Earlier this year, I made a promise to you. I promised I would get more folks and more experts to talk about real estate and their experiences in it.
Our next guest was armed with only $3,000, gut-wrenching fear, and absolutely no real estate experience… he bought his first few parcels of raw land in 2001.
Today Mark is the owner of Frontier Properties, a very reputable and successful land investing company, and has been buying and selling land full time since 2001. By focusing on working smart, not hard, he has completed over 5,000 land deals.
Prior to his land investing success, he had a high-stress, soulless corporate job, and felt trapped & burned out.
Our next guest’s success in land investing to teach, coach and mentor others to help them achieve their financial goals and probably for himself to make some money along the way too.
Please help me welcome Mark Podolsky, The Land Geek.
In this podcast episode, you will…
- Discover how he moved from a soulless corporate job to his entrepreneurial journey that he loves
- Learn why he flips raw land
- Discover the tax consequences of his flipping and how owner financing is involved (Hint: There’s a downside involving depreciation)
- Learn about the difference between tax lien and tax deed (& the hybrid method)
- Why owner financing is an amazing to generate cash flow
- Learn who the best buyers are for your land that you want to flip (Hint: Your back-up is a ‘little’ website you may not have heard of before)
Resources Mentioned in This Podcast
Dave: My name is Dave Denniston and welcome back my friends to the latest episode of the Freedom Formula for Physicians Podcast. Well earlier this year my friends I made a promised to you, I promised I would get more folks and more experts talk about real estate and their experiences in it. Our next guest he started a real estate with only three thousand dollars, he describes he had got wrenching fear and absolutely no real estate experience and he bought a few parcels of raw land back in 2001 the midst of the tech talk will all be kind of interesting to talk about. This gentleman he is the owner of frontier properties which is a reputable land and investing company and he’s been buying and selling land full time since then and he’s been kind of focusing on working smart, not hard and as a matter of a fact he’s done five thousand land deals today and prior to this he has this high stress; I think he’d call it the soulless corporate job and he just felt trapped and burnt out and I know a few of us physicians can relate to that. So now he’s in this time in his life where he’s obviously investing in land still but he has this big passion for teaching, for coaching, for mentoring, to help people towards their financial goal and I’m sure along the way he’s making himself a little bit of money too, so please help me welcome Mark Podolsky. Welcome Mark
Mark: Dave Denniston thanks so much for having me I appreciate it.
Dave: Oh, it is my pleasure buddy, we were talking beforehand you’re like a grandfather at podcasting 4 years into this thing.
Mark: Oh, I love podcasting. Yeah, I’ve got the 3 podcasting, the laingy podcasting, best passive income model podcast and now the current one the art of passive income model podcast.
Dave: Wow! That’s a lot of podcast I got to catch up man I only got 1.
Mark: I know-I know it’s a lot of fun.
Dave: So, I’d love to know about you and your journey I’m guessing a lot of our audience may not have heard of you before they’re not familiar perhaps with real estate, I mentioned in the introduction that you have the soulless corporate job and then you made this huge shift, so I’d love for you to sketch out how you got started into real estate and what that journey was like.
Make: Yeah-yeah you know it’s so funny is I used to work with Dentists, and I used to be like a Dental broker and help them buy into some practice and private equity groups started rolling them up and buying up this whole practitioner.
Mark: And I saw the writing on the wall and this is like in 2000, and I said to my wife let’s go to you know Tucson Arizona. I got a job as an investment banker, it was a nice and easy transition and there was a few private equity groups, because I kind of understood that business and I was doing mergers and acquisitions and working with little mid-market companies, let’s say five to five hundred million in enterprise value. So, nothing like golden sacks that kind of thing, but I hated it I hated the fact that I had no control I had a 45 minutes commuting to work and back. It was long stressful hours it just wasn’t fun, and so my firm hires this guy and he’s telling me that on the side he’s going to these tax deed auctions and he’s buying up raw land pennies on the dollar, he’s flipping them and he’s making a 300% return online. Well Dave I’m looking at companies all day long and a great company, a great company has over 15% [inaudible 3:33] market for cash flow. Great company, your average company is at 10% and I’m looking at companies all day long less than 10%. So, I’m from St louis Missouri, I’m from the show biz stage I don’t believe them. So he takes me to New Mexico I got like three grand saved up for car repairs and I buy 10 half acre parcels in the middle of nowhere in Mexico for $300 each right, sure enough I did exactly what he tells me to do, I put them up online and they sell for an average price of twelve hundred each.
Mark: Right, so it worked. So, I go to another auction in Arizona there’s no one in the room, I’m buying a property pays with the dollar and I used all that money that I just made from the first one for the second one in Arizona, I made over ninety thousand dollars in under six months working part time flipping this raw land. So, I went to my wife, I go honey I think I’m gonna quit my job, and invest in raw land full time, and she said absolutely not so I said fine-fine-fine. So, I did the land flipping part time while I was working my investment banking job. It took me 18 months of land flipping before my land investing income exceeded the investment banking income and I’ve quit my job in 2001 had a six-month-old baby and I’ve been doing it full time ever since. I’ve done over five thousand land flips and I absolutely love it and I you know amidst the arguments it’s the best passive income model, because with raw land it’s a onetime sale and then we make a cash flow with recurring income, because we do owner financing. So it’s a onetime sale, we get recurring passive income and we don’t have to deal with any of the typical headaches of real estate so no renters, no rehabs, no renovations, no rodents and because we’re not dealing with a tenant we don’t have to worry about Dodd Frank or Respa, or any of this odious real estate legislation which probably is gonna go away with Trump, but regardless right. So, we shuffle paper and we make money and what I learn from working with Dentist is that this is the best way to get out of what I call solo economy dependency, which means if you’re not working you’re not making any money. And if Dentist didn’t have his hands in someone’s mouth or a doctor wasn’t doing surgery there was no passive income, they are high paid plumbers essentially right, and so we kind of talk about what’s the ultimate business and the ultimate business was basically you know has no physical inventory, it’s a onetime sale you get passive income high margins and very little competition, [inaudible 6:19] really met every single one of this criteria for me.
Dave: Interesting. Let me interrupt a second Mark just to because there’s a few questions I have as you’re talking through. Now you-you talked about this concept of a taxing, I wanna come back to that. One of the first things that came to my mind though as you were talking through this process and I think of investing. I think of investing in real estate, and you mentioned about flipping properties like this. This tax implications-so in this show we talk about slashing your debt and slashing your taxes and living a liberated lifestyle. So in terms of a tax like holding period we know that when you hold something for over a year you have like a long term capital game and you have something for less than a year then you pay short term capital games, so I’d love for you to talk to me maybe a little bit about holding period you know how long are you holding these things for you talked about flipping it.
Mark: Right, right.
Dave: You hold them for longer than a year or less than a year what does that look like?
Mark: Yeah, so my CP loves me because the majority of my transaction are on land contracts, so I own the paper and I own the property for over a year today and we get the recurring income coming in every single month on installment sale and what’s interesting is real estate is exempt from like a dealer; right like if you’re a car dealer, let’s say I buy this property over thousand dollars I sell the twenty thousand dollars on installment sale. Well if you’re a dealer in a car you got to take that whole twenty thousand dollars as income on that day of the sale even though you’re getting payments overtime while real estate we are exempt and my CPA showed me the code on that. So with raw land as far as the tax implications are concerned yeah we make 300% RLI on a land flip but we make over 1000% when we do owner financing. So, we usually get our money out on the down payment or within six months of the down payment and then we get these payments coming in every single month. We use a software program called loangig.io that’s a onetime set it and forget it type of system, that manages all that, and so it you know from a time stand point it’s very simple to do, from a tax stand point you know we do have one disadvantage from you know typical convention real estate because you can’t depreciate raw land
Dave: Yeah, I mean absolutely for sure if you’re making great returns on it. Now let’s go back to this- this lean idea where.
Mark: Now Dave let’s get our terminology right because it’s not lean, it is tax lean investing which is basically like tax lean state what they do is you’d bid on the interest. So, you won’t own the underlined asset right, so we want to tax deeds we gonna actually own the properties. So, there is deeds states, there is lean states and there is a highbred right, where there is like Colorado might be a highbred where some counties will do tax lean auctions and some counties will tax deed auctions. But to make it really simple we don’t even go to the auctions anymore, we actually send offers to people that own the property like you can do that if you want.
Dave: So, if I’m understanding you right to kinda bring the audience bring us into this conversation, it sounds like what you’re doing is you’re trying to find someone that is in a situation where they have a liability on the assets. So, what I mean by that is sounds a little political yes we’re talking about property tax so you own a piece of property like your house you have to pay property taxes on it, well the same is true for land as well right.
Dave: And so someone owns a piece of land maybe they’re not making any money off of it all cause it just has some grass or woods or whatever, and so there-there paying having to pay property taxes jut for holding the damn thing and maybe they don’t have the money, and so they’re falling behind on their property taxes which might be, I don’t’ know a hundred dollars a year or five hundred dollars a year I guess depending up on the size of the thing, and so you’re somehow identifying this person who’s in this tough spot where they can lose their property.
Mark: Exactly! So they’re just stressed and it’s a waste and so this asset now becomes a liability and so what we’d do we would contact the county treasurer and we get something called the back tax list right, and then what we do is scrub out all the residential, commercial, industrial property , and get just a vacant land they can do by used code VO right, and we send them an offer twenty to thirty cents of a dollar right. So, it’s really simple to do, we’ll look at the market cups we divide by four then we send out an offer. Now three to five percent of those people accept that offer, we go through our due diligence and we go through our property reports to make sure that there is no leans or comprehends or access, something compelling about the property you know all these things that you have to learn about wrong hand and then we close with our seller. Now we own the property we get the deed and then we flip it online and then we sell that property typically at about thousand percent return on investment because we’re getting our money out on the down payment and then we have this passive income stream coming in every single month until they pay off their loan.
Dave: So, the passive income stream is coming from where?
Mark: The passive income stream comes from let me just walk you through, so Dave where do you live?
Dave: I live in Bloomington Minnesota.
Mark: Ok. So, you live in Bloomington Minnesota and let’s say you ordered piece of property in Texas right, and you owe a hundred in back taxes, so you are advertising to the world you no longer value that piece of raw land right, because maybe if you ever gonna go out there you keep getting these tax bills you’re like I’m never gonna go out of taxes. I’m very happy with my snobbier bills in Minnesota and I’m not gonna pay it, so now you get an offer from me you know like this is kinda low but it’s better than nothing because eventually you’re gonna loose that property to a tax lean or tax deeds sale, right. So, you’re like ok just like everything else in life you don’t want to use anymore you sell it to me thirty cents to a dollar and now I own it. And now say that I paid a thousand dollar for it from you right and you owed a hundred-dollar back taxes. So, I paid the back taxes, so now I’m into it for eleven hundred dollars and then I would sell it for about a car payment right, I would make it irresistible so what I might do I might get you know a thousand dollars down two forty-nine a month at 8.7 percent interest right.
Dave: So, let me stop you right there. So, you found a buyer online.
Mark: Right, right.
Dave: The buyer isn’t buying it in all cash I supposed they could.
Mark: They could but we don’t want them to because then we’re just selling it for cash we want terms.
Dave: And the reason you want terms is in order to make it pass the one year mark or why are you.
Mark: Well it’s pass the one year mark but now I’ve actually created a passive income stream for myself right, so because now I have a borrower who is making payments every single month to own that property at ten thousand dollars. Now I got my principal out typical on the down payment right but now they’re paying 249 a month for the next eight years at 8.7 percent interest.
Dave: Sure! So, you can negotiate on the terms whether it’s the principal or the interest amount there lots of ways you can play with this cause normally I know getting financing on lands is difficult right.
Mark: Yeah, it’s also possible so you have to owner financing exactly.
Dave: Cause I think it’s normally what you have to have like fifty years.
Mark: Fifty percent in, so if you would buy a million-dollar ranch let’s say right you’d have to put five hundred thousand in and then borrow five hundred thousand typically you’d have to get you know like a construction loan you’d have to do something to improve that property you can’t just buy raw land the bank won’t like it. The banks don’t like raw land which is another great reason why this niche is non-competitive.
Dave: So, sounds like from your perspective that an on our end as the buyer that we would go and we’d use our cash to buy the property, so we’re not borrowing. I presume…
Mark: You wouldn’t need to borrow for a thousand dollar typically, now if you did if you didn’t have any money then certainly you could find an investor that you’d be happy to know maybe you know five hundred percent.
Dave: And so just- re-walk into the process of what you said Mark cause I want to make sure I capture it. First there’s this process of either using a software or going to the county office and first finding the property out there that are land, where there is not a residence and then second you send out some sort of you do some sort of screening even there and then you send out a mailing that, then you send the mailing out to those people of those three to five percent respond then of the responder you need to do some other filtering and then you start making offers, that I can’t…
Mark: Just say buying right, if they really need your offers then you use the word buying.
Dave: Got it! So, you buy and now on this other side now you’re looking at, now you can essentially get your money back by selling it to someone else which you doing that online. Did I capture that correct that…?
Mark: Right-right! So we wanna go to places where people are looking for raw land right, so we wanna be in the convincing business we wanna go to people that have already told themselves the story that raw land is valuable right, so there’s you know there’s lots of different places to market now the best place to market Dave is we have a built in best buyer you wanna guess who it is?
Dave: Uncle Sam.
Mark: No-no! It’s the neighbors! They live there they know it’s out there right, and so you send them a letter saying before I take this in the open market and you not gonna know who your neighbor is I’m gonna give you the first chance and first crack at making your land parcel even larger and protecting your views and protecting your investments right. Now what will happen is sometimes it’s that like I wanna sell too and now you got an even larger parcel to sell right, now let’s say for example the neighbors pass, the next best place to go to is what we call our buyers list. So, we have an optin strategy like I have a squeeze page called three fatal land buying mistakes.com and this is for people I’m teaching them how to become a better land investor and how to avoid three fatal land buying mistakes. They give me their email address in exchange and I give them this white paper right, and then I send them a promotion every single week right deal of the week right and then I sell property that way. So, every week I’m selling property. Now the other place I can go to is this little web site Dave you’ve probably never heard of called Craigslist. What!
Mark: It’s the tenth less traffic website in United States and you would not believe how many people buy property every single day from us on craigslist, and there’s this other little website that you probably never heard of called Facebook and you have buy and sell groups on Facebook, and you put up your property there and it sells. And then if you don’t sell Facebook and you don’t sell craigslist you go land and farm .com, landwatch.com, lands of America. Com, landhub .com. It’s a massive market there is a lust for land in this country and nobody doing this.
Dave: Well this a really interesting I think it’s so educational, obviously, there’s people that might be interested in this kind of thing. I’d love to know from you Mark as you look out there I-I do believe that to a degree that there’s no free of lunch coming, from the investment banking world as you have, there’s the I guess to be arbitrage overtime, and overtime more and more people get to be crowded to a market place. So, at some point like you’re looking foreclosures right, cause foreclosure used to be this hot thing that was great for a while, but then everyone kinda crowds into it. What would you say to some of them listening out there saying that I don’t believe this you know; I don’t think this can exist forever maybe there is an opportunity now, but maybe there is a window of opportunity. What do you think about that?
Mark: Well, I didn’t do this full time since 2001 and in every year except for 2010 my business is gone up and I keep teaching the more and more people how to do it and what I’ve discovered is that there are 3,700 counties, there is billions of acres of land and there are no edge funds, there are no private equity groups, there is no big money in our niche. You, me a million other people can start invest in this niche, we would run out of money before we run out of deal flow. I really believe that the market is massive and the fact that you don’t go HD TV or the DIY Network and say “flip this land” no one is going to start doing this, it’s not sexy, it’s shuffling paper and making money. So, the people that I find that do this are systems and process oriented people, because with software we’re now 90% automated; so to give an example, I did 192 deals last year working two hours a week in frontier properties because it’s all automated with software.
Dave: Interesting, but don’t you agree that there has to be a point though that changes? Obviously, there are billions of dollars of land but not all billions of dollars of land have tax laid on it; right?
Mark: No, but even if you could only buy 1% of those billion, right, how many parcels can you buy before you ran out of money? for example, there is one county in Texas that has 28,000 lots that have back taxes on it, 28,000, right. If you go to a real estate investor meeting, a RIO meeting, there are 100 people in that room Dave, you’d be the only land guy, 99 of them are trying to sell houses, they want to flip house, they all want to wholesale houses that is a competitive market.
Dave: that’s a fear point, I think that’s only a fear point. One thing I want to transition to Mark, as we look on this, physicians are people that have not have a business education because they spend so much time in medical school, in training, in residency and I would love to hear from you to tapped into your wisdom, we don’t have the whole month but; what do you think is the best business lesson that you’d like to pass on to doctors that are listening here today?
Mark: Yeah, so Dr. Bob Demick was one of my clients and he is an oral surgeon, and he’s flipping land and he making 8-10 thousand a month just part time doing this. And when Bob first started he really struggled with the tech piece of it, he just wasn’t not technological competent , like excel, what take us two seconds, would take him three hours to do something in excel and I think the business lesson that you really need to take away from any kind of investment is knowing what you know and knowing what you’re good at, and learning what really makes you money, in this business and there’s only two things that make money in real estate: it’s mailing and marketing. If you buy any asset, it doesn’t have to be raw land, any asset 23 cents a dollar, I guarantee you someone is on the other end of that transaction, so with raw land it is very simply, all you have is the buyer, a piece of land, the seller, that’s it. You don’t have to worry about financing, you don’t have to worry about all these other more complicated types of this in our niche; now, what you have to understand is okay, does Bob Demick needs to understand how to work excel? No, he can go on fiver.com and find a kid in the Philippines who is an excel ninja to do exactly what he wants to do, right. Does Bob need to know how to create a website and manage a website? Absolutely no, he can go on E-lancer, Odesk.com and he can outsource it. So, you need leverage your time, you need to leverage your expertise and really focus every single day on being an entrepreneur, now you need to know that the basics of any business, but should you be working every single day in that business? Absolutely not, so we look at what’s out comparative advantage. So, LeBron James might be able to type 100 words per minute, should he be typing? No, absolutely not! All that guy should be doing is playing basketball
Dave: (Inaudible 00:24:43) he should be on Nike commercial every day.
Mark: Or Nike commercials, that’s what he should be doing. So, understanding where you should be spending your time is really critical in business especially when you’re coming from a medical background. You’re a high income earner, and if you’re going to start doing investing or you’re going to start a little side hustle where you want passive income, then start leveraging your time even more. Always be compounding your time and learning how to that and building a team once you get the knowledge and the depth of knowledge down, which if you’ve gone through medical school understanding what I do is really basic and simple.
Dave: Well Mark, I think that’s a great for people to consider, is maybe you don’t have time to do it all and certainly you have to understand this stuff first so certainly don’t go into these things blind which I think is a big mistake that many doctors make, they go and invest in a Winery in the Cayman Islands but they’re not part of the business, they don’t understand it, they’re not there, so getting dirty and getting your hands in the soil to understand how this stuff works, I can’t emphasize enough is so important, and I think what Mark is doing here is empowering us for some great information is a great way to do it. Now Mark, I’d love to-we talked about a lot of really good positive things, I’d love to know, what’s the number one mistake that you made in this process? Maybe a bad deal, or maybe you set something up incorrectly that you think our listeners can learn from.
Mark: One of my biggest mistake was not doing a takedown deal in this community in Pennsylvania. So, I was making so much money Dave about 2006, remember what the real estate market was like in 2006?
Dave: Oh, burning up.
Mark: Yeah, I was full of myself, it would be hard to find a more arrogant guy, like I could just throw up any property, I was making so much money. so, I go to this community and they have their own developed community in Pennsylvania, they had a thousand lots, that had property association leans and back taxes so I go in, I fly in wearing my suit and I said “look, you’ve got dead money here, even if I sold these properties for $1, and I get a new person paying taxes, I get a new person paying property owners association fee, it’s more money than what you’re getting now. I’m going to take that dead money and I’m going to make it live” and I negotiate that deal for about two years, right. They say “okay, fine, buy all thousand lots, they we’re selling me for 50 bucks a lot” and I said great, so I bought them all, what I should have done and because I was so arrogant, I didn’t go to a mentor or a business mentor and said “how would you structure this deal” and get another set of eyes on it, I should have just bought ten at a time, made a little tiny bet, maybe the community wasn’t going to sell; but instead I bought all of them. Now, I did sell the first 100 and I made about $100,000 on that deal, but when I factored in my time in flying back and forth and the opportunity cost of it, it’s the first deal I can consider where I actually lost money or broke even. I always think about what is factor hourly rate, and when I look back on that deal I think I actually broke even with my time. So, if I were to done over again I would have just made tiny bets, bought ten at a time, sold ten, buy another ten because if the market turned on me like it did in 2008 then I would have been stuck with all of these lots and I would have lost face with that community because I told them how I would be able to sold them really fast. And that was really a good lesson and then after that I got a business mentor Orey, who’s’ just a genius, it was a nice, delicious, piece of humble pie.
Dave: That’s good. Well, I think having that experience probably grounded you for the future, you learn from your mistakes.
Mark: Yeah, absolutely.
Dave: And Mark. As we’re rapping up this interview because we don’t have forever together I would just love to know, how do you think about financial freedom for yourself? Do you think you’ve achieved it, or is it a work in progress? How would you look at your personal financial freedom with where you’re at right now?
Mark: Well, I have it. I have for a while now because my passive income exceeds my fix expenses, so I’m really working because I want to and not because I have to. So, in that definition I would say I am financially free and what I do now, I do because it makes me happy. So back in 2001 to 2009 or 10, nobody ever thanks me for selling them a piece of raw land like it was really good for five people – my family, didn’t really change anyone’s life, now I have so many clients that I have changed their lives and it’s so humbling to me when they tell me “hey Mark, before I met you, I wasn’t happy or I wasn’t financially free and now I can quit my job or I’ve just retired my wife, now she can stay at home and raised the kids” I got an email yesterday from Eric Peterson, he made $100,000 as a side hustle last year just flipping raw land and that was his goal, he hit it. I’ve got a client who made $10,000 a month passive income and he makes more money working two hours a week in his land investing business than he does as a full-time fire fighter and that allows him to spend more time with his family and his friends. And I think helping other people for me is now my new calling as oppose to just buying and selling raw land and just helping my family, so not only I’m I financially free but I really feel like if I die tomorrow, I can die in peace because I’ve made a difference in other people’s lives.
Dave: That’s good. Well Mark I’d love to know- I know you have a number of different courses, you kind of have your own little academy over there where you teach people this stuff as you kind of reference through out here, where can people find you and locate you online?
Mark: Yeah, I think the best place to go is thelandgeek.com or start on ITunes with one of the podcasts
Dave: which you have three of them, which we’ll link all of these in the “show notes” my friends so if you don’t have time to write this down, just know you can click on the description that would be towards the bottom of the “show notes” here. Well Mark, thank you so much for being with us, do you have any closing thoughts that you want to leave with us right now as we transition out?
Mark: I think for doctors, I think it’s really important that they understand the concept of sole economic dependency and, it’s an uncertain world, and certainly it doesn’t have to be raw land but they do need I think a passive income piece in their lives, and I think real estate is the simplest way to do it.
Dave: I would really encourage you just to keep learning. You’ve spend so much time practicing medicine, and I know many of us there are burned out at this stage, and has you look for ways to not have to work that hard, Mark presented some great ideas that are worth exploring and understanding and worst case scenario, even if you never do it maybe it’s something you’ll come back to down the line so I’ll encourage you, check out Mark’s resources, check out podcast, obviously there’s a lot of free resources, he’s put out there over the years, four years’ worth of three different podcast, that are to help you and to help you understand business and how to make money. And so, Mark, anything else you want to leave us with?
Mark: No, I think we’ve covered a lot and certainly, if they want to learn more I’m an inch wide and a mile deep on land investing, so just learn more at thelandgeek.com. If you think that this is something you want to make a little tiny bet on because even if you started with me with $3,000 you can try it and maybe make $12,000 and go from there.
Dave: Very good, alright Mark thank you again for being with us and my friends, if you are a physician or you’re someone serving physician we want to tell your story I would love to have you on the next freedom formula four physician podcast so make sure to contact me at firstname.lastname@example.org or on my website www.doctorfreedompodcast.com. For the freedom formula four physician podcast this is Dave Denniston, thank you so much for joining us and I have a favor to ask my friends if you got some value from this podcast or you have tremendous value from this podcast, I would like you to just take a quick minute and do a review on ITunes it really helps this show and it would mean a lot to me and remember my friends to cut your debt, cut your taxes and live a liberate lifestyle.