Land Investing Online

In this episode, Apke Brothers Daniel and Ron cover two popular strategies that are often at the forefront of the real estate industry:
house flipping and land flipping.

They reveal the pros and cons to house flipping and how it can be a very lucrative but difficult avenue to take due to hiring contractors & on-site requirements. 

Land flipping on the other hand can net you fast and big profits, but only if you are doing proper due diligence. 

Whether you are new to real estate investing or have been in the game for a while, watch the FULL episode to see the pros & cons of investing in land & flipping houses!

Listen or watch the full episode below ⬇️ to get the full list of
Pros & Cons to House Flipping vs Land Flipping!

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Dan: I know a lot of people making a lot of money flipping houses is something that’s not going away.

Ron: Depending on the city, like permits can take six months sometimes. And it’s so expensive in house flipping. That’s the biggest thing.

Dan: Loans are scary. Like you start talking about these loans when you’re doing these big projects, it’s a lot of debt you’re taking out and a lot of risk.

Ron: Being smart with where you put risk.

Like if I buy a property today in land, I’m putting it on the market tomorrow.

Dan: Hey everyone, welcome back to the real estate investing podcast. Today’s topic. We’re talking about house flipping verse. And I’m your host, Dan Apke joined again by my brother and business partner, Ron Apke. I wanted to start this.

We, this was one of our first episodes ever that we did run house flipping versus land flipping. And not everyone in the community is coming from house flipping. Now it’s a lot of wholesaling and things like that. But there’s still house flipping is a huge community and a lot of people still want to get into it And it just brings it back to like it teaches us how good land is like how good we really have in the industry And when today’s topic we’re gonna talk and obviously house flipping has a lot of pros.

There’s been around a long time It’s very sustainable. We’re gonna talk about both sides But before we start, I do want to just touch base. Ron and I obviously are land investors. We own land investing online. We own apculan. com, but we also real estate invest and we have, I own a mobile home park and we own salon and commercial properties and apartments.

So we try to be as unbiased as possible when, when kind of going through this, because they do have. Their Pros and Cons.

Ron: For sure. Just like anything, everything has its pros and cons. We saw the opportunity and land a couple of years ago. That’s why we’re still in it today. Um, but yeah, we, we have a lot of people who come from house flipping.

There’s a lot of people who are house flipping at the same time as doing land flipping. So I think it’s going to be a good episode.

Dan: Let’s get into it and let’s start with house flipping. I just want to talk about. Some of the pros and cons and I’m going to start with the pros because I don’t want this to come off as a negative episode against house flipping The pros are guys it’s been around a long time.

Mm hmm. It’s sustainable if you’re good at it I know a lot of people making a lot of money flipping houses. It’s just something that’s not going away Competition is good. It shows that a market is sustainable and was flourishing at one point. Yep That’s what competition is means. It’s a healthy market in general, right?

So it’s not necessarily a bad thing being overly competitive Um, there are pros to it. It might be harder to get started, but those people who are still doing it, who have their ground, have their footprint, have their crews, have the inspectors, all that stuff lined up and have a really sustainable business are making good money.

Ron: Yeah. And I think that’s why we have more wholesalers come over here than house flippers, honestly. Because the people that are successfully house flipping are killing it. Honestly, like they, they are really killing it. There’s a bigger barrier to entry. There’s a, you need expertise. Like you need a real expertise in fixing up houses and, uh, predicting the construction costs, all these different costs associated with it.

So we don’t get like, we get house flippers coming over here, but the most successful ones like really, really do well.

Dan: Yeah, exactly. I mean, if you can balance out a house flipping company and scale it, it’s going to be easy on this side. Like it’s just gonna, you’re, you’re fighting an uphill battle, house flipping with the competition, contractors and labor issues and everything that you guys, if you’ve house flipped or done some sort of construction, you know, some of the challenges in that.

Um, but those people, I mean, it’s, it’s, you can make good money from it for sure. But like you said, it’s, it’s an uphill battle.

Ron: Yeah, without a doubt. Um, we’re going to get into the other side of it, Dan or talk about land.

Dan: Let’s get into the other side. Let’s keep talking about house flipping here because I want to continue to touch base on it.

Um, so we talked about some of the pros it’s been there for a while. Uh, and like another, I don’t know if this is a pro or con, it’s probably more of a con, but, um, you do it where in your backyard a lot of times you can do it remote, but most people do it and they’re on site, um, kind of easier to manage that way, I’d imagine, or more confidence in managing it than doing it remote.

Potentially, I don’t know if that’s a pro or a con, but that is a difference because we’ve never been to any of our land. So I did want to point that out, but some of the other things I want to talk about is the complications and risks with house flipping in general, because. You, you never really know what you’re getting into, um, fully because there’s so like a house is competitive or not competitive that too, but a house is, um, more complicated than a piece of land, right?

Piece of land you can look at. Yeah, you can do a soil test, whatever you want, but it’s very simple. When you start getting a house, there’s multiple floors, there’s plumbing, there’s electric, there’s, uh, you know, insulation roofs, ventilation, all this different stuff you get into. And things can come up, there are unknown risk.

Ron: For sure. And I think that’s part of the difficulty with it. And why a lot of new people struggle with house flipping is one. It’s harder to get money partners. Like you have, you need money partners. You need good money partners. You’re paying interest every single month on whatever your money partner is, whatever that interest rate is.

So like getting money partners, I think is a huge barrier to a lot of people getting started that I think there’s a lot of barriers to really getting started and getting up and going. But, um, you know, like you said, like you really don’t know if there’s foundation issues when you’re buying a house and with how competitive the market is, you need to offer cash closes and like 14 day closes.

So you don’t have a full inspection a lot of times.

Dan: Yeah. And you know, one of the strategies that I like, um, is actually you’re buying the house, kind of like house flipping, put work into it and then you rent it out. I like that strategy because then you don’t need killer margins and you can have a long term hold and there’s more risk you can kind of associate with because you’re going for a long term game play and you’re going to rent it out.

It covers more up. But that being said, house flipping in general is for cash flow. Right. You’re not doing anything when you’re flipping the house besides getting more cash. You’re it’s transactional real estate, short term transactional real estate is what is considered just like a land flipping. So these are two land flipping and house flipping go and wholesaling go in the same bucket as transactional.

Once you start getting into rental properties and all that or buying, um, Finishing up a little bit, redoing, doing all that to putting all the fixes in. And then you can refinance out and get cash back and kind of make it transactional, but you’re taking equity out instead of selling it and getting your equity out completely because you’re, you still take on risk when you’re refinancing, obviously the other thing you touched on.

So you touched on loans and we touched on complications and risk. Um, let’s talk about contractors. Cause that’s a big one. Yeah,

Ron: Yeah, I mean, you’re the management of what you have to manage in terms of contractors, getting a good contractor, staying on timelines is a huge thing where you’re trying to get this project done as fast as possible in the best way to keep that bank money every month, every day you are paying more interest.

So being able to deal with the contractor, some people are really good at it. Some people. struggle to work with contractors and that’s why they can’t make it in the business because they cannot manage the contractors.

Dan: Have to manage you it’s different than managing employees these guys you got to be tough on um it’s it’s much different style if you’ve been in the industry you know how it is but um it’s tough especially if you don’t give them a lot of business like that’s why it’s so important in a lot of these industries to give contractors full time work.

So yeah, if you’ve been in the construction business, you know how dealing with some contractors are. I used to be in the building world and I’d go from job site to job site. And, uh, great house flippers and the great, uh, you know, just contractors that I knew all had full time contractors under them because they give them enough work to keep them busy for 40, 50, 60 hours a week.

It’s when you start to give them 10 hours job here and there, and they’re filling that in other day. Then they give their priority to elsewhere, right? Cause now they’re putting it in different spots and buckets, but that’s not really the point of this. Um, Uh, episode discussing how house flipping works.

It’s just kind of showing the pros and cons, but managing them is one of the main challenges is what I was trying to get at. And then along with that run, the last point I really have is the permits and inspection.

Ron: They can take long. The bigger the city you’re in, uh, not necessarily bigger the city you’re in, but depending on the city, like permits can take six months sometimes.

And if you get into a project, you’re trying to do an addition, you’re trying to do something and you need to go through permitting. Like it can be very, very, the time, time is so expensive in house flipping. That’s the biggest thing. If you cannot predict how long the job’s going to take, if you’re just predicting like what’s the resale value.

Um, minus what’s my purchase price minus, I guess the, uh, construction price as well. And you’re not taking into account the, uh, price of the money that you need to borrow. That’s when you’re going to lose. People lose money in house flipping. That’s the thing. Like you, there’s a lot more.

Dan: Oh yeah. Well you have a hard money loan too.

So like you have a debt you have to pay back if you went hard money. Um, yeah, there’s a lot with that and I’m not that familiar with how inspection periods work or anything like that, but I do know it’s a risk and I do know. Um, there’s a lot that has to happen and you got to make sure things are in order and you’re getting inspected and approvals and all that stuff, final approvals, depending on your ordinance and everything there.

But that’s another risk associated with it, especially if you go ground up, it can be permitting can be, but ground up, there’s more money. And like, if I were to do it, I’d probably go ground up. Uh, just because we’re so good at buying land, we just put our systems there, acquire the land and then go ground up, um, and kind of be on your own time schedule and everything instead of, you know, rushing it already because that’s the thing.

There’s not as much risk with ground. There is, it’s different risk, but with ground up, you already know what you’re building. So you’re not opening up a whole new can of worms with how someone else built in working with her, but it’s different scales and different levels there. Let’s get into land flipping.

I know we’re with house flipping, uh, for the majority of this episode so far, I want to get into land flipping now. And. Land flipping is another thing that it’s, it’s been around for a while. It’s a not hasn’t been around for as long as house flipping for sure. HDTV and all that boomed house flipping, but land flipping has been around for a while, even if you guys don’t think it, but it’s, it’s been around in a day, like land investing has been around maybe not necessarily the way we’re flipping it, but land investing is the category we’re really talking about here.

Um, but what we do, we buy land at 45 percent market value, put it on the market and sell it for 90 to a hundred percent. And that’s kind of our average numbers there. And we’re doing it through blind offers and direct mail and there are major obviously major differences between that and house flipping First being it’s just vacant land.

Ron: Yeah. I mean the product’s different the what we’re trying to flip is different What we’re trying to flip like we’ve talked about a couple of times. There’s less risk It’s easier to to identify all the issues before you buy a piece of land versus a house So doing this like it I think with the land like I think one of the biggest pros with land is how scalable is like You said house flipping is much more difficult to do anywhere But your backyard because the management and and if you’re doing it somewhere outside your city You need management to be in person without a doubt Wow land There’s what, 150 million vacant parcels in the country, whatever it is, 90 million vacant parcels it might be.

I don’t know the number, but yeah, a lot. Like with land, you can do this anywhere. Like, and there’s less competition. Yeah. Well, we’ll talk about that. 90 percent of our due diligence can be on a computer. Yeah. 95 percent of our due diligence.

Dan: That being said, it is typically smaller purchases too, though.

Ron: Without a doubt. Yeah. So if you, yeah, I mean, we’re a house you might buy for 400, 000, in and sell it for 800, something like that.

Dan: I know, uh, flip the flips guy, the big flipper. I know you buy it for 1. 1, put 200 in and sell for 1. 8, stuff like that.

Ron: Good margins without a doubt. And with the land, our average margin can be buying for 20, 000 selling for 45, 000 wall houses.

You might buy, like you said, you might. Buy for 400, 000, put a couple of hundred in and sell for 800, 900, 000. The purchase price is a lot bigger. Obviously a lending’s different. Most of our land deals are done with cash. Like when we’re buying a property, whether it’s one of our students coming to us, like it’s done with cash in terms of the purchase and it’s not hard money lending.

So I think the ability to have that type of funding partnership, the ability to do deals wherever I think can make it very, very scalable.

Dan: Yeah. And you can get hard money partners in land flipping. There’s obviously different risks to it, but the beautiful thing about how we do land flipping is you’re getting.

You’re using a JV partner, uh, who’s putting up their risk essentially and providing the money for a profit split on the back end. So you’re not risking any credit scores, which kind of led me to the next point, Ron. You’re not risking, you know, you’re, you don’t need a loan. You don’t need a hard money, anything where it’s gonna be collateralized against you.

So if something happened, it all falls on the deal funder traditionally. Mm hmm. Um, which is nice because you don’t need to get loans. Loans are scary. Like you start talking about these loans when you’re doing these big projects. It’s a lot of debt you’re taking out and a lot of risk.

Ron: Yeah, for sure. They can get, I mean it, it can get really expensive.

Like you said, we have, there’s a lot for anything, honestly, like you can get JV partners probably with house flipping too. Like if you had the right partners, like there’s always, there’s always different ways to finance and you gotta be creative. Yeah. I think being creative with the way you finance, minimizing, not eliminating, but being smart with where you put risk, like how much risk.

And I think a lot of people. And house flipping in particular, probably over leverage because they are expecting the top sale price. That’s the thing about house flipping too that we haven’t talked about is the market can change in a good way or a bad way.

Dan: Yeah, exactly. That’s a good point. Uh, the last three years, mainly a good way if you hold it long term, like in the U.S. but yeah, things do change a lot faster.

Ron: But like what happened in this house? You bought this house and they kind of got a little hurt, huh?

Dan: Yeah. So the, that’s a good point. Actually, I can talk about that. So the people who I bought this house from were in a, they had a hard money loan, some sort of bridge loan, I think it was.

And they bought the house, put a little bit of work, not much because it was already pretty finished. They put a little bit of work, I think, put a new shower in, finished a couple of things up, um, fix some things around, but they didn’t do the backyard either. And the backyard had a pool and other things.

So they left the backyard alone. Backyard was scrapped. I had to get a whole new pool, whole new everything. But they put on the market like around Thanksgiving. This was last year’s Thanksgiving. And then, um, they kept dropping the price and I was like, they’re dropping really fast for, especially for this time of year, like between Thanksgiving and Christmas, not money sales going on, just a slower market in general.

And people are out buying Christmas gifts, not house shopping as much. It’s just the market drops drastically in November, December, December, especially. But so I came to look here and I was like, started digging in for more information and the other realtor hinted that they were needed to sell quick. So once we figured that out that they had a loan and they need to sell pretty quick and times more of the essence than the money was, it’s kind of what they hinted at.

They’re like, they want to close as quick as possible and all this stuff. And we kind of figured that out and we put a really low offer in. Um, and it dropped a few times and we put a really low offer. They said, no, we came back and we negotiated it down. But that was just an example of them being. In a just very very little wiggle room.

You think they lost money? I could probably find out. Yeah I don’t know. I doubt they lost. It was tight though. It was tight.

Ron: Yeah, like they wouldn’t go back and do it again No If everything came and that’s where it can happen with houses really fast and the market changed Yeah, like they might have started this update and do you know when when they bought it?

They did it quick market was hot though when they bought it And like, once you get into those winter months, things just don’t move. And you get overly excited, especially areas like this. Um, but, uh, it’s a common thing I think. And that’s one of the most nerve wracking things, especially with newer people getting house flipping, you can lose your shirt on.

Dan: The other point.

Like they didn’t have enough money to fix the pool. Um, I don’t know if they’re planning on it or not, but the pool was, there was water in it. It wasn’t empty. There was water. It didn’t look that bad. There’s just a little, like fiberglass flaking off the sides and some other things like it was. Um, so I, I don’t know if they thought, cause it was full and had chlorine and move in when I did it and it was clear water and stuff.

Uh, but it’s not nice. It’s just not nice. And they didn’t do the pool. Like it was really outdated. Like it needed work. You get, you get in it, you’re getting out itchy because the fiberglass was feeling off. So I don’t know if that was in their budget or not, but that’s a good point too. Um, but that’s why one of the reasons why it was scaring buyers.

Cause they looked at that pool. They’re like, wow, we need to put in all this work. We’re going to move in and need to put in 20 grand right away.

Ron: So coming back to land, as far as that, like the thing with land is, it’s, If I buy a property today in land, I’m putting it on the market tomorrow, unless we do some small subdivide, something like that, it’s a short term thing where we are going to be looking for buyers immediately.

So we understand the market. We are not going to buy wrong 99 percent of the time because we know what the exact market is when we are listing. We don’t have to predict what the market is going to be six months from now. Um, so that, that is one of the things that make it very difficult to lose money in land in my opinion.

Dan: Yeah, exactly. That’s the biggest challenge with land is it’s, it is hard to evaluate, which is kind of a con. Um, we’re really good at it. I’d like to think, but in terms of evaluating what something’s going to sell out, like that’s what we do. Um, that’s what we’ve done for a long time. So we have experience doing it and feel good about it.

But if you’re just coming off the streets, like that’s probably one of the hardest things to do in this business is analyze and evaluate vacant rural land. Um, that is a challenge because there’s not a lot of comps, so that’s kind of a con in that sense, but at the same time, once you get good, you can feel very confident in it and be within five, 10%.

Um, be very, very close to that, that number you’re expecting to sell for. And when you’re buying it at 40 to 50%, it’s just all, you have a lot of wiggle room to work with essentially.

Ron: Yeah. I mean, whenever I’m looking and evaluating opportunities for business, anything like that, like I always kind of look at barrier to entry and land actually does have a pretty low barrier to entry.

The barriers education. Honestly, there are some financials, but compared to some other industries like land is a relatively low barrier to entry that could be flooded with people. Um, I’m not saying it will or won’t, uh, but I’m just saying it could potentially be flooded. Yeah. I, do you think experience house flippers, like the big ones you’re talking about?

Like, do you think they care about competent? The hardest part for them is getting the deal because they have people who not necessarily are willing to lose money, but people don’t realize the issues with some of the properties that they’re getting. So you have these low level flippers who will end up losing money.

So these higher level flippers are fighting for deals with these people that. Not are willing to lose money, but they just are going to lose money. Expect unexpectedly.

Dan: Yeah. But at the same time, I think the good level flippers, uh, are

Ron: To get deals.

Dan: The, yes, they’re getting deals because the people around them, no, I’m the wholesalers.

No, I’m the, there’s just people out there attacking deals for them. Realtors investors in the market. Like those people dominate the markets. They get deals. I remember who was, I can’t remember who exactly I was talking about, but he. He had a real estate business, I think in Cleveland, and he like had such a surplus of good deals coming to him all the time.

Like he didn’t, he didn’t need deals, his, his issues. But he, that’s top, top two, but his issues and his scaling was always the operations, the contractors, the crews, like that was his challenge. But he had system. Most people’s challenge is getting the deal when you’re there. But when you have people hunting, you have good systems, um, and you just have people hunting deals for you because when you get to that level, you do because they know you’re a buyer.

They’re like, he’s the real deal. I can find him any deal. He’ll buy 20 of my deals, uh, you know, a year. If I find him, he’ll buy 50 of my deals a year. If I get them good under market value and this zip code zip codes, you know what I mean? Kind of like what Eli was saying on the podcast day with their builders, like they’ll buy 40 of them from them a month.

If they’re a good builder, kind of same philosophy.

Ron: Yeah. So it’s the wholesalers that are feeding them, the deals,

Dan: wholesalers, investors, local hunters, like whatever it is.

Ron: And wholesalers don’t make money unless the deal closes. So they want legitimate people are going to close the deal. Yeah. That makes a lot of sense.

So kind of wrapping it all up, Dan, like. What are your take on the two? Like house flipping is definitely for some people. Like it’s without a doubt for some people, there’s some people doing great. Uh, if you don’t have any experience in real estate though, house flipping seems unless you’re buying a property, like with cash or the bank loan, or like you’re living in it and fixing it up.

Like, I think that’s where a beginner person can learn that for me and like to lower your risk, like don’t go and find a house on the market to try to flip. I think like buying a house for yourself and maybe flipping it and try to do it like that, where you do have time on your side, you can live there.

Um, and it’s not like you have a hard money person at 12, 13 percent .

Dan: Yeah, you don’t want to over leverage this, especially at first. Like if you don’t aren’t in the industry, it’s a, I’m not saying you can’t do it. Like, of course, go for it. If that’s what you really want to do a hundred percent, go for it. Um, but there are risks with it and you just got to be careful.

It’s one of those things, like, I think it’s a very, very, very high business. To entry, like you said, barrier to entry, high barrier entry. Yeah. I think it’s on the upper side of that.

Ron: To be successful without a doubt.

Dan: that you got loans, contractors building materials, you need, uh, just so many different times.

So I am in times working against you. And the permits, there’s just so many different moving parts and pieces. It’s definitely a high barrier, which means if you do make it though, a lot of times, uh, good things can happen on the other side.

Ron: Yeah. Like we talked to Panayian here, like he did 500 house flips and he’s still doing that.

Um, like the top guys kill it. Like they do really, really well, but they have their operations so in sync and it is a legitimate business when they have that up and running, but there is a high barrier to entry. Anything else? I

Dan: I think we’re good to go guys. As always, thank you for joining. Please like, and subscribe our YouTube channel.

It really helps drive our mission forward. Thank you for joining. We’ll see you next episode. Appreciate it guys. 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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