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.