• LIM Mod

    For me, I break down real estate into two camps: active and passive. 

    For active, I think the land flipping business is the best -I actually made a video about it: 


  • Jaren Barnes what do you deem to be the best passive real estate strategy? Also, what’s the best way to generate cash flow from land investing? I.e. Developing a mobile home park, applying modular homes for rent, or so on.

  • LIM Mod

    Shaneil Johnson

    That's a tough one!

    Investors value specific factors and criteria differently from one another.

    For example, if you were to ask me, "Jaren, what do you think is the best passive real estate strategy for people with limited funds?"

    My answer would be different than if you were to ask me, "What do the best passive real estate strategy is in regards to the highest ROI potential?"

    There is a lot someone has to consider in choosing a passive income strategy - do they mind doing a little bit of work each week on their "passive" investment or do they just want to throw money at something and do absolutely nothing else?

    Depending on these answers certain strategies will be more suitable than others.

    All things being equal though, I think being a private money lender for active land investors or a passive investor in an apartment syndication can be pretty sweet.

    In both circumstances, all you do is look at deals, decide to move forward or not, and wire money.

    Then you wait, and if all goes well, you simply collect a check and make a profit.

    You need to ensure you're "sowing in good soil" meaning the active investor you're working with knows their stuff and is reliable and trustworthy, but as long as that box is checked... it's a pretty sweet setup that's hard to beat!

    If it helps at all, my least favorite passive strategy is owning single-family rentals - when it comes to rental properties, it's really hard to scale buying one house at a time.

    When it comes to rental properties, going with larger units gives you the economies of scale, which I think is a big deal!

    Second to that, I'm also not a big fan of how most land investors structure their seller financed deals.

    Most land investors do almost no underwriting and require very little money down, which increases the possibility of people defaulting.

    Sure, this makes it so inventory moves quickly but it builds up consistent cash flow for the business, so there is definitely a place for it... I just don't really think it's all that "passive".

    You're constantly having to follow up on people, handle the logistics of an early payoff, be available for questions, and... well, it can be a lot of work.

    Again, there is definitely a place for it, I just don't consider it a very good "passive" strategy.

    And it should be said, there are always ways you can make pretty much any business passive through software, systems, and outsourcing.


  • Jaren Barnes thanks for the quick response. So what would your thoughts be on scaling up to bigger owner financed land deals such as agricultural space for farmers? Do you think you could be in a more passive space if you found developed land to finance to a mobile home investor, maybe even cell phone towers? I really like this land niche just want to see every option to actively invest for years understanding I’m 23 where I’ll build up enough capital to purchase bigger projects that will allow for more cash flow. My goal ultimately is cash flow via notes from my land.

  • LIM Mod

    Hey Shaneil Johnson!

    Sorry, I somehow missed the second part of your question there.

    ...what’s the best way to generate cash flow from land investing? I.e. Developing a mobile home park, applying modular homes for rent, or so on.

    So what would your thoughts be on scaling up to bigger owner financed land deals such as agricultural space for farmers? Do you think you could be in a more passive space if you found developed land to finance to a mobile home investor, maybe even cell phone towers?

    For me, developing a mobile home park, applying modular homes for rent, or offering owner financing on land for farmers are all very unique from one another.

    All of them produce some form of cash flow but each one you mentioned requires a totally different business model and system to facilitate.

    Development of any kind is not really passive. The logistics of going back and forth with the city and county alone can be a huge time commitment.

    Renting out modular homes, or selling modular homes via seller financing can both work... but as I mentioned in my previous comment, they’re similar to renting out a single family - they’re hard to scale with.

    When it comes to leasing out land to farmers - in theory this is as passive as it gets.

    Farm land is essentially what they call a triple net property, where the tenants cover all the cost of the property like maintenance, taxes and so on.

    In a traditional triple net property, often your tenants are big chain stores like Lowe’s, TacoBell, Walmart etc. and they’ll sign up to 15-30 year leases with you.

    With triple net, as long as a tenant is in place the owner literally does nothing except collect a check, which is pretty hard to beat.

    The risk though, is that triple net properties typically have really expensive holding costs, so if you have a vacancy on your hands you can be losing a lot of money every month.

    The other major factor is how good the location is of the property. If the triple net property doesn’t have a good location it will be hard to find a tenant.

    I feel like leasing farm land has a leg up on traditional triple net investing because good farm land is always in demand and a lot less expensive to hold in light of a vacancy.

    As long as you can get a property with enough acreage that professional farmers can use it, farm land can be a fantastic asset.

    The issue though, is getting farm land cheap enough where the cash flow makes sense.

    Normally farm land is very expensive and it’s hard to find motivated sellers who will let go of their property to an “outsider”.

    Farming communities are very tight knit, and they normally keep land within the family or close friends.

    If you can figure out how to get farm land at a great price it’d be a great asset, but it may be hard to do so.

    I don’t know enough about cell phone towers or windmills to commit on those.

    I will add a little note about billboards though - billboards can be a great passive income strategy!

    There are a number of ways you can use them but the most passive is to simply lease out a portion of your property to billboard companies who will pay you each month to use your land to put a billboard on.

    Some of these can pay out big money, depending on how many people can see the ad from the road, and the billboard company will service the sign and do everything, so it’s truly passive for the owner.

    The issue here is that, there are a lot of restrictions to adding a new billboard on a property (some counties have it where if a new one goes up, and old one has to go down). In some markets it can be a nightmare and almost impossible to accomplish.

    You could buy a property that already has a billboard on it... but it will likely be expensive because billboards are such a great passive cash flowing asset.

    Wrapping this all up though, you asked me what I believe is the best way to generate cash flow from land investing.

    I think it depends on your goals and I think it ultimately depends on what you define as passive.

    Selling residential vacant land via seller financing provides some of the best returns and cash flow in all of real estate.

    But it does require a certain level of activity to facilitate which to me, defies the definition of passive.

    To answer your question directly, I would stick by my original comment about being a passive investor.

    If you have the capital and you can fund deals for active land investors who know what they’re doing... in land flipping, it’s pretty common practice for the financial partner to make 50% of the profit!

    All that’s involved is building relationships and vetting active land investors to ensure they’re competent, and if they are, all you do is just wire money.

    That’s it... and you likely make 50% of the profit.

    Sounds like the best of what’s out there to me!

    These can be terms deals or cash deals by the way, so you can still get month to month cash flow by funding seller financing notes but you won’t have the headache of being the operator.

    The returns in land flipping are the best I’ve found.

    It’s common for deals to yield 100% ROI or greater- it’s hard to beat, and if you were to be a passive money partner involved in those deals, you’d reap all the benefits but wouldn’t have to do any of the work.

    It’s truly passive.

    If you have a solid process to ensure the land operator knows their stuff and that you’ll be protected if things go south... to me it doesn’t get much better than that.

    Now there is money to be made passively funding mobile home developers, apartment syndications and a number of other strategies... but it’s only in land that I’ve seen a 50/50 split.

    That’s why I think its probably the best.

    Shaneil Johnson said in What Is The BEST Real Estate Strategy?:

    Also, what’s the best way to generate cash flow from land investing? I.e. Developing a mobile home park, applying modular homes for rent, or so on.

    Shaneil Johnson said in What Is The BEST Real Estate Strategy?:

    So what would your thoughts be on scaling up to bigger owner financed land deals such as agricultural space for farmers? Do you think you could be in a more passive space if you found developed land to finance to a mobile home investor, maybe even cell phone towers?


  • Jaren Barnes thanks again. So what I’m getting from this and what I need to embrace is that I need to just think of this as an active business. Legacy wise a family business. Continue to add land notes to my portfolio. Build a list of investors also that allow me to do bigger deals that can lead to more cash flow. Then once I’m seasoned possibly get into commercial land or the other topics we touched such as agricultural land or renting land to mobile home investors. Maybe even the billboards or so on.

  • LIM Mod

    Shaneil Johnson

    Sure man! That sounds like a plan!

Online Now

Active Contributors

Top Posters

Term of the day

Related Discussions

  • 5
  • 16
  • 11