How to buy Rural Land at an 80% discount (Part 1) - The Basics
The investment gains on land are made at the time of purchase
Investing in rural land is one of the most prolific ways to build low-maintenance passive income. Not only does it require zero maintenance, it allows for the use of Real Estate Contracts (in certain states) which keeps your ownership of the land, but pays you income every month. Since banks refuse to make loans on rural land, you can charge triple or even quadruple the current interest rate that banks are offering for a home mortgage (the interest rate on my land contracts is 7.99%). You can even include a balloon payment in the contract that requires the buyer to make full payment on the contract on a specified date, usually at the 10 year mark. However, the characteristic that makes rural land investing so appealing as an investment class, is the ability to purchase the asset at extremely cheap valuations. It is not uncommon for a savvy investor to buy rural land at a 60-80% discount, sometimes even as low as a 95% discount.
Why are such incredible deals able to be proffered on vacant rural land? Three reasons: 1) When economic times are difficult, rural land is the first thing people sell. 2) Rural land has a high percentage of out of state owners who are less emotionally attached to the property. 3) People who inherit rural land are often very quick to sell since the land was the dream of their parents, not themselves.
This is not to say that all rural land owners are willing to sell their land at cheap prices. In fact, many land owners won’t sell their farm, ranch, or recreation land for any price. The key to rural land investing is to identify which owners are likely to sell at a discount. The easiest way to find owners who may be willing to sell at a discount are to find owners who are delinquent on their property taxes. In most states, owners are given a two-year period to pay property taxes after which their property is sold in a tax auction. Some rural land investors will buy property at tax auctions, hoping to outbid the other participants. This is futile however, and rarely produces significant discounts.
The key to getting great discounts on rural land is identifying owners who are delinquent on their property taxes and making them an offer to purchase their land BEFORE the property is sold at a tax auction. The process for this is very simple, albeit slightly tedious. First, you need to choose an area of the country where you would like to purchase rural land, then narrow it to a specific county. Navigate to the county website and request the delinquent property tax list. Comb through the list seeking two specific things: 1) rural land owners who have been delinquent on their taxes for at least one year and 2) owners who live out of state. Alternatively, you can find numerous real estate database services that will amass this information into a spreadsheet for you. One of the ones I use is Agent-Pro, but there are many variations.
Once you have identified the land owners who live out of state and are delinquent on their taxes, you can begin making offer letters by mailing them to the owner addresses listed on the property records at 50-80% of market value. Surprisingly, many owners of rural land will be happy to have their taxes paid off and make some cash on that land they haven’t used in years. Imagine the land owner in Arizona that hasn’t gone camping in ten years or the owner who inherited their Grandfather’s hunting land in Maine, but do not hunt themselves. You would be surprised at how willing people are to sell off assets that have no personal use to them when they are offered cash. The only alternative for the land owner is to keep paying property taxes on land they never use or hire a realtor to sell their property.
Although it is surprising how many people are willing to sell their land when offered cash, I want you to remember, that this is a numbers game. You may mail out 200 offer letters and only get five responses which may lead to only one sale. That is perfectly fine, because you are getting to purchase assets at an 80% discount. Where else can you do that?
In part 2 of “How to purchase land at an 80% discount” , I will discuss how to value the property so you know what to offer, how to word the offer letter for maximum success and how to overcome seller’s objections and finally, how to sell the property to create a stream of passive income. Part 2 will only be offered to my paid subscribers since it will offer proprietary information and my personal land purchase advice.