Brad Warren helps patient investors purchase risk mitigated, pre-developed land in high growth areas of Southern California. I then assist them with selling their parcels to developers who consolidate that land into a larger parcel to build housing, a shopping center or other mixed use project, a solar farm, etc. Multiple returns on investment are very common. The majority of our investors use dormant or under-performing 401(k)s or IRAs to fund their investments, but you can also use cash, do a 1031 exchange, or utilize several other options.
Episode Highlights Here:
Brad
For every 30 properties that we look at, we buy one. That’s how diligent our process is in buying the land.
Brett
So let’s dive right into the focus at hand, which is land banking investments. So the first bread defines what that is, right? And then number two, let’s go. Let’s dive into what’s the number one secret to investing in building wealth with land banking investment?
Brad
So number one, the short answer, land banking is buying land, we call pre developed land that isn’t strategically placed in the path of growth, holding, we’re very conservative. So we tell people seven to 10 years is the average time we have found that it takes for the exit strategy, which is when a developer comes, knocks on your door and says, I need your land because I’m building 500 homes or a shopping center or a football stadium, or something like that. The exit strategy yields you between three and 7x, returning three to seven times your investment. And that comes at a cost, which is time you have to be patient. What was the second question again, all of this big secret. Due Diligence, our company, as far as I’ve seen from any other land banking companies out there, and there’s not very many, that’s why a lot of people were gonna say land banking never heard of that before, it’s a very well kept secret. The due diligence that our company does, before it even buys the land, and it buys the land with its money. First, it’s called first mover risk, we will buy the land ourselves, because we believe it is going to appreciate in value, and then we sell it to an investor. But for every 30 properties that we look at, we buy one, that’s how diligent our process is in buying the land. So I’d say that’s probably the secret right there. Cool,
Brett
awesome. So it sounds like you guys, pot buy pre developed land and the path of growth. And you’re looking for developers to come within seven to 10 years to offer you three to seven times your investment. And it’s in the pre-development phase. Maybe you do some entitlements, maybe maybe you increase it, or maybe you’re just buying it flat out and just waiting and let them do all of that sounds like
Brad
yep, we call it, set it and forget it, easy people investing. We do all the research, we buy the land really, really inexpensively because we have ways of finding land that people want to get rid of that they don’t think is valuable, because they don’t do the research, they don’t know, we do mark it up, obviously, the gap between where we buy it and what we sell it to the investor gives us the cash flow to run the company and give the owner a profit. But then the investor who buys it here, which by the way, they’re still buying it below market, so they’re still getting a good deal. They’re the ones that hold it the seven to 10 years, they’re the ones with the patience to ride it out. And by the way, sometimes people exit sooner. And sometimes it could be later. So it has to be what we call patient money. And most of my investors, I’d say 75 to 80% of my investors use a dormant 401 k or a self directed IRA of some kind, which you know, gets into what you like to talk about I’m sure is, you know how to people tax deferred money and do it in such a way to minimize the taxes.
Brett
Yeah, I got it spending, that’s great. So set it and forget it and and you’re buying it at a discount, you guys get a little delta. So you’ll mark it up a little bit for you guys, but you’re still buying below market. And then you got to be patient, right? And you got to make sure the due diligence is done. That’s the number one secret. So maybe talk about the number two secrets that come to mind when it comes to successful land bank investments.
Brad
Well, you and the investor have to be very patient. One of the other things that we offer after you’re an investor with our company, we have free Tuesday night webinars where you get a 30 minute update from the CEO and what’s happening where we invest. So one of those times I heard that the city council in Lancaster where I owned a mixed use property, they rezone my property from m mu four to m u five. They basically said to the developers, okay, you can now build a five storey hotel, or office building instead of a four storey building. Well, that just increased the value of my land and I didn’t do anything. It goes back to your question about entitlements and all that we don’t do anything. We let the City Council do all that. We let the developer have the headaches about getting all the permits. So I would say that’s the free updates. And then we offer free negotiation coaching. When it comes time to sell your property to the developer, the landowner probably doesn’t really know what your land is worth even getting on those webinars. You’re still not going to really know the value of my land, because it’s very hard to find comps. It’s not like residential real estate where you just look up three or four houses within a mile and you see what they sold for it. We do that but there’s other factors so you could have two pieces of land next to each other. And one of them has a Have a culvert running down the middle or an easement from the energy comes, you know, from Southern California Edison, that lets it render that undeveloped bubble, but there’s this it’s the same dark red there. So five acres, they’re touching each other. How come I can’t develop this one, but I can there’s one. That’s the land of commercial, you know, the environment of commercial real estate, if you got to be very careful. And that’s part of our due diligence. So we offer this free negotiation coaching, we might have other owners that are 100 yards away from you or a half a mile away, that have already been offered two or three times what you got in your initial offer, which is always lowball. And we’ll share that information. by the way, we know that the land is worth at least three times that because we have other investors that are getting those offers, and you’re gonna go oh my god, I didn’t know that. So when you go back to negotiate, you’re armed with a lot more information and knowledge so you can do a better job negotiating.
Brett
Excellent. That’s great. I think it’s great to to build back up into the community and to the investors into their training and so on
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About Brad Warren
Brad Warren is a national and international speaker and coach. He traveled to 19 countries and 27 United States for over 40 years, teaching business courses. He’s coached 500+ business owners, is the 2014 Bay East Association of Realtors Affiliate of the Year, author of Just Sold! The Real Estate Professional’s Guide to Selling More in Less Time, and he’s spoken at the National Association of Realtors 2016 and 2017 Annual Conventions. After 40+ years as a business coach, Brad transitioned to a new career as a land banking specialist, helping investors build generational wealth by investing in land.
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