629: Turning Junk Land Into Gold

0:00How to earn 10 to 100 times returns in a really surprising flipping niche. What's up? What's up? Nick Loper here. Welcome to the Side Hustle Show, part of the Entrepreneur Podcast Network. It's a business podcast you can actually apply. And have I got a side hustle for you today? We've talked about flipping products for a profit in the past. We've talked about real estate investing in the past. We've even talked about land investing, but never like this. My guest specializes in finding these unloved, unbuildable parcels. Maybe they got no sewer, no septic. Maybe they got tidal issues. and he specializes with dealing with that red tape at City Hall to overcome those issues and then reselling those new and improved parcels for big, big gains.

0:44We're talking 10x your investment or more. He's been doing this for decades as a repeatable and teachable process from junklandintogold.com. Wayne Seminoff, welcome to the Side Hustle Show. Hey, good morning. Good morning. Yeah, thanks for inviting me. You bet. Excited to chat, excited to dive in. Wayne is a neighbor of mine. It turns out that We're locals here in the Northwest. So stick around in this one. We're covering the best ways to find these so-called junk land parcels near you, even if you live in an expensive area, maybe even better if you live in an expensive area. He's opening up his playbook on how to fix the various issues that you'll encounter, get them ready to resell for a big profit, and of course, the risks and mistakes to avoid along the way.

1:26And Wayne, I want to start off with this turning$1 ,000 into$400 ,000. I think that'll get everybody's attention. I can take$1 ,000, buy a piece of junk land at a tax auction, fix the goofy little problems that are wrong with it, turn it from junk into buildable, and then sell it as a buildable lot for$400 ,000. And I can do that over and over and over again. That's what I do. It varies in different sequences, but sometimes I buy a lot for$1 ,000 and only sell it for$10 ,000, but sometimes$50 ,000, sometimes$60 ,000. And every once in a while, I hit the home run and I sell them for$400 ,000. I've done over 100 properties, maybe 300 properties probably.

2:10Wow. Do it over and over again. And the key to it is pretty simple. Generally, junk land is junk because you can't build on it. But I found there was like seven tools you can use to change junk land into buildable land. And one is like variances. You get a variance from the building code. or let's say you need a boundary line adjustment, or it's tidal problems, or whatever the problem is on the property, if you can isolate that problem and then correct it, your value dramatically increases 100 times. I mean, like literally 100 times. I'll give you an example of that. I bought a property a year ago in Issaquah, which is a really hot area, bought a half acre lot with water, sewer, power, road access, right across the street from Target, and I paid$1 ,000 for it.

3:03And then the reason I bought it for$1 ,000 is the guy who had owned it for like 20 years couldn't sell it to anybody because they had a title problem. He couldn't get clear title from the title insurance company. So he was going to let it go in the tax sale. So I called him before the tax sale and I said, Hey, are you going to let it go in the tax sale? And he says, yes, I'm going to let it go in the tax sale. And I go, well, I'll buy it from you, you know and don't let it go in the tax bill and i said i'll give you five hundred dollars for it and he goes no no no no no you think i'm crazy and i said well how much do you want for it he goes um i'll take a thousand dollars for it i need to pause and say like you know any you know piece of land just given the the path of development in this area is worth significantly more than even a thousand dollars so you're thinking he's like hey dude don't lowball me come on i know what I'm sitting on, but he's like, I didn't really want that much more.

3:55It always shocks me. And I always come back, do that low ball thing. And they always come back with low, low counter offers. And so he said, if you write, if you send me a thousand dollars, I'll sign over the deed to you. And so him and his sister owned it. So I got his sister and him to sign it. And we did, I just sent him the deed electronically. And then I Venmo'd him the money. So he had the money immediately. and then he just sent it back to me and I had a deal. So then I took this gorgeous piece of land. Right now it's zoned for one unit. In that area, one unit of land is worth$500 ,000, one housing unit.

4:34And so I went to my attorney and I said, I need to do a quiet title and clear this title. And I looked into what the problems were on the title and I found some supporting data to give to the attorney to make the title, quiet title action go smoother. And it took him four and a half months. And at the end of four and a half months, he gave me clear title. And I got a title report that says, I'm the sole owner of the property and nobody else can challenge it. And now today, that thousand dollar property is worth 500 ,000 right now. Yeah. So you have a thousand dollars into it plus some legal fees.

5:07Yeah, they cost me$15 ,000 for clearing the title. So for$16 ,000, I'm going to make$500 ,000. Right. Wow. That sounds pretty good, right? That'll get people on their toes, right? But that's not enough. Okay, so this lot is subdividable. So I'm applying for a short subdivision. I'm going to split the lot in two, and two lots in that area are worth a million dollars. So in four months from now, when the short subdivision is over in Issaquah, I'll have two separate lots and I'll have a million dollars worth of land for about$25 ,000 total investment. I'll have a million dollar property. Well, there's a lot to unpack here from the title clearing process to how do you even know that this was coming up for a tax sale in the first place.

5:59But maybe we start with the confidence early on. Take me back to like 40 years ago, Wayne, to say like, you know what, even if it has a junk title or I can figure this out and for$1 ,000, I'm willing to roll the dice. It's like, whereas, I don't know, I mean, I guess it's relatively low risk. You got the purchase price and the legal fees. It's like, if the owner couldn't figure this out, theoretically, he had the same million dollars to gain from doing it. Like why, why would he sell it so cheap? And then for you to have the confidence to say, well, shoot, I can, I can clean this up. I can figure out like the legal red tape that needs to happen.

6:36I teach people to buy from don't wanters. Okay. Don't wanters. Okay. People who don't wanters are people who like own this property. They were the kids that inherited from their dad. Their dad was a real estate guy like me. He could figure stuff out. But the kids, they don't know how to do it. And they don't care to learn how to do it. It's just something they got. It's extra stuff. It's like they're called don't wanters. They don't want the property. It's hard to imagine anybody not wanting an extra million dollars. But they don't know it's worth a million because any barrier to them is a final barrier.

7:12There's no – they don't see beyond the barrier. They just see – they're very short-sighted. But the main thing is they don't have the desire to look beyond the barrier. Don't want her people. They just don't want it. They don't want to mess with it anymore. You know, it's sort of like there's a divorce and the wife gets the husband's property and she hates the husband. She just doesn't want the property. She just wants to get rid of it. You know, she doesn't care if she can make more money off. She wants to dump it. famous story of the girl, the wife got the guy's Corvette and sold it for 50 bucks.

7:48You know, just out of spite. Yeah, just, you know, they just want to get rid of it and whatever. But I run into this a lot and people are very short-sighted about their properties. And these tricks that I have, they're not upfront. You know, you call the city and you say, hey, how do I make this lot buildable? Nine times out of ten, they'll say, no way, you can't build on it ever. The clerk guys at the low levels, they don't even know and they don't care. They don't even care about looking up the rules. They're authorized to say no, but it's, you know, all of a sudden they stick their neck out to say yes.

8:21It's like, well, what did you just approve? Yeah, right. And these guys, they tried to give it to the city of Issaquah, and the city wouldn't take it because the title was screwed up. They were going to give it to them for free, for zero, for nothing. and uh and the city said no we don't want it even the city in its short-sightedness didn't know that it was a buildable lot that they could do something with or whatever so what's this process like to clear that title you call a title company and you ask for a title report and they send you a title report and it shows you all the problems on the property and they're all kind of unique so each report is different but on this one what it was is in the chain of title, that means from everybody who deeded the property to everybody who owned it during all the years, there was a gap.

9:12About 50 years ago, these guys, Pickling Brothers, deeded it to this guy. And that deed, although it was a real deed and it really happened, never got recorded in the title company's records. Who knows why, but it never got there. But he took possession of the property, thinking he owned it, he paid for it. And then he deeded it to these other guys, the other guy, and then he died and it went to his kids. The title company says, well, since there's a gap, we can't give you title to it. Because I bought it from the kids. They say the kids don't have title to it. So what I did is I found out who this guy was, the missing link deed.

9:50He was still alive, which is rare because it was like 50 years ago. And I called him. He said, yeah, I bought the property and it's a real deal. And I recorded it. But there's no record, I guess. He wrote me a little statement saying, I'm the guy. I got it. I bought it. I recorded it. And then we gave that to the judge. When we went to court, we said, well, here's a statement from the guy who actually bought it. And then I asked the court, my attorney asked the court to give us clear title against everybody. So when you clear title, you're clear against the whole universe. So it's not just him, but anybody who has a claim to it.

10:27It's a beautiful thing because it gets rid of any title issue. Interesting. What would have happened to have that guy been dead? You weren't able to track him down. What would have happened then? That's the front door. The side door is his heirs. If he dies, legally, his ownership right goes to his heirs. And they don't even know they own it. So I'd call them up, you know, their kids, and I'd tell them the story. And I'd say, give me a quitclaim deed. I'll send you a couple hundred bucks for your time and trouble. And they'd give me a quitclaim deed. And then I'd use that, and I'd give that to my attorney, and then we'd go to court.

10:59Do you ever have the kids come back and say, whoa, whoa, whoa, whoa, wait a minute. You know, you're going to give us a couple hundred bucks for this half a million dollar parcel here? People who inherit stuff are don't wanters. They didn't even know they inherited it. It's like an illusion. They go, oh, really? You mean my Uncle Joe? He gave me this property and I never even knew I owned it? Yeah, when he died, he got the ownership. They go, I've never had him say, give me a big chunk of money. I've always had good luck with that. How funny. I mean, this is 10 minutes from our house. We drive past this all the time.

11:33And it's like, yeah, it's a prime. It's kind of up on a little hill, like nothing, not a ton built around it. but it is right across the street from Target, this huge shopping development. How did you come into the intel that it was going to be going up at the tax sale? Okay. Every year, the county, King County, where I'm at, posts a list of all the properties that are going to be foreclosed on. And what I do is, before the tax sale, I call the owners to see if they're going to let it go in the tax sale. Because if they are, then I offer to buy it from them. And these are Target properties that I really like.

12:07It's not all the properties, just the ones that really look good to me. Okay. So in advance of the foreclosure, auction, and tax sale, the county is publishing this list. Hey, here's everybody who is delinquent or here's what's coming up on our docket. And so that gives you a chance to go track down the existing owners and try and make an offer in advance of that. So you don't get into a bidding war with other investors, other buyers. Correct. Yeah. Once you go into the auction, then prices go up. People, crazy people bid at the auction. You know, it's online, so you can bid if you live in New York, you know.

12:41And so this is all public record type of stuff. Is it similar in other areas of the country? Most areas of the country have tax sales. Some, they have different law systems, like in Philadelphia and stuff. It's a whole different animal, but the majority of the country has tax sales. Some areas have tax title sale, which is a whole different animal, but I don't deal with those. I remember going to some seminar and it was tax lien investing where you buy the lien on the property. And every now and again, you end up getting the deed because you're one of the first lien holders. Oh, gosh. Yeah. It's the whole thing.

13:17Yeah. And you can make money at that. You might make maybe two or three times your money. But in my game, you can make 100 times your money. And the best bet is let's say you pick 10 properties and you're successful in maybe one or two. And eight of them, nothing happens. You just can't make it happen. But on the two that are successful, you make so much money that you pay for all the ones you bought and you have enough money to buy brand new ones. Got it. Is that a typical success rate? Like not everything is going to be a 100x home run. But you cast a wide enough net, you place enough bets that enough of them work out to erase all the losses and then still make a profitable living.

13:59It's like the 10 to 1 rule. Basically, if you do 10 deals, you'll make a killing on one. Okay. And you might make some money on two or three, and then you'll make no money on the rest. And you might even lose on one of them. Helpful to know, right? Buy right, minimize your risk, all that stuff. But aim for the ones that have a big upside potential. More with Wayne in just a moment, including how you might find these unwanted parcels near you and the playbook for resolving issues on them right after this. As a business owner, you worked hard to make that phone ring, but missing a business call?

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16:31This Black Friday, join the thousands of new entrepreneurs hearing for the first time with Shopify. Sign up for your free trial today at shopify.com slash side hustle. That's shopify.com slash side hustle. Go to shopify.com slash side hustle and make this Black Friday one to remember. Starting at this, you know, county level pre-tax sale, if there is such a list that's available and trying to contact those owners in advance and the ones that say, yes, I'm going to let it go to the auction. Say, well, let me make a deal with you in advance of that. Or what would it take to part with it before that?

17:11Yeah, I say, yeah, what would it take? And invariably, you know, like nine out of 10 guys I contact, if they're going to let it go on the sale, they'll take pennies on the dollar. I've got one good example. I bought a beautiful ski chalet in Stevens Pass there, and it's gorgeous. It's right on top of a hill, and it's newer, and it's all in perfect shape. I called the guy, and he said, yeah, we used to use a lot and everything. And he says, but, you know, I'm just getting too old, and I don't go there anymore. and I said well you know will you take a thousand dollars for it you know it's worth 180 thousand dollars sure you know right now as is and he goes no no I'll take eight thousand for it and I said no no I thought I'll give you two and so we settled it too he said all right I'll take two so I bought this 180 thousand dollar ski chalet for two thousand dollars is it just that they owe back taxes and they don't want to deal with it and the side on this was he owed um six thousand dollars in back taxes i actually paid him eight thousand dollars for the chalet okay clear the back taxes and take ownership of the property you have to clear the back taxes yeah why not just sell the place for 180 000 like it's just he's a don't want her like you're talking about you are a rational person and not a don't want her i'm a rational person not a don't want her but there There are people out there who are not rational.

18:36They're in the don't-wander category. When they don't want it, that means they don't care to do anything on it. They don't even want to call a listing agent and say, hey, see what you can get for it. I mean, they don't want to lift one finger on it to do anything. And it's a beautiful thing because without those people, I would be out of business. That's the meat of my business is all those don't-wanders out there who just don't care about their properties. All right. Another site that I found, so starting at the county level, actually King County pointed me to a site called bid4assets.com, bid the number four, assets.com, which appears to be kind of a nationwide type of database.

19:14Bid for assets. King County used bid for assets to sell at auction their properties once a year. They don't use them anymore. But it's a really good site because it shows you you can go on the site and see which properties are in the auction. and it has a diagram of the property. It also has a title report, which is very critical. And it also tells the stats on the property, you know, if it's wet or whatever. It's a really good site. The one that King County is using now is called Real Auction, R-E-A-L Auction. That's where it is going to be this year. They have the title reports and they have the, it's a nice informational site, tells you what the minimum bid is, which includes all the penalties and stuff for the back taxes.

19:56And typically the cheapest thing you can buy is around$1 ,500 to$2 ,000 for a lot. I did buy a lot for$667 last year. I bought one property for$600. It seems to be like it's almost a Warren Buffett type of situation where it's like, I don't need to be making deals every week. I just got to wait for the right one to come along. And that could be my year. That could be my two years worth of income here. Well, what I do is this has been like my hobby because I love it so much. And once a year, the tax sale comes up. So once a year, I'll buy 10 properties or approximately that. Okay. And I spend the rest of the year working on those properties.

20:41Yeah, trying to fix them up and deal with them. Doing whatever they need and all the work. And typically, by the end of that year, I've sold one or two cheaply. And the ones that I get a lot of money for, I have to wait maybe two or three years to actually get the big money. Okay. And you may want to, right? You've got to hold on to 12 months at least for long-term capital gains or something maybe. Yeah. Did you have a background? Like how do you get into this? Like this is just such a random side business. I think I'm the only guy that really does this stuff here in King County the way I do it.

21:14How I got into it is really a good story. Like 40 years ago or 45 years ago, maybe 50 years ago now. I went to a, I didn't know how to make money, but I thought, what the hell, I'll go to an auction. So I look in the paper and it said, auction, dead people's effects by King County Morgue. I went to this auction and you buy all the, all the jewelry and stuff. They cut off the bodies. Oh my God. Okay. That's morbid. Okay. Jeez. Yeah, I know. And you know, eyeglasses and false teeth and rings and earrings and, you know, it just all was, and then this other guy was competing against me in the auction and he stopped me in the middle of the auction.

21:49He says, hey, Wayne, we're the only two main bidders. He says, why don't you and I agree to partner up and we'll just buy everything and then we'll split it up after the auction. We'll just do one minimum bid, you know. And that's what we did. So we got our minimum bid. We bought everything. And so we went to Denny's and we put everything on the table in the big pile of stuff. And we said, OK, one for you, one for me, one for you. And the most valuable thing were watches. They had some really nice watches. And so he'd get a watch and I did a watch. But the bottom line on this is this guy owned a thousand pieces of junk property that he'd been buying at the tax sales for like 10 years.

22:31Okay. And I'd been working in real estate at that time and I knew how hard it was to fix properties when they have problems. And I know there's no way that he can manage a thousand properties. Yeah. Get them saleable. So I said to him, I said, I tell you what, I know how to fix problems in real estate. if you give me half of the profit on every property I fix and sell, we can be partners. He says, I'll do it. Okay. So at that point, I became a half owner on a thousand properties. And that's where I really honed my skills on fixing stuff up. Got it. I had a thousand chances to learn how to get in the back door to fix properties.

23:11And since then, I've learned that basically there's about eight major tricks. and they're all solid, really good tricks that you can do to fix a junk property and make it saleable. Yeah. You're getting in a lot of reps. You're doing it almost on a performance basis. If it doesn't make a profit for you, you don't owe me anything kind of thing. And this guy, Bill Looney, he was the third largest landowner, parcel landowner in Washington, below the state of Washington and the federal government. Wow. He had more parcels of land than anybody else. but they weren't buildable they needed they needed a little tlc yeah most of them were not buildable i mean basically not buildable he had some that were prime pieces but the prime pieces i didn't help with because he could sell himself okay so i just got the junk ones all right let's let's talk through some of these tools in your toolbox and maybe even sorting that list of a thousand like well that's pretty daunting which ones am i going to tackle first is it you know these title issues like the issaquah property is it you know sewer or septic is it you know trying to get a variance you know some like where do you even begin or do you have a you have a game plan yeah right i'll tell you how i do it is um i get the list from king county and i print it out and i put it down in front of me the first thing i do is i look for all the cheapest it has the values okay and i look for all the ones that have the least amount of money that's owed on back taxes So I work from the bottom up.

24:42I don't go with the ones that have the highest value. And I'll look at each one. The first thing I do, I look at it and I say, where is the owner? Is he a local owner or does he live in Iowa? And my list has where they're located. And if they're out of state, I know that they're probably a don't wander. Is this like free public records? Just go find on the county website? Yeah, right. It's all available. Okay. And then the next thing I do is I'll look at a picture of the land. I'll go to IMAP in King County, which is their site for examining properties and shows the property lines. And I'll see what the lot looks like.

25:19When I look at the lot, I have these seven or eight tools. And I say, which of these seven or eight tools applies to this lot? Okay. And I do a quick scan. And, you know, I look at this one, maybe it needs a boundary line adjustment or maybe this one needs a variance or whatever. And I can tell visually for most what it needs. And then there's some other things you want to check on, which is, does it have sewer? That's a big one. If it doesn't have sewer and it's a small lot, then you have a problem because you usually need a big lot to put a septic system in. Yeah, for your drain field. Okay.

25:54I know how to take a little lot and make it perk and put a drain field on it, even though it's too small for normal approval. So most people don't know how to do that, but I can do that. It'll like have a checkbox. So like, is there sewer or sewer plumbed? Like that's just a public information. If you go to IMAP in King County here, there's a, you can actually see all the particulars on the property. You have a picture of it and then you can also push a button and it says everything about it. It's got water, sewer, power, access. If it's got steepness or wetness or whatever, it says all that stuff.

26:36Okay. Got it. And so you're sorting by least amount of back taxes owed. Any other filters that you try and apply? Because I imagine some of them are going to be pretty – some of them are not going to be in the$1 ,000 rate. Some of them are going to be like, well, it's a half-million-dollar parcel because it's in the center of Bellevue or like right in Seattle. Yeah, I know. And believe it or not, I buy a lot of parcels that are in really high-rent areas like the center of Bellevue. I've got two parcels in downtown Bellevue. I think I paid$2 ,000 for one, and I paid maybe$1 ,000 for the other one.

27:07And we're working with the city now. If we can get those approved, those two lots are worth$2 million. Right. They're worth a million apiece. And they're just little teeny scraps of land. They're very small, but they're buildable. Well, they weren't buildable when I bought them, but they're going to be buildable when I'm done with them. What did you do to have to make them buildable? Well, this one right off Bellevue Way, it doesn't have an access. It was landlocked. oh okay it's only 20 feet wide by 300 feet long so it's really long and skinny and there's a driveway that connects it it goes right past the front of it and connects it to it goes to some guy's house a few hundred yards beyond okay so it's right on a driveway but we you can't legally use that driveway because you don't have a legal right to it so what i did is i went to the guy next door on the driveway and i said hey if you'll give me an easement i'll give you ten thousand dollars and he says uh i'll tell you what if i give you the easement i want you to give me what that your lots can be worth and you know market value a lot and at that time i told him what a lot was worth 500 000 with an easement he says if you'll give me 400 000 i'll give you an easement you know and then you make 100 and i make 400 uh-huh you know it's like i can see where he's coming from like it's still a win but yeah yeah it was a win so easement would just be like make it a part of the public record that the owner of this lot could use your driveway, basically?