I hope you are doing well.
In my blog post on June 14, I described how I built my land business during 2018 & 2019. I also mentioned that late in 2019, I wanted to expand into other types of real estate. In order to do that I felt that I needed to change how I invested in land so that it would mesh well with what I wanted to do in other real estate markets.
2020 and Beyond…
So, today I am describing what I have done so far in 2020 to keep my land business growing and free up time to start focusing on single-family rental properties.
Previously, I mentioned that in 2019 I was forming more partnerships with more successful land operators. Here is how I work with a couple of the most successful ones.
My Partners
I have several partners that I work with that sell land in several states. They find the land to purchase for inventory and present it to me. I invest money to cover the purchase price.
We agree on a profit split of the profits plus I will get my investment amount back. We document this in a joint venture agreement.
Then they go about marketing the land.
When they sell the land, I get a copy of the details of the sale and based on our agreement how we will split the payments. They document the sale with their buyer and set up automatic ACH payments from their buyers.
In some partnerships, I get my share of the payment as each buyer makes their payment. In other partnerships, I get a distribution each month based on all the monthly payments collected that month.
My Investment Vehicles
I am investing through a couple different entities. One is an LLC with a minority partner. The other is an LLC that my qualified retirement plan owns and manages.
Investing Retirement Funds
Yes, that’s right.
If you are not familiar with this great vehicle allowed by the tax laws, you should learn more about it. I will write a post later this year that covers this in more detail, but here are the basics.
My main operating LLC has a qualified retirement plan that is similar to a 401(k) plan available to employers at a corporation. My LLC’s qualified retirement plan owns an LLC entity and has named me as its custodian and manager. This is fully allowed under the laws and regulations governed by the ERISA Act.
Most of my tax-deferred retirement funds are held by that LLC. I manage and invest those funds. A majority of those investments are invested in land with my partners as I’ve described above.
This is great because investing in land does not provide any tax benefits that I can use to offset other taxable income. So investing through this tax-deferred vehicle helps me reduce my tax burden on this income and gains.
Helping Other Investors
Through the strategy outlined above, I am also able to help other investors get solid and consistent returns on their investment dollars as well.
Sometimes I have great deals presented to me and no cash available to invest. What I have done in those situations is borrow from others.
In most cases what I do is borrow at a fixed term length at a fixed interest rate and pay the lender/investor cash interest payments quarterly and then return the principal at the end of the term.
This allows that investor to a get steady cash return on their money at least equal to long-term stock market returns, if not better, with no volatility of their value.
Let’s Talk
If you’d like to have a conversation, feel free to email me or set up a call with me or just call me if you already have my phone number. I’d love to hear what you think.
For now, be safe and take care of your family.
Mark