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Land Investing Online

In this episode of the Real Estate Investing Podcast, host Ron Apke reveals the essential steps of due diligence when doing land deals, specifically when it comes to preventing bad investments.

Ron begins by recommending investors utilize computer-based research & tools to examine key aspects of the physical land such as wetlands, flood zones, road access, and slope.

Taking these extra precautionary measures is an effective way to gauge the land’s quality before investing further time and money.

It is also recommended that land investors utilize platforms like Zillow and Redfin for recent sales data helps in making informed decisions and negotiating better deals if necessary.

Watch or listen to the full episode below to get actionable advice and proven strategies to ensure you find better quality land and maximize your ROI! ⬇️

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Ron: How do you make sure you’re not buying bad land, essentially? So when we talk about due diligence, it is trying to prevent you from buying bad properties and you’re doing due diligence. You want to be unbiased. You want to be like a third party person, not looking at it like that. Just a third party person.

You are a fact finder. So when you’re doing legal aspects, you’re just trying to find the facts. The key to price checking, you want to price check apples to apples. You don’t want to find a comp that’s 50 acres. When you have a five acre piece of land, you want to find something that’s similar type of land, similar location, and.

without a doubt. You want to make sure that the seller you’re talking to is on the deed. Sometimes sellers call us. They’re like, yeah, I’ve been paying the taxes. My cousin died a few years ago. Like that doesn’t make you the legal owner of the land just because you’re paying taxes. Hey everybody. Welcome back to the real estate investing podcast.

I’m your host, Ron Apke. Today we are talking about the five steps to doing due diligence on a land deal. This is something I don’t think we talk about necessarily enough, to be honest with you. It is, how do you make sure you’re not buying bad land essentially? So when we talk about due diligence, it is trying to prevent you from buying bad properties.

Um, we’ve done this for hundreds and hundreds of deals. Uh, so. We are very used to the process, but new people doing this, when you’re first getting into land, it’s a, it can be a bit of an overwhelming process. So being able to do this effectively, efficiently, you’re going to get better through without time for sure.

But again, this is going to be a shorter episode. Talk about due diligence in high detail. What are the five steps? So starting number one, you got a purchase agreement back. You have a seller that is interested in selling. Number one is doing computer due diligence. And what I mean by that, it’s getting on the land portal and it’s looking at what is the land on the computer?

As far as the slope, the wetlands, the floodplain, and all you are looking at on this step, the computer due diligence is essentially the quality of the land. So like I said, wetlands, does it have road access? Is there a floodplain? What’s the slope look like? We are doing everything we can do on the computer.

We don’t want to spend money on due diligence at this point and whatever, get someone to the property. We want to just see what it looks like from the resources online. You can go on different satellite images, images. You can try to go on Google street if that is an option. So number one is computer due diligence.

The key to that is just checking the quality of the land on the computer. Going to number two. So the land checks out. So wetlands aren’t that bad. Floodplains, not that bad. Slopes. Okay. All this stuff checks out. Number two is the lands. Okay. Okay. Number two is checking the price. Does the deal make sense for you and your business?

And this could be if the property you’re buying for a 50, 000, it could be, it makes sense to you if it’s worth 80, 000. Uh, it, it could be, it makes sense if it’s worth a hundred thousand dollars. This is where you need to evaluate based on your business. You want to make sure you have enough margin in it where it makes sense for you and your business.

You’ve got to make sure you have funding that you can line up for that. What you’re doing in this step two, which is price check is going on Zillow, going on Redfin, going on the different sites, maybe getting a realtor involved. I don’t really like that too much for this step with the price check. First, you want to do this without a doubt on Zillow, on Redfin, and you want to check recent sold comps.

The key to price checking, there’s two keys. You want to price check apples to apples. You have a good piece of land, Uh, five miles from X city, five acres. You want to try to find an apple to apple comp. You don’t want to find a comp that’s 50 acres. When you have a five acre piece of land, you want to find a comp that’s anywhere four to seven acres.

If it’s that you want to find something that’s similar type of land, similar location, and similar size without a doubt. And then you’re looking at sold comps and you are in this step. You need to, you need to determine what you think you can sell this property for. And then, like I said, Move forward. If it makes sense, you might have to go back to a seller and negotiate.

If a combination of those defects and the location, whatever it is, maybe you overprice and maybe you agree to a price that you’re not okay with. It is okay to go back to the seller at this point. If the price does not make sense to you or your business, be transparent, be honest with the seller and let them know what you can pay.

Most of the times those negotiations go pretty well. So number one, computer, you’re looking at overlays, land quality. Number two is a price check. Number three is you’re looking at the legal aspects. And maybe that’s not the best term for this, but this is when you’re calling the county, you’re getting the deed, you’re Um, finding out restrictions on this, finding out if it’s an HOA.

So everything like legal compliant, what is the end buyer going to, going to be able to do with this, um, beyond legal? It’s what is it zoned for? What can the end buyer do? Can they put a mobile home? That is an extremely important thing. We want mobile home friendly lots more times than not. We’re doing business in very, very rural America.

So a lot of the end buyers do want to have mobile homes on their lot. So find out. If it’s an HOA, find out the tax situation, find out restrictions on the lot, get the deed. You want to make sure that the person you’re talking to, the seller you’re talking to is on the deed. And they’re not just sometimes sellers call us.

They’re like, yeah, I’ve been paying the taxes. My cousin died a few years ago. Like that doesn’t make you the legal owner of the land just because you’re paying taxes. Like you want to make sure that. That the person you’re talking to is the legal owner to the best of your ability title will do that on the back end But that’s what this is all about.

Okay, and after each one of these steps an important thing is you want to review? To make sure the deal still makes sense to you. So number one, if the, if the computer due diligence doesn’t make sense to you, if it’s too defected, you can’t go back and negotiate. It’s just too bad. Then you can throw the deal away there.

Same thing with price. You go and the price is off. You want to go back and negotiate there. Number three, if you’re not talking to a legal owner, And you can’t solve that issue. Like you might have to throw the weight, throw the weight, throw away the deal there. Number four is the first time you’re going to really spend money is getting a drone out to the property and getting a drone out.

We talked about this quite a bit, getting a drone out, going to droners. io, hiring a drone photographer in your area. If there are question marks on the land, you want to get the drone photographer to walk the land, to get them to answer your questions. This is going to be your boots on the ground. These drone pictures can be used for marketing and, um, Like I said, if you have questions, if there’s anything that is like, you’re unsure of what the land that you can’t see on the computer, this is when you get those questions answered.

So getting a drone person out there, it’s really hard, easy to hire them nowadays. Like they’re all over. You can get them no matter where you are in the country, they’ll drive hours sometimes to get to your land, but you want to give them good instructions. So you can get the questions answered. Maybe there’s a dip off the road.

Maybe there’s a lot of slope and you want to make sure there’s buildable area at the front before it starts sloping up a hill or down a hill. So those are all the things that a drone photographer, maybe not 100 percent can answer, but they can share as heck give you their opinion on it. So number one, computer, number two, price, number three, legal aspects, number four, drone, and number five is title search.

Some people ask, I get asked all the time, like, can I not do a title search on this? Not send the title. You are putting so much risk on yourself on your business. If you are doing a 5, 000 plus dollar deal without title, a title search, title search is going to cost a thousand dollars to 1, 500 and they’re going to close the deal.

They’re going to make sure there’s no. Fraud on either side from you or the seller doing a title. Search is going to confirm those legal things. They’re going to tell you about the restrictions. They’re going to tell you about HOA. They’re going to check the back taxes, everything like that. They’re going to make sure that the person who is selling you the land is the actual owner of the land.

So going through this, going through title, Is something sometimes it’s hard to swallow the pill of how much it is because it is twelve fifteen hundred dollars every single deal But it is so worth it You’re going to get a title commitment before you close on the deal and essentially it’s saying This is what we’re covering and a title going through title.

You’re essentially getting insurance On if anything that they did is wrong. So if they’re insuring the transfer of the property, and then you find out that that wasn’t the correct seller, they will pay you for that. It will be a title claim just like anything else or an insurance claim, just like anything else.

So really guys, those are the key things. As you are going through due diligence, It’s really important to put on like, I always say like putting on different hats. So you might have your sales hat when you’re trying to get a purchase agreement. When you’re doing due diligence, you want to be unbiased. You want to be like a third party person.

Not looking at it like that, just a third party person. You are a fact finder. So when you’re doing legal aspects, you’re just trying to find the facts. You’re not doing an opinion, having an opinion at that point. You are just putting on a due diligence hat and making things happen from that aspect. Other than that, guys, if you’re watching on YouTube, hit the subscribe button below.

If you’re listening on Spotify or Apple, give us a review, uh, like it, share it with a friend. All of that stuff helps so much. Other than that, thank you so much. We’ll see you next time. As always, thank you for joining. Please do us a huge favor and like and subscribe our YouTube channel and share this with a friend.

It really means the world to Ron and I, but more importantly, it could help change the life of someone else. Thanks for joining and we’ll see you next episode.

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