The Terra Prime Aribitrage Method to Building Wealth

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Hey, welcome to another episode of Making Billions, I'm your host Ryan Miller and today I have my dear friend Mark Podolsky. 

Mark is known as the land geek, and is widely considered to be the country's most trusted authority on buying and selling raw undeveloped land. He's actively invested in real estate, in raw land, for almost 20 years, and he's completed over 6000 unique transactions in that time. 

So what does this mean? Well, it means that Mark understands how to buy and sell raw land, but in a way that sidesteps competitors for eye popping returns.

[THE GUEST]: Mark Podolsky is known as the land geek, and is widely considered to be the country's most trusted authority on buying and selling raw undeveloped land.

[THE HOST]: Ryan Miller is an Angel investor in technology and energy. 

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Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it.

Ryan Miller  

Forget everything you know about buying land. The old rules no longer apply because we're stepping into a whole new world of deal making. This era belongs to those daring enough to rewrite the rules, seize new opportunities and transform their futures. The old ways of who you know are now distorted. This area is about how bold you're willing to be in creating the new era, welcome to the era of Terra prime arbitrage. All this and more coming right now. Let's get into it. 

Ryan Miller  

Hey, welcome to another episode of Making Billions, I'm your host Ryan Miller and today I have my dear friend Mark Podolsky. Mark is known as the land geek, and is widely considered to be the country's most trusted authority on buying and selling raw undeveloped land. He's actively invested in real estate, in raw land, for almost 20 years, and he's completed over 6000 unique transactions in that time. So what does this mean? Well, it means that Mark understands how to buy and sell raw land, but in a way that sidesteps competitors for eye popping returns. So Mark, welcome to the show, man.

Mark Podolsky  

Ryan Miller, thank you so much for having me. I am such a huge fan of you, your community, your podcast. My only nitpick is that I wish you were more ambitious, as we were talking about earlier. Why not Making Trillions?

Ryan Miller  

I know Making Billions, Making Trillions. Well, maybe that'll be the next evolution, or someone will come out with that show, and you bring up a good point, the sky's the limit, man in this industry, you can take it as far as you want. It's yours to lose and by yours, I mean anyone who's listening. You can make it, you can break it, but it's all up to you. So if you want to make trillions, a people are doing it. So why not you. So you know, buying land is such a cool industry. Thanks to you as I'm coming up to speed on that, and I cannot wait to get into all of it. So thank you for being on the show. Let's jump right into it. So for a lot of listeners around the world, we maybe they're looking at land, they don't know anything about it, they or real estate or whatever, and you're constantly banging on the drum, letting people know how impressive that this, this asset class is. So for those that are just starting out, how do they get early points on the board? What would you say?

Mark Podolsky  

So early points on the board is going to be basically finding your market, right? I mean, Ryan, let's face it, nobody wakes up and thinks themselves. Boy, I'd like some raw land in Iowa today or Minnesota today, unless you live in Iowa or Minnesota. So we want to focus on those sunshine states, those fast growing states. So I'm looking at places like California, Florida, Arizona, Nevada, Texas, New Mexico, Colorado, maybe a little bit in the northwest, Oregon, Washington, pockets in the Midwest, Arkansas, Tennessee, Oklahoma, treat areas, Missouri, and these are gonna be your biggest buyer pool. And that's really we want to focus on number number one and this we're gonna get our big win is, where can I buy this asset, and where can I make money on my buy and where's the best market to go to with my biggest buyer pull.

Ryan Miller  

Brilliant. So, so the first thing you do to get some really points on the board is make sure that you zero in on the best possible market you can find and you've outlined some your opinions on some of those things. So great, we have the market. What's the next step? How do it? Let's, let's go a little bit deeper then, how do you start turning this into an acquisition of raw land that turns into, hopefully, some profit. What do you do next? 

Mark Podolsky  

Right? So let's, let's use you as a case study. 

Ryan Miller  

Sure. 

Mark Podolsky  

Okay, so Ryan, where do you live? 

Ryan Miller  

Canada.

Mark Podolsky  

In Canada, okay, so let's assume that you own five acres of raw land where I live in Arizona, and you owe, let's say, $200 back taxes. So you're advertising two important things to me. Number one, you've no emotional attachment to the raw land, you're in Canada, the property's in Arizona. And number two, you're stressed financially in some weird way, because we don't pay for things like our property taxes, we don't value them in the same way. As a result, the county treasurer keeps sending you notice and saying, Ryan, you don't pay your property taxes, you're gonna lose that property to attack the lien or tax deed investor. So all I'm going to do is look at the comparable sales on your five acre parcel for the last 12 to 18 months. Now, remember, we're in this very inefficient market, so the comparable sales are all over the place. So I'm going to take the lowest comparable sale, and let's just use easy not let's say it's $10,000 and then I'm going to divide by four, and that's gonna get me what Warren Buffet would call a 300% margin of safety. So I'm gonna send you an actual offer of $2,500 for that five acre parcel that you own. Now you accept it. Why? Because for you, $2,500 is better than nothing. In reality, three to 5% of people are gonna accept my quote, unquote top dollar offer, but now that you accepted it, I have to go through due diligence or in depth research. I have to confirm you still own the property. I have to make sure the back taxes are only $200. I have to make sure there's been no breaks in the chain of title, no means or encumbrances. 

Mark Podolsky  

So I have this property checklist, I outsource it to my team in Jamaica. They're connected to an American Title Company, and they're going to prepare all that due diligence pay for it for me. But while they're doing it, they're preparing my marketing package, because I'm getting the flat maps, the aerial maps, the GIS maps, I'm finding out what's going on in the area, and so I'm creating my marketing package. So let's assume that everything checks out, and I send you a check for $2,300 I send the treasurer a check for $200, I own it free and clear. Now, Ryan, I'm gonna sell this from 30 days or less, gonna make it cash flow like a rental home, so I have a built in best buyer. Do you know who it is? 

Ryan Miller  

Who?

Mark Podolsky  

The neighbors? The neighbors? Yeah. So I'm gonna send out those neighbor letters saying, hey, here's your opportunity. Protect your privacy, protect your views, know your neighbor. So oftentimes, the neighbors will buy. Now they pass. I'll go to my buyers list. The buyers list passes, I'll go to a little website you may have heard of called meta or Facebook, buy sell groups in the marketplace and then I'll go to lands, land.com, landmoto.com, landandfarm.com, landcentury.com landsamerica.com, landflip.com. These are platforms for people buy and sell raw land, but the secret is in the pricing. So all I'm gonna ask for is a $2,500 down payment, and then I'll just make it a car payment. Let's say $329, a month and 9% interest for the next 60 months. So I got this one time sale, I get my capital out on the down I could go 6 to 10 months out, and now I'm getting $329 a month and 9% interest for the next 60 months. But Ryan, no renters, no rehabs, no renovations, no rodents, and then it's a simple game, can I create enough land notes where my passive income exceeds my fixed expenses, and then I'm working because I want to, not because I have to.  And just as a side note, because we're not dealing with tenant, we're exempt from Dodd-Frank RESPA in the SAFE Act. All this owners real estate legislation as well. 

Ryan Miller  

Got it. And so when you're looking for these different properties, I know you mentioned, there's some issues, and there's some reasons why those can be for sale. Is there? Where do you find these properties? Where's a good source, that is there? Are there aggregators out there where you can just find a whole bunch of of these pieces of parcels of land available? Where do you go to find it? 

Mark Podolsky  

Yes, such a good question. So you can go to the county assessor and ask them for the list of real property owners in that county. But sometimes you're talking about a county that may not be up to date with the times, and they're like, oh yeah, for $500 I'll send you CD ROM, you're like, that's not great. So there's companies like datatree.com, zamplo.com that are data aggregators and then you can get a list of those real property owners from the county. And then once you get that list, you'll do what I call an initial scrub of that list. So just to make things simple, we could scrub that list by use code, let's say VL, for vacant land, and that way we're getting rid of the commercial property, industrial property, the residential property, the homes, and we're just left now with rural vacant land in that county, so that we can start making our offers and doing our research into the pricing of those offers. 

Ryan Miller  

So that's how you start to we would call it a short list, you can kind of get some of the properties that you think is good, and you search by budget at all or? 

Mark Podolsky  

You absolutely can search by budget in the sense that, let's say I'm looking at a neighborhood, right, the assessor's parcel number. So that'd be my next scrub essentially, is, I want to make sure that if I'm selling, if I'm buying, let's say, a one acre parcel, I'm pricing that differently than a 40 acre parcel, because that's 40 acre per 40 acre parcel, person is going to send me litter in the mail. So as far as my own personal budget, I'll be looking at counties where initially, when I'm starting out, I can buy five to seven properties. And so if I've got a lot of capital, I can go to areas, say Florida or California, and look at more expensive properties. What about a limited budget? I might start in a place like New Mexico, where I could buy inexpensive property starting with $500.

Ryan Miller  

That makes it so much easier to understand, probably gonna go buy some land after this. But in all seriousness, so when you're doing your first deal often and rightly so, you want to look at the upside, and we've covered a few things to say. How do you start bringing some of the upside that land offers into your world? But that's only half the story, isn't it? There's also downside risks that we do need to consider. So from all your experience, man, you've been doing this a long time, what are some downside, cautionary things that people really should start looking at when they enter into this field, what would you say?

Mark Podolsky  

Yeah, I mean, I think really, when you first start number one, you want to make sure you are really educated on the due diligence piece, so you're not overpaying for the property because you didn't realize about the back taxes, or you didn't realize there was a break in the chain of time. Now, if you're doing a much more expensive property, yeah, and you'll close traditionally through a title film thing and again, these aren't really big sort of gotchas in this niche of doing the due diligence. But I would say that when you first start out to sleep well at night, you want to be able to do your due diligence well. But I would say the more common mistake that I see newbies making are fear based, where they start making offers and remember, it's been about six to eight weeks before you get a return from that seller saying, oh, yeah, I'm interested in selling my land. So during that time period, what happens is, you go through that process we talked about, you buy the land, and then you say, okay, I'm not gonna mail anymore, not gonna invest in any more deal flow until I sell this piece of land. And so what's happened is, you sell land, and now you're a chicken company with no chicken, essentially. And so that fear of stopping deal flow can really hurt you in the beginning, I'd say that's a big gotcha as well. And then the other one is just being a land stop, right? You're not the market in the same sense, like Ryan, do you like McDonald's? 

Ryan Miller  

Sure. 

Mark Podolsky  

Okay, well, I don't, I won't eat McDonald's processed food, not that I'm judging, maybe, maybe a little bit.

Ryan Miller  

Maybe a little bit.

Mark Podolsky  

But, but, but anyways, but I would own a McDonald's franchise, right, even though I don't eat McDonald's. And oftentimes people will look at the land like, oh, this is two hours from the nearest city. It's rural,there's nothing out there. Well, there's a picture of your bar, and just because it's not for you doesn't mean there's not someone out there that would love this asset that lasts forever, nothing to maintain, nothing to protect, and they can afford.

Ryan Miller  

Brilliant, I love it, man. So making sure that you get it right, and getting it right meaning, I would say, getting the price right, is that right? 

Mark Podolsky  

Getting the price right? Absolutely. 

Ryan Miller  

There was an interesting you remind me, it was an interesting story. So when I was a younger man in my undergrad, I was able to negotiate a lunch with Warren Buffett, and so I flew out, hung out with him, and it was, it was life changed for a young man who's in finance school. And I remember he echoed your exact point is, he said, you know what, you make money when you buy, not when you sell, right? And it sounds obvious, but then you, of course, you ask him to to emphasize that and and as he unpacks it, he says, look, when, when I buy something, I don't overpay and, hands to the heavens, praying that the market will be just perfect and I'll make money. He said, I know that the best thing I can do to make money on any deal is to get in at the right price instead of praying to get out at the right price. Because if you get in at the right price, then you're good, and you run it is that kind of in line with what you were saying. 

Mark Podolsky  

No, it's 100% in line what I'm saying. It's, it's so critical to really buy that asset, 25-30, cents on dollar, so you have that, that big margin of safety in case there is an issue and something does happen in the market. Well, no one's going to complain of making 100% return on their money, or 50% of their money. 

Ryan Miller  

Yeah, you got that, right? That begs the question, I'd love to maybe just zoom out to the 30,000 foot view. So this is good, this is phenomenal. Just some quick, easy things that you can implement to get some early points on the board, also to maybe some risks to consider. Some of them is, like your McDonald's analogy, some of them is buying it for the wrong price. I mean, there's, there's a lot of areas that can take a well, capitalize an ambitious person and really clip their wings and prevent them from soaring. But there's also the market as well and I know I say the market, I know there's plenty of markets, but what are you seeing out there, as far as land and everything? What are you guys paying attention to? 

Mark Podolsky  

Yeah. So I always ask that Jeff Bezos question, and if everything's going to change and everything is going to change, what's not going to change. And what I think is not going to change is, is people always want a real asset, and they'll always want a good deal. And as long as those two things stay fundamentally true, I think we're in the right niche in that sense. 

Ryan Miller  

Okay, so land's not going to change, even though maybe what you build on it might so paying attention to the zone, Jeff Bezos himself, really good advice. What else are you seeing out there in the market? 

Mark Podolsky  

Yeah, so because we're paying cash, we really don't care about interest rates. So interest rates can do whatever they want, we're gonna be fine. And let's look at the macroeconomic conditions. If we go into recession, great, the world's on sale. As we come out of recession, we have equilibrium. It's easy to buy, it's easy to sell, and then oftentimes that market will heat up. It's gonna be more difficult to buy at a good value, but things are flying off the shelf, and then that market cycle will tend to repeat. And so that's really how we sort of analyze the macroeconomics of our land niche is from a risk to road ratio. We really think we're in the right spot in that sense. 

Ryan Miller  

Okay, so hedging against interest rate risk, which is a very immediate, we'll say risk. So what you're saying, and I have a few other friends That are in real estate as well, and they're doing one very close friend of mine manages, I think about 500 million or so, maybe a billion, and he just launched a new fund, and it's pure equity, pure equity, zero leverage in real estate, which sounds bananas, but I think he's seeing what you're seeing is to say, how do we manage interest rate risk because there's a lot of uncertainty. Often that shows up in the yield curve in interest rates. Governments are doing all kinds of things, which tend to be quite a large driver of what's going on with interest rates, especially in geopolitics. And so now they're saying, What if we just take that off, off the chessboard altogether, and we're not worried about this interest rate risk, and now we unlever this asset, and often in finance, we actually have to do that. Those of you out there, you finance quant nerds like me, I see you out there, so unlevered beta. So when we're analyzing a lot of these things, we're trying to understand, how will this thing operate without leverage? And then you actually operate it without leverage and now you're saying, now it's just up to asset performance, and no longer cap stack and financial wizardry, which is fine, nothing wrong with it, nothing illegal with it. But we're just saying, actually, when you make money, when you buy you get in at a good price, you buy an excellent asset, you're still gonna get some yield out of that. Is that kind of what you're looking at right now?

Mark Podolsky  

100%, absolutely and you said it in a way, nerdier way that I absolutely ever could.

Ryan Miller  

You're speaking to the finance geek, man, we're chopping it up.

Mark Podolsky  

It's just fantastic. I mean, I think we might as well just start sharing our screen and just show spreadsheets at this point. Let's do a podcast. 

Ryan Miller  

Let's do it well, we promised a good show, and we're gonna deliver it. So you know the other thing in the market now, you mentioned a lot of areas earlier, right? Midwest, Sunshine states, there's a lot of stuff, and I mentioned budget, right? So sometimes you get huge capital allocators like my friend and yourself that we talked about, then you find people to be like, this is fascinating. It's great, diverse move for me ,what if that's who these people are? So what are, just from your perspective, what are some areas that are good for someone with a large budget, and then what are some areas that are good for people who may not have a substantial budget but still want to enter the game. What would you say? 

Mark Podolsky  

Yeah, I think, I think right now markets with a large budget, I would go to Florida, Nevada, Colorado, smaller budgets. I would stick to think of the Midwest and definitely New Mexico. 

Ryan Miller  

Okay, brilliant. So Florida, Nevada, really good, New Mexico is really good. If you're starting out and you just want to dip your toe a little bit. That's certainly a place to go now. It's one thing to talk about the market, and it's cool, and you're seeing a lot of cool things, I'm seeing a lot of cool things. But the reason why we pay attention to the market, one of the reasons why it's because we're trying to extrapolate for ourselves and perhaps for investors, if you have them, where do we predict based on today's economy, interest rates, buying habits, migration, immigration, where do we see it going? And I'm curious, where do you see the market going in the future based on what you're paying attention to today? 

Mark Podolsky  

I mean, I think because the market is so big, and there's billions of acres of land available, and you couldn't think of a more boring real estate niche. For example, you wouldn't go on HGTV with a DIY Network and see flip this land, the before pictures, raw land, the after pictures, raw land. If you go to a RIA meeting, a Real estate Investor Association meeting, 100 people in the room, 99 of them will be wholesalers, landlords and flippers. So you and I would be only land guy, essentially. So I just think the market is going to remain inefficient, and it's sort of this fine wine type of market where the longer you're in it, the better it is. Because what happens is, let me go back to you as your case study. Right? We sold that land for $329, a month at 9% interest. Well, we're using a land contract, and so we're not having credit checks. And so what can happen is a person put $2,500 down, they make 12 payments of $329 a month, and something happens, they lose their job, or they lose interest in the property. Something weird happens in their life, and they go into default, and now we still own the underlying asset. There's no cost foreclosure. We keep the down payment. We keep their monthly payments. In this scenario, we've already made our money, but now we get to resell it, and we get expanded out our our IRR and our ROI on that one asset. And so the longer you have it, plus you've got inflation that's helping you on the backside of that deal as well. 

Ryan Miller  

Yeah, it's brilliant. Yeah, I do see inflation not like hyperinflation, but I call it runaway inflation. I don't know if that's a technical term, but that's what I call it's just to say we're burning a little hot. We're coming in a little bit hot land, real estate, gold, some crypto. I hear people saying the moral of the story, and I think this is what you're saying, Mark, to be honest, as you're saying, if inflation is going to be a persistent problem, right? Like we like some inflation, but this one is we're burning hot. Then you can get on the right side of that transaction and I think I'm just gonna take my shot here, but I'm assuming that you believe that land is one of those superior assets in a high inflation environment to really help get you on the right side of that transaction. So not only are you sleeping well, but now you're also eating well as a result of inflation. Is that what we're saying? 

Mark Podolsky  

Yeah, 100% you said that really well. I'm a little jealous. 

Ryan Miller  

Not to worry, man, we're just chopping it up when it comes to all of your experience and everything that you've done and people that you've worked with, people that you've helped your own podcast, by the way, we'll get a shout out for that. But what unfair advantages can you provide for our listeners today with all of your experience? What would you say? 

Mark Podolsky  

Yeah, so the unfair advantage is going to be understanding that this is a business and to use three lever pulleys, right? You've got other people's time, so inexpensive virtual assistants and so to break that down, where can use other people's time? Well, there's actually virtual assistant companies already out there that have been trained in this land niche. So one of them is landvaforyou.com, and then the other one is landmasters.us. Landvaforyou.com are Jamaican virtual assistants and landmasters.us are Filipino assistants. This is very inexpensive, well trained labor to run your land business, because it's a volume business, right between a river of nickels, essentially with these land notes. So that's your first unfair advantage. The second unfair advantage is going to be software and automation and there's software programs like lgpass.com, which will manage your mailings. They'll manage every part of that process, all the way to contracts, the promissory note, the land sale contract, the purchase sale agreement, when you take me 20 minutes in paperwork is now a press of a button. And so again, we can always make more money, we can't get more time and so the software automation is gonna be another unfair advantage. And then the third unfair advantage is gonna be being in the Ryan Miller orbit of understanding how to find other people's money and raise money. And if you can be a master of that, you literally win in this game. You just win, because you become now a black hole of deal flow, because other people can't close that deal as fast as you, and once they know you have that capital, deal flow just continues to go towards you. 

Ryan Miller  

Awesome as we wrap things up, any final remarks, anything, any ways to reach out to you, anything that people can do to connect if they want to learn more, maybe shout out your podcast, because I know that's actually super well ranked in the podosphere. I know that's not a word, I just made that up. But as we wrap things up, any final remarks at all? 

Mark Podolsky  

Yeah. I mean, I would say, if you really want to go down this passive income rabbit hole, and I'm assuming Ryan, that everyone who's listening to this has already solved their money problems, but maybe they haven't solved their time problems. And so I would say that if this model does resonate with you or you want to learn more, you can go to the landgeek.com, I have a link that I'd love to offer your listeners where they can get the book, Dirt Rich for free just pay shipping, and then certainly if they're not sick of my voice, they can check out, The Art of Passive Income Podcast as well. 

Ryan Miller  

Awesome. Just to summarize everything that we have, get a trained VA, leverage other people's time, get those people, Mark actually explain a few areas that we can go to get some of these people, but really leverage other people's time. The game of this industry, if you want outsized returns, it's usually a game of leverage, but that's not always financial leverage, that could be time leverage, there's many other sources of that. The other one you mentioned was learn to raise capital, that's something that I do. We have a community at fundraise capital.co you can go there and learn how to raise capital, last year, they reported of raising over a billion dollars as a group and so this is truly life changing. And then finally, get your tech stack right, learn some of those tech stack advantages, and you too will be well on your way in your pursuit of Making Billions.

Ryan Miller  

Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.