Jack: Welcome, everyone, to another episode of “The Jack Bosch Show,” where we talk about all things real estate and finance. And today is the day where we are going to talk about finance. We’re going to talk about microcaps. We’re talking about the market, what the market’s doing, the stupidity that we see in the market, and all those things around it. And our guest is a microcap investor expert financial expert, Mariusz Skonieczny. Mariusz, I hope I didn’t butcher your last name too much. It’s a difficult name to pronounce in the American language or in the English language. But welcome to the show.

Mariusz: Hey, thanks for having me. And you did pretty well on my name.

Jack: All right, good. Well, I imagine I changed my name from Joachim, which nobody in the U.S. can pronounce, to Jack because of that same reason. And so I applaud you for actually keeping your name.

Mariusz: Well, I just keep it for interviews. In real life, I just tell people to call me Mario.
Jack: Mario. Okay. Mario sounds good. Well, Mario works. So, Mario, let’s go right into it and talk about what your expertise is. What do you specialize in in this world?

Mariusz: So, I specialize in small companies, as you said, microcap companies, small companies. And why small companies? Well, because the financial industry calls it toxic. They call it penny stocks. They don’t want to go near it. They say you’re going to lose all your money in it, you’re going to go broke. So that’s great because then I don’t have any competition or I have very little competition, and I…

Jack: That’s right. I mean…

Mariusz: I don’t like competition.

Jack: Yeah. So, what strikes me is that I never got much into microcaps, but what strikes me about it is that microcaps are companies like any other companies. They’re valued between probably $50 million to $300 million typically. And they still have earnings. They still have growth trajectories and so on. So why shouldn’t you be able to invest in those because their stock moves just like other stocks, probably with a little bit more volatility, I would assume. But how do you deal with the volatility in that market? Or am I wrong that they don’t have…

Mariusz: No, no, no, the volatility is absolutely insane. They have less liquidity, and they sold off really heavily during these times. But look, not all stocks are created equal, right? There’s a ticker symbol, and there’s a company behind it. So, you might have absolutely bad, bad companies behind it, or they might be promising companies behind it. Don’t make an assumption just because something is of a certain size. It’s not good just because… or depending on what the stock price is, it’s not good or whatever. You gotta look behind. And I know you are into real estate investing. So, I always like to use an example of, you know, the financial industry will tell you, don’t go for these small companies, but then the same person giving you advice will tell you it’s not a bad idea to buy apartments. Well, if you have a 100-unit apartment building, and if you put it in a public vehicle and it became a publicly traded vehicle, guess what? It would be a microcap stock.

Jack: That’s exactly right.

Mariusz: Because apartment buildings, what are they worth? Two million, five million, ten million, depending on where it is. But a 100-unit apartment building is not worth $10 billion. So, it would be a microcap. So, why is it okay to put your life savings into an apartment building through private ownership, or syndicate, or whatever, but it’s not okay to buy companies of similar size or businesses of similar size when they’re publicly traded? It doesn’t make any sense.

Jack: That’s a good question. I mean, we could dive into that. Like, one of the reasons I think people, and I’m not saying it’s right or wrong, people say that it’s okay to do one versus the other is because if you buy the entire building, you are now the business operator, and you have more control than if you buy a few shares of a company that is not big enough to make it perhaps through the hard times and so on. And also, real estate is perceived to be more stable because rents are, rents are, rents are rent, and they’re going down slowly, and they’re going up slowly, but overall, it’s more stable, and it’s something that people can, like, touch and so on, versus over here they’re investing more passively. But I can totally see your point. At the end of the day, if you put it into a public vehicle, it’s still a microstock. So, that makes total sense.

Mariusz: And some businesses, like real estate, are more stable than others, you know? Some businesses have better quality revenues. Some have recurring revenues. Some don’t have recurring revenues. So…

Jack: So, let’s go into that actually a little bit more. I want to also go into your background. You obviously have an accent. I have an accent. We’re both actually from neighboring countries. You’re from Poland. I’m from Germany. Let’s go first quickly into your past. I want to quickly know… You’re in the U.S. Where do you live right now?

Mariusz: I live in Indiana, close to… you know where the University of Notre Dame is?

Jack: Uh-huh. I do, yes.

Mariusz: Yeah, so very close there.

Jack: Okay, did you go to Notre Dame and then stay there, or did you just happen to be going in that direction and… How did you get there? How did you come to the U.S.? Tell us a little bit about your story first.

Mariusz: Well, I came to the U.S. when I was 16 in 1996. So, when I was in Poland, I was an athlete. I was in a specialized track and field school. I was a sprinter. And during the ’90s… And like everybody in Europe, we all played soccer. But then, during the ’90s, something special happened, right? Michael Jordan, Barcelona, 1992. So, we all kind of started playing basketball during that time. So, when I came to the U.S., I really, really wanted to play basketball because we didn’t have any basketball clubs in Poland. We had soccer clubs but not basketball clubs. So, when I came to the U.S., I did make the basketball team in my high school, but I didn’t speak the language. I never played organized basketball. I never got the chance to play. Like, I was on the team, but I never got a chance to play.
And so, I kind of ended my athletic years when I came to the U.S., and I started dancing, actually. I became a ballroom dancer. And also, to continue dancing, I was always looking for ways to make money where I would get a lot of return for the effort that I put in. And I realized that the best way to do it is to be in spaces that are not competitive. Like, if I wanted to make money being a basketball player or a soccer player, I would have to put in a lot of effort and get very little return.
And that’s what most people do. They want to do what everybody else does. They want to compete for the best schools, get into Ivy League schools, and then get those jobs, like investment banking jobs and things like that. Well, that’s how I got into the path of being in the microcap space because I was looking for ways to make a lot of money with little effort compared to what I would have to put in elsewhere.
I also realized that there was very little competition in that space. Around the same time, I discovered Warren Buffett, and I studied everything he had to say. Even now, if you go back to some of the things he said when asked what he would do if he were a college student with $10,000 to his name, he said he would go into the most obscure places, which are small companies because the investment industry cannot go there. So, you can find and uncover things early. That market is the most inefficient market, and that’s where you can get the most returns if you choose properly. But instead, even…

Jack: And that’s actually a good point if I quickly jump in. Like, I’ve read almost everything that Warren Buffett wrote or that was written about Warren Buffett, multiple of his books, his annual reports, and things like that. So, I love Warren Buffett. And I agree. Obviously, at this point, he can’t do this anymore because he is sitting on $200 billion or something like that. But starting out, that makes sense. So, in essence, I find it fascinating that high school and those things taught you to go where the least competition is, where you can have the biggest impact with the smallest input. So, that’s really a criterion or characteristic of a contrarian. Would you call yourself a contrarian?

Mariusz: Absolutely. My entire life, I’ve been a contrarian.

Jack: So am I. Yeah, love it. So, now you’ve figured out the microcap space, and you mentioned Warren Buffett. Am I safe to say that… well, the next question I had, I wanted to ask you is, how do you select these microcap stocks? Do you do technical analysis? Do you do fundamental analysis on those?

Mariusz: Well, of course, fundamental analysis.

Jack: Okay, I figured. I just wanted to make sure. Since Warren Buffett comes into the picture here, it needs to be fundamental.

Mariusz: I mean, technical analysis doesn’t really work that well for small companies because the price movements could be completely out of whack. I mean, you can buy something at noon and be down 30% by the time you take a nap because John from North Carolina decides to unload his entire position, and he doesn’t know how to sell. So, I mean, the volatility in these names is crazy. And that’s one of the reasons why even the institutions that would want to be in that space don’t want to be in that space because the volatility is too great. If you are running an investment business as an advisor, it would destroy your business. If you have too much volatility, your clients could not handle this, and they would just leave you.

Jack: Yeah, that makes sense because clients can’t really tolerate that kind of stuff. So, mentally, emotionally, they see themselves going up and down. They want slow and steady. So, what’s your process to select a good company in there? What do you read? What do you go after? What do you research? So, if somebody says, “Okay, that’s a good idea. That sounds appealing to me. Microstock, never thought about it. Less competition. Yes, high volatility, but the key is to find the gems in the list of properties in that market space.” First of all, where are they typically traded? Let’s start there.

Mariusz: They are usually traded on secondary exchanges. For example, the Toronto Stock Exchange Venture, Canadian Stock Exchange, or OTC (over-the-counter) in the U.S. The U.S. doesn’t really have a venture exchange. That’s why many of them trade in Canada. But they are primarily on secondary exchanges that are not NASDAQ or the New York Stock Exchange.

Jack: Okay. And how do you access those? Are there apps for that? Can you do it through your Fidelity account? Give us a little insight. Imagine someone starting here who has never done it before. We’ve grown all kinds of businesses, but this is something that I have never done either. So, if I want to go and I’m fascinated by the idea, I’m a natural contrarian. I think, “Great, let me explore this.” What do I do first? How do I find these markets? Are there apps where I can create an account? How do I go about that?

Mariusz: I’ll look at every company that’s trading under the exchange.

Jack: So, how do I find the exchange? I mean, it’s a super…

Mariusz: So, let’s say you look at the Canadian Stock Exchange. You go to Google…

Jack: So, I grab my phone and I Google that, or…?

Mariusz: Yeah, Canadian Stock Exchange, and it will show you all 800 companies that are listed there, and I will look at every one.

Jack: All right. Okay, good.

Mariusz: I mean, the TSXV, which is the Toronto Stock Exchange Venture, will have 2,000 to 3,000 of them, and I’ll look at all of them. It might be like, “Oh my God, so many.” Well, if you know what you’re looking for, then you can eliminate a lot of them quickly because the financial industry is correct when they say a lot of these companies are trash and shouldn’t be touched. I agree. 80% of them are like that. So, quickly you eliminate them because 80% of them don’t have any business, they don’t have any revenues, they don’t have any clients. They might be looking for gold and silver in the mining space, or they might not even have a business. So, that’s quickly like, “You know, gold and silver? No, no, thank you. I’m not interested.”
I’m looking for something real. I’m looking either for a company that already has revenues, so then I know that somebody is already paying them to solve their problem, okay? Or I’m looking for some assets that solve a problem, and then that solution of their problem will bring revenues in the future. That’s a little harder to do. So, with the asset place, I don’t know, maybe someone told me, “Hey, look at this company,” and I’ll look at it, and I would be surprised.
For example, right now, I’m involved with a company called Aduro, which is a pre-revenue company, but what they have is a technology to recycle plastic. So they’re able to use water to take plastic and break it into molecules that can be used to make plastic again, or they can make fuel because plastic is made from petroleum products. So, they could take it and make more petroleum products.
That’s an example of a company that somebody told me about, and I was skeptical at first. I didn’t want to look at it. But after I made the trip, visited the company, and did a lot of due diligence, I was very impressed and decided to take a position in a company like this. But it’s a little harder to find something like this that says, “Oh, you know, we have something that’s going to change the world.” Because every single one of them will say that they’re going to change the world, every single one of them has a cure for cancer, you know. And every single one of them claims to be disruptive, but in reality, most of them will disrupt your wallet, not the thing that they say they’re going to disrupt.

Jack: Yeah, that’s true. Okay. So, the process is to look at them and eliminate certain classifications that fall into the treasure hunter kind of category, like gold and silver. Obviously, if they strike it rich, it could be good, but it’s a gamble.

Mariusz: It’s kind of like if you were to look at residential real estate deals. If you look at 100, you’re going to find something that’s interesting. There’s no specific formula. There are certain checkboxes, but real estate is more uniform with standards like three bedrooms, etc. But if you look at enough opportunities, you’re going to come across something interesting and say, “Wow, that’s interesting. They have something here.”

Jack: No, I can totally see that. Now, particularly when you have companies that already have revenue. And you mentioned visiting the companies in some cases. But as you look into the financials, what are you specifically looking for in the financials? Since they’re publicly traded, I would assume they have quarterly reports and such. What kind of alarm signals or positive signals do you look for in the financials?

Mariusz: Well, I want to understand what the business is about. So, financials are just one aspect to consider, but not everything. I’ll look at the financials to see if they have revenues, if they’re profitable if they have debt, what kind of margins they have, and whether they have recurring or non-recurring revenues. I also evaluate the addressable market. But then, I always talk to the management. I know all of the CEOs who run these companies, and I even have their cell phone numbers. You can’t do that with CEOs of larger companies like Microsoft. The CEOs of these smaller companies will pick up the phone and talk to you because they don’t receive many calls. They can teach you about the business, but they can also lie to you.
I learn from them, but I also practice what’s called scuttlebutt investing. I get on the phone and try to talk to people involved with the business, such as customers, suppliers, employees, or former employees, to gain a better understanding of what I’m dealing with and decide if it’s something I want to get involved in.

Jack: So, what’s the biggest loss you’ve taken on any of these investments? And I’ll ask about the biggest win in a moment too.

Mariusz: Well, over the course of 13 years, starting with $10,000, I grew it to $7 million by 2021. However, I’m currently down $5 million over the past two years. Now, you might ask if this is a failure. One of my investments turned out to be a failure because it didn’t meet my original thesis. But just because a company is down 50%, 70%, or 80% doesn’t necessarily mean it’s a failure, especially in this market that’s completely insane. I have situations where a company today is actually better than it was in 2021, yet it’s trading at an 80% discount. So, I wouldn’t label it as a failure.

Jack: And what’s been your biggest win on a particular investment, where you put in…
Mariusz: Yeah, I made 100 times my money.
Jack: A hundred times your money. Okay, that’s what we’re talking about. Of course, the ultimate failure is losing your money, but the upside potential is 100 times or more in some rare cases, right?

Mariusz: Oh, it could be even more. I’ve experienced it myself, but I’ve seen many companies that had even bigger opportunities. That’s why you venture into this space, for those opportunities. You don’t go in to double your money. You can find other investments for that.

Jack: You definitely don’t go in to get a 10% return.

Mariusz: Exactly.

Jack: Yeah. So, it’s not for the faint of heart, definitely. But I think it has its place if someone is willing to thoroughly analyze the companies, the numbers, the business model, the management, and all the aspects. Personally, I’ve always been fascinated by it. I’m not a big fan of technical analysis with charts and such because it’s all theory. I align more with Warren Buffett’s approach of looking at the true quality of a business and assessing if it’s undervalued or overvalued. Occasionally, you come across undervalued companies, like the one you mentioned, which is better today than it was in 2021 but down by 80%. That’s a company that, if it continues to perform well, should eventually recover as word spreads about its improvement. It’s the kind of opportunity where you should consider investing more. And when you’re unsure about a company, it’s wise to pull back.

Mariusz: Well, if you think about technical analysis, it focuses too much on the short term. How much can a business really change in three months?

Jack: Exactly. It’s all speculation. It’s pure speculation. It’s based on the momentum of certain factors like news from the Fed or something Elon Musk says that causes a stock bump. Whereas what you do is true value analysis and value investing. It’s like Warren Buffett, who invests in good businesses with solid fundamentals. As Warren Buffett says, his preferred holding horizon is forever.

Mariusz: Yes. And when I made 100 times my money, it took four or five years. When you get involved in something, like an asset that needs to be monetized or a business that needs to grow and turn profitable and attract more clients, it takes time. It takes time to acquire clients. But nowadays, everyone wants everything instantly, right?

Jack: Absolutely. That’s the world we live in. Now, earlier, you mentioned that the market is insane. Could you elaborate on that? What do you mean by it?

Mariusz: Well, did you know that we’re supposedly going into a recession right now?

Jack: Yes, it’s the worst recession we’ve ever seen. But yes.

Mariusz: Exactly. In just 24 months, we went from people buying pictures of monkeys through NFTs and investing in cryptocurrencies to even the worst companies on the planet skyrocketing in value. They were buying movie theaters with no business. And now, people don’t want to buy anything because we’re supposedly entering a recession. It’s like, I’m not particularly religious, but you know what? I pray to God that we actually get this recession already. The pain of constantly hearing that a recession is imminent is more agonizing than the recession itself will likely be. The companies I hold are priced as if we’re heading into a recession worse than World War I, World War II, and bankruptcy combined. Yet, we haven’t even entered the recession, or maybe we have. Who knows? But why don’t we just have this recession that everyone seems to anticipate so much and move on? I’m tired of hearing about it.
And now we’re talking about the debt ceiling and so on. It’s never-ending. But that’s what the market is like—complete insanity. When the market is happy, as Warren Buffett said, Mr. Market wants to buy pictures of monkeys and pay a million dollars for them. Why? I don’t know. They told me that owning monkeys is a status symbol. Yeah, owning NFTs is a status symbol, and everyone should own them because a movie star or a pop star owns them. Then suddenly, people don’t want to buy anything because the Fed might raise interest rates. It’s completely crazy.
Let me give you an example. Imagine buying a house in 2011. The price is $100,000, and the seller mentions that the house has a pool in the backyard. You agree to pay $110,000. But then the seller keeps repeating, “You know, it has a pool in the back.” Five minutes later, “You know, it has a pool in the back.” Eventually, you start questioning, “Wait a minute. Do you want me to pay a million dollars for this house just because it has a pool in the back, and you’ve mentioned it 50 times?” It doesn’t work that way. Today, the scenario is reversed. You’re selling the house, and the buyer keeps saying, “But it doesn’t have a pool in the back, okay? It doesn’t have a pool in the back.” After repeating it ten times, you wonder if they want you to pay them to take the house because they keep mentioning the absence of a pool.
My house has value regardless of whether we’re entering a recession or not because it has inherent value. The same goes for certain businesses—they have value irrespective of whether a recession is on the horizon or not. Just because someone says it a thousand times, sends me a thousand recession-related videos, or predicts the worst recession since the Great Depression doesn’t mean that the assets and businesses I hold are worthless. Similarly, it didn’t mean that the assets and businesses were worth the moon when things were good, but that’s what people were doing. During COVID, what were they buying? Amazon, right? Because everyone was going to buy stuff on Amazon. Zoom, because we were all going to use Zoom and never leave our houses. Netflix, right? Those were the three stocks people were buying.
Back then, you couldn’t tell them not to buy Zoom, Amazon, or Netflix, no matter the price. They had to buy them because of the belief that they would benefit from the COVID situation. Well, now that COVID is over, those stocks have been decimated because people weren’t paying attention to what they were paying for. Now, it’s completely the opposite. People are selling companies with great futures, excellent solutions, and innovative applications for pennies on the dollar just because they think a recession is coming. You see the craziness and the contradiction.

Jack: Absolutely. The market is currently experiencing a level of insanity where it tends to overreact in both directions. And what we’re essentially saying, which Warren Buffett also emphasized, is that during these moments of market insanity, there are opportunities to be found. When the market overreacts on the downside, it’s actually a good time to consider investing in those undervalued assets. We’re specifically seeing this in the multifamily real estate sector. For example, in Phoenix, Arizona, where we reside, the metro Phoenix area consistently sees an influx of 50,000 to 75,000 new residents every year. This means that we have a continuous need for approximately 25,000 new units of livable space to accommodate this growth annually.
However, due to the current high-interest rates and construction costs, new development has significantly slowed down. Although rents are increasing, many real estate buyers are fixating on the absence of certain amenities, like a pool in apartment complexes, which they use as a reason to negotiate lower prices. Consequently, properties that traditionally sold for $10 million are now selling for $8 million or even $7 million, even though the demand for apartments is higher than ever. Builders are refraining from new construction due to the high costs and increased difficulties with city regulations.

Mariusz: What happened to cap rates in the past two years?

Jack: Traditionally, cap rates in Phoenix have hovered around 4, which is considered aggressive. This means that for every dollar of income, you would pay $25 for the property. However, recently, we’re seeing properties sell at cap rates of five and a half to almost six, which is higher. Keep in mind that rents initially dipped but are expected to increase because of the continuous influx of 75,000 people annually and the limited new construction. Starting a new construction project right now is challenging due to difficulties in securing construction loans, which are offered at high-interest rates of around 8% to 10%. Construction costs have not decreased either.
Therefore, it is highly predictable that rents will further escalate in the coming years due to the existing bottleneck. Additionally, more than 44% of the American population currently works from home, allowing them to relocate from cities like San Francisco, which are experiencing shutdowns. They are moving to markets like Phoenix, Tampa, Dallas, and other selected areas. Despite this foreseeable trend, the market’s behavior still doesn’t make sense. In fact, buying now and holding for ten years seems like a much more sensible strategy. However, the market itself is not efficient, as you mentioned earlier.

Mariusz: Yes, whether it’s in real estate or stocks, people tend to buy when others are buying, even though they quote sayings like “Be greedy when others are fearful and fearful when others are greedy.” In reality, they often become greedy when others are greedy and fearful when others are fearful. That’s what we observe in the market.

Jack: Yeah, particularly at the top, it seems like there’s a sense of missing out on something. The sentiment is like, “Oh my God, I’m missing out. Everyone else is doing so well. Let me get in.” In our families, we have a saying that when the mailman starts talking about getting into real estate, it’s time to sell your assets, refinance into long-term investments, and stop buying. And guess what? That’s exactly what we’re doing, and we’ve been very successful with that strategy. When the media portrays real estate as bad, that’s actually the time to get in. I believe you’re probably observing the same phenomenon in the microcap market.

Mariusz: Absolutely.

Jack: That’s great. This conversation is fascinating. I’m really enjoying it. Now, if someone wants to get involved in this, do you offer any services? Do you have a fund? Do you help people invest or provide education on the subject? How can someone learn more from you?

Mariusz: Well, first, I would suggest finding my YouTube channel. Just search for my name, which can be challenging to pronounce, on YouTube, and you’ll find it. As for funds, I don’t run a fund because I prefer not to deal with people’s emotions. However, I do have a private membership website called microcapexplosions.com. It’s a membership site where I share some of my microcap investment ideas with my members. They can then decide whether they want to invest in those ideas or not. Additionally, I often arrange live calls with CEOs of the companies I discuss, giving members the opportunity to ask questions and learn more about their businesses. Sometimes we even participate in private placements to provide funding for these smaller companies, which may need capital to expand, achieve profitability, or make acquisitions. This offers the chance to invest directly in these companies at a discount to their trading price, and we often receive warrants, which provide the right to buy more shares in the future. So, there are additional benefits like that.

Jack: That’s very cool. It’s like a multimedia financial newsletter with recommendations and live components. I really like that concept. So, microcapexplosions.com. We’ll make sure to include the link. It sounds really interesting. Now, what is your outlook for the future? We seem to be entering or already in a recession, although it’s the strangest one where malls and restaurants are full, people are employed, yet we’re still in some form of recession. I recently heard someone describe it as less of a recession and more of an asset deflation period. The government is still providing support to the average person through unemployment benefits and other means. But with the potential increase in interest rates, they might start pulling liquidity out of the economy to some extent. As they do that, the value of assets begins to deflate. The unfortunate, or perhaps fortunate, truth is that most people in the United States don’t hold significant amounts of assets. However, you and I do. That’s why we see the values of our assets coming down. You mentioned the impact on your asset values. Would you agree with this assessment?

Mariusz: Yeah, absolutely. But for me, I don’t really care. There’s only one thing that matters to me: buying assets. The key question is whether I have more or less competition for these assets today. If everyone is screaming recession, it means they’re not buying assets. So I can purchase whatever I want at a low price. And those who have jobs right now and can invest will become millionaires by buying things today, millionaires.

Jack: Right. Because in your opinion, and I agree, the market has, in many areas, overcorrected and now presents the opportunity to acquire solid investments at below-market prices.

Mariusz: Yeah, well, okay…
Jack: To clarify, below fair price, as market price is market price.
Mariusz: I mean, it’s like getting pennies on the dollar in certain situations. But the market’s preferences and where it wants to invest can shift. In 2021, the market wanted to invest in risky things, even pictures of monkeys, you know?

Jack: Yeah.

Mariusz: Then COVID came, and everything sold off. That’s when I wrote my book, “How to Profit From the Coronavirus Recession,” where I featured 50 companies because everything was on sale. Everything. It turned out well if you had the courage to invest during that sell-off. Today, the market has a new favorite: stable, profitable companies. That’s where everyone is piling in. Microsoft, Apple, anything stable and profitable is attracting the money. So, those companies are now becoming overvalued.
How will that turn out? Probably not good. Even though those companies are great, they’re now overvalued. Walmart, Apple, all these names because they’re safe. People feel comfortable and seek confirmation from others. They think that’s where they should be. On the other hand, companies considered toxic today are the ones that are not yet profitable or technology companies. So, where do I want to be? I don’t want to be where people find comfort because comfort comes at a price. I want to be where people are uncomfortable because there’s a price for comfort and a reward for discomfort. But you still want to be in companies that will survive, even if that’s not where people want to be today.

Jack: And that’s the challenge: identifying those companies. That’s where you have developed expertise and make recommendations. That’s where the winners are made. It’s why it’s so difficult for many to follow someone like Warren Buffett because they aren’t willing to put in the work to truly understand a company and determine if it will thrive or if it’s just a gimmick that will fade away. When you develop those skills, you can thrive in these market environments. So, with that said, let’s wrap it up. Thank you very much for being with us. Again, look up Mario on YouTube, follow him, right?
I’ve watched many of his videos, and they’re fantastic. I agree with his philosophy. I wouldn’t necessarily recommend putting your entire net worth into this, but take a piece of it. Start looking into these things. The skills you develop in fundamental analysis will serve you throughout your life when evaluating businesses. Because at the end of the day, being able to distinguish a good business from a bad one is one of the most valuable skills you can have in business. Would you agree?

Mariusz: That’s right.

Jack: Yeah. So, with that said, thank you for joining us today. And guys, that concludes our show for today. As always, if you enjoyed this, give us a five-star review, subscribe, and share with your friends. If you’re watching this on YouTube, hit that subscribe button and the notification bell. And with that, we’re done. See you in the next episode. Thank you very much.

The post The Secret to Successful Micro Cap Investing Revealed by Mariusz Skonieczny appeared first on The Land Profit Generator.

Jack: Hello, everyone, and welcome to another episode of the “Jack Bosch Show,” where we discuss all things finance and real estate. Today, our focus is on financing and raising funds, as well as making your business recession-resistant. Joining us as guests today are Wendy Sweet and Bill Fairman. How are you guys doing today?

Bill: Awesome. Thank you so much for having us.

Wendy: Yes, absolutely.

Bill: By the way, I don’t know if you can ever make a business or your investment recession-proof; you can make it recession-resistant.

Jack: Okay, all right.

Wendy: That’s the goal, right?

Bill: Yeah.

Jack: All right, I like that distinction. You’re absolutely right. Some businesses perform better during recessions, but even those businesses face challenges. Take the Dollar Store, for example. The Dollar Store probably does well during a recession, but over the years and decades, some Dollar Stores have still gone out of business. So, being recession-proof doesn’t guarantee ultimate success if the business fundamentals aren’t right, correct?

Wendy: That’s exactly right.

Bill: You know, speaking of Dollar Stores, now, in addition to recession issues, we also have inflation. They can’t carry as many products as before because they’re trying to stay within the dollar range. There are plenty of stores now that don’t even carry eggs because they cost way more than a dollar.

Wendy: That’s right.

Jack: Right. Or they sell boxes with a single egg.

Bill: And then you have to insure them from the house to the store in case they break.

Jack: That’s exactly right. Very cool. So, you’re right; Dollar Stores are now $2 stores. Just like the 99-cent burger has become a $10 burger, with that said, let’s dive into it. Tell us about yourselves. First of all, you’re brother and sister. I just want to clarify, sister and brother. Ladies first. And where do you guys live?

Wendy: We live in the Carolinas. I’m in Rock Hill, South Carolina, and Bill is in Indian Trail, North Carolina. We’re right on the border where Charlotte is located, between North and South Carolina. We lend throughout the Southeast.

Jack: So, you’re private lenders with a fund. What else do you do?

Wendy: Well, as a side gig, we have short-term rental properties in the Carolinas and Florida. We also own self-storage facilities in Tennessee and Missouri. And we’re constantly involved in buying and selling properties on the side. But our main focus is lending. It’s a full-time job.

Jack: All right, yeah. So, tell us about that. How did you get into it? What do you typically lend on?

Bill: Well, generally, we try to stay within the median price point in single-family fix and flip properties and ground-up construction. This is part of our recession-resistant strategy, which comprises about 55% of our lending portfolio. One of the lessons we learned from the 2008 housing crisis is that rents do not typically decrease even during a housing recession. By focusing on the median price point, we have multiple exit strategies. Plan A is when the loan matures and pays off. Plan B is if it doesn’t pay off, someone else can convert it into a rental property if we end up taking it back. Plan C would be to sell it, and Plan D is to hold onto the property and rent it out ourselves if the market conditions are unfavorable for selling. Over time, these properties tend to hold their value, and even if values temporarily decrease, we believe they will eventually rebound.
We also lend on small multifamily properties, small self-storage units, and strip centers. About 90% of our lending is in the residential sector, with the remaining portion in smaller commercial properties.

Jack: Yeah, what you said aligns with a recurring theme in my podcast. Many guests have emphasized the importance of setting yourself up in a way that you can’t lose.

Wendy: From your mouth to God’s ears.

Jack: Absolutely. In a recent interview with Ron Lagrande, he discussed acquiring properties with wraparound mortgages and renting them out through lease-purchase agreements, ensuring that even in the worst-case scenario, he still generates income.
What you described is quite similar. You have multiple potential outcomes: selling the property with profit, renting it out, renting it out if you have to take it back, and, worst case, still obtaining returns close to your target. With a long-term holding strategy during emergency situations, you can avoid losses.

Wendy: And that’s the key, Jack. Regardless of the asset class or investment strategy in real estate, the key is to have multiple exit strategies. It can’t be limited to just one or two. You must always consider the worst-case scenario because, as we know, it can happen.

Jack: Absolutely. The worst-case scenario teamed up. You have to be prepared for it.

Bill: Real estate and markets are constantly evolving, and positioning oneself to take advantage of these changes is crucial. It’s better to be proactive rather than reactive. However, unexpected events, such as black swan events, can occur beyond our control, and that’s when having additional strategies becomes essential to minimize any potential issues.

Jack: 100%. Now, let’s delve deeper into your business model. When it comes to houses or similar properties, what are the typical parameters you look for? For example, loan-to-value ratios, have they changed recently? I’d like to hear more about what’s happening in the current market.
We’re in the beginning, or in the middle, or perhaps we haven’t even started, or perhaps we are at the tail end of it. Nobody really knows. Nobody has a crystal ball. But we’re somewhere in a downturn of the residential real estate market. Land is a different kind of thing right now, at least the way we approach it. So, what measures do you take to protect yourselves? You mentioned the price ranges. You focus on the medium level. Why is that?

Wendy: In our area, which is the Southeast of the United States, affordable housing is considered to be around $500,000 or less. If, for any reason, we have to take back a property and cannot refund the investors, we ensure that we can rent out the property to continue generating investor returns.
To mitigate risk, we never lend more than 70% of the after-repaired value (ARV) of a property. While some individuals may have been buying based on the assumption that property values will continue to rise, our lending is not based on that speculative approach.

Jack: That’s akin to the musical chairs strategy. It’s similar to what happened in 2007. Everyone bought with the belief that there would always be someone else willing to pay more until the music stopped.

Wendy: Exactly. We don’t engage in that kind of behavior. The numbers and formulas we follow have proven successful for decades. The 70% ARV rule has stood the test of time. The only things that change are people’s willingness to take on higher risks, bring more money to the table than necessary, and act greedily.
When underwriting properties, we now focus on comps from the last three months rather than the usual 6 to 12 months, given the rapid changes in the market. We may require a higher amount of out-of-pocket funds at closing, but overall, we maintain a cautious and conservative approach. We prefer a calm and plain strategy because we value our sleep and our investors’ returns.

Bill: Additionally, we are operating in a strong market that is still growing. More people are moving here than leaving, which is favorable for us. If we were lending in a different area, we would adjust our parameters accordingly. That’s why we only lend in our local market, as we have a deep understanding and presence in it.

Jack: So, if we take an example of a $500,000 house with an after-repair value supported by comps from the last three months, you would lend $350,000?

Wendy: That’s correct.

Jack: And in that case, do you lend the purchase price plus the rehab up to $350,000?

Wendy: We lend 90% of the purchase price and 100% of the rehab costs.

Jack: So, in this example, if the house needs $100,000 for rehab, you would lend 90% of the $250,000 purchase price, meaning they would need to bring $25,000 to the table. You would lend around $225,000 or somewhere close to that. And for the $100,000 rehab, you would lend the full amount as long as the total amount lent does not exceed $350,000, right?

Wendy: That is correct.

Bill: Yes. Despite being a private lender, we operate similarly to a bank. We require six months’ worth of reserves and conduct thorough due diligence, including reviewing bank statements, pulling credit reports, and conducting background checks on the primary officers of the LLC involved in the project. We work with experienced individuals who know what they’re doing. While we used to work with newcomers, the past five years have allowed us to learn from and cover up many mistakes. Now, we believe it’s time for professionals to be in the business.

Wendy: Yeah, it’s not easy out there right now. You have to be cautious in everything you do and rely on your brain trust, seeking guidance from experienced individuals who have been through similar situations. There are many pitfalls in the industry, and the key is to avoid them. One way to do that is by actively participating in local groups, masterminds, and your local Real Estate Investors Association (RIA) groups. These avenues help you stay informed about what’s happening in your area. And when you encounter challenges, it’s important not to hide them.

Jack: Absolutely. That’s an important point. Many people try to conceal their difficulties and maintain appearances, but eventually, the truth comes out, and it can have devastating effects on one’s reputation.

Wendy: That’s precisely right. I’ve seen numerous cases where people hid their struggles instead of reaching out to experienced individuals who have faced similar situations. We’ve all experienced losses and encountered obstacles. The goal is not to dwell on the problem but to support and assist in overcoming it and achieving success.
We can’t provide loans to individuals who are out of business. We prefer borrowers who are actively engaged in their business endeavors, and we want them to continue thriving. So, it’s not just about doing the business; it’s about surrounding yourself with a network that uplifts and encourages you to improve. There’s enough opportunity out there for all of us.

Jack: Absolutely. You mentioned something interesting about the professionals stepping up and knowing how to run numbers tight. In the past, as you mentioned, there was some margin for error because the market could compensate for mistakes. However, in a stable or declining market, time becomes a crucial factor. The longer it takes to rehab a property, the fewer mistakes you can afford. Speed and accurate numbers are paramount because even a small $5,000 or $10,000 error can have significant consequences. Would you agree?

Bill: That brings us to the reason why we’re in the lending business.

Wendy: Yes.

Jack: Okay, tell me more about that.

Bill: Well, if you’re a contractor or a flipper, you bear all the responsibility. Everything falls on your shoulders, whether things go right or wrong. While you may earn more profit in terms of dollars, you also invest significantly more hours compared to other parties involved in the transaction.
On the other hand, being in the lending position allows you to control the asset without being directly responsible for it. You invest the least amount of man-hours into the project. If we calculate it on an hourly basis, lenders make more money per transaction than the property owners themselves.

Jack: That’s a valid point. Now, how do you structure your lending? Obviously, you don’t have an endless pool of your own cash. You didn’t win the lottery or anything like that. I know you’ve flipped houses and earned money, but how does your structure typically work? I understand you also have a fund. So, let’s discuss how you raise money and how it’s structured for the investors who come to you. What do they receive, and how is their investment secured? Please provide some insights into the workings of your system.

Wendy: Let me start by…

Bill: Can we start by sharing our background first?

Wendy: Yes, let me begin by telling you about how I initially entered this business in 2001 when I started working with Larry Goins. You’re familiar with Larry.

Jack: Yes, I know, Larry. We’re all part of a large mastermind together.

Wendy: That’s correct. Larry and I had a mortgage company together, specializing in investor-only loans. During that time, I noticed a pattern: one person had money but couldn’t find houses, while another had no money but found plenty of houses. So, I started lending their money to each other. At the time, I didn’t even realize it was called hard money lending. That’s how I stumbled into it, and that’s how the hard money business grew.
Eventually, I reached a point where I had raised $23 million from other people, specifically self-directed IRA money. It became a complex puzzle, juggling three people to be in the first position and lending money to another individual. It was getting out of hand. That’s when I convinced Bill to join me in 2012. He had actually introduced me to the business initially, but I kept showing him my bank statements, proving that I was making money. I pleaded, “I can’t do this alone anymore. I need your help.” So, he came on board, and together we started Carolina Hard Money. It was Bill who took charge of setting up the fund.

Jack: It seems that the brother-sister relationship isn’t so different from a husband-wife dynamic.
Wendy: That’s right.

Bill: Sometimes it is…

Jack: We do what our wives, or in this case, the lady in the relationship—your sister—tell us to do.

Bill: So, the fractionalized loan approach required a lot of energy, but it wasn’t very productive. We decided to start a fund, and all the initial investors we had were active investors. They actively reviewed deals, appraisals and made decisions about buying notes. With the fund, everyone became a passive investor without any say. So, we had to either retrain them or bid them farewell.

Wendy: Only about 25% of them actually came into the fund. Some weren’t accredited investors, meaning they didn’t meet the net worth or income requirements. Retraining the active investors to be passive was a challenge. However, over time, they realized why they should do all that active work when they could make nearly as much passively and still have safety. One advantage of a fund for investors is greater diversification. Our fund currently holds $20 million, with an average loan size of $200,000.

Bill: Not $200!

Wendy: $200,000. That translates to a significant number of loans. If a few of them go bad, it goes unnoticed. We allocate loan loss reserves as part of our expenses. It doesn’t affect the yield, but if someone had $200,000 invested in a single asset that goes sour, it doesn’t mean they’ll lose money, but they won’t make any until we figure out what to do with the property. It’s about strength in numbers.

Bill: And mentally, it eases anxiety about worrying over a deal that’s not generating payments. Our fund is designed to be simple. Our loans are interest-only, and the investors are equity members of an LLC. At the end of each quarter, we deduct expenses and distribute all profits to the investors. They can choose to reinvest and compound the returns or take it as income each quarter. It’s a straightforward process. I prefer simplicity.

Jack: What is the typical return?

Bill: Our expected returns, as stated in the documents, range between 7% and 9%. During the COVID year, we were in the 7% range, but for most of the time we’ve been in business, we have been in the upper 9s to 10%.

Jack: All right, very good. That’s actually very nice. And I love the fact that you actually allow them to keep it and compound it. That is really one of the key things that is not the case in most funds or even in private placements and multifamily syndications. Once a property is funded, you usually don’t need more money in the deal, right?
In your case, you’re looking to grow your fund continuously, so it makes sense to offer the choice of either taking the 9% or 10% return or reinvesting it to keep it working for you. It’s highly attractive because in a normal deal if you pay out the returns and people use the money for daily expenses or vacations, their money isn’t growing and compounding. But in your case, it does, and it’s a brilliant little tweak that I haven’t heard very often. So, that’s a really cool thing.

Wendy: It’s great for self-directed money too.

Bill: Exactly. That money would sit there anyway, but that’s the difference between owning a note or a piece of a note and being in a fund. When a note is complete, you have to look for another note.

Jack: Exactly. And if you get busy and that money comes back to you and sits there for three months before you invest it again for another three months, you end up making 10% for only six months of the year, bringing down your average return to just 5%.

Wendy: Yeah, I do that myself with my own money.

Jack: Oh, I do that all the time with my own money. It sits there, makes good money, and then it comes back. So, I love that idea 100%.

Bill: Yeah. So, those are the benefits of the fund. However, the downside of being in a fund is that if you’re a micromanager or someone who needs to be in control of everything, it will drive you crazy. So, if you have that personality type, funds may not be a good fit for you. But for most people, they don’t want a second job managing their money. They just want to watch it grow, and their due diligence is on the fund manager and the company, not necessarily on how the money is working.

Wendy: And that’s another good point you brought up. Whether it’s us or any other fund, it’s important to understand who the sponsors are, who the fund manager is. You need to know their track record, their character, their experience. Those are the questions you should be asking when considering any fund to invest in. It’s not just about the asset and how the fund is structured but also about investigating the sponsors because there are people out there who do good and know what they’re doing, and then there are others who are like Madoff-type characters.

Bill: Well, the vast majority of fund managers aren’t the Madoff-type. And even if things go wrong, they didn’t do it intentionally. Things happen.

Jack: No, I 100% agree with you. This is a key point in any investment you make. For example, if you invest with a rehabber and they are a lousy operator, they might waste your money on unnecessary things that don’t add value to the property. Then, they might struggle to sell the property because it doesn’t look good, or they abandon it, putting your money at risk. But if you invest with a clean, experienced operator, even if it’s not a fund, they will put your money to work, maximize every dollar, and provide a smooth experience. The same principle applies to funds and multifamily operators. In our case, we’re currently facing a situation where we bought a multifamily property six years ago, positioned it for sale, and it was hit by a hurricane causing $2 million in damages.

Wendy: Oh no.

Jack: The insurance company doesn’t want to pay, and our partner gave up, saying he can’t invest any more money. If that syndication had been led by someone who casually thought, “Multifamily is a good idea; let me raise some money while I have a job,” we would be left with a $2 million repair and no one to fix the property. We’d be forced to do a fire sale.

Wendy: That’s right.

Jack: However, since we are the right people, we stepped in and are investing $2 million of our own money into the deal. We just had a call with our contractor today, and we have to spend another $400,000 on air conditioning repairs alone because the hurricane destroyed them all. By the end of this year, we’ll have invested between $2 million and $2.5 million into that property. We won’t make any money from it, but we are committed to paying our investors back.

Wendy: That’s right.

Jack: And we have those reserves on the side. We never thought we would need them. But you know what? Because stuff happens, we now have the ability to use them. We have the lines of credit, we have the cash ability to put that thing in place, and that’s the difference between an operator that doesn’t know what they’re doing and an operator that knows what they’re doing. So, yes, you do need to check your operator; you need to check the principles, the syndicators, the people in charge because that’s where your return lives and dies by. I’m 100% sure of that.

Wendy: And your character too, Jack. I mean, you stepping up to say, “Hey, I’m gonna die before I don’t pay my investors back.” You know, that’s character. There aren’t a lot of people out there like that.

Bill: One good question to ask if you…

Jack: Unfortunately, you don’t know them until it happens, but then…

Wendy: That’s right. Yeah. That can be true.

Bill: A good due diligence question to ask for any operator is, how long can you operate with a 25% vacancy rate? Or let’s say 75%, in your case, a 75% vacancy rate? How long can you operate with that? Because, you know, you’re waiting on repairs. In our particular situation, how long can you run with only 75% of your current business model? If you lose 25% of your business, how long can you survive like that? The same thing with us. The money that we make is not transactional. It’s mostly from loan fees and interest payments…

Jack: You’ve got two income sources, the fees, and the interest. So, I totally get what you’re saying. You’re basically saying, well, if you lose 25% of your transactions and if your entire business is depending on the transaction fees, you’re in trouble. So, yes, that’s a good question to ask, like, how long can you operate?

Wendy: Right. Plus, you want to ask people about their scars. I mean, anybody who’s been through the wringer is more than happy to share what they’ve been through and how they got out of it. That’s what makes somebody strong—what have you been through that’s really knocked you to your core, and how did you get out of it? That’s the key. Did you walk away, or did you dig out of it? The person that dug out of it is the one you want to be doing business with.

Jack: Yeah. Actually, that reminds me of something I just heard the other day. They studied a whole bunch of people, including those who went through the horrible German Nazi times and were in concentration camps. They measured their happiness level later in life. It turns out that a lot of people who had the hardest hardships, including the concentration camps, later in life actually scored higher and were happier because they were put through the wringer. Of course, it was horrible, and nobody needs that in their life. But there’s something to be said that if life tests you and you come out of it and figure out how to make it through, you have a different level of appreciation. You also have a different level of performance in your life because it’s like, “If I was able to get through that, I can get through anything in life.” That’s the kind of people you want to surround yourself with. So, I 100% agree with that.

Wendy: Awesome.

Bill: Yeah. I think you hit on the appreciation factor. You do appreciate life more when it’s been tested.

Jack: Yeah. Well, in everything they say, there’s everything and everything you want to accomplish in life. People always have good ideas, and there’s the idea and the end result, but what people don’t see in the middle is the shit sandwich.

Wendy: That’s right.

Jack: So, the bigger the shit sandwich is—excuse my language here—and if you’re willing to go through it, and you’ve gone through it, the more you’ve grown and the more you can handle. The people who had the biggest challenges are the people that have the biggest abilities at the end because you don’t grow by doing nothing.

Wendy: That’s right. You’re not afraid of the unknown because you know it now; you’ve been there. The unknown isn’t as scary as it once was once you’ve been through all that.

Bill: And in business, failure shouldn’t be considered failure. Failure is a learning experience, and you just need to make sure you don’t do the same thing again.

Jack: Absolutely.

Bill: It’s okay to fail at things, just don’t fail at the same things over and over again.

Wendy: That’s just how it is.

Jack: If you have to re-learn the lesson a few or too many times, it’s time to look for something else. But other than that…

Bill: It’s time to be a W2 employee at that point.

Wendy: That’s right.

Jack: Yeah. Not everyone is made to be an entrepreneur. I mean, I love Gary Vaynerchuk. He talks about that, and there are other people out there. Not everyone is made to be the owner with all the stresses, tensions, risks, and everything that comes with it. Some people are made to become amazing number twos. And if you look at it, like, what’s his name? Steve Ballmer? If you look at most of the people in Microsoft, they’re like billionaires. They’re not owners; they’re not the founders. Bill Gates was the founder, and there was one other guy.
But on Apple, the same thing. Some of these multi-billionaires from Apple were just employee number three, employee number four, employee number five, and played a critical role in the company, but they never owned the company. So, there’s something to be said about that. Well, with that said, guys, let me see how can we help you. If somebody wants to invest with you or wants to learn more about that, how can they get ahold of you guys?

Bill: Well, it’s pretty simple, carolinahardmoney.com, or they can email me at bill@carolinahardmoney.com.

Jack: Right. Very good. That’s easy enough. And I think they can contact you and email you for both if they have deals that they need financing as well as if they want to invest money, right?

Bill: Correct.

Wendy: That’s correct.

Jack: Right. So, what’s the minimum criteria for a person to work with if they have a deal that they want money for? What are you looking for? And are there some parameters, like how many deals they have done, etc.? How long have they been in business or in the current market?

Wendy: Well, we’d like them to have at least a couple of deals under their belt. We want to make sure they have some money in the bank. A credit score needs to be at least 650, but really, we’re kind of looking at 680 at this point. We’d like to know that they’re involved in the area with small groups, investor groups, that kind of thing, constantly training themselves. So, those, and of course, the deal has to work. That’s key.

Jack: Very good, very good.

Bill: But they can run a scenario by us, and we’re not going to waste their time. The deal either has legs, or it doesn’t, and we’re happy to look at them.

Jack: Wonderful. Is there anything else that you want to share with us? I love the business model. I love the fact that investors get compounded. I love the fact that you’re careful right now, that you’re doing 70% after-repair value, that you require the partners or the actual rehabbers to have some experience. I mean, these are all little factors that make for a big shield and make it, if not recession-proof, then very much recession-resistant, so very much so.

Bill: I just want to end with the fact that single-family housing is not going anywhere. The problem with single-family housing is that we’ve had a shortage, and we’ve had it for a long time. We’re about, what, 5 million homes behind starting back in 2008 when a lot of people exited the industry, and we’ve never caught back up. So, single-family housing is still in demand.
Now, real estate is local, so there are areas where people are moving away from that may be losing a little bit of value, but if you stick in those areas, then you can easily pull up these stats. Go to U-Haul and figure out where all the trucks are going. You’ll know the areas where the prices are still holding. They may take a little bit longer to sell, even though interest rates are going up.

Wendy: People always need a place to live.

Bill: If you’re worried about your asset being backed or your money being backed by a solid asset, single-family housing is still going to be a pretty safe bet.

Jack: And the United States is also still one of the few countries where the population is growing. Now, obviously, there’s population growth in third-world countries, and that continues to be the case. But like China is about to go off a cliff population-wise. I mean, they realized they had the one-child policy, and they want to change that, and now people can have more than one child. But it’s almost too late because their entire population is now in their 50s, 60s, 70s, and they’re about to, as hard as it sounds, die off.
They’re going to have 30% to 40% fewer people in China in the next 40 to 50 years than they have today. Europe is the same thing. Europe is aging dramatically. I just was in Europe with my daughter, and she’s like, “Hey, I only see old people around here.” And it’s like, well, she’s 15, everyone over 25 in her mind is old, but she’s right. She’s right. There are some families with young kids, and particularly in smaller cities. As soon as these kids grow up, they go off to colleges, and they go off to the bigger cities. And in my particular case where I grew up, it’s one of the areas in Europe or in Germany where people go to retire, so it’s very pretty, so there’s lots of population, but they’re all older, and they’re all going to pass away at some point in time.
And if you look at that, the U.S. is one of the few places in the world; through immigration and other reasons, we’re still having net population growth. So, this shortage is not going to go away. I 100% agree with you. So, this is a safe area, particularly, you’re in the Carolinas, the Southeast, it’s a growth area of this country, you’re in a good spot with a good model. So, I love it. Thank you very much for being on the show.

Wendy: Thank you.

Bill: Thank you, Jack.

Wendy: Thank you for having us.

Bill: It was awesome. Appreciate you.

Jack: All right. With that said, guys, if you enjoyed this show, make sure you are listening to it on iTunes, give us a 5-star review, share it with friends. If you’re watching this on YouTube, as always, make sure you hit that subscribe button, hit that notification bell. And if you’re listening or watching it anywhere else, do the exact same thing. With that said, see you in the next episode. Thank you very much, guys.

The post Build a recession-resistant business with Wendy Sweet and Bill Fairman appeared first on The Land Profit Generator.

Hi, my name is David Van, and I went from a broken foot, a broken truck, and a one-bedroom apartment with no money to closing deals in 15 states and retiring my wife. I hope you guys enjoy this episode.

Jack: Welcome to our podcast. Once again, my name is Jack Bosch. I’m a real estate investor, land flipper, entrepreneur, husband, and dad. In this podcast, we’ll be discussing various topics such as success, real estate, and many other subjects. Today, our guest is David Van. David Van is a sales master, land flipper, real estate investor, and entrepreneur. However, I believe his greatest skill is his exceptional ability as a closer. He’s the best closer I’ve ever encountered. So, David, welcome to the show.
David: Yeah, hey, thanks for having me here. This is a lot of fun. We were actually discussing some of this on the way here, and I’m excited because I feel like today, we’ll be covering topics that nobody else is addressing. I don’t know why, but I’m really passionate about discussing them because these are things people need to focus on in their business right now, and they’re neglecting them. So I’m excited.
Jack: Awesome. So, David, could you give us a bit of background about yourself? Where are you from? What do you do? And so on.
David: Yeah, I come from a working-class family in South Florida. My father always told me to stay out of jail, and my mom used to ask, “Why can’t you just get a regular job? Why do you want to do anything with your life?” So initially, I didn’t have any goals. I just had a job. It wasn’t until I started believing in myself and observing others succeed around me that I began taking risks and challenging myself. That’s when my personal growth skyrocketed. I made early improvements that paid off, and now I’m proud to be where I am today.
Jack: Alright, awesome. So what do you do right now? How do you make a living these days?
David: Currently, I’m a land flipper. That means I acquire land under contract at a low price and sell it to someone else for a slightly higher price. That’s essentially what I do.
Jack: So you sell it for more than what you bought it for?
David: Yes, I sell it for more than I bought it for. I do this virtually, operating in 15 states. Although I live in Dallas, Texas, my primary focus is on Arizona and Texas. There’s a vast amount of land available. Interestingly, I once sold a piece of land in Hawaii to a gentleman in Pennsylvania. He was on a ladder in Pennsylvania, holding a nail gun in one hand and his phone in the other. I closed the deal over the phone in just one call because I created a sense of urgency. I’m really excited to discuss this further today.
Jack: Absolutely. That’s great. Also, you work with us in our coaching business, right? You’re a land expert in our coaching business, helping students find their own path to land success and determine which strategy and approach they should pursue. So, you interact with people a lot, right? You work closely with them. Now, from a sales perspective, what do you think is the biggest mistake people make when it comes to sales?
David: Well, I believe many people tend to turn the conversation into a transactional one too early on. In most cases, people need to know, like, and trust you before they engage in business with you, before they buy something from you, or even answer your call. Developing that kind of rapport and trust within the first few seconds of a conversation is crucial. When I train my team on closing deals and selling, I emphasize the importance of those initial seconds. Surprisingly, you’re already building trust right from the start.
So, my focus is on having a human conversation. We can address business matters shortly, but initially, I want to establish a connection with the person. I check in, show genuine interest, and build a rapport. We can discuss business later. The mistake people often make is rushing to the end, going straight to the finish line too early and too fast. The seller or buyer is not prepared for that, and it creates conflict and friction. The trust barrier is still high. You need to break down that wall of trust a bit before going for the close. Those who lack training, experience, a coach, or a network often fail to grasp this concept. There’s a trust barrier that must be overcome, and that’s what I focus on early on. It’s also what I teach and assist with. That’s where our success lies.
Jack: Right, let’s delve deeper into that because it’s powerful. Suppose I get on a call with you, and you want to sell me a piece of land. Let’s say I’m actively looking for land and have submitted my information. You can apply this concept to various scenarios, like walking into a car dealership with a sales representative. Obviously, you’re not the car sales guy, but let’s imagine you are. So, how do you initiate the conversation in a way that doesn’t immediately turn the person off? This is a common issue, as I receive calls throughout the day from individuals saying, “Hey, do you want to sell your houses here?” And even though I’m not interested, they appreciate the directness, allowing me to shut them down right away. But their intention was the opposite. How do you approach such a call?
David: Well, first and foremost, there are three essential steps: setting the agenda, qualifying, and closing. They must be followed in that order, number one. Secondly, I’m a strong advocate for visualization. I like to imagine two people in a canoe on a river. If one person is rowing in one direction and the other person in the opposite direction, we won’t make much progress. And if there’s a waterfall at the end and you keep fixating on it, thinking, “I need to hurry up and get this done,” you’re already setting yourself up for failure. People without experience, training, or education often perceive the waterfall to be just two feet away.
So, number one, when you answer the phone, whether it’s a buyer or a seller, introduce yourself and explain why you called. For example, “Hi, this is David. We haven’t spoken yet, but I wanted to quickly introduce myself because I’ll be assisting you with the property.” By doing so, you establish trust and provide a reason for your call. Then, you can move on to qualifying by determining if it’s a good fit, asking relevant questions, and seeking answers. Many inexperienced individuals neglect the importance of asking questions.
The key takeaway here is to consider what questions you’re asking and why you’re asking them. If you’re not asking the right questions, you won’t receive the right answers. And if you’re not getting the right answers, you won’t achieve the desired results. So, set the agenda, qualify, and then close. And you know what? If it takes five minutes, it takes five minutes. If it takes 45 minutes, so be it. Those 45 minutes can change your life forever.
Jack: So, asking questions. I understand that. I’ve noticed that many salespeople, especially those who are inexperienced or trying to enter the sales field, make the mistake of simply sharing all sorts of information about the property, the solution, or the product without asking the prospect about their specific needs. Is that what you’re referring to?
David: Absolutely. I also firmly believe that if you’re thinking about sales, you should stop using the word “sales” and start using the word “relationship.” When you approach conversations with that mindset, it becomes much more natural and fluid. Building relationships is something people have been doing their whole lives. Whether it’s making friends as a kid, starting a new job, or looking for a date, there’s a process to building relationships. If you’re solely focused on making the sale, that anxiety will seep through, I guarantee it.
Most of the time, when I explain things, I frame it in the context of a relationship dynamic. Imagine sitting at a bar, wanting to ask the person next to you out on a date. You wouldn’t just lean over and say, “Will you go out with me?” There are other things you can say to bridge the gap. Your role, whether you’re buying or selling, is to fill in those gaps, ask the right questions, and understand the nuances of the conversation. Often, you won’t know what those questions are until you’re on the phone with the person. Are they distracted? Are they paying attention? What are their goals? Do they have any questions for you?
I suggest being open and flexible. Avoid relying too heavily on scripts. Instead, focus on key aspects of the conversation and allow the dialogue to flow naturally. Once both parties are rowing in the same direction, everything will start falling into place. You’ll gain confidence and improve the conversation rapidly.
Jack: That makes sense. You’re building a nice relationship. You’re having a good chat. You’re laughing together, chatting together. Then at some point, how do you transition the call into the next phase?
David: That’s actually very easy. Most of the time, you’re asking qualifying questions like, “What got you interested?” They’ll provide you with answers. Then something magical happens. They start asking questions to you. That’s what you want. You initially start as a friend, and then, as the sales process unfolds, something really cool happens. You transition from being just a friend to becoming their trusted advisor. They ask you questions, and you provide them with answers. Because you’ve built trust and established a relationship, they want to take that further.
In sales, the focus is often on ensuring that the person you’re speaking with is the decision-maker. Once that’s established, addressing price and fit becomes relatively straightforward. Honestly, Jack, most of the time, they ask me for the close. I believe one of the biggest mistakes closers make in the industry is attempting to close before the lead is truly ready. In many instances, the lead asks me to close. They might say, “How do I pay for this?” or “Okay, send me the contract.”
Jack: How do I get started?
David: Exactly. They might ask, “How do we get started?” or “What’s the next step? Walk me through the process.”
Jack: That sounds like a lot of mastery. How did you come up with that? How did you learn it?
David: It came from making numerous phone calls, Jack. I must admit that I don’t have all the answers.
Jack: Because there were probably times when you didn’t do that, and then you realized, “Oh no.”
David: Absolutely. I’ve undergone a lot of sales training. What I’ve also come to realize is that you might be listening to this while driving, and you might be thinking, “Well, I have my own style and personality. I don’t want to change who I am.” Just like in a marriage, you don’t want to change your personality for your spouse. Instead, you want to find common ground. So, here’s my challenge to you. First and foremost, you need to introspect. I don’t know any successful salesperson who doesn’t understand their own strategy and strengths. It’s not a coincidence.
What I suggest is to look within yourself and ask, “What am I good at? Am I good at initiating relationships? Am I good at concluding them? Am I good at communicating?” You need to find some talking points, a story. In the industry, they call it a sales story. My sales story is that I’m the little guy. I’m interested in talking and getting details. I often say, “It’s just me, my laptop, and my dog.” That disarms people, and in my mind, I visualize the trust wall coming down, down, down, until eventually, they’ll jump over and say, “Come on, let’s go. I’m ready.”
Jack: Very nice. It’s not always about the features of the property, the program, or the thing, right?
David: Absolutely not. I would say, maybe 90% of the time; it’s not. And 90% of the time, it’s about the conversation and the relationship I build with them. Absolutely.
Jack: Very cool. Listen, guys, when you hear that, stop focusing on just knowing. Yes, you need to know every detail of the product you’re selling because if it comes up, you want to present it with certainty, confidence, and all the relevant details. But prioritize building the relationship because people buy from those they know, like, and trust. I love that because I would almost call it relationship selling, right?
David: Yeah, I consider myself very strong in that aspect. I want to be an ambassador for my products. I want to say, “Hey, listen, I use this. I love this, and this is why.” That’s why you often see infomercials hitting those key points and keywords. Personally, I like to use certain words strategically, such as “easy” seven times. If I’m talking to a seller, I want to say the word “buy” seven times. If I’m speaking with a buyer, I want to use the word “purchase” seven times.
There are specific keywords I employ to target the subconscious mind in a fluid, creative, and gentle manner. I don’t want to go in and start aggressively slashing and cutting off arms, so to speak. That’s not a conversation, that’s not a relationship—it’s just overwhelming someone. Nobody is truly happy in that situation. Neither the buyer nor the seller, and it’s not a sustainable approach.
Jack: Absolutely right. Let’s delve deeper into an important area. You mentioned learning through sales training, trial and error, and knowing yourself. Actually, it’s the same area. Let’s explore it further. By knowing yourself, does it mean that everyone has to do it exactly as you’re suggesting right now? Or if someone is more talkative, extroverted, and exuberant, while someone else is more introverted, calm, and speaks at a slower pace, how should they adapt their approach? Because from what I understand, you’re saying that they don’t have to become a replica of David Van. Everyone can develop their own style, but can they still apply these principles?
David: Yeah, a lot of people emphasize the keyword “confidence.” It’s a common theme in sales training and the industry. Confidence is about identifying something you excel at without needing anyone else’s validation. You just know you’re good at it. For me, it’s my mom’s chicken pot pie. When I think about my mom’s chicken pot pie, I absolutely love it. I could eat it for two weeks straight. There’s nothing better than my mom’s chicken pot pie. When I mention it to my mom, she proudly says, “Oh yeah, it’s my chicken pot pie.” Nobody can tell my mom how to cook that chicken pot pie. The confidence she exudes while making it in the kitchen is unwavering.
If I were training my mom on how to close sales and be a better seller, I would tell her that she is the best in the world at making chicken pot pie. I want her to have that mindset. I want her to act like she’s making chicken pot pie when she’s on a call with potential buyers or sellers. I want her to feel that emotion in her heart. Whether you’re a tech person, a social media influencer, or a landscaper, bring that same level of confidence to your interactions. When landscapers speak to clients, they confidently discuss where they’ll place palm trees, for example. That’s confidence.
When dealing with buyers or sellers, it’s important to have confidence because, as humans, we look for subtle cues that indicate whether someone is being truthful or not. Confidence serves as an indicator of honesty. Of course, you must also possess knowledge about your product and present yourself with good posture and assertiveness. Personally, I stand up and walk during my calls for about 14 hours a day because it helps convey confidence. I want the person I’m talking to, the person I’m working on a deal with, to know, like, and trust me. I want the interaction to be an exceptional experience for them. I want them to make a decision on the call and not call me back five minutes later to say they’ve changed their mind. Loss of confidence in the deal or in me leads to such situations, and I want to avoid that.
Jack: Absolutely, because they feel coerced into it. I don’t want that either. So, to wrap this up, can you provide a few tips, one, two, three, or as many as you like, for someone out there who wants to improve their sales game starting today? Let’s say they’re selling land, like many of our coaching students. We have numerous individuals who have never sold anything before but are now venturing into land sales and are unsure how to proceed.
During our coaching sessions, we guide them on having effective conversations with buyers and sellers, asking the right questions that compel them to close the deal. However, let’s provide value to everyone out there who wants to enhance their sales skills. What are a couple of things they can start doing today to become better at sales?
David: Yeah. Well, number one, I would definitely recommend doing some mirror work to improve your self-awareness and build confidence. Look at yourself in the mirror and speak the truth to yourself. When you can do that and see yourself looking back, your confidence will grow. If you struggle with confidence, practice your keywords, lines, and opening pitches while looking in the mirror. Keep it brief but impactful.
The first thing you should do when on a call is to introduce yourself properly. Maintain good posture, stand up straight, put the phone to your ear (without a Bluetooth device), and announce yourself with presence. For example, say, “Hey, Joe, this is David.” Avoid sounding like an infomercial person because that can turn people off. Standing tall and projecting confidence in your introduction sets a positive tone for the conversation. Then proceed to explain why you called them in the first place, focusing on the relevance to their needs in your industry.
Secondly, don’t hesitate to ask them questions about why the property or product is a good fit for them. Many salespeople make the mistake of trying to convince the buyer instead of engaging in a dialogue. Instead, ask questions like, “Jack, why do you think this property is a good fit for you? Why is this situation favorable to you? Why did you reach out to me today? Walk me through it.” This approach helps build a relationship and demonstrates genuine interest in understanding their perspective.
Lastly, don’t always be the one asking the closing questions. If you’re skilled and attentive and allow the conversation to flow naturally, the buyer will often ask the closing questions themselves. This makes the conversation smoother, more enjoyable, and more profitable for you. Remember, by slowing down the conversation and focusing on building a personal connection, you can create a better sales experience overall.
Jack: That’s great advice. I particularly like the tip about announcing yourself with confidence. I had a recent experience when I had to call a title agent to get some account numbers for a property purchase. I simply said, “Hey, this is Jack Bosch,” and remained quiet. It was a moment of expectation where I assumed he knew who I was. There was a brief awkward silence, and then he responded with, “Oh, yeah, Jack, Jess, how are you?” I realized that I could have applied this technique in a sales conversation as well. Just stating your name confidently and pausing can catch the other person off guard and pique their curiosity. They may start connecting the dots and recognizing you. So, in a sales conversation, announcing yourself with confidence, especially if you have already set up an appointment, can be effective.
Most of the time, that’s how it happens. Slow it down, everyone. One of the worst things salespeople often do, regardless of what they’re selling, whether it’s cars, lampshades, or solar panels, is rushing the conversation. Slow it down. Make it a personal conversation. Remember, the person you’re speaking to wants to have a conversation too. Not everyone wants to engage with a salesperson, believe it or not. However, they would love to speak with Jack Bosch, the husband, or with Patrick, their friend. So, make it personal and take the time to connect.
Jack: Absolutely. Those are great tips. Slowing down the conversation and creating a personal connection can make a significant difference in sales. Thank you for sharing these valuable insights.
David: Yeah. I would say, obviously, number one, no matter what you want to achieve in sales, whether you’re just starting out, aiming to improve, or seeking to increase your earnings, you need to have clear goals. If you lack confidence in your goals, take a moment to look at yourself in the mirror and truly understand what you want to accomplish. In sales, the conversation itself is the transaction. If you come across as desperate, overly eager, or forceful, it will create issues.
Knowing yourself, understanding your goals, and having confidence in them are key factors in my own success. I believe in establishing a connection with the person first. So, slow down, build that connection, and proceed from there. Take your time, everyone.
Jack: Alright, that concludes our podcast for now. Thank you very much, David, for joining us. We greatly appreciate it. If you’d like to follow David on social media, particularly Instagram, his handle is @davidvaninvest. Check him out, follow him, and you’ll find some excellent tips. Also, if you’re interested in land flipping or any related topics, find the links below, leave comments, like us, subscribe to our channel, and we’ll see you in the next episode.

The post From Zero to Hero: The Inspiring Story of David Vann’s Real Estate Success appeared first on The Land Profit Generator.

There is a common belief that you need to have a huge capital reserve to get started as a real estate investor. This might be true for a lot of real estate assets. However, you can, in fact, invest in real estate with no money if you know what real estate assets to target and the best methods to use to turn a profit with no money in the deal. 

In this article, we’ll walk you through exactly what to do and where to start.  

What are the best ways to invest in real estate with no money? 

As a real estate investor, your ability to grow your portfolio highly depends on how you raise funds to purchase properties. However, if you have little or no money to start with, you can still build and grow a successful real estate investing business. One of the best ways to get started or grow your business is to use other people’s money to fund your deals. 

The following article lists the most common methods real estate investors use to do deals with no money down while still making impressive profits. 

Hard or Private Money Lenders 

If you have identified an excellent opportunity in real estate but don’t have the liquidity to do the deal yourself, you still have options. One of the most common ways to do real estate deals with no money down is by getting a hard or private loan from a money lender.

If you can’t get a loan from a traditional bank, a hard loan or private money lender will award you a loan that will enable you to close the deal. However, hard and private loans are subject to strict terms and conditions that are likely to favor the lender. You can also expect higher interest rates than you would receive from a commercial or private bank.   

Wholesaling 

When you do real estate wholesaling deals, you don’t have to buy a property to flip it.  

The first step to a wholesale deal is to find a property owner interested in selling their property for below market value. You would then get the property under contract, allowing you to market the property to prospective buyers for a fixed term.  

You will need to find a buyer prepared to pay substantially more than the seller asks for the property. The difference between the seller’s asking price and the amount a buyer is willing to pay is retained as profit by the wholesaler.

When wholesaling, you will need to find properties selling for much lower than the market value to make a reasonable profit. Most wholesalers target distressed properties to achieve the margins necessary to make this method profitable.  

When wholesaling land, it is a lot easier to find properties on the market for cents on the dollar and flip them to the right buyer at a significantly higher margin.   

Seller financing 

One of the most attractive ways to invest in real estate with no money is to use seller financing. When buyers are unable to secure a loan from financial institutions, they may opt to enter into a seller financing deal from the seller.  

In this model, you would find a property and cover the upfront costs of the transaction using the buyer’s down payment. You will then contract with the buyer to settle the difference over a fixed term.  

Seller financing is one of the best ways to get started in real estate investing using raw land. Financial institutions do not offer loans for the purchase of undeveloped land. As a result, seller financing is very common and very effective in land deals. 

The Double Close 

The double close method is another highly effective way to invest in real estate with no money in the deal. The secret to double closing on a property is to contract with a seller and a buyer simultaneously but separately. For example, you would find a property for sale below market value and place it under contract with the seller. At the same time, you will seek a buyer willing to pay closer to market value for the property.  

You would then close the deal with the buyer, use their money to pay your seller, and keep the difference as profit. A double closing is a very effective way to build your real estate profits without affecting your cash flow.  

Why is it easier to invest in real estate with no money using raw land? 

If you have little or no capital available to start doing real estate deals, raw land is the best asset to get you started.  

Land lots are generally more affordable than houses, multi-family units, or commercial properties. When you are flipping raw land, there are no costs associated with repairs or alterations. With the proper knowledge and skills, you can get started in real estate without ever needing to spend a dollar on a property. 

You must keep in mind that you will need to invest in the proper real estate education to reduce your risks and fast-track your progress. You will also need to cover a few business costs, such as marketing and administrative fees. However, real estate investing is the most reliable way to build financial freedom, so a small investment in a qualified coach has the potential to get you on the road to creating the life that you want to live. 

The post How To Invest in Real Estate with No Money  appeared first on The Land Profit Generator.

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https://podcasts.apple.com/us/podcast/forever-cash-life-real-estate-investing-podcast-create/id980606803 

https://open.spotify.com/show/1GuL6hjnkOI941HdSMn6vV

What Is Imposter Syndrome?

Have you ever felt that you are not the person others believe you to be?

Do you sometimes feel that your internal reality is at odds with where you are in your relationships, career, or community? This feeling is common and is often a side effect of growth.

There are two major types of imposter syndrome that I have dealt with in my life. The first is when my environment has grown, and I am trying to catch up. The second is when I have grown, but my environment has not, and I am afraid to make the changes I need to be my true, genuine self.

Self-doubt is a normal response to change. When you find yourself in a new and challenging environment, it’s normal to question your ability to succeed. At the same time, when you outgrow your environment, it’s not unusual to find yourself questioning your life’s purpose and feeling like you have to ‘fake’ your way to happiness.

The best solution for both situations is to take the necessary action to foster a balance between your environment and your capabilities, dreams, and true purpose.

Dealing With Imposter Syndrome When You Are In A New Environment   

One of the most exciting things that you can do in life is seizing an opportunity that will allow you to realize your full potential. At the same time, one of the most frightening things you can do is push out of your comfort zone and take on something great but that you don’t necessarily feel equipped to handle.

Feeling afraid that you are not as competent as you need to be to succeed is normal when you step up to a new challenge. You can either give in to your fear and walk away from your dreams, or you can push yourself to become the person that your dreams need you to be.

In my experience, the best way to overcome this kind of imposter syndrome is to find a mentor and push through your fear by doing the work. Doing is the best way to learn, and the more you do, the more competent will become.

Dealing With Imposter Syndrome When You Have Outgrown Your Environment

The second kind of imposter syndrome I have experienced is when I find myself in an environment that no longer suits my needs or potential.

Have you ever found yourself in a relationship, job, or community that used to be a good fit but somehow no longer fulfills your needs? When you have grown professionally, emotionally, and spiritually, but your environment stays the same, you may start to feel discouraged, disengaged, and despondent. You might spend a lot of time trying to convince yourself and those around you that everything is okay, but you still feel like a fraud.

When this happens, the best way to change your situation is to walk out on whatever is holding you back and keeping you ‘comfortably miserable’. Find a new environment that will allow you to achieve your dreams and vision for the future that you want to live. It might be frightening to walk away from the job, people, or place that you have associated with comfort, but if you don’t, you may spend the rest of your life faking happiness while your dreams pass you by.

Overcome Imposter Syndrome By Building The Life You Know You Deserve

If you are comfortably miserable in your life or are searching for a new environment to build your wealth, find your freedom, and live the life you were meant to live, we encourage you to reach out and join the students that have transformed their lives through land investing. Our 12-month incubator program is designed to give you the skills needed to master this unique business opportunity while supporting you as you grow into the business leader that your dreams need you to be.

Book a call to find out if this is the opportunity that you have been looking for to escape your imposter syndrome and grow into the person you are meant to be.

The post Two Types Of Imposter Syndrome And How To Overcome Them appeared first on The Land Profit Generator.

As real estate investors, we are all aware that the markets are changing. Official Interest rates are up to a record-setting 8.6%, pushing the FED to raise interest rates by 75 basis points in mid-June. The 2008 market crash and subsequent recession demonstrate how important it is for real estate investors to be proactive when responding to changes in the market.  

Listen to this week’s episode of the Forever Cash Podcast with Michelle Bosch to discover how to succeed in as a real estate investor in 2022.

Listen to the Forever Cash Podcast on Spotify HERE and don’t forget to SUBSCRIBE:

What Market Factors Are Affecting The Real Estate Market In 2022

We have seen several forces come to bear on the US economy over the past two years, which have directly and indirectly contributed to market volatility.

We have experienced significant disruptions across every sector of the economy due to the pandemic. In the post-pandemic economy, we continue to deal with disruptions to the labor market, with the Great Resignation driving up the cost of labor across sectors. The Russian- Ukrainian conflict, and resultant sanctions against Russia from the West, continue to disrupt trade on a global scale, hitting the energy markets particularly hard. All of these factors have placed pressure on the US economy resulting in high inflation levels.

In mid-June, the official inflation rate was set at 8.6%. In response, the US Federal Reserve raised its benchmark interest rate by 75 basis points, marking its most significant rate hike in 28 years. As a result, debt is a lot more expensive than it was just a year ago, which will directly affect the real estate market.

The cost of mortgaging a property will increase for prospective homeowners and real estate investors. As a result, now is an excellent time to look for real estate assets that you can buy and sell without financing the property through the bank.  

How To Succeed In Real Estate Investing in 2022

The real estate market is vulnerable to increases in interest rates when buyers and investors are reliant on banks to provide funding for deals. Fortunately, not all real estate deals are funded using debt. Over more than 18 years of experience as real estate investors, Jack Bosch and I have continued to buy and sell land, regardless of the market conditions, as land deals are not funded by mortgages!

Many of our Land Profit Coaching students continue to wholesale land, making 6 and 7-figure profits without taking on debt, needing to apply for a bank loan, or raising private capital. You can buy a piece of land for a few hundred dollars and flip it for several thousand dollars, with none of your own money in the deal. As a result, land flipping is the hidden real estate market that will continue to turn profits despite market volatility.

Learn how to mine the hidden gap in the real estate market

If you are interested in learning how to be a successful real estate investor in 2022, join us for our upcoming training session, Crack The Wealth Code: 5 Steps To Mining The Hidden Gap In The Real Estate Market, on Wednesday June 22.

During the FREE special meeting, we will unpack the current state of our economy and what investors like you can do to overcome the pain and find the hidden gap in the real estate market that continues to outperform all asset classes no matter what is happening in the broader market.

Make sure to register TODAY

The post How To Succeed As A Real Estate Investor in 2022  appeared first on The Land Profit Generator.

I have been a highly successful real estate investor for more than 18 years and have discovered seven reasons why flipping land is better than flipping houses.

If you are familiar with the Land Profit Generator family, you will know that we are a community of highly successful real estate investors. What sets us apart is that we have discovered a gap in the real estate market far superior to traditional house flipping. Our secret, learned through trial and error by my wife, Michelle Bosch, and I, is that FLIPPING LAND is better than flipping houses.

In this episode of the Forever Cash Podcast, I take you through the seven powerful reasons that LAND is a superior asset class for real estate investors that want to make consistent active and passive income through real estate investing.

SUBSCRIBE to the Forever Cash Podcast on your favorite platform and never miss an episode:

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https://open.spotify.com/show/1GuL6hjnkOI941HdSMn6vV 

Why Flipping Land Is Better Than Flipping Houses

Investing in real estate as a trusted way to build meaningful wealth is well established. The problem is that traditional house flipping is highly competitive and expensive, requiring a lot of time and energy to succeed.  

Fortunately, there is a way to build your wealth as a real estate investor without dealing with all the complications inherent in the house-flipping world.

There are seven powerful reasons why land flipping is better than flipping houses, especially if you are looking to build lasting and meaningful wealth.

1.      Land flipping provides a higher return on investment

As professional land flippers over the past 18 years, Michelle Bosch and I have enjoyed ROIs of anywhere between 100% – 2000% on land lots that we have bought and sold. You are unlikely to achieve ROIs anywhere near this level when you are flipping houses.

When wholesaling undeveloped land, you don’t have to deal with any of the overheads that traditional house flippers have to account for when flipping a home. No contractors, home improvements, or mortgage costs need to be worked into the deal. In addition, people who own land lots they are not using are far more willing to let their land for cents on the dollar. With far lower acquisition costs, there is a lot more room to make a profit on a raw land deal.

1.      Easy Seller Lead Generation

One of the most remarkable reasons flipping land is better than flipping houses is that it’s a blue ocean market. In other words, there is a whole lot of land across the USA, and plenty of potential sellers do not want the lots they own. There are always a lot of people looking for land to develop and enjoy. However, there are only about 1000 professional land flippers active across the USA. As a result, the is a lot of supply and a lot of demand, but very few investors. Our Land Profit Coaching students are very successful at taking advantage of this opportunity.

2.      You don’t have to raise a lot of capital to flip land

When buying and selling homes for profit, the first obstacle you need to overcome is raising capital to do the deal. Fortunately, this is not a problem for land flippers. Land is a lot more affordable in comparison to houses. You can pick up a lot for just a few hundred dollars. As a result, there is no need to finance your purchases with a mortgage or through private funding. In addition, you can use the double close method, which allows you to get a property under contract and find a buyer. Once you have a buyer, you can use their money to pay the seller and keep the profits. Find out more about double closing on land lots HERE.

3.      Land is a recession-proof asset

In 2008, thousands of real estate investors went bankrupt when the real estate market crashed. During this time, Michelle and I continued to buy and sell vacant land lots, creating both active and passive income, forming the foundation of the real estate empire we control today.

You must be wondering why we were spared the real estate crisis. The answer is that only about 10% of the lots we buy and sell go to property developers. The vast majority of lots are bought by private individuals with the disposable income to purchase land regardless of what is happening in the market. Land deals are not funded by the bank and therefore are not affected by the interest rate. As a result, land investing is recession-proof!

4.      You don’t have to use your own money when flipping land

One of the most significant drawbacks to flipping houses for profit is the risk of financing a second or third home or sinking all of your savings into the investment. One of the best things about flipping land is that you don’t have to buy the property before finding a seller! We call this the double close method. Once you have found a willing seller, you put the property under contract for a specified period. You are then able to market the property and secure a buyer. Once the buyer accepts your offer, you use their money to pay off your seller, and you get to keep the difference.

5.      Create passive income with land

One of the greatest myths in real estate investing is that you can’t generate passive income from land lots. However, when you use the Land Profit Generator Seller Financing deal structure, you can create consistent passive income from your deals.

Seller financing is one of our favorite ways of generating wealth with land. The key is to get the buyer to pay for your deal’s costs with a down payment. Once the downpayment is made, you can contract with the buyer to pay for the property in installments over a fixed term. Learn more about flipping land with seller financing HERE.

1.      No tenants, toilets, or termites

The final and most compelling reason why flipping land is better than flipping houses is that you can enjoy all of the benefits of being a successful real estate investor without having to deal with all the complications of houses.

Any house flipper will tell you there is nothing ‘passive’ about the income you generate when dealing with contractors in the fix and flip model. Rental units are no better, as tenants come with many other complications. When you are wholesaling land, you don’t have to do anything to the property before you hand it over to the buyer. While a residential deal can take months and sometimes years to yield a return, we have managed to buy lots one day and flip them the next, with MASSIVE ROIs.

If you would like to find out why flipping land is better than flipping houses firsthand, visit www.landcoaching.com to speak with one of our land experts today.

The post 7 Reasons Why Flipping Land is Better Than Flipping Houses appeared first on The Land Profit Generator.

Several factors will determine what a developer can do with a vacant lot. In the following article, we will share some tips to help determine if a land lot is buildable before purchasing.

Start With Your Due Diligence

One of the most critical processes you will need to master as a land investor is doing due diligence on any land lot you intend to buy or sell. Your due diligence can include everything from an appraisal to a per-location test to a trip to the courthouse to conduct a title search. Your due diligence should thoroughly investigate the factors determining whether your land lot is buildable. If you intend to market a lot to a developer, you might want to find an experienced builder to help you through the due diligence process. This is the best way to find out if land is buildable.

When conducting your due diligence, with the view to establishing whether the lot you are interested in buying is buildable, you will need to consider the topography, access to infrastructure, and zoning restrictions to get a complete picture. Once you have all of these facts, you will have a better idea of what a developer can do with your land lot, which will strongly impact your fair market value.

How Long Should Your Due Diligence Take?

According to Jack Bosch, the founder of the Land Profit Generator and one of the most experienced land investors in the USA, “your due diligence can take anywhere from a week or two to a few months. That is why we strongly advise our students to start the land acquisition process with neutral letters, rather than blind offers.”

When you do blind offers on properties, you must do your due diligence on every single land lot you have identified in a county before you send a blind offer. The problem is that you might end us doing hours of work on a land lot, send a blind offer, and the landowner simply ignores you. This happens in most cases, which is why we suggest you only start the due diligence process once you have established that the landowner is willing to sell.

Therefore, before you start finding out if a land lot is buildable, it’s advisable to establish that the landowner is, in fact, willing to sell.

Schedule A Perc Test

When doing your due diligence before buying a property, the first thing you should consider doing is a percolation test (known as a perc test.) If you want to find out if land is buildable, understanding the water and sanitation restrictions is essential.

A perc test determines the water absorption rate of the soil on your lot. If your lot is not connected to piped water and the municipal sewer system, your perc test will determine if a septic tank can be installed on the property.  

A perc test is conducted by drilling or digging a hole in the ground and pouring water into the hole. The rate at which the water drains away is then recorded. The perc test can only be conducted by a licensed excavator or engineer. You will incur costs when commissioning a perc test on a land lot, which you will need to consider as a land investor.

It’s a good idea to make sure that the landowner is, in fact, serious about selling their land before incurring costs to ensure that you don’t lose money on the deal.

Access To The Property And Identifying Any Easements Or Encumbrances

Properties that are accessible by road are more valuable than land-locked properties. One of the first things you will want to establish is if the prospective lot is accessible by road. A property with neither legal nor actual road access is classified as landlocked.

However, if the county records show an easement to the property, there is the legal right to access it. An easement is the right to use or enter someone else’s property without owning it. It means you can take a backhoe and grade the road over that easement into their property. The owner of the land the easement is on cannot prevent you from doing it. The rights for the road are already established, even if the road doesn’t exist.

You will get an accurate understanding of legal access to your property by conducting a formal survey of the land.

Municipalities Can Be Your Best Friend Or Your Worst Nightmare: Familiarize Yourself With Their Ordinances

Land use is governed by a wide range of local, state, and federal regulations. Once you have all the information you need about the topography of the land lot and its suitability for building, you need to establish the legal status of the lot. This is a key to find out if the land is buildable.

Most properties will come with some limitations, and you must know what those limitations are. Potential restrictions include zoning, building codes, subdivision regulations, and deed restrictions.

The most common form of land-use regulation is zoning. Zoning regulations and restrictions are used by municipalities to control and direct the development of a property. Your local zoning laws will determine the zoning district of the property. Fortunately, zoning ordinances and maps are public records — freely available to every potential land investor.

Fortunately, zoning restrictions can be challenged. Zoning regulations are based on factors including the needs of the municipality; the location, size, and physical characteristics of the land; the character of the neighborhood; and its effect on the value of the property involved. Over time these factors can change. If you believe that the zoning of the property is not in line with the changing needs of a community, you can apply to have the zoning reviewed. It’s advisable to consult with a certified zoning lawyer if this is an avenue that you are considering.

What do you do with unbuildable land?

Once you have completed the due diligence process, you will have a clear idea of whether the land in question is buildable. If the land offers a solid opportunity for developers, you will be able to market the lot accordingly.

However, if it turns out that the lot is unbuildable, it does not mean that you have to walk away from the deal. The first thing that you will want to do is inform the seller. Any offer you put on the table will be in line with a lower fair market value, based on the fact that the land is not suitable for development. Your next step is to find the right kind of buyer for the lot. Many buyers are looking for land lots they do not intend to develop. This includes camping enthusiasts, RV hobbyists, and recreational hunters, to name a few.

Jack Bosch points out that “only about 10% of the lots that we flip are ideal for developers. Our best buyers are private individuals who want a piece of land to enjoy.”

Learn more about how to sell rural land lots HERE.

The post Buying Land: How To Find Out If Land is Buildable BEFORE You Purchase appeared first on The Land Profit Generator.

What Is A Land Contract? A Compromise For Both The Seller And The Buyer 

A land contract is a written legal agreement used to purchase various forms of real estate – including the likes of residential and commercial properties as well as industrial or farmland. 

A land contract could be considered similar to a mortgage in the housing market.  IN this case, however,  the difference is that the buyer makes payments to the real estate owner, or seller – instead of a bank – until the purchase price is paid in full.

What Are The Rules For A Land Contract And How Do They Even Work? 

A land contract is typically between the buyer and the seller. 

Here’s the basic foundation for an agreement: the seller agrees to finance the property for the buyer in exchange for the buyer meeting the terms agreed upon in the land contract. In most land contracts, the seller keeps the legal title to the property until the land contract is fully paid off. While, on the other hand, the buyer is able to build up equity in the property. 

The Wrap-Around Land Contract 

This is a little more complicated, but, essentially, the buyer and seller agree to a seller-financed land contract, but the seller keeps paying on their existing mortgage. See how it gets a little tricky?

It still works for both parties because the seller can keep the difference between their mortgage payment and what they are paid on a monthly basis by the buyer. Unlike a straight land contract, however, the buyer gets the deed to the property immediately in a wrap-around land contract. They own the home. Again – a little tricky. 

Here’s the catch, the seller’s lender has to agree to a wrap-around land contract because it means they won’t be getting the full payoff amount. They are only getting what the seller gives them.

To make up for the difference in risk, the lender also takes a junior lien position in these agreements so they can take possession of the home if the seller holding the original mortgage stops making their payments.

The Many Potential Facets Of A Land Contract

Land contracts typically have installment payments due as agreed between the buyer and seller. In many cases, there is a balloon payment to satisfy the loan terms.  There are many facets of a properly executed land contract so let’s dive into what those various frameworks could look like:

Sales Price

At what number is the property being sold? That’s the sale price. Like in every loan, once you pay off this amount of principal, all of the obligations under the land contract are satisfied. If it’s a straight land contract, you’ll get the legal title at the time of payoff.

Down Payment Amount

Like in most loans, the seller will require a certain amount of guaranteed money up front. That down payment is due at closing and may be calculated as a percentage of the sale price or as an independent flat amount in the contract.

Interest Rate

The interest rate is agreed upon by the buyer and the seller. It is also determined in advance if the rate is fixed or variable.  If the rate is fixed, it will always be one percentage number for the full terms of the loans.  If it is variable however, the timing and conditions under which the interest rate could change should also be defined in advance – and also if there is a cap to how much it can change.

Payment Amounts

The amount of your payment should be spelled out along with how often it needs to be made, monthly or otherwise. Check to see if the contract has specific due dates and late fees. More importantly, note if there is a balloon payment due at the end of the loan term or if there is a penalty for paying the loan off early. 

Responsibility Of The Parties

This is pretty basic – everyone is responsible for certain actions in the loan.  In other words, the buyer agrees to make the mortgage payment and the seller will keep track of the payments. But what happens if there are any missed payments? Are they allowed? If so, what’s the timeline for paying them back, and under what conditions might the buyer become delinquent to the point that the seller takes the property back?  Both parties need to be fully clear on the terms. 

Title Settlement

A buyer needs language in the agreement which states they receive the legal title once all terms of the loan are satisfied.

If it’s a wrap-around mortgage, it is prudent to ensure the seller will make payments on the underlying existing mortgage. That way, the buyer can take legal action if they lose the house as a result of the seller not satisfying their end of the agreement.

Is “An Agreement To Convey” The Same Thing As A Land Contract? 

All of the different terms for real estate acquisition can sound very similar, and it’s easy to get lost in all the terminology. For instance, a land contract may sound similar to a lease with an option to buy (AKA: a purchase option) or even a “rent-to-own” agreement – but they are very different. A land contract is an agreement to purchase, whereas a lease or rent option is not.

Whereas “An Agreement To Convey” is actually the same thing as a land contract. Here are the many names which also refer to a land contract.

• Land contract of sale
• Land sale contract
• Real estate sales contract
• Land installment contract
• Installment sales contract
• Agreement to convey
• Agreement for purchase and sale
• Contract for deed
• Articles of agreement for a warranty deed
• Executory contract
• Contract for sale
• Poor man’s mortgage

How Does A Buyer Protect Themselves During The Land Contract Negotiation Process? 

There are many land contracts consummated every single day in the real estate world, and nearly all of them are above board. But, if you are considering a land contract, there are a number of steps you can take to better protect yourself during the negotiation process – just in case, you feel like your seller isn’t as trustworthy as you would like them to be. 

Do your research. Do an online search for “land contract” and the name of the state, and another search for “land contract” and the seller’s name, to look for red flags.  Do not engage with anyone if there is even a hint of a red flag to their name.

Title search. It’s important to hire a reputable title company to do a title search and issue an owner’s title insurance policy before signing a land contract. Without the search, or the proper title insurance, you’re taking an unfathomable risk that someone other than the seller may have a claim to the property. Here’s the problem, if they claim ownership of the property, and that claim supersedes the claim of the seller – your sale is essentially null. Meaning, you don’t own the property. 

Escrow service. Another smart way to protect yourself as the buyer in a land contract deal is to use a third party to hold the deed to your property throughout the payment period. There are plenty of options like an escrow service, attorney or financial institution. This is important because the seller shows good faith that they do intend to transfer the deed to the buyer once the buyer makes all the agreed-upon payments. At the same time, though, the escrow service protects the seller by returning the deed if the buyer does not make the payments.

Appraisal. To make sure you’re paying a fair price for the home, order an independent, professional home appraisal. You’ll pay a few hundred dollars for the assurance that you’re not overpaying for the property. At a minimum, ask a local real estate agent if they’d be willing to give you their opinion on the home’s value.

Home inspection. DO NOT SKIP THE INSPECTION. EVER. Unless you intend to bulldoze the whole property. Your primary job is to make sure your investment is in safe and sound condition before you buy.  As such, get a professional home inspection. While many land contract homes are sometimes in dreadful condition, you just need to check the actual structure to protect yourself first. 

Legal recording. The seller needs to file a summary of the land contract, with the local municipality called a “memorandum of land contract”.  This document should include the buyer’s and seller’s names a legal description of the property, and it should be signed by both parties in front of a notary. This is important because it formalizes the agreement and its existence becomes a matter of public record to protect the buyer’s interest in the property.

Less Legal Protection Means More Risk For You – What Are The Pros And Cons Of A Land Contract? 74

Pros

• This kind of financing can be easier to obtain because the terms can be anything that works for the buyer and seller.  It doesn’t have to be heavily regulated like a traditional mortgage, and it doesn’t have the same overwhelming terms of a hard-money loan. Whatever you agree to is how it works. 

• Land contracts provide a way to buy a low-cost property when a small-dollar mortgage isn’t an option.  If you want a property, but can’t find the right terms for not coming up with your own money, then a land contract can make this kind of deal possible.

• There are no mortgage origination fees, and other normal closing costs are optional.  

• Refinancing with a traditional mortgage after the buyer improves their credit and saves up a down payment is still an option! 

Cons

• Sellers don’t often offer favorable terms in a land contract deal.

• Because of the lack of regulation, land contract interest rates may be much higher than conventional mortgage rates.

• Even if the buyer tries their best to close every loop, they could lose the home if the seller stops paying the mortgage for any reason.

• Due to the low regulation, state laws may not provide strong protections for the buyer in a land contract deal.

• Furthermore, low regulation can make it much more difficult to foreclose on a non-paying buyer, depending on state law. In fact, the process could take a year or potentially even longer.

• Refinancing is still possible, but it may not be possible under certain conditions. For instance, if the property is in poor condition, the buyer’s credit isn’t good enough, or the home value is too low.

• Part of owning a home is the collateral it affords in future deals.  But with a land contract, the buyer may not be able to use the land contract as collateral for another loan and may not be able to assign or transfer their interest in the property until the contract is satisfied.

The post What Is A Land Contract? An Effective Alternative Anyone Can Use To Acquire Land appeared first on The Land Profit Generator.

Buying and selling land for profit is a proven way to build your wealth in real estate without all of the hassles of houses. The Land Profit Generator Coaching team are experts in bringing people to success as land investors using the tried and tested Land Profit Generator method.

Learning How To Communicate with Your Buyers and Sellers

While flipping land is much simpler and faster than flipping houses or multi-family units, there are a few steps in the deal-making process that will directly affect your success.

One of the most important skills you need to develop as a land flipper is communicating with buyers and sellers. The Land Profit Coaches have all had years of experience speaking with sellers and buyers and have learned through experience the best way to engage with these critical stakeholders in your land flipping deal.

Tune into this week’s episode of the Forever Cash Podcast to discover:

• How to build a relationship with your seller
• The frequency that you should reach out o your seller while you have a property under contract
• How much to tell your seller during the deal-making process
• How to engage with buyers to make sure you close the deal

You can tune into the Forever Cash Podcast on your favorite podcast platform HERE:

https://podcasts.apple.com/us/podcast/forever-cash-life-real-estate-investing-podcast-create/id980606803 

https://open.spotify.com/show/1GuL6hjnkOI941HdSMn6vV 

If you are curious about how you can up your game as a land investor by collaborating with a Land Profit Coach like Jeff, book a call with one of our team TODAY!

www.landcoaching.com

The post Communication – The Key to Flipping Land appeared first on The Land Profit Generator.