Becoming Dirt Rich: How Raw Land Investing Builds Passive Income & Wealth
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Hello, this is Richard Jacobs with the Finding Genius podcast. My guest today is Mark Podolsky. He's the author of Dirt Rich. So we're going to talk about raw land. Why invest in it? Why think about it? What are the advantages, disadvantages over traditional real estate, residential, commercial, etc.? Mark's considered to be the country's most trusted and foremost authority on buying and selling land.

especially raw and developed land. So let's get into it. So welcome. Thanks for coming, Mark. Richard, thanks so much for having me. Appreciate it. Yeah. Tell me about your journey through real estate. Not going to be just become a realtor and do regular properties like, you know, headed

How did you land in this part of the industry? Yeah, I mean, if we rewind the tape to 2000, I was a miserable, micromanaged, 45-minute commute to work and back investment banker specializing in mergers and acquisitions with private equity groups. And Richard, it got so bad for me, I wouldn't get the Sunday blues anticipating Monday coming around. I'd get the Friday blues anticipating the weekend going by really fast and having to be back at work on Monday. So my first- I really hated your work. Yeah.

Yeah, yeah. And my firm hires this guy and he's telling me that as a side hustle, he's buying up raw land and he's on the dollar. He's flipping it online and he's making a 300% return on his money. And Richard, I'm looking at companies all day long and a great company, great, has 15% EBITDA margins or free cash flow. Average company is 10%. I'm looking at companies all day long, less than 10%. So of course I don't believe them. So I go to New Mexico with them. I've got three grand saved up for car repairs. I'm like,

I do exactly what he tells me to do. I buy 10 half acre parcels, an average price of $300 each. I flipped them online. They all sell for an average price of $1,200 each. It worked 300%. So I took off that money and went to another auction in Arizona, which is where I live. And again, it's 2,000. There's no one in the room. I buy lots and acres for nothing. And I sold all that land and I made over $90,000 cash. So I go to my wife and she's pregnant. I said, honey, I'm going to quit my job and become a full-time land investor. And she's like, absolutely not. That didn't land too well with her. No.

No, not at all. So it took 18 months for land investing income to exceed the investment banking income. And then I quit. And I've been doing it full time ever since. So she was trying to be prudent and be careful and all that. So hopefully you thanked her after the fact. Yeah. Yeah, absolutely. Okay. So you got into land. You would, I can't, I can't imagine that every purchase made you money. What were some of the early, you know, punches in the face you got from doing the wrong thing? Well, okay. So the model's pretty,

was pretty crazy because I'm making my money on the buy. So I wasn't losing money, but I can tell you about a stressful deal that was, I messed up in due diligence. So I ended up buying a mountain in New Mexico. And so I'm looking at this 40 acre parcel and I think it's accessible, but literally 25 acres of it is a mountain. So only 15 is accessible. So I paid $2,500 for it. And I thought, well, if I just get my money out, I'll be happy. So I

I put out the GIS map and plat map and the aerial photos. And I put it up on eBay at a dollar, no reserve bid. And the first day it got up to $2,500. By the 10th day, it sold for over $32,500. And I'm freaking out because I thought, oh, did I misrepresent this property in some way? So I call the buyer. I'm like, hey, just wanted to confirm you. You saw the ad. You saw this, like only 15 acres are really accessible. The rest of it's, you bought a mountain. He's like,

He's like, no, no, it's perfect. I'm like, what do you mean? He's like, I'm a film director in LA and I didn't want to deal with the county having to get permits. So this is cheaper and faster than working with the county. So I learned pretty early on there's a pig for every barn. That's pretty cool. And if you want, Richard, it might be better for the listener if I just kind of walk you step by step through the whole model. Yeah, let's go ahead. We did some interesting stories. So what's the model?

Yeah, where do you live? Austin, Texas. Austin, Texas. Wow, okay. You've lost all complaining privileges, number one. But let's assume that you own raw land

where I live in Arizona, and you owe $200 in back taxes. Let's say it's a five-acre parcel and you owe $200 in back taxes. So you're essentially advertising two important things to me. Number one, you have no emotional attachment to the raw land. You're in Texas, the property's in Arizona. And number two, you're financially distressed in some weird way because we don't pay for things. We don't value them in the same way. And since you're not paying your property taxes, you're getting notices every month from the county treasurer saying, Richard, if you don't pay your property taxes,

You're going to lose that property to a tax deed or tax lien investor. So all I'm going to do is look at the comparable sales for the last 12 to 18 months on your five acre parcel. I'm going to take the lowest comparable sale. And let's just use easy math and say it's $10,000. I'm going to divide by four. And that's going to give me what Warren Buffett would call a 300% margin of safety. So I'm going to send you an actual offer of $2,500. Now you accept it. Why? Because for you, $2,500 is...

is better than nothing. In reality, 3% to 5% of people are going to accept my quote-unquote top dollar offer. But now that you've accepted it, I have to go through due diligence or in-depth research. I have to confirm you still own the property. I have to make sure that back taxes are only $200. I want to confirm there's been no breaks in the chain of title, no liens or

or encumbrances. And so I had my team in Jamaica and it cost about $11, fill out my property report and they're connected to an American title company. Now, if it was say more than $5,000, I wouldn't take any title risk. And I was just closed traditionally through a title company, but this is only $2,500. We'll assume everything checks out. I send you a check for $2,300. I send the treasurer a check for $200. I own it free and clear. Now, Richard, I'm going to sell this property 30 days or less. I'm going to make a cashflow

like a rental home. So I have a built-in best buyer. Do you know who it is? No, who? The neighbors, the neighbors. So I'm going to send out neighbor letters saying, here's your opportunity, protect your privacy, protect your views, know your neighbor. So oftentimes the neighbor will buy. Now if the neighbors don't buy, I go to my buyers list. The buyers list passes. I'll go to a little website you may have heard of. It's called Meta or Facebook.com.

buy-sell groups in the market marketplace. And then I'll go to the lands. Land.com, Landmodo.com, LandsofAmerica.com, LandandFarm.com, Landcentury.com, Landflip.com, Landhub.com. These are the platforms where people buy and sell raw land. But the secret is in the pricing. So all I'm going to ask for is a $2,500 down payment. And then I'm going to get a car payment. Let's say $329 a month and 9% interest for the next 60 months. So it's a one-time sale. I'm going to get my money out.

on the down. I could go six to 10 months out. And now I'm getting $3.29 a month and 9% interest the next 60 months. Richard, no renters, no rehabs. You're financing the land. So you're selling it on a, you're the bank essentially. Exactly. I'm the bank. And so it's a simple game. Can I create enough land notes where my passive income exceeds my fixed expenses? And then I'm working because I want to, not because I have to. Okay.

Interesting. So you don't, you usually sell parcels outright or do you usually finance them? Like, how do you know which way it's going to go? What do you offer both? Yeah. So I personally, I bought cash flow. I don't want cash. And the reason being is cash is great, but then I've got to do it again. It's, I got to pay taxes. It's a hustle where cash flow literally solves my money problems. And it's, I think it's the antidote to financial insecurity. So that's the game I like to play. Now they're

There are times when I might need cash so I could sell my note to another land investor and get that cash if I needed to get cash. Yeah, I'm sure your criteria has changed over time, but how do you know what to finance, what to sell, what to keep, what to buy? How has that changed over time with you? Well, it really hasn't changed. The fundamental asset is really interesting because here's this asset that lasts forever. There's nothing to maintain, nothing to protect. It can't be destroyed.

And because I'm paying cash, interest rates can do whatever they want. I don't care. And if there's a recession, great, the world's on sale. And then we go into equilibrium where it's easy to buy, it's easy to sell. And then the market heats up where it's harder to buy and everything's flying off the shelf. So from my perspective, for doing this last 25 years, the market really fundamentally is getting better in the sense that the technology is getting better. And

I'm able to use mapping software where when I first started, I couldn't use mapping software. 90% of this business now is automated with inexpensive virtual assistants and software. So from my perspective, as long as I'm buying this asset right, then I'm always going to be able to make money. And so ultimately,

I like to ask myself that Jeff Bezos question where if everything's going to change, which it is, what's not going to change? And I think what's not going to change is people will always want a real asset and they'll always want a good deal. And as long as those two things remain fundamentally truth, I think I'm in a good niche. So you've been doing this now 25 years? 25 years. How many transactions do you think you've done? I think over 6,500 now. Wow. What's the, how does zoning affect land? Like raw land, does it have any zoning or is it...

Does it have a designation where it's as yet to be zoned? How does that play in? Before we continue, I've been personally funding the Finding Genius podcast for four and a half years now, which has led to 2,700 plus interviews of clinicians, researchers, scientists, CEOs, and other amazing people who are working to advance science and improve our lives and our world. Even though this podcast gets 100,000 plus downloads a month, we need your help to reach hundreds of thousands more worldwide.

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So land does have different zoning requirements, right? So you've got residential, you have agricultural zoning. Sometimes you'll see industrial, sometimes you'll see commercial. But when I'm getting a list of the raw landowners in a county, I really want to get agricultural and residential land. And I want to scrub out any type of industrial commercial land, typically speaking. And so

An easy way to do that is you can go to a website like zamplo.com and you can filter using Zamplo and you can get that list using that software. And then you can use a software called lgpass.com to upload that list and automate your mailing.

So you're doing a lot of mailings to people at their address. Like, well, obviously they're an absentee owner, essentially. So you're like, for me, you know, if I have land in Arizona, you'd mail me at my house here in Austin. Hey, I saw you have this land and you have back taxes. You know, will you open a selling it or something? You know, that's how you'd approach me. That's how I'd approach you. Absolutely. I would actually send you an actual offer. I don't want to be in the appraisal business. Oftentimes you'll see people just say, send a blind offer. I'm interested in buying your land. Yeah, I'm interested in selling my land.

And now we're in a negotiation. And that's why, you know, living by the philosophy, I can always make more money. I can't get more time. I really want to do my research upfront and price that land accordingly based on comparable sales, make sure I have that 300% margin of safety and really get that low hanging fruit quickly. Now, once I've established the market, I'll mail everybody. I don't care if you're in-state, out-of-state,

taxes are current or taxes are delinquent, I know I've got a good market. Well, are you getting like a 1% response on mailings or what do you get? I'm getting a 3% to 5% response rate on mailings. So I know, given that metric, if I'm getting less than 3%, I came in too low for the market. And if I'm getting more than 5%, I probably came in too high and I have to retrade. Well, how do you know? Okay, so, I mean, you know, it's up to you what you want to reveal or not. But I would think it would be much more dangerous to buy land like from

20 miles from anything, it would probably be best to buy it on the edges or the best of all would be infill. What have you seen? Well, you're right. It depends on what your strategy is and what your niche is and how much capital you have. If you have a lot of capital, absolutely, you can buy infill lots, but those are going to be more expensive. You're not going to get those 25, 30 cents a dollar. But if I'm going an hour to three hours outside the nearest city, well, that's rural, inexpensive, raw land that can't

people aren't really interested in having anymore. And after doing this over 6,500 times, I've realized there's a lust for land in this country. Whether it's an infill lot, it's, you know, in your neighborhood or if it's an hour to three hours away from town, people want a real asset that they can afford. Yeah, it makes sense. I mean,

I mean, what are some of the things to what, you know, people should read your books, do your courses, I'm sure, all that. But what are some of the initial conditions that would allow someone to do this? Like, how much should someone have? Should they expect to maybe lose one of three transactions? Like,

You know, if people listening are all excited and they want to get into it, how do they do it prudently instead of stupidly? Yeah, I mean, I think you're right. I think you have to get educated. And so the first thing you want to do is county research. So there's 3,007 U.S. counties. What's a good market? And so I would go to a website like landmoto.com and see, well, where are the other land investors buying? So if you and I were going fishing and there's 10 boats on

on one part of the lake and they're all catching fish and there's three boats on the other part of the lake and not catching any fish counterintuitively we want to be the 11th boat even though it seemed like oh there's so much competition that's really not the case we want to go definitively where we know people are you know buying and selling raw land in those markets so i would say that is sort of the first thing you want to do is make sure you're in a good market and then from there just

Just follow the steps that I just outlined. You want to get a list from the county, or you could go to a website like zamplo.com or datatree.com. You would scrub that list by use code, say VL for vacant land, and get rid of the commercial and industrial properties, all the residential homes. And then you do another scrub based on your research. So you'd look at those comparable sales. You would divide by four, by the lowest percentage,

comparable sale. And then you would scrub it by assessor's parcel number subdivision. So I don't want to send somebody a five acre parcel or 40 acre parcel, the same offer somebody who has five acres because a 40 acre parcel person's going to send me back glitter in the mail. So then I'm looking at my metrics and I know if I'm getting my response rate right, I came in correctly with the market. And then I'm going to use, I'm going to close with my seller and buy that property. I'll use again,

software like LGPass.com. It'll create the promissory note, the purchase sale agreement, the land sale contract. And then I will own that property essentially. And so, and then I'll go to the marketing piece as we talked about the neighbors, my buyers lists, Facebook,

the lands. I want to sell that property on easy financing terms that if you have a job, everyone can afford. And then I want to manage that note properly. I'll use software called geekpay.io. It's a set and forget it note collection system. And so I'm simplifying the process for the podcast, but it's really comparatively speaking, the simplest real estate niche I know of because we're eliminating so many of the complexities and the brain damage that

dealing with physical properties as well as dealing with tenants. Well, what happens if you sell on a note and they don't pay? Then you foreclose the land or what? Yeah, such a good question. So we're going to use a land contract, which states that we own the underlying asset until you pay off your promissory note. If you default, then we keep your down payment. We keep your monthly payments. You've lowered our cost basis and we sell it again, extending out our ROI.

So there's no cost of foreclosure. Oh, okay. You don't have... So you just file the proper notices and, you know, you maintain ownership and the contract is voided. Exactly. You don't have to take them through like a foreclosure process or anything or forfeiture. Exactly. No. Okay. Well, the one thing I know you can't do, I guess, is depreciate anything because there's nothing to depreciate. It's interesting because you can do cost seg on land. Yeah, as long as God didn't put it there, you could do a cost seg study. Now, our raw rural vacant land,

To your point, you can't depreciate it. The only tax advantage of this model is if you use a self-directed vehicle, like a self-directed IRA, a Roth or a SEP, and you can grow that vehicle tax-deferred or tax-free with a Roth. So 25 years ago, it was obviously, no matter where you buy, it was more cheap than today.

How much would someone need to get started today? Assuming they may have some screw ups and lose a little bit along the way, what would they need to have to be safe maybe to try this? Yeah, I mean, to dip your toe in the water for a very inexpensive property, you need about $500. Ideally, you should start with about $5,000 because you want to buy five to seven parcels.

And the more capital you have to start with, you know, you're going to have a bigger pool to look for. So, for example, there's certain counties, let's say in Florida, where you're going to need more capital than, say, San Francisco.

some counties in New Mexico where you could start with $500. Yeah. Well, why, I mean, why is there such a ready flipping opportunity? Is this just something that most people don't think about? And so the market is not nearly as liquid or fluid or there's less price discovery? Like, why does it seem to be so inefficient that you're able to do this easily? Yeah, because, you know, banks don't finance raw land. And so it's an inefficient market. And you go on, you know, Zipod,

Zillow, you're not going to see a lot of land transactions. And so it's truly what a buyer and seller still agree to. And that's really the secret sauce of this is that you're looking at an inefficient market because there aren't that many transactions per year in raw, vacant, rural land. So for people that are interested, what...

How do they get started in this world? Do you have like a book or courses or like, how do you recommend interested folks get in on this? Yeah, I have two books. I have Dirt Rich, which I'd recommend people start with. And then I have Dirt Rich 2 for people that want to scale their land business. And Richard, if you like, I can give your listeners a link to click on to get the book for free. They just have to pay shipping. Yeah, that'd be great. Yeah, I'll send it to you. And they can click on that and then they can go to thelandgeek.com and learn more there.

Okay. And then you mentioned scaling it. What does that look like? Like, how do you scale a land business? Well, scaling a land business, you have three levers you want to pull. You want to use other people's time. So inexpensive virtual assistants. So you're going to build a team. Then you're going to use software and automation, LG Pass and GeekPay. And then you're going to use other people's money as well. What about other places where you can speak to other people that have multiple parcels and do trades like Monopoly?

you know, hey, I love that parcel you have up near Nashville. You know, I've got a couple here. I could trade you. Would you be open to that? You know, does anyone do that kind of stuff? I mean, people do all types of really creative things with raw land. So you can absolutely trade. You can barter. You know, we even talk about, you know, you can subdivide land, which is a phenomenal strategy. It's a little bit more advanced. You have more capital. So there's all different types of things you can do. I mean, you know,

Oftentimes people are like, hey, you know, I've got this car. Retrade me. Right. Now, I don't like to do those things, but people will do it for sure. You know, we'll get offered cryptocurrencies. We'll get offered, you know, all types of things for trade. Okay. Well, very good. Anything else I should have asked you about the land business that we left out? I know there's tons more nuance, but this seems like a very good start to get, you know, people's interest. Yeah, no, for sure. I mean, I'm listening. I'd be skeptical because if it's so great, why would I teach it?

And I think it's a fun question. And really, the reason is, is that when I first started about teaching in 2011, I got a call from a guy named Tori and he's on my website. I thought he wanted to buy raw land and I'm on vacation. He's like, hey, will you teach me how to do what you do? I said, look, I don't teach this. He's like, well, what if I pay you this? I'm like, oh, OK, well, that's interesting. So I go to my wife. I'm like, hey, this guy wants me to teach him the land business. And she's like, that's ridiculous.

why would you do that? You're going to create your own competition. I'm like, that's a really good point. So let's put on our investment banking hats. How big is this market? And it turns out there's billions of acres of raw land available just in the United States. You couldn't think of a more boring real estate niche. You're not going to go on HGTV or the DIY network and say, flip this land. The before picture is raw land. The after picture is raw land. And so I found that

I helped Tori make over $300,000 on his first deal. It changed his life. And that feeling was so gratifying. I'm like, this is amazing. And so I love helping people solve not just their money problems, but their time problems. Because I think once their passive income exceeds their fixed expenses, then the promise of passive income can really be realized of having money, time, and health at the prime of your life to go and live your best life. Does that make sense? It still makes sense. Okay.

Well, very good. Well, again, thank you for your honesty, your openness, and the resources for listeners, you know, for the free book plus shipping. And I appreciate you coming on the podcast. Thanks, Rich. Appreciate it. If you like this podcast, please click the link in the description to subscribe and review us on iTunes. You've been listening to the Finding Genius Podcast with Richard Jacobs.

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