Seth: Hey, everybody. How's it going? This is Seth Williams and you're listening to the REtipster podcast. This is episode 127. Show notes for today's episode can be found at retipster.com/127.

Today, I thought I would kick this one off a little bit differently than I usually do by reading just a few random reviews from the Apple podcast platform here. I know people can listen to podcasts all over the place. And by the way, if you are listening to your podcast through Spotify or some other platform like that, feel free to leave reviews there as well, if you want to.

But since Apple is kind of like the home base for most of our listeners, I figured I would just check out some of these reviews. I don't usually talk about leaving reviews for us, but I just figured I would visit this and see what people have had to say over the past few years of us doing this. We've got one here from Rosales, I think this is how to say this. She says, "Heck yeah, these guys know what they're talking about. Their advice really works and has been huge in my success in the land business. If you subscribe to just one real estate podcast, it should be this one." Awesome. That's great to hear.

Let's see, we've got another one from Heather Bo. Heather says, "This podcast provides so much insight and great actionable tips to investors. Highly informative yet entertaining." Sweet, glad we're checking both the informative and the entertaining box. Thanks, Heather.

We've got another one here from Casey. Casey is saying, "Used to be really good when their focus was on land investing. Now they're spreading themselves too thin with a bunch of other topics. There are better real estate podcasts for those topics. If they focus on land, they would be the best podcast on it week in and week out."Interesting. That's helpful feedback. What do you guys think? I'm actually always curious about how much people want to hear about land-specific content versus everything else there is to be said about real estate, like mobile homes or self-storage or apartment syndications, or rental properties. There are so many things we can cover. And kind of my whole philosophy with REtipster has been land is a key component of it because that's just what I happen to know the most about, but that's like a very, very tiny slice of everything to be covered in the real estate realm.

We try to cover these other topics as well, but I can see where Casey's coming from, because I think we probably can-do land the best justice just because we have the biggest knowledge base in that as opposed to everything else to be talked about in real estate. But at the same time, I know there are other folks in our audience who do want to hear about other things. So, we try to cover those things as well.

The way I kind of look at this is I think about, “What am I interested in? What would I want to hear about?” Because as a land investor, if there's other things that I think either go hand in hand with that, or make sense as a next step or another place to funnel cash into, there's probably somebody else out there as well who would be interested in that. But it's hard to meet everybody's needs without just thinking beyond myself or what I hear people talking about and asking about in our community.

Yeah, I guess I'm curious if you guys have any feedback on that. If you would rather have REtipster to just be a strictly land investing podcast, or if you are interested in hearing about some of those other topics. It'd be helpful to hear that. If you want to leave an honest review with whatever you think about, be sure to head over to the Apple podcast app or on Spotify or Overcast (I'm not sure if you can even leave reviews on Overcast) or any other platform you're listening to and let us know what you think. It'd be awesome to get some more input and hear more feedback from all the listeners out there.

Something else that's new. I'm actually recording this right in the middle of March. And I just got back from a conference called REWBCON. It stands for Real Estate Wealth Builders. And it was the first time ever that this conference was put on by my friend, Dustin Heiner over at masterpassiveincome.com. And he invited me to be a speaker there. It's the first time I ever did any kind of a presentation like this. In my typical fashion, I just over-prepared in practice what I was going to say again and again and again, because I was a little nervous. I didn't really want to get up there and mess it all up and look dumb. So, I wanted to make sure I really had this thing figured out and it turns out I did because the presentation went really, really well.

I had sent out a handful of emails to the REtipster email list just to let people know that I was going to be there. And I forget what the final count was. I think it was something like 20 other land investors ended up showing up. I don't know if they all came because they heard about it from me or just because they happened to be in the area. But man, it was so cool to see so many other land investors in one spot.

That never happens to me. Usually, when I go to these conferences, there's no other land investors anywhere. Even when it's like a real estate investing specific conference, there's really not that many of us out there. And I figured, hey, since I'm talking about this and since I rarely go to conferences like this, why not let people know? And a lot of people ended up coming.

It was one of the coolest things I've experienced that I can really remember. Just being able to put faces with names of people who I have known about and people who I've seen in our communities for years and actually shake their hand and hear their voice and just get to know them on a more personal level was awesome.

I get emails and messages from people all the time just saying, "Seth, I really appreciate all you do. It's been so helpful. I've learned so much from you. I've accomplished this and that because of the stuff you put out there," which is always great. I love getting those emails, but it's like something else entirely to actually meet the person and talk to them and develop a personal connection that you just can't do through an email. And it was like that, 20 times over, because I got to meet so many people.

We also put together a meetup. It was also the first meetup I've ever done. And some people came to that, that weren't even at the conference. I think there were like 40 people total throughout the night that showed up. And that was awesome. Man, it was just such an overwhelming experience in a good way to meet so many of you. So, if you listen to this, if you were somebody who came out to either the meetup or the conference, thank you for showing up, it was so awesome to do that.

And I'm not sure what conferences I'll be at the next year, but I'll be sure to blast out some emails to you guys just to let you know. If you're not on the email list yet, it's actually really easy to do that. You can head over to retipster.com and there's an opt-in form right there on the homepage. Or you can take out your phone and text the word “FREE” to the number 33777. And you'll be able to join the email list through that as well. We don't send out a bunch of spam text blasts. So don't worry about that. It's just an opportunity to join the email list through that medium.

Today, I'm talking with a guy named Brad Warren. Brad is a land banking consultant, and I thought Brad would be an interesting person to talk to because land banking is something I've always had a very basic understanding of, but I'm definitely not an expert in it. There are certain aspects of this idea of land banking that always kind of confused me, like how to predict what the value of land is going to be 10 years from now. And other parts of it have kind of just turned me off, like the idea of just sitting on a property for years and just waiting for something to happen. And it's probably because I don't fully understand how it works.

And I thought Brad would be really a good guy to help us clear up some confusion about why and how some land investors choose to do this. And if this is something that you ought to be doing, I can't say that for you, but if you feel like this is a good fit for you, hopefully, Brad's input can help you figure that out for yourself. So, Brad, how's it going? Welcome to the show.

Brad: Well, thank you. It's great to be here, Seth.

Seth: Yeah, absolutely. Maybe we should just go back to the origin story. How did you first get into this niche of land banking in the first place? What made you decide to pursue this?

Brad: Well, I do a quarterly net worth statement. I’ve been doing it since I met my wife a little over 30 years ago, and on December 31st, 2011, I looked at the numbers and I realized my wife could retire. She was working for Oracle, had a 401(k), very steady, every year putting the money away. I was an entrepreneur.

I was a business coach at the time and I looked at my numbers and I realized together we could retire. She could retire on her own, but me by myself, I didn't have enough. I invited my land banker, her name is Marcella Silva, to come to our house. She did a little presentation at the kitchen table and my wife actually got up and said, "No, thanks. I don't really get it. I don't understand." Walked out of the room. And I turned to Marcella and I said, “This is right for me. I've got some money in a retirement account, it's going to sit for 15, 20 years anyway, and I need to have enough money to retire on.”I bought my first property, got another one a year later, another one a year later. Finally, then my wife came to hear Marcella speak again and the whole way in the car to the hotel, she said, “Now, I'm not going to buy. I'm not going to buy it. I just want to learn more." And I said, "Okay." And she goes and gets there, listens to the presentation, and buys two properties right there at the hotel.

And along the way, I became what's called a finder, which is a referral partner, and was getting a lot of finders’ fees. Marcella was paying me for referring business to her. So that kind of helped my wife understand this is for real, this is serious. And that's basically how I got started.

And then four years ago I got my real estate license and became a land banking consultant. I left my 40-year career as a business coach. And now I'm doing land banking full-time.

Seth: When we look at land banking versus any other type of investment or any other type of real estate investment, why land banking? What does it have to offer?

Brad: Let me first maybe define land banking the way that we talk about it. What I do is I help patient investors diversify their portfolios, or maybe build a portfolio by investing in land that is strategically placed on the path of growth. They hold, and this is the opposite of a flip, Seth. We tell people very conservatively, seven to 10-year hold. It could be less, it could be more, but on average, our company's been around 42 years. On average, that's about a good amount of time to keep in your head, so that it has to be money that can just be parked and sit there and you don't need it for a hip operation or a midlife crisis or around the world cruise. You hold seven to 10 years.

And the exit strategy is you're waiting for a developer to knock on your door and say, “Knock, knock, knock. Hi, Seth, we need your land because we're building a thousand-acre solar farm, or a shopping center or 500 homes." And your land happens to be right in the middle of their project. You may only own one acre, but it can stop that project from going forward until they get it from you. And so, it makes the exit very high. We generally see three to seven X returns on our investment.

Seth: Okay. What if that developer never does knock on your door or doesn't do it in that seven to 10-year timeframe that you think? Are you actively trying to sell this thing once the seven-year time clock comes around? Or how does that materialize?

Brad: Nope, we don't promote it. It's your land. You could put a for-sale sign out there. You could try to call around to energy companies, Pacific gas and electric. We're in California, by the way. Southern California Edison, San Diego Power. It's your land. You can do whatever you want to try to promote the sale. We just tell people this is set and forget it real estate. It's for patient people only. And you just wait.

Now, I can't predict when that will happen. I know people that have had their land for 10, 12, 15 years and they've had offers, but they said the offers weren't big enough and they don't need the money. So, they're just waiting till it hits the price that they want. In some cases, it's 10 or 20-fold. There's a lot of money to be made. You just need to be very, very patient.

Seth: Yeah. If I understand that, is this like a syndication model or you're just helping people identify, “Hey, here's a good lot to buy, you go do that now?” And that it's theirs to deal with. Or how does this usually work with the people you work with?

Brad: We do all the research. We do all the risk mitigation. Our company has something called a 16-point comprehensive analysis. We actually have a whole division of the company called research and acquisition, and all they do eight hours a day, five days a week is try to find land that qualifies under those 16 points. If it doesn't get a yes checkmark for all 16, we don't touch it. And we only buy one out of every 30 properties that we look at. That's how strict the criteria are.

Our company applies those 16 criteria, buys the land, makes sure that gets the title, gets the deed, and all that. And then we hold it in inventory. In other words, we keep it. We pay the ongoing property taxes until an investor who wants to buy something in that price range says, “Okay, Brad, I'm ready to invest. I have $38,000.” By the way, our minimum is $25,000 up to $2 million. That's our range.

Let's say somebody says I have $38,000. We look at inventory. If we have one that's plus or minus two, so $36,000 to $40,000, we pull it out of inventory and we sell them that land. It's not like residential real estate, Seth. We pop them in the car. You show them 10 houses and they get to pick. They get one property to look at. And that's the one that they buy. If they don't buy, they're probably not somebody that's going to work with us just because we know the land is great. It's gone through our process and there's no reason for them to reject it. Marcella actually has a 100% closure rate. She does very well in presenting the property. They then buy that one and it's theirs.

Seth: I don't know if I was catching this. So, you actually buy the property first and you hold an inventory and then you show it to these people that you work with and they buy it from you. Is that how it works?

Brad: Basically, yes. Valore goes out, takes what we call first-mover risk. Buys the land with Valore money. We buy it by the way, way down here, we look for very discounted properties. People say, “Well, Brad, how do you find those?” I asked the CEO that very question myself. And he said, divorcing couples is one major source of leads for the land. Because the court says, "Hey, you've got this piece that grandma bought 20 years ago for $8,000, $10,000. You have to sell it." They don't know what to do. We approach them. We get it cheap. We mark it up. We're very clear, transparent. We do mark it up just below market value. And so, we buy it here, we mark it up, sell it to our investors here. They then write it all the way to the heir for that three to seven times return.

And people always ask me at this point, "Well, why doesn't Valore just hold it and wait?" Well, in the ensuing seven to 10 years, how are we going to pay our employees if we don't have cash flow? We have to have cash flow to keep the company running. The difference between what we buy it at and what we sell it to our investors, that little bit of markup creates cash flow to run the company. The investor is the patient one who sits and rides it to the full value that they can get.

Seth: Yeah. Okay. That makes sense. I don't know if you can divulge this, but a lot of land flippers in our audience are very familiar with how to find deals in the first place. Usually through direct mail and divorces. I don't know if that's super common, but that's definitely a reason, inheritance or delinquent taxes, different reasons like that. And we try to pay a really low price. These days, maybe 20% to 30%, maybe 40% off market value. Is that kind of what you're doing or are you paying a higher percentage of market value than that? I'm just curious, where do you find them and if your model is basically the same as what we do? It's just that when you flip it, you flip it to a land banking customer who then intends to hold it long term.

Brad: I can't really answer that because the company doesn't tell me what they pay and what the markup is and all that. And then of course, the real estate agent's fee is included in there. We pay for title insurance, that's included in the market. There's a lot built in there. So, I don't really know the answer to that.

The way that I think that we're different is we only invest in one very specific area, in Southern California, called the Antelope Valley. There are 10 reasons why we're there. We call them the 10 growth factors. And our CEO, his father, actually founded the company 42 years ago. The son is now the CEO. He's a trained economist. He studies micro-economies and macro. Micro trends and macro trends.And as a result of the research that he's done, he found this one area of California. Actually, you can kind of see it on this map. Let me pull this over just a little bit. That's a map of California. That white circle is a 60-mile radius around downtown LA. Downtown LA is right there where my fingertip is.

We used to invest in five areas within that circle. Obviously not the water. We don't sell stuff in the Pacific Ocean, but in the other five areas, we identified these 10 growth factors. Flat land, business-friendly city government, infrastructure growth, population growth, job growth. It's like a tsunami of economic trends all occurring at the same time. And it's made of these five areas, we can see the horizon, we see the growth. We go to city council meetings, we follow reports when they do a master plan or a 10-year revision, we get copies of it and we read it cover to cover.And we say, okay, city council just put $180 million into developing these five off-ramps. Now, why would they do that? Why would they spend $180 million to develop an off ramp off of Highway 14? Well, duh, they know something that no one else knows, there's some development coming there. So, we'll try to find land in those five spots right off the freeway, and gobble up as much as we can as long as it meets our criteria.

I can't use the G-word. It's not guaranteed that that land will go up. But we're reasonably assured because of the history of the company and the fact that we've watched these trends over time, we know that land is going to become more valuable just based on what the city council did.

Knowing those trends is extremely important. And those 10 growth factors are all occurring in Southern California in those areas. In fact, four of the areas now are too expensive. We are really down to area one. I'd say 95% of our sales, 90% to 95% of our sales right now are in area one. And the remaining two, three, four, five get the other 5% to 10%. His predictions have come true, but it's kind of putting us out of business. We're having a lot harder time finding land. We have more investors lined up than we have land right now.

Seth: Regarding those 10 growth factors and that 16-point checklist, do you have those published anywhere? What are those items? If somebody wanted to look for these things anywhere in the country, what are the basic principles that you're looking for?

Brad: Well, we don't publish that information, but if they attend one of our presentations, one of our webinars, that my partner Marcella does, which by the way is a prerequisite to investing. We don't allow anybody to invest with us until we educate them first. If you had $25,000 right now, Seth, and you said, "Brad, I will come to your house, knock on your door, hand you a paper bag with $25,000 in it, get me a property as soon as possible.” I would say don't bother coming over because you haven't seen the full presentation yet. And by the way, this does not qualify as the full presentation.

Seth: Ah, man.

Brad: Yeah. Sorry. People would go to Marcella's website. They would sign up. They would watch it or they would sign up and then get the replay and watch it on their own time. If the time doesn't work for them, sign up for one anyway and you'll get the replay.

After you've spent an hour, hour and a quarter getting educated. And she talks about the 16-point comprehensive analysis, the 10 growth factors, and the three-mile ring. She explains all the laws that are being passed in California that affect land, like all the laws about energy.

People will go, "Well, what does energy have to do with land?" Well, when California passed SB100 is just one quick example. In 2018, under Governor Brown, requires the state of California to get all of its electricity for buildings and homes from renewables by 2045. And the three-state energy companies, PG&E, Southern California Edison, and San Diego Power.If they don't meet that goal (right now they're at about 36%), but if they don't meet that goal of 100% renewables by 2045, they're going to be fined tens of millions of dollars. So, they are going crazy building solar farms, hopefully, a bunch of your listeners know what a solar farm is. It's just rows and rows and acres and acres and acres of solar panels that are collecting and they're making free energy basically.

What do they need to build those solar farms? Land. Our biggest sales right now are at the lower end of our investment range, which is what we call green real estate or green energy real estate. We're selling land that's going to the energy company. And it's not just those three big ones. There's Garland, there's S Power, there's Repower.

Warren Buffet has a $2 billion solar farm, and he's about to add to it. He just announced recently he's going to put another investment of billions of dollars into expanding the one that he's currently got in the area where we invest.

That's what's going on down there and they will learn those 16-point comprehensive analysis and they'll learn the 10 economic factors, but they got to get educated by listening to Marcella talk about it. Then they would email me, brad@bradwarren.com, really easy to get a hold of me. They would email me and then we would chat. I would make sure that they're a viable candidate because if we're going to be in business together for maybe seven or 10 years, they better be nice.

My three criteria for our investors, they have to be nice. They have to be very patient, and they have to have at least $25,000 liquid ready to invest before they can even do business with us.

Seth: Got you. Okay. I got to check out that webinar because I really want to know what those things are. I'm pretty sure I have a good idea, but some of the stuff you're mentioning, I guess when it pertains to land banking specifically, it makes total sense, but I wouldn't have thought of that, but when I hear you say it's like, oh yeah, duh. Well, that makes sense. That just sounds like good stuff, in general, to be aware of.

Brad: Yes. Well, the face that you just made and the expression you just had was the same thing that happened to me when Marcella came to my house back in 2012. What's that? That's 10 years ago. I sat there and I just went, “Duh, that makes total sense.” You don't know what you don't know. And I did not know about land banking. I didn't understand it. I thought about land speculating where you hope that it develops into something. And by the way, I had purchased land in the past before meeting Marcella, it was speculating. I thought, oh, well, it sounds pretty good. And I looked at where it was and lost money both times.

I was pretty skeptical as was my wife. But at the end of Marcella's presentation at the kitchen table, I just said, "Okay, what do I do next?" And my wife said, "You're crazy. You're using your retirement fund. You're not touching mine." And she got up and walked out of the room. I swear she left. And it was two years later before she finally got it after seeing the presentation again and watching me for two years get involved. She finally realized maybe there's something here. And by the way, we now own 11 properties.

Seth: Oh, cool. Awesome. In terms of, while you're holding these properties, they're not generating a cash flow, right? The investor who buys them, it's kind of just up to them to pay the property taxes and that kind of thing. Is that accurate?

Brad: Yes. No cash flow. It's actually taking money out of your pocket. But most people know about proposition 13 in California, which keeps property taxes extremely low on the change of hands. When the property is bought by a new person, it gets reassessed at the current purchase price. But because of prop 13, the tax is limited to 1.3% of the purchase price. And it's never that much because it's undeveloped land. The county always assesses it really low. And then the tax can only go up a maximum of 2% a year. So, let's say your taxes are like my wife’s. She has a property that was $100. $100 in taxes for the first year. You know what the tax bill was in the second year? $102.

Seth: That’s horrible.

Brad: Yeah. The initial price is very low. The initial setting of the tax is low, and then the ongoing increase is low. So, your carrying costs even over 10 years, she'll put in $1,100, $1,200 caring costs for a decade, but then she'll reap five times, six times, seven times her initial investment of $35,000, $40,000, whatever it was. So, it makes sense if you are patient. I really want to stress this. This is not for everybody. And that's why we're very careful about who we let in because I don't want them calling.

I had one guy. Can I tell a quick story?

Seth: Yeah, go for it.

Brad: One of my investors, he understood seven to 10 years. After one year he gets on the phone, he calls me. He says, "Brad, how's my land doing?"

I'll use his first name only. I said, "Well, Rick, first of all, do you get on the free Tuesday night webinars that the COO does every Tuesday for 30 minutes? He gives us an update on what's going on, where we invest." I said, "Do you get on those to watch what's going on? Because you would know how your land was doing."

He says, "Well, no, I don't do that."

I said, "Well, you need to start doing that. Or I'm not going to even tell you how your land is doing because he tells you."And I said, "Rick, let me tell you something. It rained last night where your land is, just a little bit and your land is wet and tomorrow your land will be dry. And that's how your land is doing."

And he laughed, he kind of got the point and he said, "Okay, I won't call you for another five, six years." I said, "Fantastic."

Well, a year later, he's down in Southern California, standing on his land and he sends me an email and there's a picture across the street from his land, a picture of a just-completed solar farm, literally across the street. Not a mile away, not five miles, across the street. And he said, "Brad, I'm not going to bother you anymore. I know how my land is doing. It's doing great. This just got built. It's across the street. I know they're coming for mine eventually. Thank you. Thank you. Thank you." And that was the end of that conversation. He actually bought a second property by the way.

Seth: Got you. I know with many vacant land properties it can be really tricky to figure out what the thing is worth because a lot of the information that an appraiser would normally look at doesn't exist. There's no cost approach for rebuilding anything. There's no income approach for the income that it's generating. It's just sales comparables, if there are any comparables in the area.

Given that it's so hard to value most of these vacant lots right now. I mean, not always, but many times it is. How do you go about estimating what the value is going to be in the future? It's one of those things where it always seems obvious in hindsight, when you can look back and be like, yep, that happened.

But when you don't really know, it sounds like there's some pretty good indicators, like highway ramps and that kind of thing. But the bottom line is, you don't know, nobody knows the future. How do you get even halfway confident about where values are going to go and how long it's going to take to make money on that thing?

Brad: Well, that's a great question. It's a little hard to answer. I'll do it as quickly as I can. There's something known as the three-mile ring. The California Land Institute did a study and they found that when a new project breaks ground within a one-mile radius of your land, the land value goes up 30%. Within two miles, 20%. Within three miles, 10%. And that's for every project.

Seth: When you say project, what does that mean? Like building a government project or what is that exactly?

Brad: Yeah. Kaiser Hospital announces, we've just acquired 40 acres at this location, Avenue X and Y. And we're breaking ground next month and we'll be done in two years and it's going to be a brand-new hospital. And they show you renderings and all that stuff. Well, anybody that owns land within one mile of that project, their value just went up 30% according to the California Land Institute.

We don't make this stuff up. We do research. We find people with third-party validation. So that's one way to determine it. When you get a property from us, Marcella puts together what's called a property profile. It's about 30 minutes long. She does Google Earth and she pinpoints your property right there. She draws the three miles and she puts in every project that is going on in that area.And if we know of some land that is being sold and has a purchase price, she puts that in there too. In fact, I'll give you an example. My first property that I bought from Marcella way back a long time ago is mixed-use. And I'm sure your listeners know there's five kinds of land. Residential, commercial, industrial. Mixed-use is the highest.

I bought it at $2.17 a square foot. Well, a mile away, there's a 10-acre parcel zoned exactly the same as mine that's selling for over $8 a square foot. So, we kind of use comps. They're not done the same way that residential is. Because you could have two pieces of land touching one another and have wildly varying potential. A quick example, two 10-acre parcels touching each other. We sold one to an investor for $150,000.They went online and found this one for sale for $50,000 and called us up and called us crooks. How could you sell it? They're touching one another. It's the same exact 10 acres. I paid $150,000. That one's $50,000. And we said, hold on. We have somebody called the map room. We have maps that the city and county of Los Angeles do not have. They call us for some land use issues because we own maps that they don't have.

The CEO took a map, took an overlay, put it on top of the plat map. And it showed this dotted line going through the middle of that $50,000 property. And the guy says, "What's that? My map doesn't show that dotted line. What the heck is that? Oh, that's a utility easement running through your property, which renders it completely undevelopable. So, if you bought that land for $50,000 from those people that are trying to sell it to you, you would own $50,000 worth of dirt and that's all it will ever be."A guy apologized profusely. He said, "I'm sorry. I will never doubt you again. I'm very happy with my land at 150,000, which is developable." And he hung up the phone. That's the end of that story.

They could be right next to each other and have wildly different values based on the history of the land. What if there's a buried gas tank from a gas station that was there 50 years ago and isn't there anymore? We find out that kind of stuff. And that's one of the reasons we would reject that property. That'd be one of the 29 that we throw away. Well, we're not going near that. We know something it's underground. It's not showing on the surface, but we know there's a buried gas tank there. We're not getting anywhere near that one or anything even close because of the mitigation problems.

Seth: On that, the whole due diligence piece, how much does it usually cost to investigate all these things? Like environmental, or geotechnical investigation to make sure the soil is firm enough to build something? There are so many hidden things with land. Some of which I just discovered this past year. I didn't even know what a geotechnical investigation was until I had to start doing it on one of my own properties. And it's just like, “Oh, here's another thing to think about.”

I assume you want to be pretty darn confident with all this. And it's usually not free. My investigation cost me $6,000 just to have somebody drill eight holes on my property and analyze the soil. How much money does a person have to spend? Do you guys do that or do the land investor, the end buyer have to do that when they're buying? And what are the typical costs of that?

Brad: I don't know the specific costs of the different reports. I know they are expensive as you've just pointed out yourself. That is the research and acquisition department. In other words, we literally have staff. I don't know the exact number. I'm guessing probably five or six people in the back office whose jobs are just to get those reports, get those samples, check city records, find out what used to be there if there was anything there. Look around for the three miles, use the 16-point comprehensive checklist and make sure that everything gets a checkmark.

Sensitive environmental area, an SEA.If your land is near a sensitive environmental area, it's not going to get developed. As Marcela would say. She says, "If there's a red-legged toad on that land, that little critter has more rights than you do." And so, we reject any land that's near sensitive environmental areas, things like that.But you got to know the boundaries of this sensitive environmental area. You got to have a map that shows you where that is. So, you can say, okay, this land is a quarter a mile away. I don't think we want to touch that one. I don't know the exact cost per report. I know it's expensive and that's why we have to mark up. We'll buy it down here and we have to mark it up to cover the salaries, the profit for the company, the salesperson commission. My commission comes at, what we pay for title insurance, all that is built-in. Of course, the company doesn't share that information with a lowly salesperson. My job is just to go out and find investors. They do all that research and all that.

I still believe very firmly because like I said, I own 11 properties. So, I put my own money in. I've met the CEO and the COO. I'll go to the company headquarters for meetings. I believe that our process is impeccable and that the land that we offer is going to be developed at some point in the future. I can't say when, but we tell people seven to 10 years to be conservative. And I'm very confident that I'm going to do really well on my investments and that my investors are going to do really well on their investments.

Seth: Yeah. Are you typically dealing with just commercial land? I know you mentioned mixed-use earlier. And I guess on that point, is it ever part of the process to change the zoning? Is that part of how you add value to it? Let's just talk about the zoning stuff for a minute.

Brad: Great question. Hold onto that second question for a minute because I'm 71 years old so I forget things pretty easily. The five kinds of land. You have non-residential agriculture. That's what we call green energy. Those become solar farms. You have residential, building houses. You have industrial. So that might be a marijuana growing facility where they grow all the marijuana plants that everybody consumes. The products for the CBD oils and all that.

It could be a warehouse, that would be industrial. Then you got a commercial, which could be a shopping center of some kind, or an apartment building, maybe commercial. And then mixed-use, which could be a project that has all that combined. It might have some housing, might have a shopping center, might have a distribution center. So, you got those five. The price obviously goes up, lower to higher and the returns are generally better.

Mixed-use. My wife and I have two mixed-use. We don't expect to sell those for anything less than 10 times what we paid. Those are going to be what we call them a 10 bagger. We're expecting those to go 10 times and we'll hold them until they hit that point.

Down at the lower level at the green real estate. They're three to four times. Maybe a little more if maybe you own a bigger chunk. Like if you've got a five-acre lot, maybe you'll get five times, six times, but that'll still be in that sweet spot.

Remind me of the second question.

Seth: Are you ever-changing the zoning to make it worth more?

Brad: We don't change the zone. The city council does that. And I'll give you an example that made me extremely happy and my wife. The mixed-use area that we're in is normally zoned for four levels high. They change it. They made it five. We know another city, I think, is Desert Hot Springs, where they just increased the height limit to 120 feet. It was at 60 feet and they just said, “No, we want to accommodate bigger buildings and they need to be higher.”

When the city council does that, we're doing the happy dance. We're jumping around because we didn't do anything and they just increased the value of our land 30%, 40%, 50%. They just jacked the price up because now they can build a whole another level. My one-and-a-quarter acre, which is really five acres, because you do one and a quarter times four levels. One-and-a-quarter times four is five-acre property. I'm selling it as if it were five acres. Well, now it's six-and-a-quarter acre. So, it just bumped my sale price up. We love the city council when they do stuff like that.

Seth: They just do it whether you want them to or not. Do you have any control over that? Could you try to make it happen yourself or that's not really your concern? It's just like, “Well, just hang onto it, and if they change it, okay?”

Brad: It's not our concern, but we're allowed. Some of our staff could go to a city council meeting and get on the speaker list and speak in favor of it. I'm sure that might happen. I don't know if they actually do that. I've never heard of us doing that, but we get those reports. We're on the list to get all of the general plan updates.

Usually, every five or 10 years cities have to update their general plan. We read those from A to Z. We read every line in there to see what they are talking about. Where are they even thinking about changing zoning? We immediately start researching that area.

Because if they're going to take something from non-residential agricultural, and now they're going to go, "Hey, we think better use of that land is for housing." Well, hell yeah. We're diving in there. We're going to want to buy that land because we know that's going to be more expensive land over time. So, we love following politics. Business-friendly city government is one of the 10 trends, by the way.

Seth: Okay. Got you. But I guess what I'm hearing is, as the end buyer, the goal is not to subdivide it or change zoning or really do anything. You're literally just sitting there and assuming that somebody else is going to come by and buy it from you and that they will do that work. Is that accurate?

Brad: That is 100% accurate. We call that the unearned increment. We didn't do anything to earn it. It just went up because somebody in the city council decided to change the zoning where a new project came in. My land just keeps going up in value the more projects that are built, the more housing that's built, the more solar farms that are built. It means there's less land, and basic economics, supply and demand. Less supply, more demand, price goes up. It’s set it and forget it real estate investment.

Seth: Yeah. Does that happen often where the municipality just changes the zoning on your land and you don't really have any say over it? Like it just happens to you one day or do you have to be involved in that, approve it or allow them to do it or something like that?

Brad: Nope. First of all, often, no. It doesn't happen that often. Usually, when land is designated a certain category of those five, it usually stays there. So, it doesn't happen often, but we have no control over it whatsoever. It's completely out of our hands. We're just very thankful that there's a very business-friendly city government in the areas where we invest and they want to make it easy for developers. They weigh fees, they don't charge as much. They do all kinds of stuff to bring business in.

I'll give you one quick example. Seth, have you ever heard of a company called BYD? Build Your Dream. Ever heard of that company?

Seth: I don't think so. No.

Brad: I wouldn't be surprised. I'd never heard of it either. Well, it's a Chinese electric car manufacturer. It's the biggest one in China. The mayor of Lancaster on his own dime flew to China several times to court that company to come to Lancaster to build its only North American electric bus manufacturing facility. I've been there. I've seen it. In fact, the first time I went down to look at my land, I drove by it and it was a relatively small building. They had about 80 employees and they were building about 15 buses a year.

Well, two years later, I went down. The building was five times the size. They had 800 employees and they were building 100 buses a year. And by the way, my mixed-use property is less than a mile away from the factory, from the facility.

On the other side of me, less than a mile away, BYD just bought 640 acres to build another bus manufacturing facility because their orders are backlogged for years now. They have more orders for buses. LA just went to an all-electric bus fleet. San Francisco just went to an all-electric bus fleet. Guess who's building the buses? BYD.

By the way, guess who owns 10% of BYD? Warren Buffet. I'm an idiot. I didn't buy that stock. When I first heard about it, I thought it was $6.5 or $7. I don't know what it's at now, especially with the market today, but people diversify. Maybe your investors also do a little dabbling in the market. But that company is doing really, really well. They're going to double their workforce. They're going to double their production. And now they're not just building electric buses anymore, Seth. They are building electric planes, electric tractors, electric dump trucks, and electric cars. It's ridiculous. It's just ridiculous. And that's just one company.

That's an example of business-friendly city government, one of those 10 economic trends that I talked about, those 10 growth factors. Just that one alone resulted in just that one facility. And now it's going to be two facilities in Lancaster. Guess what? You think the city's making some money on taxes? Yeah. So, it's a win-win and jobs.

These are high-paying manufacturing jobs, which increases the population. That's another one of the growth factors, which by the way, when you have more people moving in, what else do you need? Hospitals, schools, and housing. So, the home builders down there are going crazy. Building homes. It's nuts. It's crazy. The whole thing.

It totally makes sense. Except if you didn't know it, you wouldn't know it. But once you see Marcella's presentation, most people, their jaw drops. They immediately email and they go, "OMG, Brad, this is amazing. What do I need to do next?" So be careful, Seth, if you watch, you'll become an investor too.

Seth: All right. I'll have to check it out. How often does it happen or what are the chances that would happen that you get into a project like this with certain assumptions about taxes and growth and employers in the area, but then things change during those seven to 10 years hold period. Maybe a change in government policy or higher taxes or employers leaving. How do you guard against those things since they affect your projections so much? Or is it just a risk you have to accept like, “Yeah, this could go sideways if that happens?”

Brad: You're right. We have no control. I mean, let's look at the current situation in the Ukraine.

Seth: Yeah. Exactly.

Brad: Who six months ago would have predicted that? Nobody. How about COVID? Hello? Who knew? In February of 2020, people were living their lives. Everything is fine. People made predictions. The stock market was predicted to do certain. And March of 2020, the world changed. And nobody would anticipate that. New businesses sprung up. Old businesses went out of business. Some restaurants survived, some thrived, some went out of business.

We have no control over that. I don't lose any sleep over things I can't control, Seth. It's out of my control. All we know is, over the 42 years of the history of the company, looking at what we see coming, looking at what the mayors have told us, looking at what the city council says, looking at the population projections, looking at the actual numbers of people that are moving into the Antelope Valley, we're assuming, and if there are assumptions, you're 100% correct, assumptions can change.But based on our assumptions about where we see growth, this is an incredible opportunity and it will continue to be for the foreseeable future for at least another 10 years. Our CEO basically said we have about eight more years left and then the land's just going to be too expensive. And I'm probably going to retire. I'll be 79. So, I may actually retire at that point.

They always say, "Well, what are you going to do next? Where are you going to go? Where's the CEO going to go when the land runs out in California?" We've asked him that and he won't tell us. I don't know where else you can find these 10 economic growth factors all occurring in one area at the same time. Texas has some of them. It's got cheap land. It's got a little bit of sun. Though, it's also got a lot of snow and stuff.I don't know a business-friendly city government. It does have a little bit of population increase. It's people from California leaving to go there, but I don't think it has all 10. And like I said, that circle, that white circle, which if people are listening, they don't know what I'm talking about.

That 60-mile radius around downtown LA, that is the only area we have ever invested in and the only area we ever will invest in, as far as I can tell. I don't think the CEO's going to want to go out of state because then it's very expensive. We'd have to fly people there to look at the land and that is not going to happen. You can drive from our company headquarters to the Antelope Valley in an hour. So, if they want to double-check a piece of land, they just get in a car and they go there and look.

Seth: Yeah, that was one of the questions lingering in the back of my mind. Could you do this anywhere else? You probably could. But to your point, once you find an area where it all works, there's probably not a ton of places where everything is in alignment. Probably it takes a long time to find them. And even if it could, is it efficient to be flying across the country to do that?

It almost makes me wonder, if a person was trying to get into land banking and figures this out themselves, maybe they could do it in some other country if everything aligned up. But I don't know, it's fascinating. I've never looked at a deal quite like this through this kind of lens or intent on the back end.

Brad: Well, we hear that a lot because when I go to a networking event, now I do a lot of Zoom and networking events. But when I would go to live ones, like a chamber of commerce, I would have my little name tag and it said, "Brad Warren, land banker." And people would reach over. They would shake hands and say, "Hi," and they'd look at my name tag and they'd go, "Land banker, what's that?" I never had anybody go, "Oh, land banking. I know all about that. I've taken classes on it. Seminars and I invest in it." No. Zero. Not one person ever said anything to me except, "Land banking. What's that?" And that's what they always say.

And I was like that when I first met Marcella. I knew Marcella for over two years before I even invited her to my house and she would present. I was in a networking group with her. That's how she met her husband. He was the head of the networking group. He's a good buddy of mine, a former coaching client. He ran the networking groups. I was in the networking group. She joined and she would talk about land banking in the group. And I was like, yeah, okay. Two years before I got involved, and then two more years for my wife.

So, it's not something that people know a lot about or even anything about. And we want you to take your time. We don't want everybody coming in because we couldn't handle it. We can't even handle the business we have now. One of my current clients is in escrow now on a property. It took us three weeks to find her a property in her price range, because we just couldn't find one. We didn't have one, it took three weeks.I got another guy now he's in week two of waiting. He's in the $40,000 to $50,000 range. We haven't found him one yet. We have more people lined up wanting land. So, I'm happy if people go, “Eh, it's not for me. - Okay, great.” I only want to work with the people who get it, who understand what it is. They understand the risks. They understand the hold period and they're willing to just park their money. Forget about it. Pay your tax once a year, a couple hundred bucks, $100, $200, and just wait, and then build what we call generational or legacy wealth. That's what we want.

You take $25,000, turn it into $125,000 and then reinvest with us $125,000 and turn it into $500,000. And even if it took you 20 years to go from $25,000 to a half a million in 20 years, that's not bad. That's legacy wealth. That's something you could leave your kids. If you can't use it, give it to your kids, your grandkids.

Seth: When it comes time to sell these things, do you guys facilitate that at all? Or is the land banking investor kind of just on their own? Like, yeah, I want to sell it now. Do you play any part in that?

Brad: Fantastic question, because I forgot to mention another free service. I mentioned earlier the weekly Tuesday night webinars that the COO of the company does. We also offer free negotiation coaching. So, let's say you buy a two-acre lot, like my last client for $19,000, two-and-a-half-acre lot in the solar area.

And two years from now, the energy company calls up and says, "Seth, we looked at the county records. We see that you paid $19,000 for two and a half acres at such and so and so and so location and we're Southern California Edison. We would like to give you $25,000. We know your land is kind of way out in the middle of nowhere and we think that's a very fair price." And you say, "Please send me that in writing in an email and I'll get back to you” and you hang up the phone.You don't say another word, you call me. I’ll call the COO. I will send them your email. I say, “COO, here's my client. Here's the plat map. This is where they're located, where he's located, two and a half acres. Here's what Southern California Edison offered.”

Well, first of all, we might have other investors in the same area that are already in negotiation with Southern California Edison. So, we've got legal insider information to help you get the price up. We then also will give you questions to ask Southern California Edison. I just made up some of my own.

Here's what I would tell you to do. Go back and you say, okay, Southern California Edison. First of all, are you the person that I'm going to be negotiating with who's going to actually say yes to the deal or do you have to run it by somebody else?And if he says somebody else, can we get them involved in the negotiations now so I'm directly talking to the person that's going to say yes? I don't want to go into you and then to them and then to some committee and back to them.

Second of all, I'm assuming you want my land because you want to build a project. What's the name of the project? Is it a solar farm? How many megawatts is it going to be? When are you breaking ground? When is it going online? How much do you expect to generate in electricity from the panels that you'll be putting?

These are all great questions that I never would've thought to ask until I got involved in this business, you might not have thought to ask. So now if you go back to Southern California Edison with those five or six questions, they're going to scratch their head and go, "Oh, this Seth guy, he's pretty smart. He just asked us a whole bunch of questions. He's not going to sell for $25,000."

So they go, "Okay, well, we probably underestimated the value of the land, we'll offer you $35,000." You just went up $10,000 and all you did was ask them a couple questions. You say, put it in writing, send it to me. You call me. COO to me, me to you, you back to them and this could go on for a year. But once they're in that sweet spot. So, what did I say? $19,000 for my client. Three times $19,000 is $57,000. You're not going to sell for anything less than $57,000.

So, let's say they finally go to $75,000 and you're like Brad, they're almost four times what I'd paid. I'm in this sweet spot. And their last offer only went up a little more from the one before that. I know in negotiations, when the offers get smaller, you're getting closer to the last offer. Should I sell? I cannot give you financial advice, Seth. I cannot say “Yes, sell or no sell”. I will lose my real estate license.

But I'll give you the code. I say, "Seth, what was the last offer? $75,000. That's an excellent price." Or I might say, "Seth, based on what we know about what's happening in the area, i.e., we have other investors who just sold their land for about the same price. We think you're at market value at $75,000." That's our code words basically saying, yeah, we think it's a good idea to sell.

Now, it's your land. You could go for $78,000. You could try to squeeze out $80,000. You might put yourself in jeopardy losing the deal. But you know when we say something like those code words that we think that's a good exit strategy, go ahead. $75,000 you paid $19,000. You're selling for $75,000. It took three years. That's a nice return.

Now, the next question people always ask me, "Well, Brad, why would your company offer the COO's time?" Which usually is several thousand dollars an hour if he just hired him for an hour. Why would he do all this for free? There are two reasons. And number reason has an A and a B. 1A is, we want you to be happy because when you're happy, what are you going to do? You're going to refer all of your friends to us and we're going to get a lot more business. 1B is, and I'll be absolutely transparent and honest and upfront with you. We hope you reinvest some of that profit with us and buy another parcel yourself. We're not stupid. I'd be silly to not tell you that.

So that's A1 and AB. But number two, we are getting, we, our company is getting legal, insider information about that area that we could never get if we called Southern California Edison. Can you imagine if we called up, "Hi, we're a land banking company, we like to know what you're doing with the land at this location, because we think you're going to want to buy up all that land so we want to get it first and then charge you a lot more." No, then they're going to hang up the phone on us. They're not going to say anything, but they'll give the information to you, the seller, and you'll give it to us. And we'll go to research and acquisition and say, "Guys, we just found out about a new solar project." It's called Rabbitbrush or whatever, Garland, or who knows. And it's 2,000 acres and it's located right here. And we got to buy land in that area quickly.

And so, research and acquisition now go whoop and switch direction and start researching the land within the boundary of that new project. Because we know it's coming. So, we want to get as many of those parcels as we can and sell those to our investors and let them take the ride and wait a year, two years, three years.

Seth: Got you. Do these deals ever go sideways or the returns don't come out as expected? Has that ever happened? And if so, why? What was the unexpected thing that changed it up, if anything?

Brad: Well, the company doesn't tell me stuff like that, but they have said publicly, none of our investors and we've had over 22,000 investors in the course of the company's history, none have ever lost money. So, nobody's ever sold their property less. Not everybody has exited. Some people are still waiting like myself, still waiting.

And I know of one person in Marcella's 13 years of doing this, she's only told me about one person who sold for less than the three times. And he bought the land three months later, he sold, he made a 65% return on his investment in three months. And Marcella tried to stop him from selling. She says, "No, you're crazy. You just wait a little longer. It's going to go way up." And he says, "No, you don't understand. I want to buy a bigger property. And I know I don't have any more money. I sell this one. I'm going to take all of that and buy a bigger one." She said, "Okay, fine." That's the only one I've ever heard of who sold for less than three times and didn't wait seven to 10 years. But nobody else that I know of has ever lost money. And yes, of course, there are still people waiting to exit.

Seth: Yeah, it's interesting. Because part of me is thinking, “Why couldn't I just as a land flipper, go out and find a really good deal and just wait for myself?” But I could, if I knew exactly how to look at all this stuff and do the due diligence and ask the right questions. But that's not really my area of expertise. I actually sort of can see a rationale behind just trusting people who do this all the time. In my experience with doing the different assessments and tests on the property, it's expensive. It's time-consuming. What if I buy a property and it fails those tests? It's just easier to get a turnkey land property this way.

Brad: Seth, time and money are the two reasons why you probably don't want to do this yourself. You're going to have to invest a huge amount of time doing the research. You're going to have to invest some amount of money for the reports or to travel there or whatever. Why not let us do that? And like I said, because of what we know and the experience of 42 years, we reject 29 out of every 30 that we look at.

Do you have time to go look at 30 properties to find the one that's going to give you that return? I don't know, unless you're independently wealthy and have all the time in the world and want to travel a lot. But our company is, like I said, it's an hour away from where the land is. So, if we ever have to go look at the land, physically, look at it, somebody in research and acquisition hops in a car and drives up there and looks at it and then drives back to the office. "Okay, guys. It's great. I looked at it. I took pictures. Yeah. We want that one." Or, "No, eh, get rid of it, take it off the list. It doesn't meet the qualifications." Okay. Next, look at the next property. So yeah, save time, save money. Let us do that part.

Seth: I think I know the answer to this next question, but maybe you can just confirm or deny. Aside from using something like a self-directed Roth IRA, where you buy it with after tax dollars, hold it and then sell it and don't pay taxes on it. That whole strategy. And by the way, listeners out there, I have a blog post explaining how this works. I'll include it in the show notes at retipster.com/127.

But aside from that, are there any tax advantages to this kind of investing, given that it's land? Are there any strategies to be aware of?

Brad: Nothing that I'm aware of. Nothing my CPA is aware of, but thank goodness you brought that up. My wife and I, out of our 11 properties, nine are in self-directed Roths.

Seth: Yeah, it seems perfect for that.

Brad: Oh, it is absolutely the best. We don't give tax advice. We do have three self-directed IRA companies that we work with and we do require our investors if they're going that route, they have to use one of those three companies because they're the only three that we feel confident working with them with land and titling it appropriately into the IRA and then getting it back out of the IRA when it comes time to sell. So, we send that list of three companies and we tell people here's who you need to talk to, do your own due diligence, pick the company that you like. But if you're going to use a self-directed IRA or a self-directed regular IRA or a self-directed Roth IRA, it's got to be with one of those three companies.

And you got to set that all up and get the money in there before we even start getting properties for you. We won't even get a property for you until you're already and have the money in there. But that, in my opinion, is the best way to go. Self-directed Roth, but no tax advantage. By the way, the Roth has to also pay the property tax. You can't write out a personal check or be very careful not to screw that up. So, you got to make sure the Roth knows how to send the money to the LA County or Kern County tax assessor's office, who to make it out to, parcel number has to go on it, et cetera, et cetera.

Seth: What are those three custodian companies that you guys recommend?

Brad: Oh, goodness. Off the top of my head, I know Equity Trust is one. Forge is the other and the third one, they changed their name from Pensco. It was formerly Pensco and now it's something. Off the top of my head I don't have it, but if people want to get a hold of me, brad@bradwarren.com. That's my email. It's just my name, brad@bradwarren.com.

I can give them Marcella's website where they can go watch the full presentation. I can send them a list of the three companies, if it gets that far in the conversation. We usually don't send out that information until they've seen the presentation and said, "Yes, I want to invest. Now, what do I do?" I say, "Okay, are you doing cash? Are you taking an advance on your house like refinancing?" We don't recommend that. We don't want people to go into debt to buy land. It should be money that you've got set aside that you don't need to touch for 20 or 30 years. You just park it and just let it do its thing.

Seth: Yeah. I don't know if you had mentioned this or if I just knew this, but the minimum amount to invest is $25,000. Is that right?

Brad: That is correct. $25,000 to $2 million is kind of our range. Though even having said that, last month I sold two parcels at $17,000 each. One guy bought them both. They were touching, they were contiguous. So, he bought them both. And I have one in escrow now that's $19,000. We do occasionally get those. They're very rare, but we like to tell people $25,000 and then you have an escrow fee. It's usually around $1,000 plus or minus a couple of hundred. So, you're looking at $26,000 and then we also want to make sure you have some money. Let's say if it is in a self-directed IRA, you need to have a little bit of money for the taxes. So, make sure that you've got a little extra.

For $25,000 property, we would recommend somebody have $30,000 in their account. At least $30,000. And then they're set for three, four, five years. They got enough money to cover the tax, enough money for escrow, and enough money to buy the property.

How to know if you are a candidate for getting into the game of land banking?

Seth: Yeah. So, it sounds like, and I guess none of this conversation should be taken as financial advice. Hopefully, that's obvious.

Brad: Correct.

Seth: In terms of when people do this, my assumption is that it makes the most sense for people who just have a slush fund of cash sitting around and they need a good place to put it, but it's not the kind of thing where you want to take out a loan to do this. Is that accurate? Or am I getting too specific about that?

Brad: Absolutely. 100% accurate. We do not want people going into debt. First of all, it's very hard to get a loan on land, because there's no collateral. There's no building. So, it's very hard to get. Hard money lenders, no, I might not even do business with you if you come to me with that scenario. I want you to have either cash that you got from selling a former business, or you have an IRA that you've been putting it. Like my wife did it all through her IRA from Oracle. Thank you, Oracle. They would match 6%, 8%. So, we got a lot of free money. But she built up that retirement fund and then used that to buy the land. So yeah, we want to be very careful.

We've even heard, if they wanted to, you could borrow against a life insurance policy. This life insurance with living benefits, the new way that things have gone in the last decade or so with life insurance. You can borrow against your life insurance policy and then either replace it or not. If you die, you would just get that much less in the death benefit. But we don't like those ideas. We prefer cash or some kind of retirement fund. 99.9% of our clients use one of those two vehicles.

Oh, 1031 exchange. I should mention 1031 exchange. Boot, the boot money. So, you're buying a new property. You got a million, you identified a property for $900,000. You don't want to pay tax on the $100,000? Great, buy land with us. We have people that can help you through that process. And you do it just as a regular 1031 exchange. And then you defer the tax. You don't get rid of the tax. You just defer it. But at least you don't pay the tax now, and then you own this property and it goes up to $400,000. Then maybe you'll pay the tax when you sell.

Seth: I don't know if you even know this, but you can 1031 exchange from pretty much any type of real estate to land, right? It doesn't have to be on the land property. It could be a commercial building or whatever house or something like that.

Brad: Yep. They call it like kind.

Seth: Does that mean just real estate, period?

Brad: And again, this is not financial advice and I'm not a 1031 exchange specialist. I have people I can refer you to who are, but my understanding is real estate to real estate. Single-family residents to duplex, apartment building to mega apartment building, commercial building to industrial building. Duplex to land, land to duplex. My understanding is 1031 exchange is like kind and as long as it's real estate to real estate, you're okay. But please check with a 1031 exchange specialist first.

Seth: Say if somebody does have 1031 exchange money and they're trying to find another property to move it to, but they're running out of time. Because I know there's not a whole lot of time to make this happen. Do you have any idea how quickly it could happen with you guys? If you've been looking for 45 days or six months or whatever the cut-off date is, and you're like, “I'm running out of time. I got to do this now,” could you move it in 30 days or a couple of weeks? Or how quickly could it close?

Brad: Well, you got to even mind the two timeframes. The first one is 45 days. That's the timeframe within which you must identify up to three properties. Then you have from day one to day 45. From day one to six months to close.

Depending on where in the process, let's say, you start on day one, and now you're at day 30 and you haven't identified a property and you call us and you say, "Oh my God, I only got 15 days left." We might be able to help you. For instance, let's say we have something in inventory. We already own something. And you are at $59,000, some ridiculous number in the middle of nowhere. And you say, "Brad, it's got to be $59,000 plus or minus one or two." And we look at inventory and we have a property for $58,000 or $63,000. We could have it for you in a day.Or we start looking as long as we can identify within that next 15 days, the address of the property, you can then put that in as one of your three. And then you might not do business with us. We hope that if we've gone to the trouble of finding you your property, that you will buy it, but I guess you could probably buy any one of the three that you've identified. But if we're the only one that you identified, you go with us and we help you defer the tax. Not get rid of the tax, but defer.

But yeah, it could be the same day if it's an inventory and it could be a week and it could be that we can't help you. It just depends. That's why we tell people when you're doing a 1031, you talk to the 1031 specialist before you close on the property. Some people, I've heard these stories where they close and then they call the 1031. "Hi, I just sold this building and I wanted 1031 the money so I can defer the tax." And the 1031 guy strikes his forehead. "Oh, you dummy. You should have called me before." So, make sure you're getting a hold of the 1031 person early in the process. And then when day one occurs, you immediately identify within those 45 days, find your properties. The more time you give us, the more likely it is that we can get you a piece of land.

Seth: Awesome. Well, Brad, I really appreciate you, coming on the show and sharing all this with us. It's been super helpful. Again, if people want to get a hold of you to learn more, it's brad@bradwarren.com. Is that right?

Brad: Yes. That is it. And again, thank you for inviting me. As you can tell, I get passionate about this and I love talking about land. I love talking about dirt. We say the best investment on Earth is earth.

Seth: Yeah. There's a lot of people in our community who love talking about dirt.

Brad: Yeah. And one of our other quotes is, "Invest in land because they're not making any more of it, except where the volcanoes are in Hawaii." And that land you can't build on anyway. So let them make more land, but as far as I know, they're not making any more land and what's out there is becoming more and more scarce and therefore more and more valuable. But again, thank you. Thank your listeners for listening in. Thanks for having me.

Seth: Absolutely. And if you guys want to hear the show notes for this episode, it's retipster.com/127, because this is episode 127. Thanks again, Brad. Appreciate your time, and let's stay in touch.

Brad: Alrighty. Take care.