Focusing on quarter-acre vacant lots in resort communities was the game-changer.
When I started out over 20 years ago, I had just $500 to invest. But I quickly realized I could parlay that modest sum into controlling properties worth far more.
How?
By focusing on inexpensive quarter-acre buildable vacant lots in fast-growing resort communities.
The Details
Vacant lots in planned fast-growing resort communities are one of the safest and most profitable investments. I was able to grow my portfolio substantially quickly and become a passive income earner every month tax-free—and I didn’t need a fortune to start building wealth through real estate.
Here are the details of how I made this strategy work.
I called sellers of vacant lots worth below $10,000 that were in cheap, newer resort communities with lakes, golf courses, and other amenities. The subdivisions were about 5% built out. In other words, about 5% of the homes were already completed.
When I called the sellers, I offered to buy their lot for $5,000 with a down payment of $500 and pay them the difference (the $4,500) over five years. When a seller hears that, the first thing they say is, “No, I need to have all my money right now, up front.” They all say that, and that’s OK. But the truth is not all of them need the money “right now” because they’re already successful and wealthy. They can take payments.
After calling 10 or 12 sellers, I found one willing to sell the lot on terms, meaning I was able to buy a lot for $5,000 with a $500 down payment and owing the seller $4,500 for five years. I paid the seller around $200 a month, essentially with the seller as my bank. I used my self-directed Roth IRA with an administrator that allows for real estate investments, which is called a self-directed real estate IRA.
By doing this, I was able to control $5,000 with only $500 of my own money. Five years later, that vacant lot doubled to $10,000. So, I was controlling $10,000 with only a $500 down payment. I made my payment on time every month. When I sold the lot for $10,000, five years later, I had averaged about 20% per year in profit. Obviously, if you double your money in five years, that’s approximately 20% a year.
I was happy because that investment beat the stocks I was in, all my mutual fund investments, and, of course, annuities. It also beat bonds. Owning a piece of land was less risky than being in stocks and mutual funds.
I put the lot up for sale for $10,000 using some enticing sales techniques. I would say, “Quarter-acre buildable lot for sale, zero down payment, 100% financing, no credit check. Everyone approved.”
I got 80 phone calls in three weeks because everybody who saw that ad that wanted to own a piece of land, but they did not have a down payment or good credit. But they could still buy my lot.
I realized that I had no risk. What happens if I sold my lot for $10,000 and someone made $400 monthly payments into my Roth IRA tax free? What if they defaulted? What is my risk? I didn’t have any because I still owned the land.
I don’t give up the deed until they make their last payment. It’s no different from an automobile loan. When you buy a car and you put down five grand, you owe the bank for the rest of the loan. You don’t get the title to the car until you make your last payment. It’s the same thing with a piece of land. When I finished making my last payment on my lot (for $ 5,000 ), that’s when I got the deed. When my buyer at $10,000 finished making their last payment, I transferred the deed to them. Not only did I double my money from the appreciation (100% return ), I also made 10% interest for five years—10% interest every year for five years. So, I got paid twice. You can’t beat that.
Scaling the Strategy
I realized that if I could do those deals multiple times—10 lots paying me $400 a month or 20 lots or 50 lots or 100 lots—then I could get ahead faster.
I got a loan into my IRA from my brother for $20,000 and used it for down payments on several vacant lots. I put $500 down on 40 vacant lots, all in my Roth IRA, tax free. Every year I bought hundreds of lots and grew a huge portfolio by leveraging real estate.
Helping Other Investors
Today I help investors find quarter-acre buildable vacant lots in fast-growing resorts. We send out thousands of offers to buy lots at a discount each month. When we get interested sellers, we call to negotiate with them, check for liens, and check to ensure the lot is big enough to build on.
We also check the topography and pay someone to physically inspect every lot to ensure they pass my criteria. If they do, we close on them and pay closing costs for our clients. Then we transfer the lots to the clients who are on our waiting list to get their lots. Most people who buy these lots have sold their stocks and mutual funds and/or bonds and annuities. Some have used their LLC to buy them, and some have used their IRA or old 401(k) plan or even their current 401(k) plan to buy these lots.
Owning vacant lots in resort communities presents a unique and potentially lucrative investment opportunity. With its tangible, customizable, and income-generating features, this form of real estate investment offers a range of advantages that set it apart from more traditional investment options like stocks and mutual funds. By carefully considering your investment goals and conducting due diligence, you can harness these benefits and build a diverse and robust investment portfolio.
Tangible Asset with Intrinsic Value. Vacant lots are tangible assets with inherent value. Unlike stocks or mutual funds, which can be influenced by market sentiment and speculation, land is a physical asset with an intrinsic worth.
Limited Supply and Increased Demand. Resort communities often have limited available land, creating a natural constraint on supply. This limitation can lead to increased demand over time, potentially driving up property values.
Diversification for Reduced Portfolio Risk. Investing in real estate diversifies your portfolio away from traditional financial markets. This diversification can reduce overall risk, as real estate typically doesn’t correlate strongly with stock market movements.
Customization and Control. Owning vacant land allows you control over the development and use of the property, enabling customization and potential value addition.
Inflation Hedge. Historically, real estate has acted as a hedge against inflation, meaning your investment has the potential to maintain or increase in value, preserving your purchasing power over time.
Steady Income Potential. Leasing or renting vacant lots for recreational purposes can provide a steady passive income stream.
Tax Advantages. Investing in real estate offers various tax benefits (e.g., property tax deductions, 1031 exchanges, and depreciation) that can significantly enhance your overall returns.
Long-Term Appreciation. Well-located vacant lots in resort communities have the potential to appreciate significantly, making them appealing to investors with a long-term perspective.
Personal Enjoyment. Owning a vacant lot in a resort community provides access to vacation spots and recreational activities.
Limited Market Volatility. Real estate markets generally experience less volatility compared to stock markets, providing stability.
Leverage for Potential Gains. Real estate investments can often be purchased using leverage, such as mortgages. This strategy can amplify your potential returns, albeit with increased risk.
Hard Asset with Inherent Value. Vacant lots are hard assets, providing stability and security, particularly during market fluctuations.
Strategic Timing for Acquisitions. Investors can capitalize on market downturns by purchasing vacant lots at reduced prices. This strategy can yield significant returns when the market rebounds.
Passive Income through Rentals. Owners can generate passive income by leasing or renting their vacant lots, creating an additional revenue stream without the need for active management.
Low Correlation with Financial Markets. Real estate investments are often less correlated with traditional financial markets, helping to balance a diversified investment portfolio.
Demand from Tourists and Retirees. Resort communities typically attract tourists, retirees, and vacationers, ensuring consistent demand for properties.
Limited Speculative Competition. Compared to stock markets, real estate markets generally have fewer speculative investors, reducing competition and enhancing your investment’s stability.
Pride of Ownership. Owning a piece of land in an attractive resort community can give you pride and achievement, enhancing your overall investment experience.
Legacy Planning. Land can be passed down through generations, creating a lasting family legacy.
Land Scarcity Due to Urbanization. Availability of land in desirable resort areas may decrease over time due to urbanization and development. This scarcity can drive up land values.
Potential for Development. The value of purchased land may appreciate substantially if the resort community undergoes further development or infrastructure improvements.
Resilience to Technological Disruption. Real estate investments are less susceptible to rapid technological changes that can significantly impact industries like stocks and mutual funds.
Local Economic Impact. Investing in resort communities can contribute to local economies, create jobs, and support development initiatives, thereby promoting further growth.
Psychological Comfort During Market Uncertainties. Tangible assets like land can provide psychological comfort and peace of mind during economic downturns and market uncertainties.
Lifestyle Enhancement. Owning vacant land in a resort community can offer a lifestyle upgrade, providing proximity to recreational activities, amenities, and the natural beauty of these locales.
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