Seth: Hey everybody, how's it going? This is Seth Williams and Ajay Sharma and you're listening to the REtipster podcast. This is episode 190. Today, we're interviewing Mike Balcom.

So I've had Mike on my list of people to interview for about a year now because I've heard he's up to all kinds of cool stuff with novation deals in the land business and he's got a knack for building great teams with a great culture. And to be honest, I don't actually know a whole lot of of details behind this, but I've heard a lot of people say a lot of good things about him.

And I think this is going to be pretty fascinating. So I hope you're ready to have your world rocked, have your perspective changed. It's going to be good. Mike, welcome to the show. How are you doing?

Mike: I'm doing great. Thanks for having me, Seth. Ajay, great to see you, man.

Seth: So let's start this off at the very beginning. How did you first learn about land investing and what made you decide to get into this business?

Mike: Oh, what a hard question to answer. I got into land investing two different ways. First way I got into land investing, I have an amazing, amazing father. I really do. When I was younger, around 14, 15, 16, he started buying land for me in my name. And he was a very big fan of land banking.

So I started to slowly but surely learn about land banking then. Very rudimentary. He was mostly a stock market guy. He mostly still is a stock market guy. but he would still do that, hold land five to 10 years. So I learned a little bit about it in that regard. Then, as I got older, I got into real estate as a realtor. Then I got into single family investing. Then I got into some multifamily deals, syndications, things like that.

Where it becomes really crazy is COVID hits. And at the time I am a pickleball fanatic. I absolutely love the game. I've taught it for many years. I'm a certified coach. And I'm playing pickleball with this guy. I'm always talking about real estate. I was practicing underwriting for large multifamily deals. And I thought that would be my next career move. I'd be a syndicator, run large multifamily deals, which is very hard to do.

And at the time we come off the pickleball court and this guy says, “Mike, I want to chat with you about something.” I said, “What's up?” He said, “I got these six pieces of land. I'm going to lose a tax auction. Would you be interested in it?” I said, “Yeah, what do you want for it, man?”

Guy's a retired commodities trader. You want to talk about somebody hard to negotiate with. This is back in the day when you're screaming on the floor at everything. This guy has a big personality. He says, “I don't know, make me an offer where you can make some money on the back and you're happy.”

I go home, do hours and hours of research on it, call him up the next day. And at the time, I'm reading Never Split the Difference by Chris Voss. I'm like, OK, I'm going to start here on my pricing and then I can go there and then I can come here. And I call him up on the phone. He owes about $30,000 in back taxes. I say, I'll give you 110, pick up the back taxes. At the time, I think it's worth 190-ish or something. He says, “Okay.”

I about fall out of my chair. I'm like, oh, we're agreeing on a number right then. So I immediately do what every land investor does. Sign up for a subscription to Rocket Print because I have no idea what a land contract looks like in that regard. Get it signed by him and me, take it to a title company and then start doing research on that development.

Next day, happened to call up a builder who owns 70 to 80 percent of the lots. And I say, “You want these?” He said, “Yeah, I'll give you 240 for it.” And I about fell out of my chair. And that was my first land deal, slanted contract, scariest deal of my life because I had no idea really what was going on. But yeah, I got into land investing that way, which is pretty wild. All thanks to pickleball.

Seth: So how did you—I mean, I don't want to make too many assumptions here, but—how did you then get into the thing that most of us do? And maybe you're not doing the thing that most of us do, but this idea of systematizing and sending out mailers to people and buying from motivated sellers. Like, how did you go from where you started to there?

Mike: Absolutely. Yeah. You haven't heard, Seth? I just play pickleball and make deals all day long on the court, man. Come on! I figured it's easy.

So I've had a VA since I was about 19 years old. I'm very passionate about VAs building teams. And we did this deal and my VA saw it through. At the time, he was helping me with pickleball marketing, shooting emails to clients. And he started doing some research on it. And he knows I'm always looking for a little side hustle here and there. And he finds one of these coaching programs. And he says, “Mike, you just did this great land deal. Why don't we get into this?”

So we got into that. We learned about looking at days on markets, hot areas, active, depending to sold, all this good stuff. And then we started sending out mailers and then I started doing land the traditional way.

Seth: And this was all, did you say 2020? Post-COVID?

Mike: This is during COVID, this is three years ago now.

Seth: Okay.

Mike: Three and a half years ago, right around in there.

Seth: Yeah, and how did that first year of your business go? Because I when I first met you last year, Ajay was telling me that you do novations and some people may not even be familiar with that term, what that even means. So how did things work in your first year, and then how have they changed, and how do they work now? And why did you make those changes?

Mike: Yeah, these are some great questions, Seth. So in the beginning, just doing mailers, it was me and one person on my team, a VA overseas. He was amazing. And we started doing mailers as we started building up some traction. We start sending more and more mailers. Then eventually I hear about this lady. I don't know if you guys have ever heard of her. She's pretty small in the space. Her name's Callan.

Seth: Oh, yeah.

Mike: She's okay. Yeah. I'm like, wow, you can text people. So then I get into texting and doing this. And at the time, very traditional, buy 50% of market value, sell it, double your money. That's everything you do. Slowly but surely, my team comes to me and we get some deals under our belt where our underwriting wasn't done the best.

And it doesn't look like this is a double your money situation. Really weird to look at this too, when you've been in real estate for a while. As a lot of you know, in the land space, we're used to seeing close to 100% ROI. When you go to other assets in real estate, flipping space, they look for around a 30% ROI in the house flipping space. If you're in a large multifamily deal, passively, you're looking at 15% to 20% IRR, 7% a prep return or something.

So looking at these smaller spreads, I'm like, okay, it makes sense, but really, how much of this can you do? Capital is a constraint. And then my team, I always encourage them to give me ideas. They're like, why don't you wholesale some of these? And I'm not the biggest fan of wholesaling to begin with. I'm like, it's a little slimy, I don't know.

So I started talking to some other investors, things like that. I like to be very transparent with who I talk to, let them know what's going on, be a man of my word. And then somebody mentioned novation deals. I'm like, oh, that's interesting. So I signed up for another coaching program, learned about novation deals. And I'm like, wow.

The way novation deals, for those who don't know, came out of the house flipping space. So essentially, what would happen is, let's say you find a house that is worth $200,000 after it's repaired. It's on the market for $100,000. It'll cost you $50,000 to fix up. So you need $150,000 to sell it for $200,000.

Well, let's say you have three other projects going on. You just don't have that kind of capital. Instead, you just essentially go to the owner and you say, “Look, I know you want $100,000 for this. I'd love to give you $100,000 for this, but it takes $50,000 worth of work and I don't have $150,000 to spare. Why don't we do this? Why don't we partner together? We can sign this fancy little novation document and then I will fix your house for you. But then you're going to give me the right to market and sell it. I'm going to sell it at a higher price, but I'm going to guarantee you that $100,000.

“And then, if everything goes horribly wrong, at the end of our agreement, you're going to have a remodeled house, and I'm just out of the picture.” So that's kind of how it started.

And I'm like, wow, why don't we talk to some of these land people that way? Some of these properties could be bush hogs. Some of these properties, sometimes they just need a survey done. Some, as we know, realtors, when you get a great realtor, it's phenomenal, but it's hard to find. And a lot of times too, we know to get drone photography on a property, make sure to put the little property lines on it, get a perk test done for property. We are professionals in this space. So why not, when we have these smaller spread deals, approach the person and say, “Hey, why don't we work together on this? I can actually get this done, but I'm going to do all this work on it.”

Now, the really cool thing about novations that a lot of people don't realize they're like, “Well, why don't you just wholesale and just tell them you're going to wholesale it? You know, just tell them you're great at marketing.” It's a great question and it's something you can definitely do. However, if somebody's coming in with bank financing, it's really hard to do an assignment of contract or a double close.

With a novation deal, “novate,” what it actually means is “to replace someone in the contract.” So you're essentially out of the contract now, but because you signed this document before, you're able to put a notice of interest on the property. So you're essentially treated as a lien on the property, and you're almost looked at in terms of a title company as a mortgage. So now you're just paying off a lien. Well, if you pay off a lien, anybody can come in with bank financing. So now you get around that. So then you can start dealing with some higher level properties, higher price point properties.

Seth: I'm going to catch up. I have a few clarifying questions just to make sure I'm fully grasping what's going on here.

So it sounds like it's kind of akin to putting an option on the property, but you're also investing. Like, going back to this $100,000, $150,000, $200,000 example. So are you basically putting an option on the property for a hundred grand and then you're investing your own 50,000 in the hopes of selling it for 200 grand?

And if it doesn't sell, you're just out your 50 grand. Is that accurate?

Mike: Yes, that would be accurate.

Seth: Yeah. Okay.

So in that case, there is still some capital constraint stuff going on because you're having to risk your own 50 grand in that one scenario. In other scenarios, maybe it's like five grand or something, not as big of a deal. So I guess you would just have to put less money in than you otherwise would if you just bought it outright. Is that one of the big advantages?

Mike: Correct. Yes. I think a big advantage in this space—I'm not an attorney, please consult one before doing this—but I believe what I am saying is legal. A real estate agent cannot; I used to be a real estate agent way back in the day; I'm not anymore. So many times I would go to a listing agreement and they would say, look, I want $300,000 for my house. Anything you get above that, just keep it yourself. You cannot legally do that, from my understanding as a real estate agent. You have to charge a commission.

What's nice about a novation agreement is if, say you want 300,000, 50,000, 20,000, whatever it is, I can say, okay, I will guarantee you that price and for everything else, I'll spend the money myself to get whatever. So it's a nice way to guarantee said price and then put marketing dollars into it, whether the property needs to be fixed up or it just needs some good marketing because they've tried to list with an agent for a while and the agent's not good at it. They're tired of haggling back and forth with buyers, and you can just kind of take that seat for them and make it very easy.

Seth: So is it an option that you're signing with them? Or is it like a novation agreement that's worded differently or something? Couldn't one make the argument that you're sort of practicing being an agent without a license if you're trying to sell it on somebody's behalf, but you don't own it? Is that argument still there? Can you get around that somehow?

Mike: That's a great question. Is the argument there? I guess.

So the novation indemnification I used is a two-page document, and it says a lot of things in there. It gives me the right to work on the property, gives me the right to go on the property, gives me the right to have people go onto the property to perform tests, studies, anything else. If anybody that I have is going onto the property, if they fall down and break their leg, they're suing me. The seller isn't liable for that. I'm 100% liable for all of this.

And then, on the back end, because I'm doing all of this, they're also going to sign an attorney-in-fact, which will give me the right to list it on the MLS. So I guess, in a way, it's kind of like acting like a real estate agent who's a handyman, who's going to fix up your property, get it list-ready, list it for you, sell it for you, negotiate everything, not take a commission, and guarantee you said price.

Could you make the argument? I don't know.

Seth: So you're not currently licensed as an agent or are you?

Mike: No, I am not.

Seth: And when you're talking about putting a notice of interest on the property, that's kind of like a memorandum of what's going on, right? Just to let anybody who's searching the title know there's this agreement in place. Like, Mike has a sort of a claim to this thing for however long the term of this is.

And I guess maybe I didn't get the original answer; what are you signing? Is it an option or is it a novation agreement? Or what's this thing called, this agreement you've got with the seller?

Mike: Yeah, so that one would be a novation and indemnification agreement. You will also have them sign a regular purchase and sales agreement. And you will also have them sign an attorney-in-fact, a four-page agreement.

Seth: Why have them sign a purchase agreement if they're also doing the novation agreement? What does one say that the other one doesn't say?

Mike: Absolutely. So that's a really good question. The purchase and sales agreement is the original agreement. So if, for any reason, the novation and indemnification is going to say if a new buyer comes into place, if that buyer (since you're taken out of the transaction), falls through, we're going to go back to our original purchase and sales agreement.

Also, the nice thing about that is it's not forcing me to novate a property. I can still go in and do the work, but if you're coming in with cash, it's going to be a lot easier for me to do a double close to do an assignment, anything there than actually do the novation agreement. Because to get a notice of interest, that's going to be notarized and everything. You submit it to the county, then you have to send the title company a release of notice of interest. It's just more paperwork, more of a pain. So this is a nice way too. Or you can also just do an assignment deal.

Seth: Sure. Well, and I guess that's my next question. How is this different from just having a purchase agreement with an assignment clause in it that gives you the right to create a novation and assign the person? I mean, is it kind of the same thing or is there something fundamentally different about this setup you're talking about?

Mike: The only thing that I understand that's fundamentally different is… Two things in my mind that are very fundamentally different.

A. Everything's very laid out, black and white. This is what's going on. This is what we're going to do. This is how much you're going to net at the end. We might have people walk on your property. You might have people fix this on the other. Everything's very transparent. There's no hiding behind anything.

B. The second thing about it is it gives us that right. Again, if somebody's coming in with financing, it makes it very clean and simple. And I think that's where it has really the most power.

Seth: And I guess maybe that's one part I'm still disconnecting. So the reason the financing is easier with this novation path is because I mean, you still have a purchase agreement signed between you and the seller, but you are not the person purchasing it?

Mike: Correct.

Seth; So the novation agreement somehow is like the Bandaid that fixes that? Or how does that make it okay with the bank?

Mike: Absolutely. Great, great question. So let's say you and I sign a novation agreement. I want to buy your property, we'll say for 100.

Now I find this guy, Ajay, and I decided to sell it to Ajay for 200. (What a sucker.) No, it's a beautiful property. I've put in at least 95 into it for sure and fixing it up. I end up signing with Ajay. Ajay is now going to sign a new agreement with you, Seth. So now the agreement is actually between you and Ajay. I am 100% out of that agreement. I'm not touching it.

So now Ajay is coming in with financing. Well, he's not buying it from me. He's buying it from you, the original seller. So everything's nice and clean when Ajay goes to his bank to say, hey, I need 200. Will you give me a loan for this? Then they're like, who are you buying it from? And it's not all convoluted, like, “Oh, Mike, but he has the right to do this. And then the other…” It's just, “I'm buying it from Seth.”

Seth: So when the seller, like I in this case, when I see that Ajay is willing to pay so much more, why am I keeping you in the deal? Just because I agreed to that in the original novation and indemnification agreement? Am I still signing an assignment agreement to make this happen? Or is that document that connects it all that's not part of this? Instead of doing that, we just sign a brand new purchase agreement. And if so, what's keeping me honoring the original agreement with you?

Mike: Yes. So there is only that new document in place, but the original document says that you will work with a new buyer. You're going to work with Ajay. Everything's spelled out exactly what's going on. I'm being very transparent with you saying, Seth, look, it's worth more, but things need to be done. It needs to be marketed right. It needs to do this right. It needs to get everything else done.

So that's really what's holding that together. I will say, I think if you just send somebody something, you don't really explain it, you don't really let them know what's going on. And then they have to sign this new document and see it, they’d be like, “Wow, there's now this lien for Mike for $80,000 and I have to pay it off. This isn't right.” Then it would become, technically, a breach of contract if you tried to back out of it. But I do not want to go down that legal rabbit hole.

So it's just being very transparent, making everything very easy for you. I think it would be very rare to find one where I'm actually buying it from you for a hundred dollars and selling it to Ajay for 200. I think what would be a lot more common is I'm buying it from you for a hundred, selling to Ajay for 130, 140, something there. So it's going to be that smaller spread. If you get it for a hundred, you should probably just buy it for a hundred if you can sell it for two.

Seth: And what is like the typical length of this agreement? Do you have like six months to make this happen or three months? Or how do you normally set that up?

Mike: Yeah, we typically set it up for six months because a lot of times too, if we're doing something like this, we know we have to do some kind of work on the property a lot of times. So this will just give us more time to do that. And it's really nice for you because it's just a sit back, relax, and the title company will call you up and ask you where to wire the money.

Seth; And the typical work you would have to do on this would be what? Is this just like bush hogging it or are you like building something out of it? I don't know.

Mike: Yeah. Typically what we're doing is getting gorgeous drone photography, good videos, very good marketing, getting a survey done, a perk test done, you know, checking wetland issues, doing a wetland delineation if they need to, and really just getting it ready for market and then marketing it very well.

Seth: So you're not actually changing much of anything on the property. You're just kind of creating a better package of information that answers more questions for the next buyer.

Mike: Correct. Yeah. Interesting. Ajay, you had a question. Want to jump in?

Ajay: Yeah, I just wanted to make an observation on our good friend Mike here. And for those that don't know, Mike and I are very good friends and I have to hold myself back from heckling him while we're talking live here.

Now, that being said, I just I want to call out a couple of really cool characteristics about Mike that I think could be missed in a lot of the stories if you're not looking for them. Like, Mike, I know you pretty well. When you started this off, you basically said, “Oh, my dad's awesome. He bought me some properties when I was a kid. And I made a buttload of money on him.”

That's not what you said verbatim, but I think people could take that very out of context, right? It's just like, oh, well, that's why he's successful because his dad helped him. No, no, no. Like his dad bought some cheap properties like 15 years ago and not too long after, Mike made a little bit of money on him.

But that just started the interest for land, right? Well, fast forward. Well, dude, you're a pickleball coach and you got lucky with this other dirt. No, Mike told people what he was doing and what he was interested in and talking about real estate.

And, you know, I just had a call with a guy yesterday and he was like, “Dude, I don't know how to raise money.” And I'm like, “Well, how many people have you talked to about raising money? How many people have you talked to that you do land?” He's like, “Nobody.”

I'm like, “Well, it's really hard to raise money when nobody knows what you're looking for, dude.” And he's like, ‘Well, what would my like pitch be?” And I said, you ever lost money on a deal? He said no. I was like, “Sweet, man. That's a great place to start.” I'd be interested in investing with an investor that's never lost money on a deal. Pretty enticing.

So I want to point out the lesson that number one, Mike wasn't afraid to talk about what he was doing, which led to an opportunity. Number two, Mike took action, right? How many people do you think this guy brought up this land over the years? Probably not just you. Maybe you, but probably not like, “Like, hey, I've got some dirt that's going to tax auction.” Most people would be like, oh, well, it must be crap, right?

Well, Mike said, sweet, let me do the research. Not only did you do the research, now you prepared for all these scenarios. Indicating preparation, which is unique. Not everybody prepares for these high stakes situations. You took action. You made money. You almost fell out of your chair twice. I'm glad that chair is really sturdy.

But the point just being, you weren't afraid to tell people what you were doing. You took quick action. You implement. And that's the theme I've seen from you over the past year and some change that you and I have been friends is that like, man, I'll get on a call with Mike and his team. And I'll be like, yo, dude, we're double dialing. And within like four days, he's like, gosh, I hear my metrics from double dialing. This is crazy. And I'm just like, that was fast.

I love it, man. I mean, you implement faster than 99.9% of land business operators that I know. And it's not like sexy in the sense of like, Oh, what's Mike's secret sauce? I know later in this, we're going to be talking about your team and how you've done some of that stuff because you're a freaking rockstar operator.

But like a huge lesson here is that you just like do the things you like implement and get the work done that needs to be done. It's not fun and it's not sexy. You just did the core stuff that made it happen. So I just want to highlight it all. I know I'm talking way too long here, but I just, I have a lot of respect and love for you, Mike. And I want people to understand why, because they might question me otherwise. No, I'm just kidding.

Mike: I love it. Thank you, Ajay. That really means a lot. It really does. Yeah.

It's interesting when I look back at a lot of my friends from my past and high school, college, some things like that. Because when I was in college, it was really interesting. I didn't go to a lot of the parties. I wasn't one of the frat guys. I wasn't doing all of this. I worked. When I was in college, I woke up at 6 a.m. and I started studying, not academic stuff, usually real estate stuff. Unfortunately, I'd be in a lecture and then I'd say I have to use the restroom just so I can call up another realtor on the phone because they called me because they have a buyer for a property in the single-family space.

But yeah, I think it's a lot of work that has to go into a lot of these things. But I mean, if you're putting in the work, let people know. People want to help you. And I want to help people. Every time I get on a call with an investor, I try to give them some kind of value. And it's amazing how many times those things pay for themselves tenfold.

And yeah, I appreciate you saying all those things. It's not that talked about. Yeah. And this land way back in the day with my dad, too. These were buy for $3,000 to $5,000, sell for like $15,000 in five to ten years. Yeah, maybe I should preface that, too. It's not like we're buying a $200,000 place and selling it for a mil 10 years later. That’d be nice, I don't know if I'd be in this space.

Seth: I’m curious, am I understanding right, that you were making money from real estate when you were in college?

Mike: Yeah.

Seth: So did you ever feel tempted to like drop out of college because you're like, “Look, I’m already making all this money. Why am I messing around with this when I already have a career going?”

Mike: Oh, Seth, what some good questions. You are just sparking hours and hours of arguments with my father right now.

Yeah. So truth be told, a little bit more about my backstory. When I turned 18, I thought, wow, I'm 18. This is great! I don't think there's anything good you can really do at 18. I'm like, oh, I can smoke cigarettes. Don't want to do that. If I get in trouble, you go to prison, like big boy prison. I don't want to do that. Sign contracts, be held legally liable. And I'm like, oh, you can gamble. Can't gamble till you're 21.

In the state of Florida, you can play poker at the age of 18. They don't view it as gambling. I'm not advocating for this. No one should do it, but you can play at the age of 18 because Florida does not view it as gambling because you're not playing against the house. You're playing against seven other people at the table. That's why when you watch the World Series of Poker, a lot of times you see the same people at the final table. It's a game of strategy and skill.

Seth: What parallels do you see between poker and land investing?

Mike: That is a great question.

The interesting thing about poker, a lot of people get it wrong, is that it’s not about winning or losing. Poker is about making the right decision. And I cannot tell you how important that is in the land space.

In poker, you're constantly thinking of this, then that. If I check and he bets, what do I do? If I check and he just checks, what do I do? If I want to go for a check raise, that doesn't happen. What do I do?

And I feel that's very similar to when you're on these negotiating calls. It's kind of like what Ajay said there, I really prepared for this call with the seller, like, okay, I'm going to start here on price and go here, here, and here. You start to lay it out.

And I think the same thing is there. I think it's easy to get discouraged in the land space where you find that perfect market, and then you send 10,000 mailers there and nothing happens. Was the research good? Did you actually make the right decision? There's a rule of large numbers, you know, that 10,001 mailer might be that giant deal for you. And I think that's what's so important.

And it's also too, with that same framework in mind, because you can lose at poker and still make the right decision. And I think the same thing with so hard in the land investing space and things that I have struggled with before at times is we don't have steady cash flow here. You buy a property and nothing's going on for a week, a month, two months, and then you might get five dispos in a row. And then nothing happens again, forever. And we get so excited when we get one under contract, but it's not until you dispo it that it really matters.

And I think just understanding how to have a level head. Taking it easy, not jumping the gun, not going after the shiny object, which is easier said than done is just so important.

Ajay: So this isn't passive income? I mean, man, that's what was advertised. I don't know what I signed up for.

Seth: Well, that is a great lesson. I'm really glad you brought that up. And I'm even more glad that I was so smart to ask the question in the first place about the similarities between poker and life.

A friend of mine, I was talking to him about poker a couple of years ago. He said a lot of the same things about how you can lose even though you made the right decision. And I actually found that very comforting because it almost relieved this burden of like, you lost, you're a failure. It's like, no, sometimes you make the right bet and it doesn't necessarily pan out the right way. It's like a game of probability, you know?

And there's a book called Thinking in Bets by Annie Duke, where she kind of talked about this in terms of, all of life is like this. Every decision you make, you can't have all the information; you simply don't know. You have to make the best choice based on the information you have. And if it doesn't work out right, that doesn't mean you were wrong. Knowing what you knew back then, that is still what you should do all over again.

For somebody like me who has anxiety about this kind of stuff, I found it very comforting to know that, like, it's okay to lose. It doesn't mean you necessarily were dumb.

Mike: So that is why poker is more common than chess. I will never beat a grandmaster. Never. You can put me up against the best poker player in the world. If we have 10 sessions, I might win one of them. I might even win two of them. Majority of them, I'm definitely going to lose. If I had to put all my money on it, I would want to play one session one time against the best poker player in the world. But at Grandmaster, I will lose every single time.

Seth: And you were a professional poker player for like five years, right? Is that accurate?

Mike: Yeah, that's what got me into real estate. I was very fortunate. And I got to sit with some pretty successful people at my table. Where I grew up is where a lot of people go to retire. So a lot of people would retire and just would play poker every day.

And these are very intelligent people who have run very successful businesses. And here's this scrawny little 18 year old getting to talk to them. And they said, one of the best ways to make money is in real estate. And that's what's like, oh, I should get into real estate.

Seth: Are there any, like the whole term, “poker face,” like when you're lying about something and you're bluffing and you don't want the other person to know. Is there anything like that that you've experienced with land deals? You could offer more, but you don't want to, or the seller could take less, but they don't want you to think that. Does that ever come up or not really? Because you're not necessarily talking to people face-to-face.

Mike: Let's talk about Annie Duke again. You brought her up. Annie Duke is one of the best female poker players of all time.

Annie Duke's claim to fame, I hope I don't get this wrong, but I'm 99% sure this is Annie Duke. What she did that was amazing is she played an online poker tournament and she took a post-it and put it over her cards. So she played a whole tournament, never being able to see what her cards were. She ended up winning the tournament.

The way she did this is looking at tells by everybody else on the table. What is their average size bet? When do they raise? How often do they three bet, four bet, things like that? How long do they take to make a decision? Different things like that.

So when you start looking at things like that—everybody talks about poker face, but really, poker face isn't that big of a thing. But I will say, if I'm playing with Ajay, and Ajay is a very tight player, he hardly ever plays a hand, and then he does, he probably has a good hand. You know, if he usually bets $20, and then all of a sudden, he bets $100, you know, he's either going for a big bluff, or he has a phenomenal hand, and I would assume Ajay probably has a phenomenal hand there.

So I think by understanding things like that, you start to tell it, you start to notice the same thing when talking to sellers, when analyzing deals. A seller says one thing, but you can just kind of tell in their voice and their reflection and their tone, like, oh, I don't know if that's the case here necessarily. Especially what I think we run into sometimes is sellers just don't always divulge everything they actually know about their property.

Seth: Yeah. It seems harder with a lot of these sellers because you don't have any history of them. Like you're getting on the phone for the first time. You don't know what their tells are or what their patterns are or whether they do or don't do something. You're kind of blind, right? Does that make it a lot harder?

Mike: Oh, a hundred percent. Definitely makes it way harder. And I think that's why it's so important as every salesperson will tell you, rapport is key. Spend 10 minutes or more on the phone with them. The longer you spend on the phone with them, the better off you can start to understand who they are as a person, get to know them better, start to figure out what that motivation is. And then that can lead you into helping make the best decision for both of you.

Seth: Yeah. Is it as simple as, “For every extra minute I spent on the phone with you, my offer is going down a thousand bucks!”

Mike: That's what my coaching program told me because I know what you guys are doing.

Seth: So how many of your deals are these novation deals versus just like a normal straight-up flip, like the classic, old-fashioned buy low, sell high for cash, that kind of thing?

Mike: Yeah, that's a good question. Most of my deals are novation deals in terms of that's the paperwork we get signed on it. In terms of what actually ends up being a novation deal on the back end, I would say is probably 10% to 15%.

Seth: Okay.

Mike: Most of them, the other 30%, would just be traditional, a wholesale deal as an assignment deal. And then the other ones are just, as we dive deeper into it, this is a great deal. Let's buy this right now.

Seth: How much explanation does it require when you're having somebody sign a purchase agreement and this novation agreement when they might be like, “Wait, what is a novation even? And why are we doing this extra thing?” Does it take a whole lot of handholding? And do you have your explanation down to a science so that even a five-year-old can understand it?

I've had experiences where just having an assignment clause at all, or even like “and/or assigns,” like just those words in an agreement, can blow the whole thing up. Because they're like, “Whoa, ‘what's all this stuff?”

So how do you get people to agree to this, even if that may or may not be the direction you go with it?

Mike: Absolutely. That's a really good question. And I will say it was a total mistake. The reason we get all of our deals signed as novation deals was an honest mistake in my business. I was talking to my team and I was telling them, yeah, when we send contracts, if it looks like we can get close to doubling our money, just send them a purchase and sales agreement. You know, if it doesn't look like we can do that, but we can get, maybe a $20,000, $30,000 spread, let's send them this novation agreement.

Well, had a new person on the team at the time, I think they might have misunderstood what I said. And they started sending novation agreements on everything.

And I'm always shocked in this space when you send somebody an agreement, you talk to them on the phone, you agree to a price, you send them an agreement, and then it comes back to you within 30 seconds signed. I'm like, it took me 10 minutes to write this up. There's no way you read the whole thing in 30 seconds.

So that started happening a little bit, but then it is a hundred percent. Start letting them know what's going on. When you send them the agreement, get them on the phone, walk them through it just to let them know, this is a possibility that we can also go down to. You do try to explain it very simply.

And the nice thing about it is these agreements are written up where it says, this is how much you're going to receive. You're going to receive it on or before said time. We're making this an easy button for you.

Seth: So when you're getting all your deals done this way or signed this way, and then maybe 15-ish percent of the time it ends up going the novation path, why? Like, what is it about that deal that pushes it one way or another? Is it like, oh, it hits this mark, now it's going novation, or nope, I'm just going to buy it outright? What has to be true for it to go one way or the other?

Mike: Absolutely. So for us to buy it outright, we think it's a phenomenal deal. This is something that we can get close to doubling our money on. You know, as we dive deeper and deeper into the DD, then it's a buyout, right?

For it to be a novation deal versus a wholesale deal, it all comes down to at the end of the day, are they financing it or are they paying cash? If they're financing it, treat it as a novation, put a lien against the property. Are they paying cash? It's an assignment to double close.

Seth: You're talking about the end buyer?

Mike: Correct. Yes.

Seth: Gotcha. So that's assuming you can find an end buyer pretty quickly then, right?

Mike: Quickly, three to six months. Yes. Yeah. Relatively quick.

Seth: Is the purchase agreement always for three to six months and then you're trying, and you're actively marketing it to find this end buyer before you close? And if you can, I'll just stop talking. Like do you always try to close immediately cash or are you trying to drag it out as long as you can to see what ends up happening on the backend?

Mike: Absolutely. So one thing I've noticed being in the land space for a while now is you get something under contract that you think is amazing and ends up not being amazing. And every now and then, the opposite happens. I will say not as much the opposite though, unfortunately, but definitely you get something under contract that you think this is phenomenal and then it's not.

So we get everything by that six-month period if we can. That's always where we start to begin with. Then we go down to three months. If they're not willing to go down less than three months, now we're really digging into that property, but we rather do a lot of that digging on the back end after we're under contract. So if we even have it under contract for six months but it's a really killer deal, let's just close now. Let's make everything as clean and simple as possible.

This way, we're not calling up the seller every two weeks just to kind of let them know what's going on with the property and everything. Let's just get it done, get it through, and then sell it on the back end.

Seth: So I know a lot of times, like one of the many benefits that a land flipper will give to the motivated seller to get them to accept a lower price is the fact that, hey, we can close quick. So it doesn't sound like you can most of the time when you're doing this, right? So do you basically just don't mention that?

Mike: Actually, yeah, that's just what we do. We just do not mention it. If they bring it up to us then, then we'll just dive into it deeper and see if it's something we can make work. And then that usually strikes up the conversation of, if you need this by said day kind of what's going on. Is there a big, major life event we need to be aware of? You know, can we come to other terms on things? Do you just need $2,000 today? And then I can give you the other X amount, you know, in the next 90 days, what situation are you in? Or it's like, oh, you need it all today. Okay, well, we're happy to do that. But for us to make that happen today, then it has to look like this.

Ajay: I was just going to say, I know Mike and my businesses are very similar. We don't do novations exactly, but a lot of assignments, a lot of attorney-in-facts, a lot of double closings, a lot is relative enough, I'll say.

So my point there just being with the timeline, we did the same thing where, yeah, we never advertise 30 days unless there's like a dire situation. In our pitch, we have a de facto either 90 or 180 days. And when I say pitch, I mean, before we talk price, we're on the phone and it's, hey, Mike, just so you're aware, our company makes this as easy as possible. If we come to terms, we send you a doc, you sign it, goes off to title, we take care of closing costs. And we typically wrap up in about X amount of time. We typically wrap up in about 90 days, 120 days. Any questions about that?

So we're almost just assuming it's not going to be an issue. And if they're like, oh, well, I was expecting this to be 30 days. Oh, 30 days. Got it, man. Are you in a rush to sell your property? That's the anchoring we do to try to come back. Because if they're in a rush, I'm like, oh my gosh, what's going on? I mean, our pricing is going to change if we have to close on it sooner, just risk, blah, blah, blah.

I actually got that line from our buddy, Meir Shemtov. I think we've interviewed Meir before. He's a great guy, really smart. Are you in a rush to sell your property? And then going on about, no, no, I'm not in a rush. Got it. So I guess what's the issue then?

It’s so funny. I was just on a call with my acquisitions manager earlier today. And I was like, hey, when you get on the phone with this seller, just talk to them like a human. It's like, we always have these masks up about being this big prestigious land company. And it's so silly. Like, when you just explain things like a normal person. Well, what if they ask why? Most people don't. And if they do we can do exactly what Mike and I just talked about and dig in deeper, which means we're selling on emotion.

So like, “Hey tell me what's going on. Oh, you need this because of this emotional thing or some event or blah blah.” People have this proclivity to sell with logic or it's like well I have to get a septic test done and I have to get a survey and my due diligence is going to take 75 days and all that stuff sounds fine but like it's kind of crap.

So I'll have to say like, Mike, Ii know you guys do a great job of this but just take the mask off and assume the sale. And those two things have served us really, really well. And I'm assuming you guys are doing a lot of the same.

Seth: So earlier you talked about this situation where you'll get a property in a contract, you'll do the due diligence, you'll answer all the questions, basically just improve the information package that you end up selling to the next buyer. Does it ever happen where…

Well, I guess, first of all, how much are you typically spending? Like how much time or money does it take to build that better information package? And does it ever happen where you invest the time and money into doing that and you still can't sell it? So you basically just wasted that effort. Does that ever happen? And if so, like how frequent is that? Is that a giant risk in this equation or not really?

Mike: Absolutely. Really good question. So I think the more you're going to invest in something, the more you need to feel confident on it.

So a big property that we did recently is we did a survey on it. You know, we got the front of it cleared out just a little bit, make it look nice and pretty. Amazing drone photography on it. Had a water delineation done on it. This is in Florida, beautiful five-acre property in an equestrian community and everything.

I'd say all in all, by the time we're done with all of our marketing channels on that, and we actually had a buyer representing us as well. And then a buyer was representing the end buyer as well. I would say it was around $7,000. Our hard cost in house was about $3,000 to $4,000. Not horrible, but something like that too, we feel more confident on. Some we don't feel as confident on.

It's let's get a drone photography done. Let's get some good marketing, maybe self-list it ourselves, or maybe just get a Realtor to list if they have really good experience, but not spend as much on it. We have gone down the hole of, let's put a driveway on this. Let's really bush hog it, clear a path, and everything.

But then you just have to look, is the risk worth the reward? Because we are on a timeline. We have a hard date.

Seth: Yeah. It's almost kind of a catch-22 in a way, because the more homework and research you do on the property, you're increasing the likelihood that a problem is going to come up and it's not actually going to be a good deal.

So I've heard different trains of thought where it's like, I want to go into this thing blind. I don't want to become aware of something. And then I can be accused of hiding that from the next buyer. So I've heard stories from funders who they're trying to do their due diligence on a property and they spend tons of money and it ends up being a problem and they just lost a bunch of money on due diligence on something they can't do.

So I'm just curious if that ever happens. And if so, how frequent is it when that comes up?

Mike: I would say a handful of times. I mean, I've got four of them that have gone downhill this year already, have been deals that we get under contract like that, run a perk test on. And I mean, we've probably burned close to $8,000 or $9,000 this year in perk test. Just getting these done just to find out this isn't going to be perkable, this isn't going to work, and then just back out of the deal.

And the nice thing about it (relatively speaking, nothing nice for us), is at least we can go back to the seller and just say, hey, I want you to know this is what's going on. And here's a copy of the perk test. At the end of the day, I'm giving you more knowledge about your property. You're better informed.

Ajay: I think that risk profile is so interesting too. Like, again, we're in a small business world. Overhead has more meaning. We're dealing with different types of margins than a Bridgewater Capital, Mr. Ray Dalio. He pops into my head when we're talking about this. Because, don't quote me on this, but I'm pretty sure he has said that if he looks at five investment opportunities, he only expects one to pan out, which is crazy.

Could you imagine getting five deals under contract, spending three, four, five grand on each one and being like, only one of them will make money.

Don't get me wrong, I've lost money on deals, but I guess, Mike, in your mind, what are you guys looking for in terms of… you guys do a decent amount of volume. What are you looking for in terms of deal killers and whether you're going to take the risk to take something down or not?

I mean, everybody who's ever done a double closing knows you estimate to make 30 grand. And that means you might make 22. And on a bad deal where almost no offers come in, you might only make 2,500. And they just happen sometimes, right?

Walk us through sort of like how your team is underwriting a bit. I'm really curious on like, what are the killers? And how are you penciling some stuff out?

Mike: Absolutely. These are really good questions.

So we do basic underwriting, looking at comp, seeing what's going on in the area, get it under contract. Then it goes into deeper underwriting after that. And that's what's nice about getting a contract that you can assign.

So if your numbers aren't looking as good as they are, you still have a way out of it at the end of the day to maybe make a little bit on the deal. So then after that, we start diving deeper into things.

And an example that just came up yesterday, we had a property under contract. This was a novation deal. And this was a very fascinating one because we got under contract for $350,000. And we actually talked to about 10 realtors on this and everything just because it looked a little too good to be true. And we talked to all these realtors on it saying, what do you think it'll sell for? Everybody we talked to said, 450,000 to 500,000.

And I say, “It's in a hundred-year floodplain. Are you sure?” And one of them's like, look, I live in this neighborhood. Some of them went and walked the property. We did all these things and we're looking at it and we're diving deeper and deeper into it. And then we call the county and they say, things look good. And then we call planning and zoning and we're talking to them and they say, oh, you can never build on that. I'm like, “What? I have just talked to a thousand people who said we could build on that. Are you sure? Can I talk to somebody else in your office?”

Sure enough they passed a new ordinance in this county, December of last year, that protects all these flood zones no matter what. No stilt house, no bringing in soil, no nothing to protect the environment. And everyone we talked to on the phone was unaware of that.

Seth: Oh gosh.

Mike: And honestly, to buy, even if we were actually going to purchase it hard money, 350, sell for 450 to 500, statistically speaking, that's an amazing return. I don't have this kind of money to just sit on anything, but on a regular investment, a lot of institutional people would bend over backwards for a return like that.

And here's a return that just wants to buy from 350 to dispo for 450 to now dispo for maybe 50,000. Maybe land bank it for 20 years and maybe they change the law one day.

So it's things like that as we go into it more and more, where luckily if they said it wasn't buildable, but you could do a stilt house, you can have a civil engineer write this up, make a play for it and everything. Then it's like, okay, what would that sell for then? Oh, that would sell for 350. Okay. Let's go back to our buyer and say, Hey, we found out this, that, and the other, can you do it for $275,000? $300,000? We're going to spend $10,000 on a civil engineer to go pitch this, that, and the other. So that's where you start diving deeper and deeper into it.

Seth: Do you think it's possible to buy any piece of land with 100% confidence in what you can and can't do with it? Because examples like that, that ordinance thing, I don't know many people who would have dug deep enough to catch that. And even if you did, there could still be some obscure thing that's unreasonable for anybody to know that.

And I hate this kind of stuff because I like to package things into nice, understandable boxes. Like, look at these 21 things and you will know. But I'd love to collect all the examples of these weird oddities that come up so we could have like a bulletproof checklist. Like this is going to take you forever to check all this stuff. But if you look at all these things, you will know, 110% sure, what you can and can't do with it.

So if you had any other weird things like that, that like the average person never would have looked at this, but we did, and we found this problem. Or maybe even, after the fact that we should have looked at this, but we didn't know.

Mike: How is land like poker? Land, we're dealing with people. And I think because of that alone, you will never have complete confidence in anything you do in this space.

And I'm dealing with a property right now that is driving me a little insane because it's on an easement. It was a larger size purchase. We raised some money for this, some private money for this too. We have debt on it. It's on an easement, beautiful property, got a perk test done before we purchased it and everything. Looks like a double your money deal.

And, man, I will tell you, these neighbors are not happy that we have this up for sale. And they keep running people off. They put signs in their own yard saying, “Future RV park coming soon.” And they are just doing everything they can to run everybody off of said property.

Some things they're doing could be considered harassment. Some things they're doing are completely within their legal right. Somebody's going to have to live next to that person. I will tell you when our perk test guy went out there, nothing happened. We had three Realtors go put boots on the ground, actually paid for broker price opinions on this. Nothing happened. So many people went out to said property beforehand before we even bought it. Nothing ever happened.

And now we're stuck in this situation. So you have a great question. Can you ever have 100% confidence in things? Absolutely not.

But is land investing about winning and losing? Yeah, it kind of is. Absolutely. But it's also about making the right decision. You're going to mess up here and there, and you're going to have curve balls that I think there's nothing at all you can get around. And that's what's unfortunate.

Seth: You know, that whole issue with neighbors, I'm pretty sure all three of us have experienced that at some point, probably multiple times. Is there a way to get around that? Like if you've got a neighbor who's just crazy and like they will do everything in their power to make that property not sell or just make trouble for you, can anything be done?

Or, I don't know, because I hear about this from time to time from other people too and I don't really know what to tell them.

Ajay: It's just kind of legal routes.

Seth: It's funny, actually. We've actually got a neighbor like that, personally, in my neighborhood who's just a nightmare. Like, he’s horrible.

Anyway, I’m not gonna go on and on, but I was looking up basically like unethical but legal ways to get rid of neighbors. And it was talking about things like playing music really loud all through the night. Like dressing up like a wizard playing a harp in front of your piano as their friends come by. Just like crazy stuff.

So I realized there are always unconventional things you can do. But legally, what can you do? Or is there nothing in some cases, like you're just truly stuck?

Ajay: So two things. Number one, that's a job ad. Anybody out here who's in Michigan who knows how to play the harp and wants to dress up as a wizard, Seth has a job for you. It is gig for 99.

Seth: I actually saved that job for myself. I'm pretty good at it.

Ajay: Number two, though, technically, you can get the sheriff involved if it is in the way to your legal claim for something.

So, again, I'm not an attorney. This is not legal advice, but from my understanding, like in Mike's situation, if you've got an easement and they keep blocking your easement using force, you can call a sheriff and get them involved.

Now, when you say like, can something be done? Like it, again, it's all relative because we're people, right? So if a sheriff comes out, that's enough to scare some people to stop doing stuff. But like, guys, we invest a lot in rural America. And if rural America is known for one thing, it would be freedom, which does not exactly go hand in hand with following rules. So, I mean, it's the luck of the draw.

My buddy, you guys know, Justin Pichet, brilliant guy, great land investor, love him to death. He was telling me about a deal he had in Alabama where he literally had a guy, I hope it's okay. I'm sharing this, Justin, if you're listening, but he literally had a guy come out with his gun. When Justin, whose truck has ten grand of rocks in his truck and was about to lay it out to make like a nice gravel road for this easement. And it doesn't even go through this guy's property. It's like a different person's property. And he just claims it is basically.

It turned into this thing where this neighbor got in his car and started following the contractor for like 25 miles into the next town where the rock guy knew the sheriff in that town called him to meet them in a parking lot because of how crazy this was going. Escalated shouting match, threats, it was just this whole thing.

All this to say land investing is passive income, guys. 99 down 99 a month you too can deal with that.

Seth: You know, I used to say you couldn't make a TV show about land investing, but I'm starting to think you probably could in stories like this.

Ajay: Yeah, you could definitely do it in some storyteller format. It'd be hard to document some of this stuff unless we did it like, I don't know if you guys ever watched bad TV, like Lizard Lick Towing. I'd watch some of that as a kid. It's just like these guys in rural America repossessing cars.

Seth: Where?

Ajay: I don't remember, Louisiana, maybe? I don't remember. You can imagine what in a podunk town repossessing cars would entail, but I'd imagine it'd be on that caliber of TV show or like Storage Wars. If you guys ever watched that, I used to think that stuff was super interesting. It's like that version of TV.

Seth: I think there's a lot of reenacting that goes on in those things. So you probably wouldn't catch it, the live thing, but I'm sure you could fake it and document it.

Ajay: Fair enough. So now we're hiring actors too. We've got one wizard harp player, one paid actor for these new skits.

Seth: So where were we going with that? Anything else you were going to say about that, Ajay?

Ajay: No, I don't think so. Basically the only thing you can do is potentially get the sheriff involved, to my knowledge.

Seth: Okay, cool.

Mike: Yeah. I believe you can also do a cease and desist order, but it also depends on what are they doing? You know, cause it's kind of like what you said, Seth, you know, you could be a horrible neighbor and not be breaking any laws.

But I think what comes into play here is be a human being, be a real person. Understand sometimes where these people are coming from. The first time I ever had an issue with this, I called the seller on the phone and she said, you're on my property. I said, I got a survey. She said, I've been playing on that property since I was seven years old. OK, it's been in my family forever, and now she's in her late 80s.

I think this is a situation where they just don't understand. We're the professionals. We know what's going on. We do this for a living. They don't. They didn't even know their family didn't even own this parcel potentially. So that's where have a nice conversation, see what's going on, potentially offer them some money if you need to, do like a cash for keys type thing.

Just also let them know like, “Hey, here's the situation. We can play this game indefinitely, we might have to get legal parties involved as well, or we can kind of move this as quickly as possible. Whoever ends up buying it? Who knows if they'll even do anything on it. And then you can go back to just playing on it again.” But just talk to them.

Seth: I did see this interesting thing on Reddit a while back. There's a legaladvice subreddit where people can just like post legal questions. And I don't know if these people are attorneys or not, but people will chime in with ideas of what they can do.

And somebody posted something because somebody had threatened to sue them. Like they sent them a cease and desist letter or something like that. And they're all freaking out about it, asking like, what do I do?

And somebody responded and said, it is very cheap and easy to threaten to sue somebody. But to actually sue somebody can be very expensive and time-consuming and risky. The lesson I took from that, whether I'm threatening somebody or whether I'm being threatened, is just that it's very cheap to do that. And it gets results. A lot of times, people will respond to that. So you could always explore that even if you have no intent to actually follow through with it. It's something that can kind of kick things into gear and make people move.

Mike: So since you bring that up, Seth, knowledge for the public. I got into one lawsuit last year. I'm not going to go too deep into the details, but I bought a property from someone. And after I bought the property, they claimed that they had a medical issue, did not understand what was going on.

I saw this because the actual medical issue was quite interesting that they were claiming. And they got an attorney to write a letter of intent to rescind the warranty deed.

Now, I first went to the title company, then talked to title insurance. Title insurance will string you along for a while as they do all their due diligence, as they have to. The issue is that you have to make a response. Typically, this was a filed lawsuit. You have to make a response within 30 days. Title insurance took three weeks to then say, oh, well, you know, she's claiming you essentially brought this with fraudulent activity. You forced her to sell you the property. So title insurance doesn't come into play here.

Seth: Of course. It's funny how that works.

Mike: Yeah. I was not aware of that. And then what else I was not aware of?

I think it's great for all the listeners to realize if you ever do get into a legal situation, most real estate attorneys are not litigators. So please keep that in mind. Most real estate attorneys, you actually deal with them all the time. Even if you just deal with a title company, there's actually a real estate attorney usually there in the background that's doing a lot of things. He's not going to go to court for you. He's not a litigator. I have no idea what the stats are, but I assume 70% to 80% of real estate attorneys are not litigators.

So if you ever actually need to find one while you're talking to title insurance, you might want to start the search right then as well. So you're not put in a tough situation.

Seth: That's a really good point. I'm glad you brought that up. I wonder how you do find the best litigation attorney who also knows enough about real estate. Maybe they don't need to, I don't know. They just have to be able to argue well in court or something. But I mean, I'm sure any big law firm will have that, but you're probably going to pay the most for that kind of place too.

So one of the questions, Mike, on the selling side. So it sounds like you're always listing and selling this stuff yourself, right? You're not like hiring agents. Like, can you even hire agents if you never took title to the thing?

Mike: Absolutely. Yeah. So we do, it's probably 50-50 right now. We're actually starting to push more in dispo. If anybody out there is listening to this and they're amazing at dispo and want to share KPIs with me and all these other things, hit me up, please, because I'm trying to build it in-house to understand more of our own KPIs.

But the interesting thing about it is you're having them sign an attorney-in-fact, which gives you the right to market it on the MLS and sign on their behalf. So you can market it yourself or you can get a real estate agent to market it for you, whichever you prefer.

Seth: So then who is paying the agent's commission when it sells? Does it come out of your cut or does it come out of the seller's proceeds?

Mike: That's a good question. So this is also where the novation agreement's very interestingly written because it essentially says you're going to net $100 Seth at the end of it, no matter what. So the agent commission technically is coming out of your side, but it's selling for $150, $200, let's say, to Ajay. Then the agent's commission's coming out. Then closing costs are coming out. Then my lien is coming out. So it's going to end up netting you a hundred at the end of it all.

Seth: So when you say your side talking to me, that's as if I am the original property owner and seller?

Mike: Yes.

Seth: So no matter what, I'm going to get whatever that is after the agent's commission. So basically you're sort of paying it then?

Mike: Correct. Yes. On the HUD, it looks like you paid it, but I'm making sure that everything works out. So you are given that $100 we agreed on in the beginning, no matter what.

Seth: Could you word it differently if you wanted to?

Mike: You could do anything you want to.

Seth: Like other people who do what you do, is that how they do it as well? Or do they sometimes make the original owner pay the commission? Why did you set it up that way?

Mike: I set it up that way very simply because I'm saying, Seth, I'm going to get you $100. It's very simple. You're not going to have to do anything. You're not going to have to lift a pinky. I will do all the work. I will do everything else. So I feel like it's my right to pay for that, in a way.

Seth: So how often do you get agents involved? Is it more often than not or 50-50 a year?

Mike: We used to get agents involved all the time. The struggle that we're running into right now is I can tell you how many texts we do a day, how many leads we push to our CRM, how much time we spend on the phone, how many calls we make, how many return of calls we make, how much time we spend on the phone with somebody, how many offers we made, how many got signed, how many came back in.

For every property we have listed, I cannot tell you how many calls came in, how many times I actually went to visit everything else. And we're struggling with that a little bit on the agent side. Some agents are great with that. Some are not. So now that we're depending on an outside force, we're doing a big push right now in my business to list more and more in-house before we would do 70% agents, 30% in-house. And now we're pushing to really flip that there.

Seth: So if the agents were good, you would do that a hundred percent of the time. But the problem is you just don't know. Some of them don't perform that well in terms of their willingness to do the work?

Mike: Correct, yes. And so many over-promise, under-deliver and now you're stuck in a contract, unfortunately, which is hard.

Seth: Earlier, you were talking about a lot of the work that you do in terms of being able to sell it for a higher price is because you get really good drone photography and all this due diligence stuff.

When you list it with an agent, how much of that work do they do versus you? Are you always taking on that responsibility or do you ever say, well, I'm using you, agents, so you do part of it. In what part would they do, if anything?

Mike: Yeah, absolutely. That's a really good question.

So if we're working in an area where we have an amazing agent that we know and love, we'll oftentimes talk to that agent to potentially have them recommend a survey company, a soil test, anything like that. If we know they're great at getting drone photography, we might have them do that.

But a lot of times too, I know if we get it done, we will get it done right. So typically we'll do that. A lot of times in the past, if we listed with an agent, we're essentially just hiring someone to pick up the phone and potentially put boots on the ground and show them at the property. That's really what we need them for. We will do everything else in-house because this is what we know how to do and we want to make sure it's done right.

We've had people before that have got drone photography for us and I'm like, you told me you get paid $300 for this. These are 10 photos looking down at the same exact property. There's no skyline. There's no property outlines, anything. So we'd rather keep it in-house and have more control.

Seth: Are you doing all your properties in the same general market? Are you working multiple states?

Mike: We work in multiple states. Something new that we started this year, which is amazing and horrible, is I now have about 25 to 30 people that do list-scrubbing for me. And they will look at every single property individually, line by line, to see, does it have slope, access issues, wetlands, flood plain? Is it good? Could it be subdividable? Could it potentially be commercial? Anything like that.

And last year we primarily targeted Tennessee and we finished running through most of Tennessee in quarter three. This year we finished Tennessee in quarter one. We found out that about 65% to 70% of our properties have all these issues with it. In Tennessee, that's kind of our bread and butter state, about 70% of them we just got rid of on the front end. We went through 160,000 records and about 70% of them were not good.

And these are records for properties we already think will sell for a high enough price point that we even want to get involved in to begin with before we even give it to a scrubber.

Seth: So what are these issues that are kicking them out?

Mike: It's usually slope issues, access issues, wetlands, floodplains, and things like that. It's right next to a cemetery. It's right next to a dump, or something like that. It's a really weird-shaped property.

So to answer your original question…

Seth: Yeah, I forgot what I was going to ask you. What was my original question?

Mike: Well, the original, original, original question way back in the day was when I was a junior in college, I thought about dropping out. And my father said, “Mike, you got a full ride for academics. You can't drop out.” I said, “Yes, I can. I think I'm doing better than a lot of my professors.” And we talked about it for many, many hours.

And he said, “You've come this far. Why don't you just finish it up?” So yeah, that's why I didn't drop out of college. But I did think about it, Seth.

Seth: Are you ever like, how often are you glad you did that? Like, do you ever think, man, I'm so glad I graduated. That made all the difference. Or is it like, man, I didn't really need to do that. But at least I finished. What's your stance on that now?

Mike: Hmm. That's such a great question. And the reason I say that is that I'm actually working on a master's degree in finance right now.

Seth: Oh, cool.

Mike: And I will say I have no good reason to get my undergraduate. None whatsoever. There's nothing I can be like, oh, this is great. And a lot of people are like, so why are you getting a master's in finance? And I think it's very simple. I'm 30 years old. I plan to be in the real estate space for a long time. You know, the day might come where I start a fund, I start raising money, anything else.

And I think it's great to start a fund and to say, “I've never lost money in a deal and I've done 300 deals.” I think it's even more powerful to say, “I've done 300 deals. I have a master's in finance.” And I think a lot of people that are not in this space, they don't realize how hard it is or is not to not lose money on a deal. I imagine most deals, you can actually not lose money on them if you just held them long enough. Almost anything you bought 50, 70, 80 years ago, it's probably worth way more today as long as it's not underwater.

So with that in mind, I think it looks good on paper depending on what route you go on in life. So for that reason, I'm glad I did. Has it served me at all so far? Not so much, but you never know. I got into pickleball just to lose some weight. Did I think it'd take me down this journey so I'd be talking to you fine gentlemen? No, but you just never know what things will lead to in the end. So, finish that one.

Seth: Man, that's weird. Pickleball is essentially what brought you here? I never really thought about that. It makes you wonder how many arbitrary things we do every day that will actually have a huge butterfly effect in 20 years or something that you just never could foresee.

Ajay: Are you calling pickleball arbitrary, Seth?

Seth: I mean, sorry, I didn't mean it like that.

Ajay: I'm just kidding.

Mike: I think we're done here. All right. This is Mike signing off.

Seth: Well, it's interesting what you say, Mike, about your master's that you're doing. Because I did a similar thing. I got an MBA, not from Harvard, where you're going. I went to good old Northwood University in rural Michigan.

But it was a similar thing where I didn't really need it. And I kind of knew that on the front end. But I also knew it wasn't going to hurt me in any way. And it was kind of like a bucket list thing. And honestly, I think a bit of the decision was emotional. There was a little bit of pride attached to it. I'm going to feel, I don't know, more confident or better or something. It's just interesting.

How close are you to being finished? Are you like halfway through it right now? Or have you learned any like huge lessons from it? Like, oh, that's going to help me a lot now that I know that. Or is it kind of just interesting stuff?

Mike: It's interesting stuff. Some of the classes I take are in real estate. And it's interesting to see how it's taught academically compared to what's happening in the world.

I think it's like anything else. As you get into something, you get better and better at it. you learn how to be more efficient with anything else. So being able to juggle going to school while working on a land business, while still trying to play some pickleball for fun, even, it's just learning to balance everything is so important in your life while fighting burnout, fighting fatigue, fighting all those and taking really good care of yourself.

So I won't say anything's really been crazy thought-provoking, but a really good friend of mine one time. He is very, very successful in life. And he said—yes, it's Ajay—Ajay told me… No, this guy is now triple Ajay's age. But this guy said, it's not about the grades you make, but the hands you shake.

And I thought that was so, so powerful. And that's how I feel. I mean, we joke about like, yeah, I got lucky, you know, and did an amazing deal, my first land deal. But I was out there. I was out playing with these guys because I knew the skill. They played in a very nice community. I would say yes to every single game. And I talked about what I had going on in life.

And I think I will say I'm a lucky guy. I am extremely, extremely lucky. I also try to put myself in very lucky situations every chance I get. And if I can get into a room, I want to be the biggest idiot in that room because I'm surrounded by amazing people. And I will sit there and ask them questions forever. I'm somewhat outspoken, but when I'm with people, a lot of times I am outspoken in terms of just asking them as many questions as I can.

I don't care about the pride thing. I don't have anything to prove. I did not go to my graduation for college. I do not even know where my degree is, but I can say I got it. I'm an Eagle Scout. I don't go around boasting about that or anything, but if somebody brings up my side, it's like, oh, I did that too. Now we have something in common. We're lost in the woods together and you break your ankle or something. I know how to take care of you. I know how to hide your smellables at night so a bear doesn't attack us in the middle of the night.

I know some of these things. It's just fun stuff to do, but I think it's just so important to ask people. I think we as human beings want to help others. And it's just so many of us, I think, miss out on amazing opportunities because we just don't present things and we just don't say things and we just don't ask. We have this ego of, look at me, I'm amazing.

You know, if I hop on a call with Ajay, I think it might drive him crazy because the whole time I'm just going to ask him questions. And I'm not really going to say much about myself until he starts to ask me because me talking about myself, Ajay might get value of, but I get no value out of that at all. And everything from Ajay I asked is just pure value for me. Everything I asked from you, Seth, same thing.

So go out there, ask questions, let people know what you're doing and let them help you out. It's okay. We struggle. I struggle all the time, man. Have other people help you out with that struggle.

Seth: Yeah, man. That's great. Great advice. Love that.

So we've got about 30 seconds left. I want to dive into this team building thing. Tell us everything you know. 30 seconds. Go.

I'm just kidding. We got more time.

Mike: We can knock this out in 30 seconds if you want, Seth.

All right. Well, you ready?

Seth: Well, we can go however long you want. I got time. But I hear you have this knack for building teams and building a great culture. So let's talk about that. Like how many people are on your team? What's so great about your culture? How and why do you do this? Why does it even matter to you? Let's hear what you have to say about that.

Mike: Absolutely. Well, I have to run soon, Seth, so I'll make this pretty quick. But I will say teams are amazing. People are amazing. I love the people on my team.

What I think is so important is to remember VAs are people too. And if you want to go fast, go alone. If you want to go far, go together. When people ask me how I got into novation deals, it's because of my team. It's because they said, let's do wholesale deals. Let's do this. When people say, how did I find my first land investing program to even get into? It's because my VA actually found it. I did not know this was an industry.

Rely on your team. Talk to them like they're real people. Let them solve a lot of the problems. Let them lead your team. In a lot of ways too, it's interesting because I feel like an idiot in a lot of ways because I'm not that smart, but I have a phenomenal team behind me that is so intelligent and I rely on them. I do. And I think that's what's so important.

Also, speaking of alignment, make sure you align things. One thing that I do that's different than most teams is I play games with my team. I have fun. We usually start off playing Pictionary every Friday for our KPI meeting. It's a lot of fun. We do that around the world. We talk about how everybody's doing in the world and what traditions they celebrate. And then also what we do too, in terms of commission, I do not give my team a flat commission on things that they do. I think a lot of teams do this, but it creates disalignment in everything.

What I do is I offer them about 4% of my business that's a shared commission, and we pay it at the end of every quarter. So I want my team to understand the difference between talking to a seller who has a $5,000 spread and a seller who has a $50,000 spread. And I think by doing things like that, you can do it. And my whole team shares that, whether you're a texter, a caller, a due diligence person, all of us are in this boat together. We should all be looking after each other. We should all be helping each other grow.

And it really takes my team to do this. And I love them. I love them to death. And I think that's so important. We try to do way too much alone and we try to micromanage and we try to say, I'm in charge. I'm the boss. You're the employee. And in my case, I say, no, you're the boss. You tell me what do you think is best? Do you think this isn't a bad idea though? Maybe try to edge them along one way or another, but yeah, trust people.

People are amazing. Most of my talent's overseas too. Overseas talent is still extremely smart.

Seth: Mike, seriously, this is a great conversation. Appreciate all you shared. Very enriching. I think everybody listening to this can probably agree with that.

If people want to reach out to you, you don't have to share anything, but if you want to, how would they do that?

Mike: Well, $20 will get you a minute. All right, we can talk.

No, no. If anybody wants to reach out anytime, the best thing to do is probably shoot me an email. You can do that at meet@landbh.com, M-E-E-T. Shoot me an email. We can chat about whatever you want to. If you want to schedule a little call, we can probably hop on a call, chat about some things. And yeah, hopefully we can gain some value from each other.

Seth: Awesome. Sounds good. Thanks again, Mike. Appreciate it. Hope we'll talk again soon. Look forward to seeing you at the Land UnConference. You go to that, right?

Mike: Oh, absolutely. Won't miss it for the world. You'll be there, Seth.

Seth: For sure. Cool, man. Well, we'll talk more then, and yeah, appreciate it.

Mike: Thank you.