Life, Death and Land Investing

Today’s issue of the Dirt Report is dedicated to a long time client, investor and friend.

His name is Rhett Siegfried.

I’ve known Rhett for over 20 years. In fact, he was one of the first land investors I ever worked with.

A few weeks ago, Rhett passed away. And services are scheduled for January 16 here in Las Vegas.

Today, I’m going to tell you part of Rhett’s story. As I said, he was a very good friend. But also, there’s a HUGE lesson in here for anyone who is currently investing in raw land or thinking about it.

From Condos to Dirt

I first met Rhett when he was a bartender down at the Golden Nugget in Las Vegas.

At that time, he was busy investing in several condos in the Las Vegas area. He was your typical real estate investor - he did everything from Buy/Sell the properties to fixing leaky pipes.

He had to do it all, because the rent on the condos he invested in was somewhere around $400-600 per month per unit. So there wasn’t a lot of room for positive cashflow let alone profit.

I still remember every time I went to see him… if he wasn’t at the Golden Nugget, he was working on the condos.

He bought those condos for about $25,000-$50,000 a piece. And his strategy was simply to rent them out and have his tenants pay down the mortgage. It’s a basic real estate investing strategy most people know about.

And he did well with that. Rhett, a regular working guy, figured out how to get into the real estate business. He took action and he made it happen. No small feat… especially on a bartender’s salary.

But in the early 1980s Rhett discovered raw land.

I still remember explaining to him how when you’re investing in raw land, there IS no maintenance like when you own a condo.

In most instances you don’t have to go in, spend money to improve your property and hope that your improvements add to any appreciation that happens before you sell.

Instead, I’m always looking for properties to simply buy, hold and sell.

And that’s what I taught Rhett.

***You can hear a short interview I did with Rhett on November 16, 2008 where he talks about this. You’ll even hear how he made some money from his land in a way I never even considered…

Here’s the link to the audio:

The BIG Land Lesson for Today

Now here comes the big lesson for today. And it’s one of the greatest parts of becoming an investor in raw land.

I’ve told you before that there’s typically no cashflow in land. The land just sits there until you sell it.

But when you DO sell it… well that’s when Rhett’s strategy becomes valuable. (If you haven’t listened to the audio above, you’ll hear Rhett tell you about this in his own words). So valuable that it can change your life and the lives of your children and grandchildren.

Rhett’s strategy was to sell his land investments in small pieces and create notes (meaning HE held the paper for the buyer) that would provide him with regular income. Rhett WAS the bank. Every month, he collected his checks… for years and years. -

If you listened to the recording above, you heard Rhett talk about this and what it did for his retirement income. (In the last few years, he increased his positive cashflow by an extra $1,200 per month.)

Here’s a quick summary of just one of his investments:

See the summary…

Even though Rhett has now passed, that money will continue to flow… to wherever he designated it should go.

This isn’t pie in the sky, sit on your couch and watch the money roll in stuff you see on TV. This is real.

Of course Rhett did all the work to get the returns he enjoyed. He made good choices at good times. He bought right. He sold right.

But when you’ve held land for 5 or 10 years, it’s often easy to forget you actually did the work when the checks just start showing up month after month.

Joy and Sadness: Two Sides
of the Same Coin

Life is about balance… and where there is sadness there is always joy in one form or another. But you have to be looking from the right perspective.

So although my friend and client, Rhett, isn’t here anymore, the joy is in what he left for his family and the ones he loved.

He left the land that will benefit them for years to come.

I rode out to Arizona earlier this week for the first time in a long time without Rhett.

He always used to go on the land tours with me and be my backup. In fact, most of the land tour pictures you’ll find on my site from the past 10 years were taken by Rhett.

He was always excited to go on those tours. And many of you reading this right now will recognize his name and probably even remember when he went on your land tour.

Rhett was really looking forward to the bridge being completed across the Hoover Dam. It’s an amazing site, even in the middle of construction. Unfortunately, he won’t be here to see the bridge when it’s done. He wanted to be one of the first people to drive across. His kids and grandkids will do that for him.

But I know he’s watching…

So here’s to you Rhett. A good friend to me and to everyone that knows you. You’re someone I am going to miss for a long time.

May you rest in peace.

Getting an Inside Scoop for
Investors in and Around
the Hoover Dam Bridge

OK… time to move on.

If you’ve been a reader of the Dirt Report for any length of time, you’ve probably heard me say that one of the keys to success in raw land is KNOWING more.

The more you KNOW the more you tend to make.

And today I want to tell you about a good resource to help you KNOW more… particularly if you have invested or are looking to invest in and around Mohave County.

The resource is called the Mohave County Landowners Association. I’m a member. And as a benefit of membership, I get access to their monthly newsletter which is an excellent “Here’s the bottom line about what’s going on.” type of resource for the smart land investor.

They publish a hard copy newsletter once a month that keeps you up to date on what’s going on.

Subscriptions are $45. To subscribe just send your information and subscription payment to:

Mohave County Landowners Association
1812 Stockton Hill Road
PO Box 3877
Kingman AZ 86402-9975

The phone number is (928) 753-3055.

If you’ve invested in Mohave County or are thinking about this, their newsletter is a really valuable resource to have. I give it my strong recommendation.

So What’s the Deal with
Land Taxes?

In the November issue of the Mohave County Landowners Association newsletter, there was a short article about all the landowners who are wondering why their property tax bills are so high in a down market.

Without getting into a long explanation of property taxes (which isn’t really necessary here), the point is that a lot of property owners are up in arms over the increase in their land tax bills.

The reason they’re high is because the taxes are based on actual sales of property done back when the market was hot. Remember, 2005-2006 was probably the hottest time on record for Mohave County property.

The reason I’m telling you this is simple:

Higher tax bills are just one more factor helping to create a whole lot of motivated SELLERS in a market like this.

Now when I say the land taxes are “high,” don’t freak out. I
have a client who had a tax bill of $20 last year and $50 this
year. So while the tax bill doubled, we’re not talking about a
lot of money.

For some reason, that’s enough to motivate some land owners to
consider selling. Especially in this market… it gives absentee
land owners one more reason to consider selling.

And working with motivated sellers is a key to profit.

We’ll talk more about that in a coming issue of the Dirt Report.

Happy Holidays from the
Dirt Report

Before I close this up, I just want to wish all of you Happy Holidays and a Happy New Year.

There’s no time like the holidays to remind us why we do what we do and the people for whom we do it.

I appreciate having you as a Dirt Report reader and wish you the best in 2009.

Is That Possible? 2.5 Acres of Raw Land for $125 + Closing Costs?

Two quick updates before we jump into the heart of today’s Dirt Report:

Big Dirt Update #1 Regarding
Jim Rhodes’ Pravada Development

Big news for folks investing (or thinking about investing) in and around Golden Valley…

On December 2, an Arizona Corporation Commission law judge recommended that the ACC (Arizona Corporation Commission) approve the Certificates of Convenience and Necessity for Perkins Mountain Water and Perkins Mountain Utility Company.

Those are the companies that are going to provide the water and electric to Jim Rhodes’ Pravada development in Golden Valley.

This is big news for investors in the Mohave County area.

Here are three short excerpts from the article:

“Judge Teena Wolfe is recommending that the ACC approve the Certificates of Convenience and Necessity for Perkins Mountain Water and Perkins Mountain Utility Company.”

“Perkins Mountain Water Company and Perkins Mountain Utility Company are fit and proper entities to receive Orders Preliminary to the issuance of final CC&Ns,” Wolf’s recommendation states.”

“The two companies will serve the Ranch at White Hills and Pravada in Golden Valley. The developments are expected to contain more than 50,000 dwellings.”

Here’s the full story from the Kingman Daily Miner:

Read the full article…

Big Dirt Update #2 Regarding
the Widening of U.S. 93

A-DOT recently confirmed that the start of construction to widen the Arizona side of U.S. 93 (the 17 mile stretch of highway that is still a 2 lane road) is going to start in January 2009.

The construction will be starting from about mile marker 17 and heading backwards towards the new bridge.

I’ll have a LOT more information for you after the new year about this… but for now, it looks like things are moving forward.

OK, let’s move on…

Strike 1, 2 and 3
for the Big 3

You really can’t make this stuff up…

It seems like every week, the Big 3 automakers keep coming up with brand new ways to screw things up.

As I write this, they’re still trying to get a bunch of your money to steady their companies - companies that clearly aren’t viable in today’s economy.

Ford says it doesn’t need cash for the short term, it just needs help for long term viability.

Isn’t the market supposed to take care of things like that? If a company can’t hang in there for the long term… well, then it ceases to exist.

That’s capitalism right?

But these are public companies. So it’s not really their own money they’re dealing with.

It’s the investors’ money. It’s your money.

And the only reason the investors are in the game is because they feel there’s a good chance of profit. And that’s the problem. There is no profit right now.

Here’s an excerpt from Ford’s April 4 2008 press release outlining 2007 performance and executive compensation:

“Alan Mulally, Ford president and chief executive officer, earned $2,000,000 in salary and received incentive bonus awards of $7 million.

Total 2007 compensation was $21,670,674, which includes salary, bonuses, the Company-recognized expense for stock options and other stock-based awards, as well as all other compensation.”

But Ford LOST $2.7 billion in 2007 and a whopping $12.6 billion the year before (the CEO got $28 million that year, for only 4 months on the job).

What’s wrong with this picture? It’s a wonder their investors aren’t out protesting in the streets.

But What Do the Big 3
Have to Do With Land?

I’m telling you all of this simply to show you just how crazy this whole mess sounds from an INVESTOR’S point of view.

You’ve got companies sucking wind who still pay performance bonuses and send their CEOs around the country on private jets.

Clearly, there’s something very wrong here.

And that’s why I’ve stuck to land for all of these years.

This kind of junk simply doesn’t go on. Because in land, there are far fewer places to hide. Fewer things to “fudge.”

And in the end, no matter WHAT happens, you’ve still got the land.

Sure there are crooks out there, and you’ll read about “shady” land deals of one type or another. You’ll find that in just about any industry where money changes hands.

But in land, you generally know what’s going on BEFORE you invest. From an investor’s point of view, you know what the expenses are that the managers will incur AND what they’ll make (usually a straight percentage of the profits).

Land Investing
with an LLC 101
A Very General Example

Here’s a hypothetical example:

Let’s say you want to invest in a property that’s being sold for $1 million. The problem is, most people don’t have a million dollars laying around.

So instead, you go out and find 9 friends who are willing to invest $100,000 each. You also invest $100,000.

You form an LLC and you become the manager of that LLC.

In an LLC, you have your investors and you have the managers. The managers are the land experts in charge of managing the property and executing the right exit strategy. More about that later…

The timing of the “hold” is at the discretion of the managers. In this case, let’s say it’s a five year hold for the investors.

During that time, each investor is making 10% per year in interest on his money. Ever tried to get 10% interest from your bank? Good luck.

So 5 years go by… the land is sold.

Here’s how the money gets divided:

The investors get paid FIRST.

In this case, each investor would get his investment back plus interest once the land is sold.

So each of your friends (provided they invested $100,000 each) would get his money back ($100,000) and his interest (10% interest on $100,000 = $10,000 per year times 5 years = $50,000). That’s a total of $150,000.

Once the investors receive their money back plus their interest, that’s when the managers are paid.

30% of the remaining profit goes to the managers and the rest is distributed to the investors.

Here’s the most important thing:

When you have an acquisition specialist who KNOWS he’s bought right (even if he’s planned on an 8 year hold), profiting from land basically comes down to buying and holding.

And if you’re investing in an LLC like the example above, you’re going to make interest on that money while you’re holding the land.

And the LLC is just ONE of the options to play the land game.

But this market is the best market for buyers (NOT sellers) I’ve seen in the 20+ years I’ve been in this business.

Smart Investing 101:
Know the Costs Before You Invest

The link below is an excerpt from a typical type of document used in what I’m describing.

See the document…

Those are the expenses.

In land, you know what your expenses are (granted they’re estimated summaries, but it’s not difficult to come up with very accurate numbers), BEFORE you invest.

That way you don’t have some big fat cat eating away at your profits without your knowledge. If you look carefully, there’s no line item for flying around the country in a private jet. Or room for taking hefty salaries or fat bonuses.

You know upfront what the percentages are (I just explained it…)

There are no “bonuses” or “performance rewards” in a land LLC.

And there’s simply no room for funding a lavish lifestyle on an investor’s dime.

In land, simple economics rule.

The higher expenses go the lower the profit goes. Try selling THAT idea to the Big 3 CEOs.

Here’s Why BAD Markets (Like this
One) Are a HUGE Opportunity
for Land Investors

Here’s the deal…

In a soft market, builders can’t afford to hold onto their inventory until the market rebounds.

There’s no cashflow in land, remember.

That’s why acquisition specialists who know what they’re doing (like I do) are buying land from the builders NOW.

Remember the issue a few weeks ago where we highlighted the opportunity to purchase lots that were selling for 50-60K a few years ago that are now on the market for 5K?

Investors can hang on to the land (the builders need money) until the market comes back.

When the market rebounds, guess who wants the land?

The builders. Only this time, the deal to buy it back isn’t quite so good for them… And THAT’S how you profit.

As an acquisition specialist, I know how to play this scenario. And I’ve done it many times.

So Just How Good ARE the Deals
Out There in This Market?

For the last few issues, I’ve been trying to make it clear just how much opportunity there is right now out there for someone looking to invest in raw land.

Remember in a previous Dirt Report, I mentioned a great way to buy land by sending letter to absentee property owners?

Here’s an example that showed up on my doorstep the other day.

It’s from a company called Asset Holding LLC.

Now I know the deals are good. My colleagues know the deals are good. And you might be catching on…

But with that said, my jaw still hit the floor when I opened up the letter you’re about to see.

It was sent to my wife by an investor looking to cash in on the opportunity I’m talking about.

Take a look at the letter she got the other month offering to buy one of her properties:

Download the letter.

The offer is $125 cash. (No that’s not a typo…)

The property is a 2.5 acre lot next to a major development in the Arizona desert.

The property is probably worth about 20K… even in a soft market.

And they’re kindly offering to buy it for a whopping $125 AND pay all the closing costs. What a deal huh?

The Reason These Letters Go Out
Is Because They Work… Often Enough

If YOU had to send out 2,000 letters to get even one seller willing to sell a property worth 20K for only $125… would YOU keep sending the letters?

Of course you would.

And the only reason these guys are sending them is because enough people DO sell. Enough to make it more than worth their while.

Actually, you can do this too.

I’ve just shown you an example people are actually using.

It’s a simple strategy to buy land for pennies on the dollar.

Of course, it’s not quite as simple as I’m making here. I don’t really have the time to go into all of the specifics.

But this is the type of thing I TEACH to investors who really want to create some results.

I just don’t do it for free

If you want to learn more, get the Preview Kit and get on my schedule.

The bottom line is this:

A LOT of folks out there need cash right now.

For the savvy investor who is prepared, (like the company that sent my wife the letter) that spells huge opportunity all over the place.

But land is even BETTER because so few people know about it. How many people do you know that even know the first thing about investing in raw land?

And when’s the last time you saw a late night infomercial offering to sell you a get rich course on land investing?

For some reason, it’s stayed well under the radar. And I don’t mind one bit.

I’m not looking for the limelight, I’m looking for profit.

Hopefully by now you get the point that this is CLEARLY a buyer’s market.

And it’s one like I’ve never seen before.

Next week, I’m finally going to get to the part where I outline some hot areas in the land world. And I’ll talk about one of the BIG developers that I watch like a hawk.

Watching what this guy does is a very smart thing to do. And
I’ll tell many more reasons why next time.

Who Needs a Bank to Invest in Raw Land?

If you get a steady diet of network (bad) news, you’re probably under the impression that there’s a giant vacuum out there right now sucking everybody’s money into a big black hole.

And if you’re (still) in the stock market, I guess that’s pretty accurate. Trillions of dollars of “wealth” is just disappearing.

Apparently, Mr. Market is tired of the old definition of an “asset” and is working on a brand new one that is leaving a lot of people out in the cold.

In the process, Mr. Market is wreaking havoc with people’s life savings, retirement funds and rosy plans for the future.

Some stocks are losing 90% of their value in a few weeks or months, and some of the veterans of finance are waking up to find themselves out of business.

Bye bye employees… sorry investors, your “investment” is now worth zippo.

Credit is tight… lending has dried up… getting a loan is pretty much out of the question.

If you’re watching the news, you already know this stuff. The media keeps pumping it at you so there’s less resistance to whatever plan the government comes up with next to control your freedom and spend your money.

I’m not really into conspiracy theories. I just like to tell it like it is.

So What Good are Screaming Land Deals
if You Don’t Have the Money to Buy One?

Today’s issue of the Dirt Report answers the question that might be on your mind:

“If money is tight, how am I supposed to fund an investment in vacant land?”

I wish I could give you the answer to that question. But I can’t… because there isn’t just ONE answer.

There’s a LONG list of them. So let’s jump in…

If you paid attention to the complimentary land investing course that came along with your subscription to the Dirt Report, you know my opinion on getting money to fund a land investment.

Money is rarely the obstacle to becoming a land investor. There are simply too many options, unless you’re just not serious. More often, the real obstacle is usually finding good deals.

Thanks to the market mess, that’s not currently an issue.

And if the governments keep doing such a good job of making the mess even worse, the deals are just going to keep getting better.

In the Country of the Blind, the
One-Eyed Man is King

The most important thing you need in this market is KNOWLEDGE. You’ve got to know more than other people know about what to do in a market like this.

You win in the land business by KNOWING more. More knowledge and more connections. The more the better. But that doesn’t mean you have to know it all.

As Erasmus said, “In the country of the blind, the one-eyed man is king…”

Sadly, most people simply don’t know what they don’t know.

As an investor, that can be a VERY expensive problem.

Here’s a quick example:

Usually when a new client calls me to discuss his options for investing in raw land, the first step is to get a clear picture of his financial situation.

More often than not, my client is sitting on severely underperforming assets. He just doesn’t have the knowledge (or vision) to put them to better use for higher gain. That’s part of the service I provide.

Here’s how the conversation often goes:

“So how much is your IRA earning you?”

“Well, I don’t really know. I get a statement every now and then, but it’s kind of hard to tell. Plus, I get penalized if I withdraw too early… so I’m not sure that helps even if I did know.”

“Okay, well tell me about your 401(k)…”

“Well, I don’t want to get penalized for cashing that out either…”

And on it goes. The client thinks his options are limited… little does he know that funds from IRAs and 401(k)s (and more) can be used to fund a land deal… without penalty.

But let’s say he doesn’t have those things… and he can’t go to a bank or use a HELOC to fund the deal.

Then what?

The answer to that question brings me to one of my favorite sources of funding for land investors.

It’s called:

PRIVATE MONEY

Private money is just that. It’s money that comes from somewhere OTHER than a bank.

One type of private money is seller financing. In a market like this, with Motivated sellers (with a capital M), seller financing is one of the most creative ways to fund a land investment.

Mainly because it’s only limited by your creativity and the motivation of the seller.

Another option is to use a hard money lender. It’s pretty much like borrowing money from a bank… without the bank. These are private individuals that lend money.

Except the interest rates are higher…

We’ll be talking a LOT in the coming weeks about private money. For now, just remember that when you’re considering an investment in raw land, you’ve got A LOT of options.

Now let’s move on to something else you really have to know if you’re going to be smart about investing in dirt:

Dirt is Starting to Get Attention…
the Clock is Ticking

The calls are coming in already…

A LOT of people have a lot of money they need to park, and some of them are starting to realize that dirt is a good place to do it.

Anywhere else, (like keeping it in the stock market, an IRA, or a 401(k) is getting pretty risky… it’s quickly becoming “move it or lose it…”

In my opinion, those things have always been risky because it’s hard to tell exactly what’s being done with your money.

Apparently a lot of people are beginning to feel the same way I do. Savvy investors and Joe the Plumbers alike…

Just this week I got two calls asking me about how to park upwards of $22 million in dirt.

A few issues ago, I mentioned how, even in a BAD market, dirt prices would start to climb as people started searching around for safer places to put their assets.

Well, this is the type of stuff that does it. When money starts flowing into land in a particular area, prices tend to rise.

That’s just common sense. And it’s a clue to take action, if you’re paying attention.

If You’ve Got Questions, Here’s Your
Chance to Get Them Answered

If you have questions about your particular situation and whether or not investing in raw land is smart for you, here’s your last chance to get on board the upcoming virtual “Land Summit.”

Here are the details:

I’m going to give you the answers to the EXACT questions you have about investing in vacant land… especially in this market.

The format will be a Question and Answer session. You supply the questions, I’ll supply the answers and any supporting content to make things crystal clear.

The fee is $47 and your questions are due by next Wednesday. (Due to the demand, I’ve extended the deadline a few days to give everyone a chance to get their questions in.)

Once you’ve signed up and sent your fee, you’ll get instructions on how to submit your questions (yes you can ask more than one).

Once all of the questions come in, I’ll create an audio that goes through each one and lays out the answer in simple english.

Everyone will get a copy of the audio including answers to every question that comes in.

Now I usually charge a lot more than $47 for consulting. After all, this info can make you a lot of money. But in this case, considering I can help thousands of investors at once, it’s a good deal for both sides.

Here’s the page to reserve your spot:

Register for the Land Summit

If you’re interested in becoming a land investor but have some questions, the upcoming Land Investor’s Summit is the time to ask them.

Chances are, when the audio is completed, we’ll probably begin offering it to potential land investors for at least $97. So taking action quickly can save you about 50%.