Land Flipping with Mason McDonald

I think there’s a lot of confusion around land flipping and real estate investing in general. That there’s this idea that you can come in and invest with no money down. That’s just not true. You need to be spending money on marketing materials or you need to have the capital available to actually acquire these properties.

Mason, what’s the next secret to building wealth with land flipping, once you’ve had legitimacy in place, you have the follow up and you find the leads. What’s been the next step on making sure you’re building wealth in a good way? With land flipping?

I think the main thing is looking at land that is highly desirable. Builders are building like crazy right now. We’re recording this February of 2024. And builder confidence is at an all time high. So if you’re going after land infill horizontally developed, builders are ready to go out, ready to build on it. Now that building costs, for the most part have gone down. I think targeting land in areas that are of high growth, high demand and high builder interest is absolutely crucial. And then the second part of it is access to capital. I think there’s a lot of confusion around land flipping and real estate investing in general, that there’s this idea that you can come in and invest with no money down. That’s just not true. You need to be spending money on marketing materials or you need to have the capital available to actually acquire these properties.

So if you don’t have access to capital, whether it’s your own or access to private money or bank-money or something like that, I think that’s crucial. And within land, and land flipping banks typically are not going to lend to you because they’re not able to value the property appropriately. People don’t really understand land, especially distinguishing between raw land versus fully entitled vacant land that’s horizontally developed. And so you need great access to capital and the only way to get that is networking and finding people with a lot of money that want to make a lot more money.

That makes sense. So access to capital and then targeting high demand areas and places that builders have extreme confidence that if they are to buy the land from you, and maybe we can go with step-by-step of this, looks like my understanding of land flipping is you’re going to buy the land and you may or may not actually close on the land. Most likely you’re not, right? You’re going to just going to tie it up for a six to 12 month period with some options to extend that escrow with maybe some hard money upfront. But during that period of time, you’re going to work with the city or work with the county or work with whomever to entitle it or move it forward in the process to get it to the point where, look, as much as possible, the developer can be turnkey, right? They can start developing the day they close, and it’s that delta between what you tied up and the sweat equity that you did in between that creates the value and then you flip it by selling it to the builder. So let’s say you tied it up for a hundred grand, but you added value up to a million bucks because you were able to do all of those things. Is that a fair summary? What would you change there, Mason?

No, I think that’s one aspect of the business, absolutely, of going in and figuring out what the highest and best use of the land is. So depending on the county or the city where right before this call, I was looking at some land in Georgia that would make sense to do, we call it kind of like a minor entitlement or a minor subdivision where buy it, split it into two or three lots and then go out and sell it. So for me personally in my business, I don’t do that long hold period. I’m always going to be the end buyer or the initial end buyer. I don’t wholesale, I don’t double close. That’s I think just my healthcare background and being anti litigious of having fear of any sort of anything if going wrong, if you do it the wrong way, if that makes sense.

So I think a lot of people will wholesale or sign the contract and do that value add period. A lot of these land flips though, to be honest. Brett is the only value you’re adding to the situation is purchasing at a discount. So I think what you’re suggesting is the long-term vision of most of us that are in this business that are attempting to grow. But I mean, we are closing on a deal on the 7th of February. We’re purchasing it for 205,000 I think all in, it’s 206,000, 700 bucks. We’re putting it on the market for 380,000 and we anticipated selling in 30 to 45 days just because of the market. So there are those deals, there are the minor entitlement deals and then the heavy entitlement deals as well. But it’s all kind of within the same realm of you’re either value doing a value add by purchasing it at an extreme discount, which is very minimal value add versus doing some sort of lot split or subdivision or putting in roads or putting in utilities or something like that.