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hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
You guys are far more creative than me, so I figure this is the perfect forum to ask this. Here is what I need help with:

I have kind of hit a wall in regards to finding deals. I have been looking since last fall and am still coming up dry. This can't go on, I can't make money if I can't find buildable lots.

My city doesn't have all that much land left, but their is a fair amount. I would say their are about 250-300 possible buildable parcels left, not counting tear downs. About half of those are on my mailing list which is growing.

The first stratagy I tired was knocking on doors and asking, but this didn't really yield any results. People are often caught off guard. Now I only do this when I'm really interested in a property.

My current strategy is far more successful. I mail all the owners and ask if they want to sell. This has worked pretty well for a mailing. For example I just sent out 100 letters and got back 8 calls, (as of today) and should make 4 offers. However I'm finding that most people are just holding tight for unreasonble high numbers.

The way I see it I'm having two problems:

1. I need to get more interested sellers to call me.
2. I need to get them to actualy sell for a reasonble price. I can't pay twice what a lot is worth, just doesn't work.

When it comes down to it I just need to work with more possible sellers to find the motivated ones. My mailing list probably should have 1k possible's on it, but thats the problem my city doesn't have that many. So unless I can find a better way to motivate these sellers I'm going to have to branch out. I can't keep waiting for people to literally die for stuff to become available.

I have been dragging my feet on working another city because its a major commitment.
 
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Sparlin

Bronze Contributor
Read Fastlane!
Feb 23, 2009
1,281
138
Wichita, Kansas
Just for the sake of stirring up conversation. Could you offer your lower price to 3 to 5 properties you want, and then offer a percentage of another development that you will work on or already have?

For example,

Prop A Owner wants 100 K You'll pay 80k
Prop B Owner wants 75 K You'll pay 38K
Prop C Owner wants 80 K You'll pay 40k

At this point, all the properties are locked up because you can't negotiate a price. Your offer:

Pay your amount and then up to 50% of profits on Development X (worth 200K) which is on land you already control. You could offer more than 50% so long as you are the controlling partner (own highest percentage).

Prop A gets 10% plus cash
Prop B gets 18% plus cash
Prop C gets 20% plus cash

Each partner would be silent and leave decisions to you. You could pay them indefinitely or up to a set amount which would reflect the price difference plus interest.

The Result:

You may tie up one lot (development) that you already control, but you have the potential to free up 3 or more in the process. Once everything is set, sell your percentage of property X and walk away.
They get paid for no effort applied, you get the control you want. Win/Win

I know the prices and percentages that were used do not reflect the values of the lots you are after, but hopefully you get the idea. You may only get 3 out of 100 prospects to go into the deal, but at least you'll have it.

Disclaimer: I've never dealt in this personally and I am offering this advice as a complete novice. Feel free to shoot holes in the theory. If nothing else, this will bump the post :)
 

LagunaLauren

Bronze Contributor
May 20, 2009
256
118
Laguna Beach, CA
A couple of questions so we can better understand what you're doing to hopefully give advice.
1) You're looking for "buildable lots"-what are you doing with them?
2) What kind of a mailing list do you have? Short Sale/Pre-foreclosure/foreclosure list or just property owners with desirable land? (Just asking cause you said they are holding for unreasonably high numbers-are they motivated sellers?)
3) You said there were other buildable parcels in your city. Who owns them/How do you get those?
 
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andviv

Gold Contributor
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Speedway Pass
Jul 27, 2007
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I mail all the owners and ask if they want to sell. This has worked pretty well for a mailing. For example I just sent out 100 letters and got back 8 calls, (as of today) and should make 4 offers. However I'm finding that most people are just holding tight for unreasonble high numbers.

The way I see it I'm having two problems:

1. I need to get more interested sellers to call me.
2. I need to get them to actualy sell for a reasonble price. I can't pay twice what a lot is worth, just doesn't work.

When it comes down to it I just need to work with more possible sellers to find the motivated ones.
...
So unless I can find a better way to motivate these sellers I'm going to have to branch out. I can't keep waiting for people to literally die for stuff to become available.

I have been dragging my feet on working another city because its a major commitment.
OK, this sounds like the typical novice from back 2003 and 2004.

These seminars were telling people to work with motivated sellers.
and to make offers that were reasonable to them, the investors/buyers.

Problem was... the market was simply not there.

They were begging sellers to give them their properties away, to hand them a gift.

To sell them a property with FMV of $500K for $$350K.

Well, it was not that simple.

Oh, and the punch line, and the way to keep the novices working and spinning their wheels? "these sellers are simply not that motivated"

Well, why would they?

If you can sell for $500K in a month, or $450 in a week, why would you sell for $350K?

Actually, I am pretty sure the potential sellers from your list know they can get more. They simple need to list it a little bit under FMV and will get a buyer or two. Why sell it to you at your 'reasonable' price? --of course, your offer is 'unreasonable' to the seller, don't you think?

This was happening back then when appreciation was outrageous. The limited resource were properties.

It sounds to me like the limited resource in your area is buildable land.

Maybe the market reality is that land is more expensive than what it used to be, and maybe this reality is a huge threat to your existing business model.

How would the numbers look for you if you pay close to the "unreasonable" price they are asking for their land? Couldn't you sell higher with this new cost included?

Maybe your current business model is not effective in your local area in the current market conditions?

Maybe you are trying to still use the same model while the market has changed?

*****
These questions I am asking are meant to give you a different perspective about your business model. Why do I ask? Cause I fell for similar reasons... I tried to make it work with the "proven method" I had, and failed to see the market had changed.
****

Another question...
Maybe you are right... the money is in another city... and saying it is a major commitment sounds to me like a lazy approach to reality. If that is where the money/deals is, why remain in your current city if the deals are simply not there?

Why behave like an ol' union auto worker from Detroit, when it is clear the job is not there anymore?

Maybe it is time to adapt to a new reality....

I know you have a lot of experience, and your uncle is an expert on this in that same area... what is his opinion?

What is your assessment of the current market condition?

OK, I will shut up now, too much rambling and I am not proposing any realistic solution anyway....
 

hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
Wow its been awhile since I have been on, thanks for the comments. Anyway here are some more specifics to hopefully clear some stuff up.


I live in a pretty built up area and land is at a premium. I'm also a small fish in a big pond because I'm just starting out.


I'm looking for buildable property to build houses on. As I posted in my thread on the RE forum their is a bit to this. You can only pay so much for a lot and still make money on a house, thats not just true for me that holds firm for every builder. The market dictates what the finished houses are worth, I can't really push it one way or the other much. If the market was better a ton more opertunities would open up, not just for me but for everyone. For example the market over $500k is pretty much DOA now, if this wasn't the case I could go after higher end stuff, or beach houses etc. I'm not really looking for a massive number of deals either, if I can build 5-6 houses a year I'll be happy and make plenty of money.

My main problem is a lot of the buildable land is either tied up with old people who really don't want to sell, or the big guys. The sellers I'm dealing with are very unmotived, I'm looking for someone with some motivation. Thats what I'm hunting for. Right now I'm putting together a city wide list of buildable property and mailing those people. Things change and motivation to sell can increase.

I'm starting to branch out into other towns, in the past week I have found another town I kind of like and on my off days I'm going to start to learn it. I feel my business model is good and will still work fine, I just need to make adjustments.
 

juntao65

New Contributor
Feb 2, 2009
72
4
32
This is kind of different but..

Run a highly targeted facebook campaign in your area. The lander is really up to you - you can maybe offer a quick sale or something in exchange for a better deal. This way it doesn't make a person put a super high value to their lot in their mind - like it does if you approach them directly. Like if I approach you and say "hey man I want to buy YOUR stash of gold", you'd be like "why does he want it so bad? maybe it's worth a lot." Whereas on FB if you saw a cash4gold ad, you'd be going "hey kewl maybe i can cash out, let's see what they can give me".

This shouldn't cost much either now - since the major affiliate bans. I've been hearing that CPC's have dropped down to like 0.2 suggested.

Anyways good luck.
 
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MrPink

Contributor
Feb 26, 2008
433
27
Toledo, OH
I don't know your situation that well so this maybe a drastic idea, but have you considered moving?

I am under the impression that there is not that many lots and you need more motivated people. Is there an area that has 2000-3000 lots? perhaps it could result in 30-40 offers...
 

LesG

Contributor
Mar 15, 2010
61
36
San Francisco
Give them the high price they want. Go for terms.
How about a lease option? Hey owner. I want to put put money into making this land more valuable. Lets share the wealth.
 

hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
Hmm interesting.

Some seem to feel that the houses built on the property will be worth a lot more than they really will be, maybe I could do this with terms.

Say I know the finished house will be in the $350k range, but they feel for whatever reason its a $425k house.

I could say if the house is worth $350k the lot is worth X, thats what I'll give you. But I'll advertise it at $425k for X period of time and since my money is made at $350k I'll give them anything over that. Now I know that its going to max out at $350k and they are not going to get anything, but they don't know that.

I'll have to run that by my attorney just to make sure I can't get sued for it.

Les how could I structure a lease option? I only plan on owning the property long enough to sell it on as a finished house. I'm interested in your idea, just not sure how it would work.
 
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Sparlin

Bronze Contributor
Read Fastlane!
Feb 23, 2009
1,281
138
Wichita, Kansas
Now I know that its going to max out at $350k and they are not going to get anything, but they don't know that.

If I understand you correctly, you are saying that it's ok to profit on people's ignorance and optimism. Did I interpret that right? It may be legal, but if that's what you advocate, you just lost some rep. points in my eyes. I guess it would depend on how hard you try to disclose accurately their chances of profiting. At some point it does become their responsibility to assess the risks and do their own homework. The way I read the post it seems like you are saying that they can invest in good faith and you won't go out of your way to warn them of the hazards.

Did I misunderstand? :shruggie:
 

bflash98

New Contributor
Aug 28, 2007
104
10
Why don't you enter into an agreement with the homeowner that you will give them a % of the final home price.

Most land owners think developers are under paying them for their land and keeping the extra profits. By doing a % deal you alleviate this concern of the land owner. I would show the land owner 3 different final home prices: expected, conservative and optimistic and show them how much they would make in each of the cases.

This would be a positive for you because you could conserve your cash. You would probably give them a good deposit $20k or so and then the rest would be paid at closing. You would also be somewhat protected if the market tanked since you will be paying a % of the actual home price and not your expected home price 3 months before the house sells.

In the Seattle are people usually use 30% to 40% of a final home's cost as the land value.
 

snowbank

Platinum Contributor
Speedway Pass
Aug 10, 2007
1,381
3,130
Austin, TX
Now I know that its going to max out at $350k and they are not going to get anything, but they don't know that.

Trying to trick people into thinking something is worth more than it is, is not a business strategy, that's just lying.

This is the fanocks method of business, and the road you don't want to go down. Attempting to profit by trying to convince others that something that isn't of great value, is, is not the way to do it. It's the wrong path to be on.

There are plenty of people who do business like this. It doesn't make doing business like this okay.
 
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andviv

Gold Contributor
FASTLANE INSIDER
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Speedway Pass
Jul 27, 2007
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Washington DC
It sounds to me like you are trying too hard to force a business model that is not working over there anymore...
 

LesG

Contributor
Mar 15, 2010
61
36
San Francisco
There are many ways you can do a L/O or just O.

1)OPTION ONLY: Give them what they think the lot is worth. But have a certain time limit to give it to them. I give you 10k for an option to buy this lot for 2 years at 50K price. My 10k option is the earnest. IF after 2 years I don't buy it you keep my 10k. My plan is to put $150k into building a house on it.

2) Lease and Option: I give you 5k an option to buy this piece of land at 50k for 18 months. But I must also pay you monthly payments of $500/ month and must not be late for more than 15 days on any of these payments otherwise I lose that option to buy the lot. I plan to put 150k into building a home on this property and then selling.

fyi) you will have to be able to get money to finance the property. I do not believe a bank will finance you if you don't own the land. However, private parties will if the deal and business plan is strong. The problem is you better be sure you can pull it off cuz lots of money goes on building the lot.

===
I remember the FIRST deal I did ALL by myself....no mentors.
Was in a sellers market and the seller was smoking dope on what he thought his house was worth.
I ended up giving him his price but he gave me a 5 year lease option. It was on of my better deals as 5 years later the property was worth double what I paid. He gave me terms. I'll post the lease option thread for you.
 

hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
Why don't you enter into an agreement with the homeowner that you will give them a % of the final home price.

Most land owners think developers are under paying them for their land and keeping the extra profits. By doing a % deal you alleviate this concern of the land owner. I would show the land owner 3 different final home prices: expected, conservative and optimistic and show them how much they would make in each of the cases.

This would be a positive for you because you could conserve your cash. You would probably give them a good deposit $20k or so and then the rest would be paid at closing. You would also be somewhat protected if the market tanked since you will be paying a % of the actual home price and not your expected home price 3 months before the house sells.

In the Seattle are people usually use 30% to 40% of a final home's cost as the land value.


We have a winner! Now that could work, very good idea! I can think of two deals I probably could have done using this idea that I missed out on.

I could only do this for deals that have very little site work. If I need to spend $50k to make the lot buildable that has to come off the 30%. People usualy don't understand that or want to understand it.
 
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hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
If I understand you correctly, you are saying that it's ok to profit on people's ignorance and optimism. Did I interpret that right? It may be legal, but if that's what you advocate, you just lost some rep. points in my eyes. I guess it would depend on how hard you try to disclose accurately their chances of profiting. At some point it does become their responsibility to assess the risks and do their own homework. The way I read the post it seems like you are saying that they can invest in good faith and you won't go out of your way to warn them of the hazards.

Did I misunderstand? :shruggie:


I was thinking out loud, they have unrealistic expectations. Most home owners do, everyone thinks their property is worth more because its theirs. More so these days because of the big market drops.


I have no problem profiting off others ignorance. My last building lot I got at 1/2 FMV because the lady selling it ignored good advice telling her it was worth more and listened to an idiot. A year before she put the FSBO sign on it an agent told her it was worth $125k, she FSBO'd it a year later for $60k, I bought it within 2 hours of it going for sale for $55k. Their adults, and in most cases have owned these property's for a long time, its their job to do a little research on their part. 99% of people do but their is always that 1%.
 

hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
There are many ways you can do a L/O or just O.

1)OPTION ONLY: Give them what they think the lot is worth. But have a certain time limit to give it to them. I give you 10k for an option to buy this lot for 2 years at 50K price. My 10k option is the earnest. IF after 2 years I don't buy it you keep my 10k. My plan is to put $150k into building a house on it.

2) Lease and Option: I give you 5k an option to buy this piece of land at 50k for 18 months. But I must also pay you monthly payments of $500/ month and must not be late for more than 15 days on any of these payments otherwise I lose that option to buy the lot. I plan to put 150k into building a home on this property and then selling.

fyi) you will have to be able to get money to finance the property. I do not believe a bank will finance you if you don't own the land. However, private parties will if the deal and business plan is strong. The problem is you better be sure you can pull it off cuz lots of money goes on building the lot.

===
I remember the FIRST deal I did ALL by myself....no mentors.
Was in a sellers market and the seller was smoking dope on what he thought his house was worth.
I ended up giving him his price but he gave me a 5 year lease option. It was on of my better deals as 5 years later the property was worth double what I paid. He gave me terms. I'll post the lease option thread for you.


Problem is I would have to bet that the market will turn around and I can build and make money at the inflated lot value. Thats a bit more risk than I'm willing to take, its hard to figure out where the market is going to be in 5 years.

Options are pretty interesting though, I'll keep this in the back of my mind I'm certain I'll be able to use it at some point.
 

LesG

Contributor
Mar 15, 2010
61
36
San Francisco
yep keep it at the back of your mind. I did my 2nd lease option in 20 years.

Homeowner was instructed by his attorney HE CAN NOT SELL! He had 1 million of equity and would have to pay 1 million in taxes if he sold at his inflated price being his basis is like nothing.

My 2 other competitors offered him less. We shocked him with offering him what he wanted and more. We gave him a .... LIFE ESTATE LEASE OPTION ...

His estate will sell when he passes away. We are currently working on selling our contract for a nice 400k profit 4 years later if we sell the CONTRACT, not the property in this DOWN Market. Okay, actually the market went up in 4 years in this town. :)
 
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bflash98

New Contributor
Aug 28, 2007
104
10
We have a winner! Now that could work, very good idea! I can think of two deals I probably could have done using this idea that I missed out on.

I could only do this for deals that have very little site work. If I need to spend $50k to make the lot buildable that has to come off the 30%. People usualy don't understand that or want to understand it.

Yep I should have been more clear the price of a finished lot is usually 30 to 40 % of a homes value.

Once again i think you should show the land owner the estimated cost of the site work to show them why you can only pay so much to them. People don't realize how much site work cost. The other way to do this is to do a % of the profits and share it with the land owner. This gives you totally protection since you would be protected if you under estimated your cost but it can be tough to sell this option to a land owner since they will think you are padding the bills to lower the profit on the house.
 

Bobo

Bronze Contributor
Mar 25, 2008
450
140
Hatts...

Step back a minute, so for every 100 mailings you are getting 4 solid leads and 4 tire kickers? Damn, that's great.

Every week you add 4 rows to your spreadsheet with the sellers current 'floor' and notes about them.

OK, so maybe they said no today, I seem to recall asking Jill to marry me about 23 times before finally saying 'let me know when your position changes and you are ready to settle for my offer'. Ok, so that took another 5 years but ....

What I am getting at is that you are getting leads, be damned sure you are following up. Everyone's situation will change over the next 30 days and over the next 30 months. Get their email addresses, ping them once per month, send out some notes to them, stay on them.

THere are going to be alll sorts of folks whose motivation levels will change due to circumstance, be the name they remember when they have that "OH SHIT I NEED MONEY!" moment.
 

Cat Man Du

Contributor
Jul 30, 2007
599
51
Hatts...

OK, so maybe they said no today, I seem to recall asking Jill to marry me about 23 times before finally saying 'let me know when your position changes and you are ready to settle for my offer'. Ok, so that took another 5 years but ....

Lets see now.......Ahhhhhh, here it is ...sales 101. This is where ya went WRONG.. Bo. Ask once and if refused ask again and if they still say NO...Well it’s time to leave with tail between legs. DEFEATED, but proud ....we showed them! Oh...wait a minuet .....this book is how to FAIL in sales.

You mean ya ask until they kick you out....and if it’s a life partner ....ya ask ..can I come back in...huh?:eusa_clap:
 
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Bobo

Bronze Contributor
Mar 25, 2008
450
140
Cat - she's stubborn but I am pretty persistent and very manipulative. I pointed out that if we hit the ten year 'Get in or get out' deadline and she chose 'out'... well she would have to learn how to operate a lot of complex machinery, vacuum, stove, lawnmower, washer/dryer. We're talking about a woman who interprets "The dishwasher is broke" to mean "There is no money in Bobo's wallet".

She caved.
 

Cat Man Du

Contributor
Jul 30, 2007
599
51
Cat - she's stubborn but I am pretty persistent and very manipulative. I pointed out that if we hit the ten year 'Get in or get out' deadline and she chose 'out'... well she would have to learn how to operate a lot of complex machinery, vacuum, stove, lawnmower, washer/dryer. We're talking about a woman who interprets "The dishwasher is broke" to mean "There is no money in Bobo's wallet".

She caved.

Yeah..........As you know Barbie is smart like Jill....so I asked her the definition of the above appliances.....and this is what she came up with...

Dishwasher.....That's where you put the dishes overnite for their nap.

Microwave..... That's the food zapper.....not sure how it works though.

Frig................That's why you work so that you can fill it up every week for us..oherwise we would starve!

Washer/dryer.. They are side x side in another room...I don't go there because it gives me the creeps and it's a little scary.

Vacuum ....... That's the contraction that makes too much noise...and it's a little scary to...I don't like it! :smx6:
 

hatterasguy

Bronze Contributor
Jul 29, 2008
2,044
195
36
Thanks for the advice, I do follow up and am getting much better about it.

I know of a few parcels that the owners are going to have to sell in the next year, so I'm keeping in touch.
 
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