449 | Rubber Ducks and Systems for Land Investing

22:43And then I thought, what if I mix in some real estate? So I started to model in real estate options in there. And it looked a lot better. All of a sudden, it seemed like it was faster, more achievable, less cash required. I was like, ooh, anything that shaves a few months off my retirement time is critical. So I started to figure out, how do I do this? How do I make this a reality? And in the beginning, I thought I was going to get into single family. And then eventually, that evolved into, I want to get into commercial space. And I started off actually buying a very small office on the west side of Phoenix.

23:18and that office complex was really like my first introduction to real estate in general. And it was... Office complex. I was like, let's start with an office. That's a good idea. Spoiler alert, it's not a good idea. Don't do it. But I jumped into this office. I didn't have a business in it. It was like half empty. I was like, I'm going to turn this thing around. It's going to be amazing. It was not amazing. And when all was said and done, two-ish years later, I had lost 100 grand. So that is not my recommended approach for your first real estate investment. That was a bad call. But what it did do for me, what it did do was it broke that barrier.

23:57And I thought, okay, I am now a real estate investor. And I started self-identifying as a real estate investor. And as a real estate investor. I should be looking for other real estate investments. And I stumbled across land as a potential real estate investment avenue on the Fire drill podcast back in like mid 2018, Q2 2018. And that space sounded so good because the guy that was on the Fire drill podcast at the time, I've later learned who is kind of a guru in the space. He teaches a lot and he's very optimistic on how things will go. And so he's quoting like 300 to 1000 % returns. And you're like, that seems a little extreme.

24:37But you know, maybe if it's on the low end, it's not crazy. So eventually, I kind of dove into it, determined that he probably wasn't the one I wanted to learn this from. But Seth Williams over at RE Tipster was the person I wanted to learn this from. Not only was he a member of the FI community, which I loved right off the bat, but he's legitimately, and I've learned it subsequently years, just one of the best guys to know ever. He's a really good dude. And he'll just give it to you straight all the time. And so he has a fantastic course. And that's what I took the same course. It's obviously an updated sense, but the same course back five years ago.

25:09And that's kind of what broke me into land as an investment vehicle. Wow. Okay. Yeah. Again, there's a lot there. So 300 % to 1000 % seems, quote, a little extreme. That's probably a fairly discerning heuristic for investing. That's amazing. Yeah. So obviously we will dive into what might be more plausible for this land investing because I suspect it's a lot higher than like I have my own back of the envelope heuristic for normal investing, which is if something and again, this is not a hard and fast is just a general rule. But if something is saying that it's going to return more than 10 to 12 percent a year, my spidey sense goes up of, OK, there's more risk here than I'm otherwise aware of.

25:54And now that's not to say that something returning 9 % has no risk at all, or 8%, not saying that, but it's just that general back of the envelope kind of concept of, okay, you have to be aware because returns don't grow on trees essentially, right? Like there's no free lunch and there's usually some level of risk that you're unaware of. So clearly I think 300 to a thousand might've, that was probably a good one, but I wanted to stop real quick on that identity statement. So even backing up, I don't want to go past this office complex too fast because there's something there, but the I'm a real estate investor.

26:27I think that actually surprises me very pleasantly in your case, because I think a lot of people who were sitting being an IT network engineer decides to buy an office complex out of nowhere, loses 100K in a year or to. And most of those people I suspect would like turn tail and run and never invest again. Whereas you said, proclaim loudly, I'm a real estate investor. Like what gives there? Do you have any sense of why you did that? Yeah, I will say there's probably two factors there. One is just a general proclivity to say, like, if I see a bunch of other people successfully doing this and it went badly for me, it's probably because I screwed it up.

27:06So that's one. But two was the timeline. When I started the office, I bought the office complex in 2017. I kind of finalized everything very end of 2017, beginning of 2018. And then it was mid 2018, while I was still in the midst of the office complex that I found land. And so it was the overlap that by the time it all finished, and I realized what had happened with the office building, I had already begun a successful engagement in land. And then I could clearly say like, okay, so maybe that didn't work, but this is working and there's no reason I shouldn't keep doing this. Oh, that's cool. I like that.

27:41So did you have a sense pretty early that the office complex was going sideways or maybe south and you pivoted into land or was it just at that point, like you said, you're open to being like a learning machine in essence, and you're just trying to learn from bigger pockets, learn from RE tipster. Like, was that where you were at the point? Like, how did you pivot from office to land so seamlessly like that? Yeah. So really, they ran in parallel for a while. And part of it is that with commercial space in general, you are typically relying on the agents you're working with to help get the space leased up or to have contractors redo some work.

28:21So you're typically more and more leaning on other people. Unlike single family real estate, where you can kind of get in it yourself, if you feel so inclined and like do a lot of solo work, that's less and less viable or sometimes not legal to be done on a commercial space, depending on the arrangement. So by its nature, you have to step back and be patient. And so it wasn't I didn't realize for quite a little bit of a year before I realized, this is not going well, and I need to figure out how to make it go better. You know, so that timeline of the optimism, right, where it's like, this will be fine.

28:56It just takes time. It'll be okay. That allowed me the space to kind of step back and say, like, okay, while this is happening and this will probably be okay, let's keep working on land as an alternative, you know, and another potential investment avenue where I can continue to, like, keep growing this real estate venture. Gotcha. Okay. So you're obviously an analytical guy. You talked about the different modeling on retirement, which I think is probably more than a lot of people are doing. And hey, can I update this for X percent is going to be real estate? And so clearly there's math going on here, right?

29:30I suspect there are spreadsheets with this office complex. I'm sorry, because I don't want to move past the office complex. It's just like, it's so intriguing. Okay. When you bought it, it sounds like much of it was vacant, but had you run the numbers on like, am I going to have it like a cashflow negative? If it stays the current vacancy, what happens when it fills up or even 75 % full or some such? Like, were you just not able to rent it or were there additional circumstances? Yeah. So digging in a little bit more here, the office, as I noted, is pretty small. So there were two primary spaces in the office.

30:02One was occupied by a dentist, which was a problem when COVID hit. And the other, it was unoccupied, just an open space. And so from the beginning, it was vacant. And it was me trying to find the right tenant for that space, along with the agent who helped me work on this. And that work ended up being more difficult than I initially anticipated, obviously, right, in retrospect. And sourcing the right tenant, finding the right person to put in there was also a little more challenging than I thought. So as I look back over it post-mortem and kind of realize, like, how did this go? And like, what went wrong?

30:37I can identify a few key items where I was like, oh, I was probably a little too trusting here. And that's because I just didn't know what I was doing, right? Or where I was. Like, I miscalculated some things here because I overestimated or under-matched or whatever, right? The numbers were, you know? And that really came down to, like, how much it was going to cost to do some of the work, how long it would take to get someone in, what the ultimate value of the building would be. And at the very end, I ended up selling it. Basically, it was completely vacant at that point. The dentist had moved out.

31:04And it was really like, I just sold it as a building, completely empty to someone who just wanted to buy their own building because it was small enough to do that. And so that's where it ended up being, which is why it was kind of pulling all this time, not really breaking into it, losing money continually through the whole process, and then at the very end, exiting. Gotcha. You know, it's funny that the concept that poker player and author Annie Duke talks about, which is resulting, right? It's sometimes very easy to look at the results, in this case, a negative result, and say that it was a bad decision from day one, just by definition.

31:37Now, it may have been a bad decision on day one. Like that's for you to have decided. But I think this is what's important for the audience to take away. It's like sometimes good decisions turn out poorly because maybe in this case, COVID hits. And obviously you couldn't have foreseen that. And then the dentist probably stops paying rent slash moves out at the end of their lease. And now you have a fully vacant building, right? So sometimes things are beyond your control. But like you said, there probably were some things that based on a little extra knowledge. Okay. Maybe it could have turned out a little better, but that doesn't by definition mean the decision was bad.

32:11So anyway, that's a longer conversation for another day. But I'm curious how the intersection of your financial independence journey and your real estate journey kind of worked here in the sense that a lot of people don't have money to put down on a building or to buy land or they're leveraging to the absolute hilt and they don't have enough. let's say if the cash flow is negative every month, they might not have lasted a year or two. So I'm obviously kind of extrapolating here, but I'm curious, how does your financial independence journey play into the beginnings of this real estate and then kind of as we move into the more successful land investing?

32:50Absolutely. I think that that transition was from the focus being financial independence to the focus being business where it is now. If I had not laid the groundwork with the financial independence process, like mastering my financials, increasing my saving and kind of building up a solid nest egg to work from, it would have, in my opinion, been largely impossible. I would not have been comfortable transitioning like I did because ultimately when I cut over from a good paying tech job to that, we have been living lower means the entire time. And in fact, after I quit my job to run my businesses full-time, we further cut our expenses to just make sure we had a lower starting point for all of our regular expenses.

33:33But if I had not had years of savings in the bank where I knew I have time to figure this out, I would not have made the transition. I just couldn't have done it. Emotionally, I knew that the only way I was comfortable even trying it was because I knew that I had years of savings if things went bad. And that if for some reason, I made a horrible decision and it all falls apart, then that would be okay because I would have set my journey back a bit. I would have learned a lot and I could go back to figuring out what I had done before. But those people who basically say, I have$10 and a dream, I just can't do that.

34:10I will not survive in that. An emotional state would just be a wreck. I knew I had to have that base to work from to know I've got the wiggle room to get this wrong for a while. And truthfully, I did when I started. I screwed up for like a year. Yeah, it's amazing that power of FI, right? And in your case, you had years of savings. And like you said, what's the worst thing that could possibly happen? In essence, you go back to being in IT engineering, right? Like that's the absolute worst case is you go back to your normal life where everything was rocking and rolling. And I'm sure knowing you, you would have learned something else and would have dove into that.

34:46So, I mean, there's no absolute worst case scenario here, which I think is most people catastrophize to a large degree. Even those of us in the FI community who we have those savings, everything's going great. We're still hesitant. I think a lot of us are maybe a little too conservative when it comes to that. But I actually wanted to dive into, you said you cut your expenses with the transition. So transition, I guess, from having your full-time career to then being out on your own. And again, we're jumping forward maybe a couple of years because we're still in the, okay, you're just getting started with the land investing, but I didn't want to go past this.

35:21So I think having those plans in place, right? Like what does my life look like? How can we give ourselves a little more runway, right? You had years of savings probably at your current spend, but then when you lower that spend, then it potentially multiplies, right? The number of years of savings gives you more runway. How did you think about that? And what did you actually do in practice? Was there anything significant? Yes, for us, when I finally made the cut over in April 2019, just finished my job, wrapped that up and started full time on my businesses. I needed some headspace to like detox, obviously, in the transition.

35:56And during that time, I had another one of these moments where I took the time and the space to really reflect on where I was at, where I wanted to be, and like what our trajectory was. And it became clear in that reflection that where we were at was okay, because we had enough savings, but that where we needed to be wasn't that spot. And for us, that was like physically and mentally. So we at the time, we lived in like a 3700 square foot house, you know, and like, we were like, way too much space. And we realized that after buying the house, we were there for a couple of years, we realized this is too much for us.

36:29And that combined with this shift where our income significantly changed, went from a good steady income to nothing for a while. We were like, this isn't where we need to be. We need to be somewhere else. So we looked around, because we live in the east side of Phoenix, we looked around the different areas, but we moved cities. And ultimately, I worked with a friend of mine, set a watch on the houses around and said, okay, I want a house that is four bedrooms under this price point and has a rentable guest house. Right. And so we basically said, okay, we're gonna do that. So what cropped up on the market, as soon as it cropped up, we knew what we were looking for.

37:05We made an offer and we ended up purchasing it. And this was mid 2019, late, mid to late 2019. And that house, we went from the five bedroom plus a den or, you know, like 3 ,700 square feet down to like the livable space is like 1 ,300 square feet. So we significantly dropped the size of the house, added a guest house, which we immediately rented out. We basically cut our expenses, housing expenses by like, into like a third of what they were before easily or less really, but probably a quarter if I think about it. And so we like just significantly dropped the expenses overall because we knew that that was one of our core expenses, the most inflexible expenses we had and that we didn't want to be in a position where if the businesses took longer to get going or if there was some challenges we faced where we needed the additional money, you know, we had saved to use for the business that we didn't want to feel stressed.

37:53We didn't want to be in this perpetual state about discomfort. I'd rather be in a house that is a bit smaller, but a lot more comfortably financial. Damn. Okay. That is quite a change. That's amazing. So right. You essentially cut the square footage by 60 % plus had a rentable unit at this new place. And yeah, I mean, cut 60 to 70 % of your, your living expenses, which as we know, for most people in their budget, that's 50 % of, of your life expenses. And, and you did this with, I assume at that point, a family of six. I don't know how old your youngest is, but either five or six at that point into a 1300 square foot house and made it happen.

38:30Yeah. And we're still here today. And we, I mean, our income is significantly skyrocketed past where it was at the time. And we'll still be here for a while. Like this is, we just, we came to realize that it was like divine inspiration to move here. Like we feel like this is where we should be. Like this is the location we need to be today. And we'll probably need to be for the next couple of years until, you know, we feel inclined otherwise. Wow. Yeah, that's super cool. So, okay. It sounds like we may have jumped ahead about a year, give or take. So as I understand the timeline, you bought the office complex in 2018 sometime.

39:01You found land investing also in 2018. And then you said April 2019 is when you made the transition. A couple months later is when you bought this new house. So, I mean, JT, this all went down pretty darn quick, right? So you're in the middle of this potentially negative office? I wouldn't call it a debacle because it doesn't sound like it gets to the level of debacle, but you could probably argue it. But yet, essentially 12 months later, you've left your job, you've moved. How do you get there? Yeah. So once we started land and I had some pretty early success right at the beginning, in 2018, I sent out some letters because we primarily market through direct email.

39:39And we got a really good deal right off the bat. And that both gave me the confidence that this would work and that I could do it, right? And that success did not continue for the following year, basically. But it did give me a good jumpstart. I realized, oh man, this could be done. I can do this. If I do this correctly, I can turn this into a proper investing style. And I like to say that when I first learned about land, I thought I was learning to invest in land like a true passive investment. And effectively, I was tricked into starting a business. I did not realize that's what I was doing.

40:13but after I got started after about six months it became very clear that what I was doing was actually running a business that just happened to deal in real estate it doesn't really matter you know it could have been selling literally anything I have to say like if I was selling rubber ducks that it could be the same thing it just happens to be the land is a better vehicle for this but it's really a business model that I'd run at this point that's funny so right and we will get into this but that business model whether it's rubber ducks or vacant land is it just you're buying lower and selling higher?

40:41I mean, is that like at its absolute essence? Is that fairly close? That's effectively it. We source off-market deals and work with customers who prefer convenience and speed to price. It's people who are just like, I don't care. It's not the highest price. I just want this to be really easy and really fast. So we just optimize for that. We work with people who that set reference, which was hard for me to wrap my mind around the beginning because I'm all about price. But there's a lot of people in the world who just aren't. That's just not their number one thing. And so they don't optimize for that.

41:09They optimize for other things. So we specialize in that. And that gives us the profit margin to run a profitable business. And so we go through that and bring them immediately back to market for new users to go in and own and work with. huh okay that's really interesting right so like you said direct marketing so i think that's mailing out letters or postcards in your case and for anybody who owns vacant land they know that they get a lot of these postcards i uh like i said in the in the intro i've documented many times that i have i i have a full-on debacle on my hands with one of my earliest investments with this land that i own in a golf course community in north carolina and i still to this day a couple times a year, get a little postcard from somebody essentially saying, hey, anytime you want to sell, we'll take it off your hands.

41:55Here's our offer. And sometimes it's literally written on the postcard. Sometimes it's call this 800 number or go to this website. Obviously, you are very familiar with this because you send out, I assume, hundreds of thousands of these or maybe millions potentially of these postcards. But yeah, we'll talk about that in a sec. But just the very last thing, I can't skip by this, which is you basically said this first deal was proof of concept, right? it. You said, quote, this would work and I could do it. And I think that's so important for people. I know I had that personally, again, with my tiny little site, Richmond Savers and doing free travel rewards coaching where I was making probably, I don't know, 800 to$1 ,500 a month.

42:35Like it was nothing. It didn't come even close to my income, obviously, but that was on a half hour, an hour a day. It's like, oh, okay. I've actually proved this out to myself in my own brain. I may not have proved it to my wife. I may not have proved it to my friends, but in my own head, I proved it. And it sounds like that very first deal proved it to yourself. Yeah, that's exactly right. Just getting that early success, I think looking back was critical for my confidence to do this model. And yeah, I think it was quite a blessing to be able to land a good deal right at the beginning. But just to give you some comparison, at the beginning, I said 500 at the time postcards.

43:14We do different models now, but I said 500 postcards at the time. And I got one really good deal out of those 500 postcards. And that today is unheard of. But even then, it was just pretty good luck. And because immediately, once I sent that, and I had that one deal, and it went well, and things were going well, I went, oh, man, I'm just going to 10x this. So I proceeded to send 5 ,000 postcards two or three months later. And I got zero deals out of 5 ,000 postcards. So that was the humbling moment, right? Where it was like, ah, okay, so that wasn't some pure genius on my part. Okay, I understand.

43:50Like, it was statistics and some blessings. That's how it came together. But I knew that it worked that one time. So I knew that if I did it correctly, and I saw other people successfully doing it. So I knew it like they're doing it. I successfully done it once. I know I can figure this out. Interesting. So right, just like you said, statistics, just small sample size luck, right? You sent out 500. Had you sent out 10 ,000, 20 ,000, you may have gotten that one. And that was maybe a more appropriate sample size. but any 500 out of that group could have conceivably gotten you that one deal. But that's for a statistics 101 class, maybe with someone actually knowledgeable teaching instead of me.

44:25But nevertheless, that's kind of how the concept works. Okay, so let's actually talk about this. So you sent out these first 500 postcards. How do you get the post? Like, how do you know what to offer? How do you know how to do this? Like, are there databases? Are there like, If you're sending them out, are 10 ,000 other real estate investors in the same database? Talk me through how the heck do you get started with that? Yeah, absolutely. I'll fast forward to how we do it today. We've evolved over these five years on how we approach it. But today, the process we go through when we're looking to present our opportunity or this offers to these land investors or the landowners, whoever it has at the time, we will go to the...

45:08There's public databases. If you go to any given county in the country, they will have a list of what properties are in the county and who owns it. That's the state for almost every county in the entire country. And so because that is publicly available data, there are aggregators who go and collect all the data from all the counties everywhere. And they clean it up and make it consistent format-wise. Because all these counties do it differently, right? They all have their own little rules. So these aggregators collect it all and standardize it so it's easier for us to work with. And so we buy from these aggregators this data, right?

45:41So that we can go and just get it easily downloaded. And we can set criteria and say, I want properties that are between five and 10 acres, you know, in these four counties in the state of Arizona or wherever. So we can go through and specify this. And we today, we kind of cover large swaths of area at a time, but that allows you to go in and specify these criteria about what you want. And then they will send you the data and say, here's all the properties that meet your criteria. Here are the ownership records of who owns it and the mailing address. et cetera. And from there, we take the data and begin the process of formulating our offer for their given property.

46:15And we customize it as much as possible on the per owner, per property basis. Interesting. So, right. So, they're clearly, the software exists to help facilitate it because, like you said, there are all these little thousands of jurisdictions across this very large country and the data is not the same, et cetera, et cetera. So, right. They standardize it. And then that's where you come in and you have to figure out, okay, what exactly am I looking for? Because presumably there are all the, like I said, I bought in some golf course community that might be of 0 % interest to you, or that might be exactly what you target.

46:50And you might be looking for certain size properties or able to subdivide. Obviously I'm just saying this off the top of my head, but you can figure out exactly. And then it's like you said, also So you're optimizing for convenience and speed. And essentially what that means is you are probably going to offer, as you said, a lower price potentially. But if those people are looking for just a convenient close and it being fast, and they're willing to accept a little bit less for no headaches at all, well, then you're their guy in essence. Yeah, that's exactly right. So there's just so many different ways, even inside of land investing as a niche, although the name investing is a little bit of a misnomer.

47:31We just flipped the land effectively, but that's the term we use, land investing. So inside the land investing space, there's several different subcategories, which we'll dive into all of them. But basically, the one that I focus on kind of fits my business best. I've determined what kind of business structure I want, like how many employees do I want and what kind of things do we want to focus on? What kind of conversations do we want to have? And depending on those factors that help us determine what kind of offer we make to them and what kind of properties we focus on and what kind of owners we want to speak to, right?

48:01And so it helps us kind of narrow everything down and stay in our lane. And that, at the end of the day, results in a much better product for them and a much better experience for them and for us. And so we can kind of tailor our offering to what they actually want, which is, like I said, convenience and speed. So now, again, I am very clouded with my own debacle in terms of land sometimes being incredibly illiquid and not being able to sell it even close to a quote unquote market value. So I get these postcards. I'm like, oh, that actually sounds pretty good. So like, I'm probably your, you're like ideal person, but that said, then you have to presumably turn it around and sell it for two X, three X, whatever the number is that you've determined fits your model in order for you to make money with all of the expenses of sending postcards and such.

48:50But there is clearly with any type of real estate investing, there's some level of illiquidity if there isn't just this active market. How do you consider that? Because that has to be critical, I would imagine. Yeah, that illiquidity is the reason that this exists as an opportunity for me today. It's because land is just a much less efficient market than houses. There are several factors, but that is one of the key ones, in my opinion. Because on any given house, you could sell it very easily on a market at near market prices, in general. You can do maybe just a little below market and you can move it fairly quickly.

49:26Because there's such a common, established, easy to access marketplace across the country, obviously localized marketplaces, but these marketplaces exist, right? And they're readily accessible by everybody. Whereas with land, it is significantly more fractured. And so we have to list on several different sites to try and get to find the right buyer because there's just no single point where everyone's going to go to sell 90 % of the vehicles. It just isn't a thing for land. Additionally, the buyers are different kind of buyers. Less than 5 % of our transactions involve a loan from an outside party.

50:01Vast majority of the transactions, not just on our side, we purchase all cash, but we sell to all cash buyers. Vast majority of the time. Because land's just not an attractive asset for a lot of lenders. And so there's not that many lenders that do it. And when you can't find a loan, most people just don't want to. They'll just rather purchase it cash. It also has to do with the price point, right? So typically, it's under six figures for most of our land sales. There are exceptions to that. But even at the higher price points, we still find it's mostly cash transactions. And we also offer owner financing on our deals as well to kind of smooth those transitions if people want to do that.

50:35So that's another option that they have when they work with us. But that marketplace, because of its inefficiencies, like all these different levels, that creates space, that creates opportunity for us to say, hey, look, it may be difficult for you to sell this. And maybe it's difficult for us to sell it as well. But this is what we do all day, every day. It's our specialty, right? And so we're willing to take on the hassle and time and put it into our systems that we've invested a lot into to more efficiently sell it. So if you sell it to us at this discount, we'll make it really easy to remove it from your life and you can move on to other things.

51:05And then we will go handle the hassle of trying to get closer to market value, putting it through our own systems. Okay. So these systems, I think when it comes to real estate investing, then again, that's a very broad term, real estate investing, right? There are a hundred different ways you can approach real estate investing. But I think many people either want to invest very specifically around where they live or where they're very familiar with versus, hey, I want this to. And of course, I'm saying this is like single family rentals, et cetera. Or I want to invest somewhere that's nowhere near me.

51:36I want to have a property manager and I don't want any of the headaches. I'm just thinking about this as a business. But when it comes to this land investing, because I would imagine the selling side, and this is my guess, and I'd love for you to corroborate or disagree entirely. My guess is the selling side is much more difficult than the purchasing side in the sense that on the purchasing side, obviously, you have to go into the numbers, you figure out the offers. But at the end of the day, it's law of large numbers. If I send out 100 ,000 postcards, I'm probably going to get X number of conversions, etc.

52:08but then if you just did that across the country and knew nothing, you might get into a case where it's just wholly illiquid and you're just stuck with this thing. Now, again, this is armchair and I'm not a real estate investor, but that's just my intuition. I'd be curious your thoughts on that. And also then more importantly, do you focus on very particular areas that you have an expertise in or is this just, hey, my system would work or does work anywhere in the country? Yeah. So let me break those down. So the focus between working with the seller of the property and us working on the backside, a buyer of this property are a little bit different.

52:48So when we go to purchase a property, that is actually probably where most of our focus goes because truly that is the core of our business. If we do not buy more property, we have nothing to sell. And so the biggest holdup there typically is a systems and team, like how many transactions can you actually do at a high quality level without dropping the ball there and to capital because we purchase everything cash. So there's a limit to like how much land we can buy. You know, if I sell down a million letters a week, I could buy an incredible amount of land, but I do not have the team to support that, nor do I have the capital to buy that much land.

53:24So there's a balancing act. As you decide to scale that up, you kind of have to slowly figure that out. Like how much capital, how much team, how do I bring these together? On the backside, that is a slightly different dance because you already have the asset and you own it at typically around 50 % of the current market value. And you're trying to determine what is the appropriate number that the market wants to buy. And houses have so much data on how valuable something is. So you typically can like nail down a price pretty easily. And within a very small margin of error, land is not usually that simple.

54:00Every piece is unique. And the common attributes, like they matter a lot sometimes, like the same property on the same street could be worth 40 % difference because of some critical components of that individual properties you're comparing. And so we always work in ranges. We say, I think it's worth between X and Y, like it's always a range for us. And so we have to determine where in that range is the appropriate number that moves it quickly enough that we can liquidate and do it again without sitting on it for five years. You know, like there's a sweet spot in there. And so we have to find that number.

54:33And that's, you know, you're getting feedback from the market. That's experience. That's the level of marketing and expertise. Like there's a lot that goes into like finding that right number. But that is a very much a different dance. All right, JT. So, yeah, that that makes a lot of sense. So clearly there are systems on each side. And I guess my one question about that. So again, I'm going back armchair, my college here of like, okay, offer and acceptance, right? So like if you send out a postcard and I don't know if your team sends out postcards with exact offers on them or not, but like if there is that offer and there's acceptance on the other side, like I think you have a legal contract at that point, but I'm curious, like how much diligence, because you're sending out thousands, tens of thousands of these postcards, like, but yet you're saying sometimes on one block, there could be a massive variance, right?

55:21Like, so how much is it just systems and data and this database and some, a little bit of knowledge and intuition versus like, okay, look, we've got to really dive into maybe if they, if they come back and say they're interested, now we have to really do extra work. Like, is there that level of extra work after they get in touch with you? Like, talk me through that. Yeah, that's a very intuitive question. So there are two big schools on the way this can be approached. And going back to my earlier comment about how you build your team and systems. One of the ways that you talked about and one of the ways it's done is this more what we call a neutral approach, right?

55:58Where you will send a letter. I send two page letters, by the way. So you send a letter or a postcard and it basically says like, hey, I'm interested in buying your property. Like if you're interested in selling your property, call me and let's chat, right? And that's a very like, again, neutral approach. So you're just looking for a conversation in that arrangement. Now the plus side is you're going to get a lot more calls. More people are willing to have a chat about whatever it is the scenario is. The downside is that it's a lot more labor intensive because you have to have all these conversations and talk to people and do the research and figure out whether or not you can make something work.

56:29My style is different. Mine is very data heavy. And both sides need a certain level of data discipline. But mine is even more so because not only do I dial as tight as I can on who I am trying to contact, I also have to determine to the greatest degree possible what is the value of the property I'm sending because I do send a one page, like the second page of my two pages is a draft contract that has an exact price on it. And so, and we have had people just literally sign it, send it back, we countersign it and the deal goes forward. Like it's that simple sometimes, but it basically gives them a really good sense.

57:03If you work with us, this is exactly what we're going to send you. Right. And so they'll come back and it's common for there to be some kind of negotiation on the price. Sometimes the price is right. Sometimes we guess high, sometimes we We get slow, whatever. Then we come to a final number, send them the finalized version. We both signed it and we move forward. But that involves a little bit of a lot of upfront work. I mean, I had at the beginning of the year, we were doing a pricing round. And the guy on my team who was helping specialize in this and focus on that part of the process, it took months to price.

57:34And granted, we priced a lot of land at once. But we ended up with 6 ,500 lines of custom pricing. And those 6 ,500 lines were like, I don't want to deep dive too much of this. We've talked about this for an hour, but like we basically have a way to say, okay, what's the smallest possible footprint without choosing a single property that we can get and identify the price for that, right? Like in this given area, this acreage or whatever, like these characteristics, this is the price for that kind of thing. And then we have some custom code that kind of matches our pricing scheme up with the individual properties and assigns a value to the price.

58:08And that's the number that gets printed on the letter that goes to them. Interesting. Okay. I appreciate the clarification on that. And I committed the cardinal sin of interviewing before of asking two questions at the same time. So I'm going to follow up with the second one that I asked before. And I'm glad we dove into the first one so much, which is, do you buy anywhere? Or is it very specific? Like, hey, I live in Arizona, I know these four or seven counties, and that's where I focus? Or is this something that could expand very easily if you had the capital? Because I think you said that's a constraint in the system as well.

58:40Yes, absolutely. So there are lots of different ways to run the business. But for us specifically, we focus in two different states. And we've done deals in about a dozen states, kind of one-off deals. But those two states are where we spend most of our time and effort. Because once you've established a marketplace, then you have a whole team and system in place. I've got a title agent that I use for the whole state. And she loves me. And I love working with her. And she's awesome. She helps me out all the time. And that kind of relationship is paramount for part of the system's success. And so I don't want to start that over in a bunch of different places all the time.

59:13So we build these systems and all the on the ground resource, everybody we need so that anytime a deal comes through it, you just put it right in the pipeline and everything gets taken care of all the way along the way. Anytime I go to a new market, I got to build a new pipeline. So I prefer to work in existing markets as much as possible. Now we can't expand to third, fourth, fifth states, and we probably will down the road once we feel like we've really tapped out and mastered our existing markets. But I think it's wholly unnecessary, in my opinion, to spread out too wide too fast because there's so much that's available inside one or two markets that can really do it.

59:44And just to be clear, our markets are like, we do entire states at once with a few exclusions. All right, JT, this is really cool. And it sounds like you've built systems over the last really handful of years at this point. You've got this down where, again, because we talked about, all right, there's some aspect of the conservative nature of five people for a lot of us. And it sounds like you're buying these properties in cash for 30 to 50 % of the market value. So it's not like you're up at night of, can I pay the mortgage unless I can sell one of these properties in the next 30 days. So it sounds like you've built something that can perpetuate.

1:00:21And like I've kind of deduced here because of your knowledge of modeling and numbers, this is systems-based, right? And it's replicable. And I'm curious if somebody's listening to this, because again, again, this was more just like a fun dive into your story. But if somebody's listening to this and saying, oh, that sounds fascinating to me. That sounds like something I think that I could sink my teeth into. Are there resources? How would somebody get started? Do you have resources? Or where would somebody start in land investing generally? Yeah. My biggest recommendations to anybody who asks how they can get into this space is, first and foremost, start off with some podcasts.

1:00:59I recommend guys over at Casual Fridays, REI. They have a solid podcast, especially the first kind of 50 episodes. It's kind of a little bit older at this point, but it will give you the basics. And they've got a solid podcast. And then the other one I recommend is REtipster, which I mentioned earlier. Seth Williams over at REtipster. His podcast is fantastic. And he has a lot of amazing resources on his blog. And he also has a really great course, which is reasonably affordable to just go in and kind of learn a lot about how this works. Okay. And obviously, this is a question that doesn't have a specific answer.

1:01:29But based on your own kind of ramp up for this, how many months of learning did you do? Was it just kind of all part and parcel of learning real estate in general? Or like from inception to somebody's listening to this in July of 2023, August of 2023, you have any sense of like, okay, this is probably going to take you six months of learning. Like this is intricate. Or I mean, again, weird question, but I'm curious. Yeah, that is a difficult question to answer because it really depends on where they're starting from, right? If they have experience running a business, then this will be a new version of business for them.

1:02:03And they can learn the systems and the application fairly quickly with a good course like Seth has. But if you've never run a business before, you will be learning to run a business, which is a whole different rodeo. If you've never done that before, then you're going to be like, okay, how do I run a business? What's the point? What do I need to focus? Why do I need to spend my time? There's just so much to learn about business in general and then how this particular business model runs that that will be a longer time horizon. and I know that I've seen people like within a few months absolutely killing it and with people who took a year or two to get rolling and kind of like I floundered for a while you know when I was doing it but that's okay like if you commit the time to get it right then once you have it down the system will just keep perpetually running you know with your assistance.

1:02:44I love that answer and it goes back to the the rubber ducks from before right it's uh this is a business and if you think it's something mystical magical because it's real estate you're diluting yourself in essence so best possible answer you could have come up with. I absolutely love that. So JT, this has been awesome. And I know you've been listening, like we said, for six plus years, and I'm trying intermittently to bring back the hot seat. And I'm curious if you're up for some questions. Love it. I love it. Awesome. Let's do it. In a world drowning in debt and rampant consumption, trapped by the chains of lifestyle inflation, these questions highlight the secrets of those who are broken free.

1:03:27Welcome to the Choose FI Hot Seat.

1:03:39All right, JT, let's start with a podcast, blog, or book you've recently enjoyed. We used to make it your favorite of all time, but that's a little much. Anything jump out recently that you're enjoying? I mentioned 4 ,000 weeks earlier, but let me say for this year, I think my best book, that I've read in the last six months, let's call it, is the comfort crisis. I forget the name of the author, but the comfort crisis was just a fascinating look at how making... One of the problems we face today is that so many people, all they do every day is figure out ways to remove discomfort from their life, and that is creating a problem.

1:04:16And how strategically introducing some discomfort back in your life in a healthy way will actually improve your overall life satisfaction, mental state just kind of across the board. Yeah, I love that. And you are actually now the second person in the last week who's referred this to me. So it's yeah, the author is Michael Easter. And yeah, the comfort crisis embraced his comfort to reclaim your wild, happy, healthy self and actually have this on hold at the library from the first person. So by the time this comes out, I will hopefully have read it. So yeah, that's a great one. All right, question number two, an inflection point in your life that was especially memorable or meaningful.

1:04:50I've mentioned a couple of different reflection points in this conversation. But let me just share a little bit about one of those, a little more of one of those. So right when I went to quit my job, I was like, you know, it was a multi-month process because of my position. I had to transition out into someone else to take over. And so during that whole time, I'm trying to determine like, is this the right move? Like, can I make this jump? And yeah, so like it took a lot of reflection on there. But there was a particular moment in time where I'm sitting in the bathroom, like trying to figure out, like sitting against the wall, like next to the sink, just look my back against the wall trying to figure out like, oh man, this is a few quiet spaces in the house, right?

1:05:24So I'm like, what? 1 ,300 square feet with six of you? That's right. I get it. Yes. So we're on this. I'm thinking, man, like, is this the point? Like, is this okay? Is it okay that I try this? You know, do I have what I need position-wise? Like, can I make this happen? And my wife comes in and I ask her, is it okay if I make this change? Because I was so unsure of whether or not it was going to work. I thought it could work, but I couldn't guarantee it would work. And I needed her permission to screw this up. I was like, I need you to tell me it's okay. Because I'm not sure it's going to be okay.

1:05:57I think it'll be fine. And she looked at me and said, I promise when we got married that we will live in a box if it needs to be. And that's okay if it happens again. If we screw this up and we go live in a box, I'm okay with that. And that's what I needed. I needed her to say it was going to be fine. And that was the point in which I thought, okay. Even if I completely screw this up for the next two years and we like lose hundreds of thousands, like it just messed it up. It'll be fine. Like it's going to be okay. No matter what the circumstances are, like finances are not the primary concern.

1:06:24You're like, we will figure that out. Wow. That level of support from your wife. That's incredible. I can hear the emotion and your voice obviously. And the chills on my arm are a testament to goodness. That is, that's incredible. I mean, that is the epitome of an inflection point in life. And, uh, it's amazing. The support she showed that's remarkable for really what's important, right? Is you and your family. And if it meant a box, if it meant a 500 square foot, one bedroom apartment, all right, so be it. But we're together. That's amazing, my friend. All right. I guess let's go to question number three.

1:06:58So I don't love this term, but I think you know where I'm going with this, which is your favorite life hack. And I think I talked about the library before. That's one of my favorites. Choose a five friends of the library we've long said. Or for me, Camel, Camel, Camel is one of my favorite ones on Amazon to track every single purchase you can make and get amazing deals. But anything jump to mind in the general life hack realm? You know, this is a little generic, but the life hack that comes to the front of my mind when we talk about that is a to-do list. I literally love my to-do list. It is the only way I keep my life organized.

1:07:36You know, I use Google Calendar extensively, and I used to run my to-do list and move calendar reminders until recently. I've since moved to Todoist. But like just having a to-do list helps me keep my brain so free, right? There's a system called GTD, getting things done. I don't follow that system exactly, but I'm probably 80 % on that. And it just, every time something comes up and I'm like, man, I have this thing to do. I just, instead of trying to remember that I need to do it, I just, I brain dump it into my to-do list and then move on with life because it gives me so much more mental space.

1:08:07man you are speaking to my soul my friend because i had i had i done a third one on the list of my favorite ones it would have been that and quite possibly that's actually number one to be fair because same deal and it's not that to-do list in and of itself is like something revolutionary it's just an electronic to-do list right but what it actually lets you do is these recurring tasks and i think that is what's so critical and to your point that mental space and freedom that's the benefit because I don't think about the silly example that I always use is like when our passports need to be renewed, right?

1:08:42Even if it's eight years from now, because what I do is I'm a hundred percent compliant with Todoist. So when I just recently received our new passports, I literally looked at the expiration date and then I updated my task and Todoist, whatever it is, eight, nine, 10 years in the future. And I know it's in there and I can trust it a hundred percent. So yeah, I love that one. Yeah, it's a much stress relief there. Yeah, indeed. All right. So this used to be our quote unquote bonus question. I'm not sure why, but what purchase have you made in the last, let's say 12 months or so that has added the most value to your life?

1:09:14Or just something fun. Anything you've bought recently that, you know, just fun or interesting or something useful. So I am at my core, a huge anime nerd. I absolutely love anime. Can't see behind me, but my wall is filled with anime art. So one of the things my wife and I like to do from time to time is go to Anime Expo in LA. It's like the largest convention for anime in North America. And it's got massive mecca of art. It's just hundreds and hundreds of art vendors there who all specialize in it and don't always sell easily online. So it's a great place to find art. The other reason we go there, along with the art, which we bought several pieces of when we went to the convention two weeks ago now, was we also buy, I collect, and this is like the only thing I collect, but I collect original production cells is what they're called.

1:10:03So pre 2000s, when animation was created, they basically had like a celluloid sheet that they would paint on. And that would become one frame effectively of the animation. And so they would have frame after frame of custom hand painted like celluloids. And so these cells, you can find like they are in the wild, people have saved them and like trade them and sell them. And so there are a very small collection of vendors who will sell these out and about it. And a few of them go to Anime Expo. So I will go to Anime Expo and buy collections of them. And so I have these pre-2000 cells for some of my favorite animes of all time, one of which is on the wall behind me.

1:10:43I just, I really love them. I think they're amazing. Like it's the only piece of art besides anime art that I'm like, man, I just really love this. Something about just really lights me up. And so I love being able to go and collect them. They're not inexpensive for the nice cells. Like it's usually in the thousands of dollars, but I just really like that item. That is one of the coolest answers we've ever gotten on that question. I love it. That is absolutely cool. And yeah, I can see how it lights you up. That's awesome. All right. We'll do one more question. Do you have a future like goal travel destination or maybe, I don't know if you use travel rewards points or any kind of travel reward success or anything?

1:11:17Yeah. So my family and I like to travel a few months a year internationally right now, if we can. And so we've been to several different places for the last couple of years. I don't know there's a single destination I could name. We have 10 years of travel planned now. Our next trip is probably back to Japan in 24. So I'm looking forward to that. I'm actually doing a precursor trip next month to hike Fuji. So are you kidding me? Yeah, it's gonna be great. So I'm, I just, we always kind of have a little travel planned here and there. Cause it's just, I'm always looking forward to like the next thing, you know, a few months down the road.

1:11:46Oh my God. That's amazing. So obviously I know you listen to the podcast. I don't imagine that anybody listens to every episode, but I have probably said to people who listen to every episode are probably sick and tired of me talking about wanting to hike Mount Fuji, that that is literally my life goal at this point. So I am hopefully doing that in 2024 if all goes well. So I'd love to compare some notes with you when you get back. Let's do it. That's amazing. All right, JT, this has been awesome. I really appreciate your time. I appreciate you being a member of the community for so, so long. And yeah, this has been fun.

1:12:18So I guess if people are interested, I don't know if they can get in touch with you. I know you have a couple of websites and such, but where would you direct people? Yeah, I'd say the best place to connect with me is probably just in the Choose a 5 Facebook group. Reach out to me there. I'm a member there, so connect me there. Otherwise, I mean, if they want to reach out directly, they can check out homestead.properties, the website. There's a small contact form there. It's not a big deal, but if they want to hit me up, they can connect me there. But I'd say Choose a 5 Facebook is probably the best.

1:12:48Nice. Yeah, that sounds good. You've been an active member there from basically the inception. So yeah, again, really appreciate you being here. This has been a ton of fun. Thanks for having me. Thank you for listening to today's show and for being part of the Chooseify community. If you haven't already, the best ways to get involved are first subscribe to the podcast. So you're listening to this on a podcast player and just hit subscribe and then subscribe to my weekly newsletter. I actually sit down every Monday and write this by hand and I send it out Tuesday morning. So just head over to choosefi.com slash subscribe.

1:13:22And it's really, really easy to get on the newsletter list right there. And I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsource personal finance show. And finally, if you're looking to join an in real life community, we have choosefi local groups in 300 plus cities all around the world. So head to chooseify.com slash local, and you'll find a list of all of those cities in 20 plus countries all across the world.

1:13:56And if you're just getting started with FI, or you have a family member or a friend who you think would be interested, two easy ways. Chooseify episode 100 is kind of our welcome to the FI community. And even though it's a couple of years old at this point, it still stands up and it's a really great just starting point to get an understanding of what is financial independence? What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life? And then Choose a Vi created a financial independence 101 course. That's entirely free.

1:14:31Just head to choosefi.com slash fi101. And again, thanks for listening.

1:14:43Thank you.