“Oh, I also had a few rental homes, but I mainly rented dirt.”
So begins Scott Todd’s story, his journey from corporate manager to land investor to being able to cover his living expenses on land rental income alone.
Scott reached financial independence in under a year and a half. Seventeen months and three days, to be exact.
At turns strange, funny, and more than a little envy-inducing, here is Scott’s tale of escaping the corporate life for the wild world of land investing.
Before “Landing” His First Deal: Scott the Employee
Sometimes you just know your job is headed for the chopping block.
“I was working at a Fortune 300 company and I could see the writing on the wall, my company was going to outsource my department. I started looking for something and fast.”
Scott could have looked for another job. Instead he decided he’d rather replace his 9-5 income with passive income.
“I looked at real estate and single-family homes. The cost to acquire enough of them to replace my income was a steep task and I didn’t have enough capital, so I turned to land.”
But not land in his own backyard in Florida. Instead, Scott looked further afield, aiming for the greatest return on his land investment.
Scott’s First Land Deal
“My first land purchase was a 40-acre parcel in Pershing County, Nevada.”
Huh? How did he choose Nevada?
“What drew me to this area was that I had uncovered another land investor and he had land in this area. I thought ‘If he can do it, why can’t I?’”
The older investor showed Scott that he could buy land through tax sales for pennies on the dollar. A key advantage? Land without residential dwellings on it does not endure the heavy regulation and red tape that slows tax sales, foreclosures, and evictions in residential real estate.
“I purchased my first land property for $4,000. Yes, a total of $4,000, and I bought it sight unseen. I was scared to death. I told my wife ‘If everything fails, at least we could live on the land!’”
She was not amused. Fortunately for their marriage, Scott found a renter-buyer quickly.
“In about six weeks I signed a lease-purchase agreement with a buyer for $100 down and $100 per month for the next 120 months.” (That’s a total sales price of $12,100, for those of you who don’t like math.)
It didn’t work out that way, though. “The buyer defaulted after four months and I signed another installment deal two weeks later.” Note that he didn’t have to go through an expensive, months-long eviction process to get rid of the defaulting renter-buyer. The renter simply lost the rights to their lease-purchase agreement.
Scott learned his lesson from the first attempt though and tightened up his terms. “This time I signed for $1,000 down and $250 per month for 60 months.” (Total purchase price: $16,000.)
That’s a 300% return on investment!
And this time it stuck: “That buyer has been paying monthly for the last three years.”
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Free Masterclass: How to Reach Financial Independence in Under 5 Years
Unfortunately, Scott’s had to build his own land investing strategy. When he first started investing in land, it was before RETipster’s land investing course was available (more on that shortly).
So, Scott had to build his own land investing strategy from scratch.
“I typically look for rural land, my customers like the land out west. I think a lot of people have fantasies about heading west; the West has always been an adventure for Americans and I help people realize their dreams.”
Scott has followed the same model with subsequent purchases. “I buy land for 20 to 30 cents on the dollar from tax delinquent owners and then sell it on lease-options for the full retail price and take in the monthly payment each month.”
The other way that Scott finds deals is by direct-mailing off-market sellers, finding through tools like Propstream (if you’re interested, see our full Propstream review here). In fact, when I asked him about his expenses, he shrugged.
“That’s the great thing about this business, you really don’t have a lot of expenses. I’m not making any improvements to the land, we are simply finding good deals, paying the back taxes and reselling with owner financing or on lease-options.
“What I do incur are mailing expenses associated with finding properties. My business model has me looking for off-market deals and honestly, Realtors don’t want to be involved in real estate transactions where the purchase price is a few thousand dollars.”
Perhaps the most elegant element of Scott’s business model is that he’s protected against defaults.
My experiences as a landlord have all been on the residential side. Defaults and evictions are extremely expensive for landlords – they are a real risk.
But land? Scott suffers no real risk when his renter-buyers default, because the process to reclaim possession of undeveloped land is quick and cheap.
“Because I’m selling through a lease-purchase agreement, not every buyer will complete the purchase. If that happens, I can then simply re-lease the land, so it creates a perpetual money machine.”
Even better, he has no maintenance costs or headaches. No tenants calling him at 2:00 AM complaining about a leaky roof or running toilet.
Scott put it succinctly: “No toilets and no termites.”
His model has worked, too.
“Over the next seventeen months and three days, I purchased over 100 properties, sold some of the properties for cash, which allowed me to generate new capital to acquire more land.”
Which raises an important question – does he finance any of his purchases with investment property loans?
“Banks won’t finance these properties because of the low purchase price. I pay cash for all my properties. I have purchased a third of an acre in Florida for $100 and I’ve also purchased 160 acres for $16,000.”
Because his returns are so high, and his model includes both selling and leasing, he generates both cash flow and the occasional capital gains from a land sale.
And, of course, the low purchase prices mean he doesn’t need much cash to do a deal. Instead of worrying about the minimum down payment on a $200,000 investment property, he just invests a few hundred or a few thousand in parcels of land.
What’s Gone Wrong
I pressed Scott; surely something has gone wrong, in the 100+ properties he’s bought?
“I purchased a property that turned out to be a swamp. I was surprised to learn that the land was underwater, and it really freaked me out; it was my fourth property.
“I was still able to sell the property quickly, doubling my money, to a guy that was looking for a place to ride his ATVs. As my land investing friends say, ‘There is a pig for every barn.’”
Seriously? No big mistakes? Nothing has gone wrong?
“The biggest mistake I made was that I messed up on the taxes once and missed the fact that a seller had more property taxes due on the property. I missed the total amount and ended up overpaying for the property. We purchased the property for $700, the seller had $2,000 in delinquent taxes. We sold that property for $3,000 cash, so I still made a very small profit.
“This really is a very forgiving business.”
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Scott’s Advice for Tomorrow’s Land Investors
Intrigued but nervous?
Scott understands, but like everything else in life, results come from action.
“If someone is thinking about their first property, I would say to stop thinking and to take action.
“For a long time, I sat on the sideline, I was scared to fail. We are all scared to fail, but if you find someone who has done what you want, model their success, you will be able to do it also.”
Fortunately, it’s easier than ever to learn land investing. The best place I’ve found to learn land investing is through Seth Williams’ excellent course on land investing at RETipster. Fair disclosure: I contribute articles regularly to RETipster, and Seth is a friend of mine. But he’s the best in the business, and his course breaks down land investing for beginners and intermediate investors alike.
You can also start with RETipster’s free land investing articles to learn a little more about it. But Scott urges new land investors to keep in mind that all the reading, all the podcasts, all the clever tactics in the world won’t help you if you sit on the sidelines. “Just take action!”
Scott’s New Life
The writing on the wall that Scott saw, with his corporate job? Sure enough, the axe fell.
And Scott was prepared.
“When my corporate job announced that they were outsourcing 85% of the IT department to IBM, I had replaced my income. Exceeded it, actually!”
“Today, while I’m still enjoying my freedom, I run a land marketplace, Landmodo.com, to help others achieve the same goals.”
Scott reached the ultimate milestone: being able to cover his personal expenses through investment income alone. Whether you call it financial independence, financial freedom, or early retirement, Scott no longer has to work. (If you want to calculate how much you need to save to reach financial freedom and retire early, try our free financial independence calculator.)
He wrapped up our interview with a grin: “I achieved financial independence through renting the dirt.”
Have you ever considered investing in land? Why or why not? What would you need to learn in order to feel comfortable with it? Share your thoughts below!
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About the Author
G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.