Buying And Selling Land: The Profit Potential With Kathy Kennebrook
Episode 378: Buying And Selling Land: The Profit Potential With Kathy Kennebrook
Perhaps even more so than buying and selling properties, buying and selling land done the right way can be a path to prosperity. Imagination is a land buyer’s only limit, so in a way, there’s an even larger potential in buying up land and selling to people who have their own ideas for what to do with the land. Kathy Kennebrook is a nationally renowned marketing expert. She chats with Mitch Stephen about the profit potential in buying and selling land. Looking to make a shift from properties to land? Kathy has a lot of advice and information to share with you!
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I’m here with Kathy Kennebrook and we’re going to be talking about how you can find your path to prosperity by buying and selling land. Anywhere from the regular residential postage stamp lot all the way up to the big ranch split it up, subdivided owner finance it or just flip it. Kathy, how are you doing?
You did a lot of things before you got to this point. Tell us what led up to being in real estate.
I spent about twenty years in the financial sector. I worked in the banking industry and then I worked in the barter industry for a bunch of years. I decided that I hated Corporate America, so I was looking to find something better to do that would be more self-employed. That’s how we got into real estate investing. I got into it from one of those late-night infomercials on how to buy houses with no money down and I thought, “Wouldn’t it be fun if that worked?” We went to some seminars and we went to some real estate club meetings, and the rest is history. I started out doing single-family homes, mobile homes, urban commercial and then moved into the vacant land segment which we like.
Who was that late-night infomercial?
It’s been so long I don’t even remember, to be truthful with you.
I had the same experience years ago, Carleton Sheets and Dave Del Dotto. There are a lot of names that people won’t even recognize anymore. There was a guy named Miller. There was a whole bunch of people. They were ahead of their time and there wasn’t a lot of internet stuff. It was a lot different. We were buying our cassettes.
One of my early mentors was Richard Paulsen, and that’s going way back.
We’re going to be giving away your eBook, Real Estate Principles: Your Personal Path To Prosperity. What we want to talk about is how the buy and sell program or the strategy looks as it applies to just land. Where do we start with this topic?
I got into the vacant land industry many years ago and we had bought a vacation home. The whole point was to go up close to the gates and chill. You know as well as I do that real estate investing is an addiction. It was all this vacant land and it was all screaming, “Buy me.” That’s how we got into it. I do a lot of direct mail marketing and then we also buy some vacant land from tax certificates and tax deed sales. We do a little bit of all of it and I’ve got to tell you, in our marketplace, this is a motivated seller. A lot of these folks have inherited the land or they intended to do something with it, and now they’re not going to. Maybe they were going to build a home or do farming or raise animals or whatever that was going to be, and now that situation has changed for them. These are some of the most highly motivated sellers that we’ve ever dealt with. One of our most pieces of direct mail that we did, we mailed out 147 pieces. We got nineteen responses and we bought nine of those. These are some super motivated sellers and profitable to be working with.Real estate investing can become an addiction. Click To Tweet
Give us an example of one of your better deals.
One of the things that I do that’s different from anybody else that’s doing vacant land deals in the market or teaching that is, not only do we buy and sell but we also buy and lease vacant land. About 75% of the land I buy, I lease. We’re working with a lot of different companies and we’re doing a lot of lease scenarios. On a buy and flip, one of my favorite ones was a 2-acre piece that we bought. It was an estate. We bought the piece of land for $4,000. It was four half-acre pieces that were attached. It was fenced, had a well, septic, power pole and two concrete pads. We sold that for $25,000 about 6 or 8 weeks after we bought that piece of land. That was one of my favorites.
This is a way for maybe someone with a little bit of money to get started and be a high roller. You can buy $4,000 pieces of land with your credit card. Even if you don’t have money, you can get a cash advance on your cards. It’s a small or bite-sized business where you make a lot of money. I find your ROI is always higher the smaller the numbers get, but there’s a lot of work. It takes four deals to do $100,000. In this case, it was $25,000, $25,000, $25,000, $25,000 or just do a $100,000 deal, but a person might not be able to afford to get into a $100,000 deal.
The leases are fun because I do leasing and I do owner financing. Remember, you’re buying these pieces of land for pennies on the dollar. When you lease or you owner finance a piece of vacant land, you’re getting all of the money back that you paid for that piece of land on the upfront, so the rest is gravy. I have a piece of vacant land, a smaller deal, 1.25 acres. I bought it for $1,000. I owner financed that piece of land and my buyer gave me $2,500 down. We sold a piece of property for $11,000 and her payment to me is $300 a month, which is all profit. Think about it, you’ve got no insurance, no toilets, no broken water heaters, no this, no that. “Hurricane came through. We lost another tree.” You don’t have all the hassles that you do with apartments or single-family homes and all that kind of stuff. Although I do all of that.
People say you can’t mess up a piece of land but that’s not true because I’ve had people do it. For the most part, the problem a lot of times is just trash, tires and people dumping on you. I had one time where someone cut down all the trees, which was completely asinine. Other than that, it’s tough. It’s a lot easier to tear up a house than it is to tear a piece of land, I can tell you that. I once bought 12 acres from somebody and I had to buy it fast that I didn’t have time to look at it. Upon closer inspection, I found out that they have been dumping tires on this land for years. There were thousands of tires. That was against the EPA or whatever the powers that be. I immediately called to see if there was anything in those funds to help me get rid of those tires. They have a fund and there wasn’t any money in that fund. I nicknamed it my rubber plantation.
I went and I tried to figure out, “What can you do with these tires because these tires are valuable to somebody?” I didn’t find anyone close enough to come and get them at the time or I just ran off on this idea without pursuing who needed tires. I found a way that they stack these tires and how they’re building walls out of tires so you can put a roof over the top of it. I did two walls to show the person that was coming out there how it would work. I did it in an L and then I said, “There’s more than enough tires out here to build a 24,000 square foot riding arena.” They fell in love with it and they bought it because of the tires.
There are a lot of different things you can do. One of the other things that I found while we’re talking about things you can do to vacant land is we quite often will find deals that have a nasty house on it or a mobile home that’s falling apart or sheds that are falling in on themselves. One of the techniques that I talked about in my system that we do regularly are these practice burns. You call the fire department and have them come out and do a practice burn. Now you’ve gotten rid of your problem, done a public service and got a write-off. Those are the steps we do a lot. It’s completely changed the way that I look at land because what for the seller is a big problem is nothing for me.
When you say you’re leasing this land, are you usually leasing this land to people with mobile homes?
That’s one thing that we do. One of the things that we do is we talk to the neighbors because a lot of times, they want to lease some additional vacant land for something that we’re doing. For example, one of the things that I did is I bought a piece of vacant land, talked to a neighbor and the neighbor has a business where he raises agricultural worms. He needed to expand his business. He ended up leasing our piece of vacant land and he’s using that land to raise agricultural worms. The way that they do that is with tanks and tubes, so there are a big tank and a tube and another tank and a tube. He needed more space for that. We lease to billboard companies, pastureland, and various types of storage, whether somebody has got an RV that they want to put there or cars. Even landscape companies will lease our land to have a place to store extra rock and bricks that they use in their landscape business. There are all kinds of great ways to lease vacant land.
One of my favorite pieces of vacant land is we also lease to nurseries. That’s one of my favorite ones because I get free plants. It’s all potted plants. They have greenhouses on the land and potted plants. One of my other favorite leases is a nice small piece of land that I’ve got. It’s 100×200. It’s a small lot, but it’s cheap. I lease it for $400 a month and it’s about half a block from one of the major boat ramps in the area. I leased it to a gentleman who rents kayaks. He’s got an outpost, so he put a shed on that property to store his extra kayaks, canoes and life jackets. All he did was put a building on there and he’s paying me $400 a month. It’s 100% profit.You can't truly mess up a good piece of land. Click To Tweet
That doesn’t go away and should increase over the years. That’s what’s great about leasing it. The problem with seller finance is that eventually, it runs out. When you sell something on a note, it’s temporary.
Then you’ve got to find some more.
You can build your own mobile home park one lot at a time if you bought the lots and then leased it to the mobile homeowner who needed a place to put his mobile home. I do find that mobile home sales lots are a tremendous avenue for moving your lots if you want to rent them or sell them or seller finance them. Those people can sell all the homes they want to but until they have a place to drop it off, that salesperson is not getting their commission and the sales manager is not getting credit for the sale until they drag that thing off. They will sell your property for you for free. When I had a place that was allowed to put mobile homes on it, it never took long because I have this long list of mobile home sales and I faxed to all of them, “I have a lot for sale. These are the terms I want.”
You took one of my favorite ways to sell vacant land. We have relationships with specific mobile home sellers in the area where our land is. Where I’m working vacant land is rural. We’re about 85% mobile home and 15% stick built. My home is a log home and we built it, so we had to jump in there and do something totally different. What I do is as I buy pieces of vacant land, I add those to a list that I provide to the mobile home dealers constantly. They package my land in with their house and then when the bank financing comes through for the buyer, I get paid for my land at the same time the bank finances the whole property for that buyer. We provide a list of land to two different mobile home developers that are directly in our area. We do a ton that way. You’re absolutely right. That’s the easiest, best, quickest way to flip vacant land.
My point when I started out the topic is it dawned on me that you can have your own mobile home park, just the lots will be contiguous. The problem when you buy a whole park where the lots are contiguous, you have to write a check for $2 million, $3 million or $4 million so you have to find the funds. You can build your own mobile home park on paper by buying a lot over here and there and rent them out. Make sure they have septic and electric, then rent them out. It’s a way to build a park one lot at a time. It’s a lot more feasible for people.
That’s what I’m saying. There are many opportunities and I’ve done a couple of big deals. I’ve got a piece that is 160 acres and it’s a hunting camp. The pieces are leased out during certain parts of the year for certain types of hunting, etc. We do that, but I like the smaller stuff that we do consistently. It’s easy because it keeps falling into my lap. It’s inexpensive because the sellers are motivated.
The people that are always contiguous with the land that you bought or touching that land, they’re always your prime suspects because that’s where the land is the most valuable is to those neighbors.
The other thing that’s interesting with the direct mail campaigns that I do to find the owners of the vacant land is probably 50% of the cases, we will get a seller who will contact us and say, “I inherited this land. I’ve never seen it. I’ve never been there. Go and make an offer on it.”
What does your mailing piece look like?
What I do is a personalized letter that goes to my seller. What I have in my letters which is different than a lot of people do is a response mechanism. In the response mechanism, I tell the seller exactly what it is I want them to do and what information I need to have in order to make a deal for them. When that response hits my desk, the response is already pre-screened. I’ve got all the information that I need about that property. It’s funny because one of the questions I ask is, “Where is it?” Because a lot of the time, vacant land doesn’t have an address. They’ll say, “It’s down this road and it’s next to that tree and then you make right at the rock.” We tell them what we need to know in order to make an offer on a piece of land. One of the things that I do also cover in my system is how to physically find a piece of land.A lot of the time, vacant land doesn't have an address. Click To Tweet
Sometimes it’s hard, right?
Yeah, because a lot of them don’t have addresses. Unless there’s been a mobile home on it before or something like that, it will have a physical address. If that property has not been used for anything before, it won’t have a physical address, so you have to use other ways to find that piece of vacant land.
I want everyone to go buy and get a copy of your eBook, Real Estate Principles: Your Personal Path To Prosperity. Check it out. Go to REInvestorSummit.com/landgirl. You’ll be able to download the free eBook. What would you say to people that are just starting out? This is a great avenue for the beginner. It’s bite-sized and these land pieces are not so much money. Also, our sponsor, TaxFreeFuture.com, has a deal with tax-free and tax-deferred retirement into plans. For people that don’t have a lot of money in their retirement plan, these lots and little deals are a great way to exponentially explode your balance in those accounts. There are a lot of ways to get wealthy, but not all of them are affordable or the average person can’t wrap their arms around. This is a holdable strategy. You can get your arms around it.
One of the things that we’ve done is we’ve built our Roth IRAs and we’ve done some inside our 401(k). That’s an easy, quick way to build the balances in those accounts. You could put it on a credit card, take it out of your own money, your Roth IRA, your 401(k) and use private lenders for vacant land. If you’re breaking in a new private lender, a couple of small deals like that is perfect.
I bought land in my early days and the people selling the land owned businesses. Their businesses took credit cards and they would charge my card and add the 2.7% or whatever the fee was on top of it. I was more than happy to pay the credit card fee because I didn’t have any money and I was going to make a whole lot of money on this. I was going to double my money on this property and it wasn’t even my money. I was using the credit card company’s money. I have a nothing down deal. I was buying on my credit card. When it sold, I got paid real cash and I made good money. What do you say to the newbies out there?
This is a good way for a newbie to get started or for a semi-seasoned investor to add another leg to their business. I’m all about doing multiple streams of income and vacant land is one of the multiple streams of income that I like to do. Go ahead and get started. Make sure that you follow through, get your direct mail campaigns out there, find your sellers, do some deals and start making some money. The interesting thing is everybody in our market is worried if their rents are going to get paid on their rental properties. I have a lot of single-family homes that I have rented also, but the ones from my vacant land are coming from businesses for the most part. I have no mortgages. All of my vacant lands are free and clear. That’s just extra money that’s coming into us every month. In other larger areas, you can do wind turbines and solar panels. There are many different ways to lease vacant land or buy and sell vacant land. It’s an easy business to get into if you follow certain steps and you do your due diligence.
Kathy, I’d like to thank you for being on. I appreciate you all. I’d like to thank TaxFreeFuture.com. You won’t believe what your financial advisors aren’t telling you and we’re going to tell you what they’re not telling you and we’re going to tell you why. You can do with it whatever you want to, but you’re going to be pleasantly surprised. Kathy, thank you.
Thank you for having me, Mitch. I enjoyed doing the show with you. Thank you to everybody who’s reading.
About Kathy Kennebrook
Kathy Kennebrook is the ultimate success story. She spent over 20 years in the banking industry before discovering the world of real estate.
I am married, I live in Sunny Florida and I like investing in Real Estate, and having Good Times. I like to travel, I like kayaking, bicycling, music, a good book to read and growing plants. I have two children and five grandchildren, I know I don’t look that old do I??
I like to travel, I am a national expert on marketing to find motivated sellers for your real estate investing business and I love to travel the country and share my expertise with others. This gives me the opportunity to spend quality time with my family and help others grow their Real Estate Investing Business so they can live their dreams and spend time with Family which is most important of all. I live by the Credo “Live for Today, who Knows What Tomorrow Will Bring”