- Understanding the difference between land banking and land speculation.
- How land banking can help investors build a diversified and sustainable portfolio.
- Benefits of investing in land strategically placed in the path of growth.
- Exploring various entry points, including crowdfunding and using retirement funds.
- The importance of conducting due diligence and staying aware of macroeconomic trends.
- Brad Warren’s expertise in negotiation coaching and investment guidance.
- Email: brad@bradwarren.com.
- Contact Number: 843-619-3005
- Email: corwyn@corwynmelette.com
- Instagram: https://www.instagram.com/exitstrategiesradioshow/
- FB Page: https://www.facebook.com/exitstrategiessc/
- Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
- Website: https://www.exitstrategiesradioshow.com
- Linkedin: https://www.linkedin.com/in/cmelette/
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Corwyn:
Good morning Good morning. Good morning guys and welcome to another fabulous episode of Exit Strategies Radio Show. Hey, my name is Corwyn J. Melette, broker/owner of Exit Realty Lowcountry Group in beautiful North Charleston, South Carolina. Guys if this is your first time listening to this show you sir, or ma’am are in for a magnificent treat. Because our mission here is very simple, that is to empower our community, in financial literacy and real estate education. We’re a legacy building. That’s what we do. So if you have been along with us on this road for the last several weeks, or a few months, you have experienced and should have gained a tremendous amount of knowledge about financial literacy, real estate, about investing. We’ve had the gambit on, we’ve talked to commercials, we’ve talked to crypto, people that have given an introduction to cryptocurrency. But today we bring it back to what is beneath us all. And that is the land. That’s what we’re talking about around here today. I am super duper excited to have with us a leader in this space of land banking, none other than Brad Warren. I’m gonna call him The because he’s the guy that has this thing put together, the land banking consultant. Brad, how are you doing today?
Brad:
I am doing incredibly well. And with that introduction, now, I’m doing even better than I was before. Thank you very much.
Corwyn:
you’re quite welcome, Brad. I’m super excited about this show. Because when I was looking through and kind of getting a handle on what you did, I’m like First and foremost, if you don’t mind, give our listeners a brief introduction of you, your company, high level what you do, and we’re going to start digging and unpacking the boxes on this thing for our listeners today.
Brad:
I work for a land banking company, it’s called Lower Enterprises, and they’re located in Southern California. I sell dirt. That’s what I tell people when they asked me what I do, I help patient investors diversify and build their portfolios, usually retirement portfolios of some kind, by investing in land that is strategically placed in the path of growth, then they hold and we’re very conservative, we tell people seven to 10 years on average is the whole period because you’re waiting for the development to kind of get to where your land is. That’s why you’re able to get the land cheap, because the development isn’t there yet, if the developments are already there, you’re spending millions per acre, our minimum is 25,000 per acre. You hold and then you sell the land to the developer. That is the exit strategy, no pun intended. But that is the exit strategy you sell to the developer for anywhere between three and 7x returns. And we like to also say Corwyn builds generational and legacy wealth.
Corwyn:
Boom. That’s a segue right there. That’s like, okay, a fork in the road. Now here we go with Brad, you said it’s fundamental, one of the premises fundamental. And we’re going to unpack it a little bit more. And I want to get to the terms and all those other things. So people can kind of associate this real talk, Brad, I’ve never, it’s common sense. While I know the practice, I’ve never heard of it as a business model. To walk people through everybody’s thinking about investment, thinking about buying rental properties, everybody talking about fix and flip, but not everybody knows what they’re doing with that. Right? But seldom do you hear people just invest in dirt and essentially, get themselves because eventually, somebody’s come in and somebody’s gonna want that dirt eventually.
Brad:
Not always though. Just a quick little. Also, there’s a difference between land banking and land speculation. Okay. Land speculation is when you buy the dirt and you hope and you pray, you get on your knees, you pray to God every night that somebody’s going to want my land and they’re going to pay me more than what I paid for. That’s speculation. Okay, and banking. The way that we do it. The business model that we follow is all research-based. We have something called a 16-point comprehensive analysis checklist, for every piece of land that our company looks at, and we buy it first with our money. That’s how much we believe that it’s on the path of growth. Every piece of land has to get 16 Yes. Checkmarks 16 And we only buy one out of every 30 that we look at. That’s how stringent our guidelines are. So we do a lot of the risk mitigation, the due diligence, wherever you want to call it, the homework, and the research, we have an acquisition part of a research and acquisition department. And that’s all they do. They research the dirt to make sure that there are no hidden landmines, like a culvert that gets wet when it rains and prevents development. Maybe there’s a red-legged toad. It’s an environmentally sensitive area, and it’s got a red like it told me you can’t build on it. Maybe there’s a buried gas tank from 5060 years ago, and nobody knows about it. But we do because we have special maps that we use when we look at the land. And we can tell if that was a gas station. Big difference between land banking and land speculation.
Corwyn:
Interesting, run into that stuff all the time. Early in my career, I ran across an underground tank, it wasn’t a gas tank. Let me rephrase that it wasn’t a gasoline tank. It was for heating fuel for the house and way back yonder, when that’s how people heat, they’ve had tanks in the ground. I’ve definitely run across a couple of tanks over my years on properties that were buried or what have you. If you don’t mind me asking, Brad, what got you to this? The reality is, if you’re a realtor, which I am, the preamble of the Realtor Code of Ethics says that under all is this land. So basically, we all own dirt. When we own water, there’s dirt underneath it. So we’re all alone. Dirt, right? When we’re talking about this, fundamentals are basic to me. But again, it’s not common. So what got you to do this?
Brad:
That is a great question. real short story. I did a quarterly net worth statement from my wife and I talked about Exit Strategies, you got to know what your net worth is. So you know whether you can retire and live comfortably for 2030, maybe even 40 years now that we’re all living longer. I do a quarterly net worth statement. And on December 31, 2011, I looked at it and I went, yikes. My wife could retire by herself. She worked at Oracle, had a 401 K company match, and did really well with mutual funds. And she had built up a nice portfolio, she could retire on her own together, we could retire if I added my little meager retirement fund. But by myself as a single person at that stage in my life. And at that point, I was 60 years old. I could not retire and it was very upsetting. Very humbling. But look at those numbers and just go oh man, I really messed up. I have been putting enough away. So in January, I had my land banker name, Marcela Silva. He came to our house and did a presentation just like a listing presentation. We’ll go to the computer and sit at the kitchen table with my wife and me an hour and a half later, my wife goes no, thank you. Sounds like speculation to me. I don’t really understand. I don’t want to wait seven to 10 years. walks out of the room. I turned to Marcela and I said this is the only way I can amass enough money, like a decade, short enough period of time that I’ll have enough that I can retire on. So give me a piece of land. So I bought one in 2012, one in 2013, one in 2014. Finally, in 2015, this is now three years after my first purchase. My wife comes with me to hear Marcellus speak about land banking, again, the whole way in the cargo coil and she’s going, but I’m not going to buy any. I just want to see if I miss something because you’ve been going down and looking at your land. You’ve been referring business to Marcel, I think you’re going to find her and your land seems to be going up in value. Maybe I missed something the first time around, but I’m not gonna buy it. Okay, guess what? We got to the hotel. She listens to Marcella whip out her checkbook. And she buys two properties of the four that they had for sale that day. She bought two of them right there. I was his whole way home in the car. I go, I thought you weren’t gonna buy it, shut up and drive. I get it now I understand. So that was number four and five. We bought six more since then we own 11 properties. And I went from being an investor to being a finder or a referral partner. And then getting my real estate license and joining Marcel’s team, just like you have people on your team. From our previous conversation. I know you have a bunch of buyer reps, I believe on your team. Well, unlike a seller rep on her team, my job is to go out and find investors and ask them to invest.
Corwyn:
I’m blown away. Because it’s simple.
Brad:
It’s remarkably simple, very easy to understand. We have something called land banking one on one. It’s a one-hour presentation. That’s like the one that Marcela did at my kitchen table, which is narrowing it down a little because people were saying I get 90 minutes now it’s about an hour. And it answers about 95% of the questions people have. Where’s the land? How come you’re only in that one area? How do you find it? Can I buy it with retirement funds? Can I invest with friends? Is this a syndication? Do I get a deed? All of that and when you’re done listening to Now most people get a hold of me after they’ve watched it. And they go, this is a no-brainer. And I said, Yeah, it’s really pretty simple. You buy, you do nothing except pay your property tax once a year in November, and you wait. And the value of the land keeps going up. Because as more get sold, there’s less available supply and demand, basic economics, it’s in the path of growth. And by the way, all of our research is third-party based, the council minutes, city council resolutions, general plans, and newspaper articles, we look at what the world is saying about the area where we invest, and everything they say keeps coming true. We keep buying the land in that area, and we buy it and of course, then sell it to our investors. And they just wait. It’s set it and forget it lazy people investing in real estate.
Corwyn:
I’m pretty positive. I know the answer to this, but our listeners want them to get it directly from you. Brad, one of the things that you kind of went past in that conversation was about do you get a deed. Imagine if I’m someone and I’ve made this reference fairly recently, about some time we are quote unquote, preaching to the choir. So if you’re a preacher, well, you know, I’m the choir, and I know I’m the choir this time because I know what you’re doing. When I look here, I’m right here with you. Let’s go on the cheer and let’s go make it happen. I was in the congregation another time on a particular thing because I am waiting. And I don’t know about that. When I am preaching, I don’t want you to preach to the choir, I want you to preach to the congregation about this deed. I’m pretty positive. I know what that answer is. But how does that look? If I’m an investor, I’m thinking, Okay, well, look, I want to put some money into the project. What does that look like from my seat?
Brad:
In California, it’s called a Fee Simple Deed. It’s just like the deed you get when you buy a house. Only in this case, you’re just buying the dirt that’s under the house, there’s no building, and you own it, you have title insurance, which our company actually pays for, it’s included in your purchase, we will buy the title insurance, which proves legally beyond a shadow of a doubt that you Corwin, J Melette, do hereby own this piece of dirt in the state of California located it and then it gives the APN the assessor parcel number, and it gives the legal description, southeast corner of Northwest one quarter North township range section, county, it’s all spelled out, you get that in your hand, and no one can take your land away. It’s yours, you own it,
Corwyn:
you get a D. Perfect. So you own that dirt. Now in a situation where we bring friends and family, we’ll throw those terms around fairly openly, loosely. But let’s say we bring in some other folks into investing in a piece of property. In that scenario, what would that look like?
Brad:
There are a couple of different ways you can go about it. In the state of California, you’re allowed to invest with up to four non-family members, and up to eight direct family members. So I believe that’s like grandparents, parents, kids, no aunts, uncles, nieces, nephews. I don’t think it goes quite that far. So it’s sort of close relatives. So for non-family, eight families, you own it together. There are pros and cons. Obviously, the Pro is you can buy bigger property when you pull everybody’s money together. Or the downside is that you all have to agree to sell at the same time any one person can prevent the sale from going forward because your signatures need to be acquired on the sale. So you got the pros and cons that way. The other thing that happened to me, was my first one, I didn’t have enough of the first property that Marcelo showed me, and I did not have enough money to buy the whole thing. It was $115,000 for mixed-use, which is the highest zoning of land, there are five zonings of land mix uses the highest, but I wanted in, so she said okay, how much have you got? I said about $20,000. That was enough to buy 17% interest in the property. There’s another person at 17. So that’s 34. There’s somebody at 22, 56. And then there’s a fourth person at 44%. I did not know any of those three people. Marcella found them. They all had different amounts. She pulled us together. We’ve communicated via email, we chatted, I do the property tax split because I only pay 17% of the tax and somebody paid 44 some 22. But I do all that and I send out notices and so we’ve been chatting with each other for a couple of years, but we’ve never met but we live in different parts of the United States. And when it comes time to sell I will most likely be the negotiator with the other entity, but I’ll have to go back to all three. And we all have to agree on the sales price. So there’ll be a little bit of a dance when that comes.
Corwyn:
So basically you crowdfunded a real estate deal. You hit on a lot of things in there, Brad, most of your investors are cash investors, is that correct?
Brad:
I’d have to go back and look at the actual breakdown, but the top three are cash, which is the easiest retirement fund. Okay, I do. A lot of people have self-directed IRAs and self-directed Roths. I don’t know if your audience knows the distinction between if you’ve covered this in the past session of yours, but there’s a difference between a regular IRA and a Roth IRA. There are tax advantages to the Roth that the regular IRA doesn’t have. And then 1031 exchanges on my last one that I did this couple to single-family residences, and did a 1031 exchange into a larger parcel of land, in exchange for those to defer the tax. That’s what the 31 exchange does. So they paid no tax, and they own now a more expensive piece of dirt, which they will then wait seven to 10 years that we recommend to people, and right at that three to 7x return which is way more than we’d make on the houses and they don’t have to deal with what we call the T’s tenants, toilets, termites and trouble gotten under the T’s. Nobody wakes them up at midnight on Saturday, like I got a call from one of my rentals. Brad, I’m sorry to call you so late. Oh, yeah. Why did I, I was half asleep. What is it Brooke, the washing machine overflowed your basement up in Pasco Washington with about three, four inches of water in and I’ve already called the guys their emergency crew, it’s gonna cost more because it’s the weekend? But you want to get the water out before it causes any mold. Thank goodness for homeowners insurance, because he’s covered the $5,600 bill for all the work that had to be done. But I was stuck for seven or $800 to buy a new washing machine, tenants’ toilets, termites, and trouble. We don’t want to know that. I’ve got one rental now down to just the one it’s fully paid for. So it’s all cashflow that one that I can put up with a little of the T’s.
Corwyn:
That’s the thing, like you said, just there. When you’re dealing with just dirt alone, you ain’t got that issue to worry about at all. You ain’t got a toilet.
Brad:
They may be termites, but they’re chewing on the wood that’s on top of our land.
Corwyn:
As we get posted into the show today, Brad, how does someone get started with this one? How to get in contact with you? You’re the source here? And how did they get started? What does that look like?
Brad:
It’s very simple. My email is my name brad@bradwarren.com. I got that. So I will remember it. As long as I remember my own name, I remember my email, brad@bradwarren.com. They sent me an email. They say hi, I heard you on Corwyn’s Exit Strategies Radio Show, which by the way, I ask everybody how they heard about me because all of my business, all of my business is by referral only. And I do pay referral fees. So I always want to know who was the person that referred them. So they told me to grow coral? Oh, yeah, great. I remember that show. We had a great time. Usually what I’ll do is I’ll ask them a few questions via email, or I might just send them Marcela’s link to land banking one on one and say hi, watch this. Take an hour of your time. By the end of watching it you will either want to invest or you won’t. It’s that clear? It’s black and white? Yes or no? Hot or cold? up or down? In or out? You’ll know after you watch it, please don’t share it with anybody because it’s all by referral. I don’t want this to go into people. I don’t know. After you’ve watched that one hour, email me and just say no thanks, not interested. Hey, I want to be an investor. Hey, I don’t want to be an investor. But I would like to be a finder. I know some people that would like to do this. Or the one answer that I love the most I want to invest via Finder. Now I have a referral partner and a client. I love them when they send the answer number four, and then based on what your response to me is, we set up a Zoom and we start going ahead and we keep educating. We keep raising the bar and making sure we will grill that potential investor. Do you realize this is seven to 10 years? Are you going to need that money? Do you have kids? Yeah. Are they going to college? Might you need some of that money for their education? Oh no, Brad, we have a 529 plan set aside. Kids are handled. This is for my wife and I for like 20 or 30 years down the road from her retirement. We want to get a couple of nice wins. Maybe we can do this a couple of times. I make sure they are absolutely clear that they’ve got the time horizon and they can use what’s called Patient Money. The money they’re putting aside and not ever having to need anything else? And then they’re just willing to wait. If they bug me if they’re like that I need this answer right away, right? And they’re not patient. I’m not even going to send them the video. Excuse me, the presentation. Like, it’s like, your behavior. Now you’re demonstrating to me that you’re not patient. You can’t wait a week for me to get back to you with some important information. How are you going to wait seven to 10 years for the developer to knock on your door and you’re going to be calling me every six months bugging the heck out of me, as my landowner, I’ve got one guy to do this. How’s my land doing? How’s my land, Brad? So I said, Brad, let me ask you a question. Do you get on the free Tuesday night webinars to get updated because then you’d know how your land was doing? No, I don’t watch those, and said, Well, you better start watching them. And number two, Rick, last night, it rained in the Antelope Valley and your land is wet today. And tomorrow, your land will be dry. That’s how your land is doing any other questions? And he left, he’s okay, I won’t bug him. About a year and a half, two years later, maybe there’s only a year, he sends me a selfie. It’s him and his wife. And in the background is this solar farm, 1000s and 1000s of solar panels on probably about 1000 acres of land, okay, and I called them up, I said, Rick, what the heck is that? It’s a selfie, it’s you and your wife, Minnesota. This is red, that’s next door to my property. Across the street, they had just finished building as he says, I get it. I just need to wait. They’re coming. That’s evidence that they’re building in this area, I just need to wait. And I’ll call you when I get my first offer. And you can help them negotiate with us. We also offer free negotiation coaching, but we can’t give advice. Because then I lose my real estate license, but we can coach you with some questions that you need to ask that person. Maybe we have other investors that are right near you, that are further down the negotiation process. Maybe they’ve been doing it for six months, and they’ve already been offered 120 And they only offered you 40. But wouldn’t you like to know the address of that property that has a $120,000 offer on it? And you go back to the energy company and say excuse me, you just offered me 40,000? Oh, yeah, Mr. Warren, we see you bought the land for 25 We are offering you 40. We think that’s very reasonable. Well, you know, I happen to know a property at XYZ address. And I happen to know that you’ve offered them 120,000. And it’s the same size as mine. And it’s inside the boundaries of your project. Why are you only offering me 40? And then three times that, and then you zip your lips and you don’t say another word? Well, they go, Well, we’ll get back to you. And then they get back to me and they say, okay, you know, you’re right, I wasn’t aware of that, at the time, will offer you 122 Just to make up for it. Really, is that the best you can do? You will arrive at that number. And we’ll give you the coaching language to use. If you say Well, Brad, they just offered me $130. But it sounded like they were kinda near their limit. Should I sell? If I say yes or no, I’m done. I lost my real estate license. Yeah, but I’ll give you that code Corwyn. I would say something like this Corwyn. They offer you 130 and you paid 25 to buy it originally. That’s an excellent price. Or based on what we know about what’s selling in that immediate vicinity. That is the current market value Corwyn I didn’t say yes. I didn’t say no, but I gave you the code. Yeah, so that’s a great price. That’s like, six times your investment. You’re at the upper end of our range, you know, and you got 130 in your pocket. Enjoy it, go on a vacation, reinvest with us, buy some more land, I don’t care what you do with your money. We will give you hints, but we can’t give you actual advice.
Corwyn:
Let me ask you this. Brad, as we close out on today’s show, I call it my mic drop question. And you actually kind of probably hit it already. But my mic drop question is along the vein of if you would have known this habit long ago, would have made all the difference for you. What can you tell somebody today that will make all the difference in their life going forward? And I’m pretty sure I know what you’re gonna say. But go ahead.
Brad:
What would I tell people today that would make a big difference for them in their future? Obviously, the answer is, you know, Bilan, but even I think more evident than that, do your own due diligence on any investment, crypto, stocks, bonds, mutual funds, single-family residence, storage units, apartment buildings, I don’t care what you’re getting involved in any investment at all. Do your homework, and do your research. Look at the micro-trends, the macro-economic trends, what’s happening right now and look at the macro Economic Trends what does the future look like? The biggest one I see right now. We’re going solar. People can hem and haw and complain about it. No oil is here to stay. And no, it’s not. The Saudi Arabian people and government are unloading all of their oil investments and buying solar farms. Go do the research. I’m not making this up. Go read the newspapers, read the right newspapers, Wall Street Journal, New York Times, read the industry journals, the Waltons, Warren Buffett, Warren Buffett owns a $2 billion solar farm next door to one of my properties. And where is it? It’s in the Antelope Valley where we invest now why you gotta ask yourself, why would Warren Buffett do that? He must know something. All the money follows Blackstone, the big investment. They’re moving trillions of dollars into solar, it’s happening. That’s a macroeconomic trend that everybody on this planet should be paying more attention to.
Corwyn:
That is a powerful balancer. Because while you’ve been saying that I’ve been kind of processing and thinking about, we’re starting to see more and more solar farms on the East Coast. And obviously, you always see development that always goes on more and more. Brad, I want to thank you for taking time out of your busy schedule to be on our show today. I appreciate it. I appreciate the insight. And I appreciate you breaking down what to me is fundamental, but you have placed a spin on it to enhance its potential. Again, thank you for that.
Brad:
My pleasure. Thank you for having me.
Corwyn:
You’re welcome. So our listeners guys, y’all got Brad’s contact information. Y’all gotta get this thing broken down by this dirt. So I need y’all to go give him a holler. Email them, reach out, look at the video the information that he sends, but most importantly, engage and make sure to get your questions answered. Brad again, thank you. I really appreciate your time. For our listeners, in closing today’s show, y’all know how I feel. Y’all know what I say? I’m gonna put the two of those things together and I’m gonna say it to you this way. I love you. I love you. I love you. And we’re gonna see you guys out there in those streets.
