bit below market, and I like to pass on the savings to my client, which would be you, so I'm not squeezing every dollar out of it, which is okay, but then there's repeat business there as well."
"Yeah, yeah, you don't want to gouge them on the first try; you want build that relationship, and like in my market, I I'm I tend to go into the like within an hour of major markets. So within an hour within that hour of major markets, it's mainly two or three builders in your area, so if you gouge one of the one of the three builders, what's gonna happen? They all know each other, and it's crazy how they know each other because most of the time I see it, well, I'll sell it to XYC Builder, XYC Builder goes and calls ABC Builder and like, hey, we have the slot, you want to just uh buy this from us. So you know it's it's very political, so make sure you're you're in a Kumbaya harmony with every single one of those you know builders in that certain region. Know the zoning, tourism, density, green space, yeah, all that." "Yeah, so you really want to know uh topography, what are the utilities, get really good with the utility company nearby, get good with the environmental environmental department, get really good with the county, let them know who you are, let them hear your voice a couple of times throughout the week just to check in or just to you know, and but do but do not you know if there's if there's something that you can find online, don't go and"
Call them and annoy them over some stuff that's already published on their website. So I Tai does very good; he's my underwriter, he's on this call; he does a very good job at building rapport with them. And I don't know what he does, when it takes me like 30 minutes to get on the phone with him. I think this guy's got like their cell phone numbers or something, because they immediately pick up. So, having a really good relationship with the county is crucial for your success. And, and most of the information is available online, like the planning and zoning guidelines that will say exactly what's allowed under a specific zoning; it will have all the contacts there. So you know, try to do that homework before you go ahead and call them.
Yeah, yeah. Have as much information as you possibly can up front, and only call them when you really need uh, you really need that last little bit of information in order to be able to to make your final decision on pricing or make that final decision on selling it to a builder.
For Facebook Marketplace, if they DM you for the address, how do you know to give it to them or not? Uh, I give them my cell phone number, tell them give me a call, vet them. Yeah, so vet them first and just kind of get a gauge on, you know, why why they're looking to buy it, or you know, tell me a little bit more, what are you looking to build, and just build that rapport. And from the from the moment you get on the phone, you you can tell when your gut your gut will tell you you're like, okay, you know something's something's off about this person, or you know, maybe it's most time. A lot of times it's a local builder; you know, they're they're out scouring the Facebook Marketplace looking for lots as well, a lot of builders as well, wholesale. So you know, there's a it's just it's it's a smaller community than you might think; everybody knows each other. So you know, ask for recommendations too. I call them, oh, do you know so and so over on that built that construction on, you know, Main Street? And then you know, you can kind of gauge them that way, like how how well versed are they in the market? A lot of times they're out of the country with no profile pictures. Well, if it says you can tell quickly, you know, if their profile says the profile is locked and then it says, say I I will I will sell you cash buyers, then maybe don't give the address. So you you can you can definitely get a good gauge on who who's who.
So I spend maybe once a week, I go to like a AR Ria meeting, which is your real estate investment association, and I just introduced myself as, you know, I'm the land guy. You'd be surprised how many people come up come up out of the woodworks wanting to work with you. Almost every meetup that I go to, I think I'm the only land person; there's might there might be one other person. So for every 2,000 uh home flippers, there's like one or two land investors. And so you know, market yourself as, hey, I'm actively getting on the phone, getting, you know, harassing sellers for for lots; I'm talking to them all day. You know, who do you know that's currently building? Realtors, you know, at these meetups too, they know a lot of builders, you know, lenders, all the people. So I would definitely network and call up uh your your buildings association too, like Michael has in the course I believe on uh module 6. So I I go to all the builders association websites, and all of them have a member directory, and these these guys are paying 500,000 dollar a year to be on that list. And I tried to be I tried to see if I could become a member at my North Carolina one in a certain county, and the first thing that they ask is for your license number, a couple of transactions that you've done, like what are your your previous history of experience? And so they they do a pretty good uh vetting process. So you know, if that name is on that website, they're spending some really good money, and they had to provide you know their information and all their credentials in order to be on that list. So that's a really solid list.
How well do I know if a land perks? Well, what I do with uh if an area is an area that you know that there's a lot of uh um a lot of perks needing to be done, I will go and call I I I will go on call the county and just see, hey, has has there been any recent failed perk tests in this certain area? And most of the time they'll tell you, yeah, you know, this whole street didn't per. And also I look at the surrounding properties. If you are in if you're on a street and you're trying to buy one lot and that entire street is empty, I call a red flag immediately. And especially if the street right in front of it has all nice houses with utilities and access and everything, but my street doesn't, you really want to start thinking, okay, why? And also look at the if you can't find information about uh a failed perk test or a perk test ever being done in your land, I can tell you that your neighbors have probably tried to do a perk test and it's most likely on the the county website, and you'll be able to see, has a perk test been done on your neighbors, has a perk test failed? And I've done that uh I've done that many times where we look online and we find out that the neighbor 10 years ago did a perk test and failed, and another neighbor down the same street did the same thing. If your two neighbors failed, you're most likely going to fail that perk test as well, and you're going to have to think about getting an alternate system. And if you do think about getting an alternate system, think about your buyer pool just completely dwindle down to maybe one or one buyer, because those things are like $40,000. I know we have one we're working on right now in in Durham where the only exit is to put a amount system, which was $40,000, and there's only a couple of uh couple of companies in this area that are installing them. So factor that end as well.
If uh someone's having a hard time doing dispo m, do you work with people like that or do you just work a certain geographical area? Kind of, yeah, yeah. So I I spend my days talking to investors all day like that are actually buying land. So I spend my days my my group of people are builders, um rehabbers, people that are looking to buy properties, uh investors uh from out of state buying properties in state, and and so I I work with people that understand um you know what the numbers look like; they are really quick to giving me their buy prices. So yeah, so I do offer uh dispo services to people that uh want to work with me, of course, you know, I I I'm also very busy; we have our own uh acquisition team. So if if you want to work with me, I gladly work with you; I just uh you know I just like transparency right. If you want to work with me, what do you have it under contract? Some people try to hide that; some people try to you know be very uh you know quiet with their numbers, but I mean we're I'm doing just as much work as you are on the acquisition side. I would love to JV with you; it's a joint venture; we work together and knock them out together. And I have an in-house transaction coordination company, so I I essentially handhold you; not only do I I walk you through what the number should look like, but I will take you from just a piece of paper or some most of the time it's not even a piece of paper; most of the time it's a conversation; it's a motiv, and I take you from that motivation from that seller, I'll help you negotiate with that seller, get it under contract, and I'll assign it over to the end buyer, and I'll do the transaction coordination work, and I'll open up escrow, make sure sellers on board, make sure buyer on board, and then we that we close in the next 30 to 90 days or how much time we have left on that contract.
The beauty of me being remote: when you're in your market, you tend to want to do everything in your market. So for example, let's say if I got a call from a seller in in my city where I live, I live in Germantown, the first thing I tend to do is what, go drive, spend some time, talk to the seller; two or three hours goes by, and I might I may or may not be able to get that contract. Whereas me at running a fully virtual business, I am forced to delegate, to automate my my business right. So if I need if I need uh pictures, like for example, let's talk about a house, house, if I need a lock box on a house, I send Realtors all the time, especially now where they're struggling a little bit; I tell them, hey, you want a couple hundred, put a lock box on the house for me; hey, do you want a couple more 100, take some photos for me? And so that's that's what I do; I delegate, my network, and a lot of times I I send a realtor out to the property; I'm like, hey Jay, I already have this buyer for you. And most of the time that before the end of day I'll have the buyer already in hand. So it's all about you using your network. So running a virtual business, I feel personally it's helped me go from one or two deals in my local network to eight to 15 deals in my virtual network; like I I do more volume just because I am forced to stay at my desk making calls, and I'm forced to delegating everything and having people in place for whatever scenario.