How to Map Comps on Google Earth

Daniel Apke: Welcome to the real estate investing podcast where we help you unlock your potential freedom through land investing, real estate investing, and entrepreneurship. Hey everyone, welcome back to the real estate investing podcast. Today’s topic, we’re discussing the risk of doing poor due diligence. I’m your host Daniel Apke joined again by my brother and business partner, Ron Apke.

Before we get into the show, let’s go over a question from one of our featured discord members. Today’s question is from John. John asked, what are the main tools that you guys use to evaluate land?

Ron Apke: Really good question, John. Um, I’d say number one, Dan, is MapRite, right? ID LAN?

Daniel Apke: Yep, absolutely.

Ron Apke: Yeah, so what ID LAN does, it tells us all the overlays on the land.

So it tells us wetlands, it tells us floodplain, it tells us the slope. That is our first layer of due diligence, and by far the most used tool in our land analysis. Um, is there anything else even close to it?

Daniel Apke: I mean, Zillow’s next.

Ron Apke: Yeah.

Daniel Apke: Or Redfin or whatever you guys are using for comps.

Ron Apke: Yeah, that’s a good point. Yeah, Zillow, Redfin, comps, but that first stage is the land due diligence, which is the quality of land, which we do 90% on, uh, MapRite.

Daniel Apke: Yeah, so MapRite, land ID, ID. land, whatever it’s called. That’s where we actually evaluate the land itself. And then we use the comps and the MLS and things like that, like Zillow, Redfin, all that, uh, analyze the actual pricing of the land between those two we can get, you know, 80% of our due diligence or more done. Other than that, let’s get into the show. Today’s topic. We’re talking about the risk of doing poor due diligence. This is an underspoken topic. I think Ron and people don’t learn their lesson until it comes the hard way.

Ron Apke: Absolutely. And we’ve definitely learned our lesson before, not necessarily in losing money, but uh, but yeah, doing proper due diligence, it doesn’t mean taking too much time. Like we still do all of our due diligence, 24 to 48 hours maximum. But doing it the right way, getting the right answers, not overlooking things because some people get so biased. That’s what I see, Dan. People get so biased in their deals.

Daniel Apke: Emotionally attached to their land.

Ron Apke: Exactly. And then there’s like nothing that can turn them off of the land. Right. And then they make bad decisions.

Daniel Apke: Exactly, and I feel like that’s one of the things, Ron, that’s Especially when people are newer, it’s less looked at because they haven’t been burned before.

And that’s part of the reason why we also buy at 40, 50% of market value because we’re buying it, taking on so much unknown risk that when these things have come up, a lot of times we’ve, we haven’t really lost money because of bad due diligence. When those due diligence things come up. Our margins shrink drastically, but luckily we’re buying at 40, 45% Ron, so it’s typically been okay it’s not ideal, but it’s typically been okay because of that.

Ron Apke: Yeah. That’s when I get nervous when some people come in, maybe with 50, a hundred thousand dollars, they get a deal that might be buying for, or someone negotiated up from 12 to $20,000. They’re like, I can sell it for still for 30, I’m buying for 20.

That’s when you really get burned is when you start buying at 60% of market value. Do proper due diligence or find something out after you buy it. And then you’re going to start losing money.

Daniel Apke: Eventually funders to have to be very careful with this.

Ron Apke: Absolutely. I mean, funders, you got it. When you’re a funder, you have to do due diligence. Like it’s your own deal. That’s how we do it. Um, like we’d go through all the normal things. You don’t just trust a partner just to trust them. Uh, like it’s your money going out. So you need to respect your money going out and not put it in the wrong spot.

Daniel Apke: Yeah. Let’s talk about why it’s so important. Like why, why due diligence, why is it so important to conduct it? What can go wrong?

Ron Apke: So, I mean, HOAs are one thing that I can just think about the top of my head of people overlooking sometimes. So HOAs, someone saying something’s not an HOA, it’s going to be drastically different selling a piece of land in rural America in an HOA versus not an HOA. Speed and usually the amount you can sell it for as well.

That’s a very common thing. So you can imagine just something like not finding out if it’s an HOA. It can cost you 30, 40% of your return on an investment and cost you months and months because they’re extremely difficult to sell.

Daniel Apke: And HOAs are very individual. Like you, you can find comps that make your property look very good outside of HOAs in rural America, whatever it is.

And then all of a sudden your property’s in HOA and you can’t put mobile homes or whatever the situation is. It shrinks your buying pull down. And although the comps may look good, you want to find comps inside the HOA. That’s a huge one. That’s massive because some HOAs are very, very, You know, not desirable compared to just vacant unrestricted land.

So that’s one of the first thing we look at. Cause not each, all HOAs are bad. A lot of people get this thing when we say all HO. Hoas are bad. It’s the more highly restrictive ones. The ones that are, you know, 80% vacant, not filled. They’re 80% vacant for a reason. The subdivision was done in 1990. It still hasn’t filled up.

There’s only 20 lots out of 200 of them filled Ron. That’s a sign that it’s not desirable. Those are the type of things we look at with HOAs, but there’s some other things we look at and due diligence. Let’s talk about the basics. Like what are some of the basics we’re looking at due diligence?

Ron Apke: Yeah. So basics are, so we talked, we talked about the land.

So when we overview or when we looked at the land with our discord question, that was basically what tools we use. I said, map, right? ID dot land is what it’s now called. Um, and that’s telling us floodplain. Wetlands slope is a big one. Slope is one that’s very difficult, not impossible, but very difficult to be a hundred percent sure of on the computer.

So that’s where some people can go wrong. Computer might say it’s not as bad as slope. You don’t get boots on the ground before that. And then you buy the property and you see that it’s straight up a hill or something like that. And then the other ones, like when you call the county and you have zoning restrictions, whether it’s mobile home lots, city limits, Dan is one that you will see a lot.

So if you’re in city limits, a lot of times it’s more difficult to sell land because more restrictions, more taxes a lot of times. Uh, so that is one thing where you got to keep in mind, even these tiny little cities that you wouldn’t think would have restrictions have restrictions and it can be so difficult selling the price again, similar to an HOA.

Daniel Apke: I think though, it’s very, very similar to an HOA, but then you can’t hunt a lot of times in the city limits. You can’t do certain things like city limits, depending on the city has been one of the biggest deterrence of just buying and selling land. I think like it just acts, like you said, just like an HOA.

But like flipping versus wholesaling, Ron, there’s risk versus reward. We’re doing all this due diligence up front, conducting it so we can buy it. We’re minimizing the risk so that we can buy the property. There’s a lot of people who try to wholesale land, and I get probably 20 of these a week from people trying to wholesale that are trying to get me to buy their land.

They do no due diligence. They’re just trying to wholesale real quick. There’s no risk on them, and that’s why the reward’s smaller too. We’re doing all of our due diligence, getting the drone shots, doing all the things that Ron’s talking about, checking if it’s in a HOA subdivision, getting all the restrictions, all the information up front, and then putting that risk bundle together, and then acquiring it.

Versus a lot of people like to wholesale, but they’re not doing the due diligence upfront, which doesn’t matter. I think still it’s more sustainable to do, to do the due diligence because whoever you’re selling it to is going to have those questions. But it’s not as necessary. And I want to kind of make the difference because it’s, if you’re not buying the property, there’s no risk. Therefore, you know, we’re doing all this due diligence because we’re buying it ultimately.

Ron Apke: Yeah, I think it’s a combination like with wholesalers, like you make more money when you buy the property one because a risk and two, because it’s just lack of knowledge at the end of the day, people wholesale land because they have no idea what it’s going to sell for.

So let’s try to market this out to the masses and see what happens. Um, but yeah, that, that, that for sure. Like doing the due diligence is so valuable in this stuff and 90. 5% of the time, we’re going to be within 10 to 15% of what our expected sales prices. And when we’re buying at 35, 45% of market value, there is so much margin in there to undercut the market.

But like we’ve talked about this entire episode is you get seriously burned when either you buy for too high and you get burned or you just get burned in general. You didn’t do your wetlands due diligence. You didn’t get boots on the ground. You didn’t look at the slope. Uh, you don’t know HOA. You don’t know city restrictions.

Those are like the common things where you can get burned.

Daniel Apke: Absolutely. And those are things that I think it comes back to Ron when these people are emotionally attached or trying to close their property. They’re trying to secure funding and just get it through. That’s where we see that happen the most.

So even if you guys are funders, like even if you’re not acquiring your own deals, this is stuff you want to double check. You’re the manager, the person who found the property brings it to a funder. You want to do the same due diligence as them, honestly, or at least double check them until you have that relationship and that trust, because that’s where we see a lot of people being burned as well.

And this leads me to run. I want to talk about just, you know, uncovering the land, uncovering what’s going on, figuring out the land, being a skeptic. Cause that’s what it is. We’re looking at the land and we want to find what’s wrong with it as a due diligence. Like that’s your job. Sales. You want to get acquisition sales.

You want to get it under contract due diligence. You want to find what’s wrong with it. And then every, I think every stage needs to act separate. And during this stage, unfortunately you have to disconnect from your sales, from your acquisition side. If you’re doing this all by yourself and you have to be a skeptic and you just got to put those boots on.

Ron Apke: Yeah, a lot of people in a lot of our students, a lot of people like that, like they’re doing everything and it’s very understandable to have a bias. Like, okay, I’m doing the due diligence now and I just got this PA and I want this deal to go through because I want to make money on the back end. But like Daniel said, detaching from yourself. That’s why our due diligence person is completely different than anyone who is, uh, I don’t know, fin financial, like us, our business making more money doesn’t help them make more money. So that person is extremely unbiased in the deal in general. Us buying another deal isn’t gonna help them in any way.

Um, their responsibility is to be unbiased with the due diligence, get us accurate things so we can make the final decisions. Um, so yeah, that position. In general, I think whether it’s you doing it or someone else doing it being unbiased. And I think when it’s only you doing it, getting other sets of eyes on it is really important, whether it’s a funding partner or bring it to us on our Wednesday calls, getting other sets of eyes on it.

So you’re not like thinking you’re crazy about thinking this deal is a buy for 40 sell for a hundred getting that confirmation or getting another couple set of eyes is really valuable.

Daniel Apke: Let’s talk about a couple of situations, Ron. Can you think of a situation where You know, we thought we were buying a great piece of land. Maybe we missed something, whatever happened, or this could be a member. Also, um, just the situation recently you heard of where due diligence goes wrong or they didn’t check or whatever.

Ron Apke: I mean, our most recent situation is probably with our mobile home. When we had a tenant in there, like it is not the easiest thing to find out if you have a squatter on your property or in a mobile home, uh, but it is feasible for you to do that.

I’m very skeptical when I see a livable mobile home. And I didn’t ask enough questions and I trusted the sellers too much, much in this situation. That’s another big one. It’s trusting sellers can absolutely kill your due diligence. Oh, it’s bad. Um, so that’s probably the best situation or the most recent situation, terrible situation, but most recent that I can remember is just not making sure that there’s not anyone living in a mobile home that, uh, we bought.

Daniel Apke: But it’s okay because if you guys are fine with these margins, we’re still buying it. 15, 000 and selling it for 40, right. And it just took a while to get the eviction. And Ron had to drive.

Yeah, exactly. Um, so it’s not ideal, but the money’s still there. If you guys want to go after properties with mobile homes and a victim, like in, in these counties, they’re very, very. Landlord heavy landlord favorites from where, from where we were. You got to be careful state by state, but it was not hard that hard of an eviction process besides just having to show up.

I mean, you showed up to court, the judge knew the guy and he was very in favor of us. We just had to kind of show up. The other party didn’t even show up. So yeah, I just wanted to talk about a situation that’s happened to us because it does happen. And we could have avoided that by getting drone photos or getting a realtor there before and just making sure it’s empty, those types of things.

Cause you’ll hear Ron now on our calls. Like if you guys are on our Wednesday calls. You’ll see a mobile home. You’d be like, make sure no one’s living in that mobile home. It’s because this was such a recent event for us, but let’s talk about what to do if something goes wrong. I know it’s very situational by situation, but let’s say prior to buying, you find something wrong.

What do we do?

Ron Apke: So, yeah, definitely situations situation. Like you have a few options. Obviously one option is backing out of the deal. Like this is a deal killer, whatever the situation is. Um, I found out zoning can’t be built on whatever the situation is, uh, backing out of the deal is. Always an option title company might charge you some money, but sometimes that is a cheaper option than buying the deal.

Then taking three months of selling and making 500. I don’t know. Um, and then you also have the option to negotiate down. Um, I guess there’s three options, Dan. What I’m thinking is backing out negotiating down, which is pretty self explanatory and then getting the issue resolved before closing and ignoring it.

I guess there’s four then. Yeah, exactly.

Daniel Apke: It’s not that serious of an issue, or depending on the issue.

Ron Apke: True. Yeah, so you have all those different situations. I think like getting it resolved, like some things need a survey or something like that. Or you want to make sure that eviction happens before you buy the property.

Or like Dan was talking, like maybe you’re okay with the risk. Uh, but you know going in, I think you have so Exactly.

Daniel Apke: That happens where we’re like, we know the risk, it might be five acres off, it’s a 40 acre property. The title company is not insuring it. We’re going to get it. The seller needs to close.

We’re going to get this survey before closing. That’s an example of where we’re ignoring it, not ignoring it, knowing that we’re taking on that risk.

Ron Apke: Absolutely. I mean, that’s a really good. Example, I think you have so much leverage though, Dan negotiating in these situations.

Daniel Apke: Oh yeah.

Ron Apke: Like absolutely an incredible amount of power.

So like in that situation where it needs a survey, like negotiating them, like, listen, I’m taking all this risk on this property. Either you can wait two months for this survey to happen and then I’ll get you your full money. If everything comes back or you can, I can pay you 5, 000 less right now with 10, 000 less right now.

So there’s so many situations, but it’s situation by situation, right?

Daniel Apke: It is. And you got to take the risk, understand what the risk is, understand what your return is, and just kind of make a decision based on that. Like, what am I buying it for? What’s the risk here? Is there any going to be, you always want to put yourself in the shoes of the future buyer.

Like, that’s the question you want to ask. Is there a future buyer? When, you know, you can’t even build on this land, you can’t even put a single family house on this land. Is there a future buyer for that? What does a future buyer look like? There’s no way they’re going to buy that property for the same price as just a regular retail.

So what do you have to do? You have to go back and negotiate. So those are the things you want to look at. Just think of the future buyer. Think of the risk. Think of that. Even if you’re using a deal funders money, think of their money and where that is being placed. And if it’s being placed in a safe area, I think overall, and then post purchase run, this is where it gets a little bit tricky.

You buy a property. This happens a lot too. You buy a property. Find something you sell the property it’s under contract and they discover something that’s just happened to us.

Ron Apke: Yeah. It’s definitely not an ideal situation. And it’s, if you do enough deals, it is going to happen where title company messes up.

Um, either a title company messes up or you mess up with due diligence is probably what we’re more so talking about. You got to figure a way to sell the property, whether it’s breaking even, whether it’s losing 500, communicate with your deal funder. If you have a deal funder, do not try to keep this stuff from deal funders.

Uh, I see it all the time where people do that. Uh, if it’s a little thing like, okay, just solve it yourself. Uh, let them know, but selling the property. Figure out a way to find an end buyer with the situation. We’ve had some crap, crap, crap situations that we’ve sold. Uh, we’re, like Daniel said, we’re going through one right now.

We had a property we bought, um, that, uh, only had access. Eight year, eight months a year. Uh, so we didn’t know that when we bought it. We didn’t know when we bought it. We ended up calling our salesperson, called all the neighbors and ended up selling it to a neighbor. We made like 10 which I was ecstatic about.

We got our money back, made some money, but it’s not an ideal situation. That is a due diligence that we missed. But at the end of the day, like you got to figure out a way to sell the property. Like you can’t, there’s no excuse. You can’t go back. You can’t go to the seller who sold it to you and whine to them.

You got to look forward and find out a way to sell it.

Daniel Apke: Or you go to the title company if it’s a title issue and see if you can dispute that because those things happen. Like we just bought a property with, we sold, we bought a property. We had it listed. We sold it. During their due diligence, they got the title search and it had a lien on it.

So we’re going through that right now. That’s a situation where hopefully we can put that risk on someone else.

Ron Apke: That doesn’t have a lien. That has, Um, and then there’s four other people who own interest in our property. Um, I don’t even know if you knew that. Um, but yeah, this is a situation where the person who sold us the property had three quarters interest in the property.

Um, and then there’s four other people who own a quarter interest total in our property. So now. That’s obviously going to be a thing where we have to either go to the title company or try to buy these people off and get them to quick claim the deed to, or quick claim the rest of the property to us. Um, so you’re going to run into these things guys, Dan, I, it’s just going to happen if you do enough deals.

Daniel Apke: Absolutely. Next thing I want to talk about is just. So going back to kind of the basics, Ron, let’s just walk through our due diligence checklist. What, what should someone do? They have a property under contract, the seller agreed to a 50, 000, they get the purchase agreement back. What should someone, what, what should they be doing first?

Ron Apke: So first thing is ID land map, right? Doing your land due diligence, seeing if it’s in a floodplain, wetlands, landlocked or has road access, all those different things that we talk so much about. That’s called base, like computer due diligence. You can do the base due diligence in five or 10 minutes. Um, then you’re going to go and that what we do is go and look at the price.

Like I’m going to look at the price. This is after we get a purchase agreement, look at the price, like, okay, there’s maybe it’s not the perfect piece of land, but it’s pretty solid land. I’m going to be okay with this price. Then you’re going to either you or a transaction coin or due diligence person is going to call the County, find out the zoning restrictions, get the deed, get a survey if they have it.

Um, I said zoning restrictions already, Dan, and then, uh, make sure everything else checks out. Read the deed. Electric, utilities. Surveys. Yeah, all this stuff. Like, go through the deed. Look through the deed in, uh, detail. Make sure you have the right seller. The seller actually owns the property, um, but yeah, that’s kind of the last step of due diligence is that legal aspect.

Right? Survey, deed, restrictions. All those things are going to kind of finally your due diligence. And then we go back and review price again, I guess also drones. Dan, we said,

Daniel Apke: I was going to say the boots on the ground, we get boots on the ground, whether it’s drone or realtor before every purchase we make just because.

We’ve been burned in the past where there’s been goalies on the property or just things we could have just so easily avoided with drone pictures. It just kind of sums up the due diligence. If we, there’s a question mark we have before buying that we want, it’s sloped off the property. It’s going steep downhill right off the road.

Okay, let’s actually get eyes on that. Let’s see what it’s going. Let’s get, let’s ask the drone or the realtor for their opinion. Whatever the situation is, we always want to get boots on the ground before buying.

Ron Apke: Yeah, that, that is that last step. Sometimes we do it during title. Sometimes we do it before we send a title.

It’s kind of your preference. There is some risk if you do it after you send the title, because if something goes wrong, but you also have a risk of not sending a title and waiting on your drone. And then the seller’s waiting and anxious to get their money. So it’s really your choice with that. But it’s something we do for every single property before we buy is boots on the ground, either a drone or a trusted realtor.

It’s not a new realtor. I don’t use new realtors for my boots on the ground for using a new realtor. I’m going to get a drone as well.

I think that’s a huge step that a lot of people skip, I think

Daniel Apke: you have anything else to add Ron?

Ron Apke: I don’t know. I don’t think so. I mean, I think this is really good. Good value.

Daniel Apke: 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.