WY Land?

WY Land Exchange

It's empty. It's weird. It doesn't generate cashflow. It's vacant land! WY (forgive the pun) on earth would ANYONE want to invest in it? In this post, I want to talk about my journey and what led me ultimately to invest in land. As a note, in all blog posts, including this one, I will not be using my name or that of those around me - for professional and personal reasons, I need to keep my name out of blog posts for the moment. At some point, I hope to reveal who I am, but at this point, it's not viable. With that, let's dive in!

My Quest For Financial Freedom

My land journey started during the COVID-19 lockdown. At the time, I had been working in financial services for two years, I was dramatically underpaid, and, worst of all, there was no path for future development in my role. I had taken the job out of college with the promise of financial freedom - I was told by my first boss that I would get my own book of business and, some day in the near future, inherit HIS book of business. Ultimately, he passed away before I was ready to take on his business and I did not get a single client from it - despite several of them requesting that I handle their account. My new boss simply did not see me in a client facing role.

Then COVID hit and I suddenly found myself in my apartment 24/7 by myself so to fill the void, I started listening to Youtube while working and eventually found myself listening to Graham Stephen's channel (linked here). Graham helped me to realize the value in taking control of one's situation and building income sources with unlimited upside in order to achieve financial freedom faster. One of the first things I did to this end was start asking for either a raise or clients of my own. I knew I was underpaid. All the data I had showed that I should have been making at least 75% more than I was. I had my securities licenses, I was on the threshold of earning a major professional designation, and it was time for me to be either promoted or take a producer role. My boss saw that I was invaluable and fought for me to get a raise. Management however did not see my value and I distinctly remember one person saying "I don't even understand what you do" to my face. That was the moment I realized I needed a new job - there was no future for me at this company and management had no clue what resources were at their disposal (the company in fact no longer exists as of writing thanks to management's incompetence).

Eventually, I found a new job that paid me much more than what the previous one was. But the thought of financial freedom was still in my mind. I realized that so long as my primary source of income is from a W-2 job, that company might as well own me.

Enter Land

One thing Graham and a few others including Bigger Pockets brought to my attention was real estate as a path to financial freedom. I initially planned to house hack (buying a multi-unit property, living in one unit and renting the other to offset the expenses) and had begun a journey to find a house where this was viable. But, this was the middle of COVID and competition for homes was off the charts. I could not find a single property that I thought made sense price-wise.

Then one day, while driving to my fiancé's home, I stumbled upon an episode of the Bigger Pockets podcast that featured Seth Williams of RETipster who flipped vacant land in his real estate business. What he said just clicked to me. I started researching land, and pretty soon, I was pulling lists and sending out test postcards looking for deals. The "aha" moment came when I almost did a deal, a small property in western Pennsylvania, for $500. I ultimately decided this deal was not particularly good, even at $500, the gears started turning in my head and I realized I had a viable business opportunity.

So WY Land?

What's so special about land then that I, a seasoned financial services professional, decided I HAD to get in on it?

There's A LOT of it.

This may seem obvious, but there is A LOT of land in this country. How much? To the tune of 2.26 BILLION acres! Of this, approximately 94% is undeveloped and 60% is privately owned. That leaves roughly 1.27 billion acres up for grabs. Now, in most businesses, a large supply would be a problem. But with land, that can actually work to your benefit because:

2. There isn't as much competition as other segments of real estate.

Land as an investment simply is not as intuitive as something like a house or a strip center. You can't rent it out a lot of the time, so it doesn't produce cashflow. Because it doesn't produce cash flow and it's often non-standard (vs. houses which tend to be fairly standard) it's difficult to value. When things are difficult to value, people tend to steer clear. But, we all know intuitively land is valuable. Why is it valuable?

3. Land has optionality.

My background is in finance and my first job out of college involved trading options. One maxim I learned very quickly is that "options have value". What does this mean? An option is essentially a right to take an action, but not an obligation to do so. Vacant land inherently provides embedded options with no time limit to act. You could build a trailer park, drill for oil, build a home, lease as farmland or just use it for recreation. Or you could just sit on it and landbank it! And this doesn't even begin to scratch the surface of what's possible. The possibilities are only limited by local zoning and the rights and restrictions that go along with your property and this optionality has value. How much? It depends on the property and its unique characteristics. But, unlike stock market options, land's optionality only expires when it is exercised, therefore, it doesn't experience time or "theta" decay like a stock option does. Your time to act is UNLIMITED.

4. The Market Is Illiquid

Illiquidity means opportunity. Okay, technically it doesn't. Illiquidity means that it takes a while for an asset to be converted into cash at full market value. But, when a market is illiquid, that means it will have a large "Bid-ask" spread - the gap between what a buyer wants to pay (the bid) and what a seller is willing to sell for. When a market is illiquid, there's room for a dealer to provide liquidity by buying for their own inventory and selling in the open market. In the case of land, there's enough illiquidity for someone to find people who want to sell their property but are unable or unwilling because of the costs/hassle/time and buy their land at a discount to the market. A dealer will then go and either hold the land for his own inventory or attempt to sell it in the open market (typically at a discount to fair value) and collect a spread. This creates a win-win-win situation. The seller wins because they've gotten a quick payout on a property they didn't want. The buyer wins because they've bought a property at a good price. And the dealer wins because he's provided value to both sides.

This All Sounds Great, But What's The Catch?

This is a very fair question. There is an incredibly sharp learning curve in land (though the stakes are often low enough to offset the risks). There are dozens of factors to consider buying vacant land and there very often isn't an exact comp for your property. The illiquidity factor could also mean that you're sitting on a given property for months at a time. In my first deal (more on that in my next post), I probably made almost every mistake in the book (and then some) when I bought the property, lost about a year of advancing my business, and didn't even make enough to break even on the overhead when all was said and done.

Where Do I Go From Here?

My hope is to scale my land business to the point where I have the option (there we go with the options again!) to quit my day job and invest in land full time within 3 years. I also hope that you will join me on my journey. I plan to maintain this blog as a way to self-reflect and hopefully educate website visitors about vacant land. In my next post, I'll be doing a post-mortem on my first deal and what I've learned. I look forward to seeing you there?

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