Daniel Apke is the owner of Land Investing Online, a company that purchases off-market land deals and sells them for market value. In this episode, he tells us how he got into the business of land investing, what he looks for in a deal, which buyers and sellers he tends to target, and common pitfalls to avoid in this asset class.
Daniel Apke | Real Estate Background
- Owner of Land Investing Online, a company that purchases off-market land deals and sells them for market value.
- Portfolio:
- GP of 550+ acquisitions and six rental properties
- LP of one syndication
- Based in: St. Petersburg, FL
- Say hi to him at:
- Greatest Lesson: Take action and stay consistent.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Daniel Apke. Daniel is joining us from St. Petersburg, Florida. He is the owner of Land Investing Online and Apke Land, a company that buys off market land deals and sells them for market value. He has GPed over 550 acquisitions, he has six rental properties, and he's an LP in a syndication. Daniel, can you tell us a little bit more about your background and what you're currently focused on?
Daniel Apke: Yeah, so my background starts -- right after college, I bought my first commercial real estate investment ever, shortly after graduating from Ohio University. I'm from Cincinnati, Ohio actually. And that's really when I fell in love with real estate and just other alternatives to nine to five jobs. I knew growing up I wanted to be an entrepreneur; my dad owns a carpet cleaning company in Cincinnati, Ohio, so I got to see what entrepreneurship is all about, the struggles, the benefits of it and everything else in between... And once I've invested in my first rental property, that really opened my eyes up to what's possible, and what financial freedom and just working for yourself and that freedom looks like.
I had a lot of things between then and now where I'm at in terms of land investing. I had over 10 different businesses, dropshipping businesses, all kinds of online e commerce businesses. One actually took off, I was able to sell that to an investor out in California; it was an eCommerce electric bike store company. I ended up liquidating that. I found out about land investing, and really fell in love with it, just because - when you talk about traditional real estate, it's generally much harder to get a full-time living off of fairly quickly. Land investing for me was a fairly quick way to make a really good full-time living, and it's a very sustainable business model. So I dove into that, I started reaching out to people through letters, with offer letters on them, that we can get to later on, but they actually had offer letters with a purchase agreement attached to them... And we would price and send out ten, twenty thousand a month, and I just fell in love with it from there.
Slocomb Reed: You talk about making a living quickly through land investing... As a primarily residential guy -- I'm based in Cincinnati, where you're from; I'm an apartment owner-operator, and also a residential real estate agent. Typically, when people want to build a full-time income out of real estate investing quickly, like now, like leave your job and get into real estate investing, I end up recommending doing what I call transactional investing. House flipping is a classic example; wholesaling is as well. Buy, possibly renovate, sell for a margin, and you've made a margin and it only takes a few months, or a few days or a couple of years, depending on the situation, but you can develop that source of income much faster than you can buying buy and hold cash flow.
So what I'm hearing is you were transacting land deals. In the introduction, I said that you were sourcing them off market and then selling them for market value. You got into transactional land in Florida?
Daniel Apke: Actually, primarily in the South we started. I think our first ever state was Tennessee, that we really really dove into. And believe it or not, we've never been to a property that we actually bought, so we do it all remote. And that was a part of the location freedom that really sold me. You can do house flipping and wholesaling remote, but it makes it more and more difficult. Land, without having the structure on it, without having inspections and all that other stuff, it's fairly easy to analyze online, send a drone out there, get the drone photos, all of that...
So we started in Tennessee, went down to Georgia, we did a lot in Georgia, and primarily we're in the South now, within Mississippi, Georgia, South Carolina, Tennessee and a little bit of North Carolina.
Slocomb Reed: Intuitively, as someone who is in the commercial real estate investing space, it makes sense to go to the South, because there's a lot of population growth there. These land deals - how big are they? And are you focused on being close to metropolitan areas? What is it that you're looking for in land?
Daniel Apke: Yeah, you don't want the hottest areas in the market; I would suggest not going outside of Nashville in 2020. What we look for is that median ground; it's not the hottest market and gonna be impossible to acquire, but it's not gonna be impossible to sell. We're looking for something in the middle. What we typically do and what we teach is to find a fairly populated area, say Atlanta, Georgia, test out some counties a couple removed from actually metro.
So we're in rural America; we're going two, four counties outside of Atlanta, talking about an hour drive, 45 minutes to a two-hour drive from Atlanta. So the populations there, there's a large demand for land in those areas, but it's not like you're attacking metro Nashville, trying to get three acres in the middle of Nashville, Tennessee, or in a hot market like that.
So what we teach is really analyze population density, we look at the for sale to sold ratio, make sure things that are priced correctly, are selling relatively quick, so when we acquire, we know we can sell them for this amount... And those are the main things we teach, is just finding that middle ground - not too hot, not too slow. And it's all about pricing from there. If you're in a hotter area, price it a little bit higher. Get more aggressive; it's going to be harder to acquire. If you're in a slower area, you might need to be at 80% of market value to sell it within a month or two, so we need to pull our offered price back.
So based on what we see in our analysis, what the data is showing us, you can kind of scale your offer more aggressively, or more passively, based on what the market shows. And this can be done anywhere. We've had a ton of success in rural Alabama; very slow, not a ton of demand for it, but we just have to keep that in mind when we're pricing. We price a lot lower, and we sell it a lot lower. There's always a demand for under-market value land, if it's good land.
Slocomb Reed: What makes land good land for your deals, Daniel?
Daniel Apke: That's a really good question. One, the biggest thing is slope; you'll go into areas, especially when I talk about Tennessee and North Carolina, that are on the side of mountains and cliffs, and you can hardly walk up it, let alone put a building on it. We like to buy land where people have a lot of options on what they want to do. If they want to keep it as recreational, that's great. If they want to put a cabin on it, that's great. If they want to build a house, make it their primary living, that's what we're looking for. They need to have those options. As soon as you can't build on a piece of land, the value of it drops drastically.
We also look for very little restrictions. We want - ideally, but not always - places where people can go and pop a mobile home are extremely desirable. And that's one of the hurdles I see people have at first, is they think, "Oh, there's a lot of mobile homes in the area. It's a bad piece of land, because it's a low-income area." That is very far from truth. Some of our quickest sales ever have been where there's very low restrictions, you can put anything on it, there's not a ton of guidelines.
Another thing to look at too is water. There's a lot of wetlands, FEMA floodplain type of properties when you're talking about land. So I'd just say, the wetlands, the slope, and really just the desirability of the area are the three main things, and you want to make sure there's not many restrictions; the more restrictions there are on the land, the harder it is to sell. HOA properties, depending on the area - we've been stuck with extremely nice properties in HOAs, where you have to build 2,400 square feet and up; if you put a house on, it needs to be at least 2,400 square feet. That just limits your buying pool so, so much. And although it might be a desirable neighborhood, there's only a certain amount of people in these areas that can afford a ground-up construction for 2,400 square feet. So it just limits the buying pool when you look at these restrictions.
Slocomb Reed: Daniel, I want to talk more about your buying pool, but first, just to make sure our Best Ever listeners are in a similar headspace to mine, since I'm the one who gets to ask the questions... When you're doing transactional investing, the most important thing is to know that there is a margin between what your seller will sell for and what your buyer will buy for. So what you're saying about rural Alabama makes sense, so long as there's a margin there. So you're talking about keeping your buyer pool as broad as possible... What I want to ask is, what kinds of buyers are you targeting? Is it entirely deal-specific?
Daniel Apke: It typically is people looking to put a home or a cabin or recreational land on a property. Since we're actually buying the property in our own name, we have full control of how we market it, which gives us a lot of flexibility with this. We buy a lot of commercial lots actually, and we'll sell them to investors; we can get into that later. But in terms of the residential side, if we have a residential property, it's typically people, like I said, living in Atlanta, who maybe want a property in let's just say Crawford County, Georgia, which is an hour and a half away. It's 20 acres, they want some recreational land to go out and enjoy, maybe put a cabin on it one day, maybe eventually move there, whatever that situation is. That's about 80% of our transactions, I'd say, is just to a residential owner who's looking to move there, or just use it recreationally.
Slocomb Reed: So you're looking to sell to a recreational owner, or an owner-user, owner-occupant for that land. And you focus on land that will have a broad use case, or a broad buyer pool within owner users?
Daniel Apke: Correct. Especially at first, as you're getting started, we highly recommend, as you get more familiar with areas and land, to dive into niches, to have a different niche. You might naturally come across a couple of niches and fall in love with them, or have a lot of success... I'll give you an example. I had one person come and join our program, and they had a background of wholesaling mobile homes, and they were staying in the Atlanta metro area. And they kept coming across these mobile home lots that they would market, and the mobile home lots were zoned to be mobile homes. So they could send a mail directly to mobile home lots with no structures on them, and then they ended up joining and they took that as their niche; that was their niche, is just zoned mobile home lots. They were going to send an offer form, a lot of times they have septic already installed, they have a well installed or whatever the situation is, but they knew the mobile home space so well and that area so well, they could target these extremely efficiently with this.
So we always recommend, once you get going, you can dive in and get more nichier, I'd say. But starting out, we like to keep it really broad, because it can get really complicated with the niches. And I think people fall into those niches naturally as they advance their careers.
Slocomb Reed: That makes a lot of sense. A targeted buyer is going to have some sort of likely recreational, but owner-occupant use for the property. You're not talking about selling to developers who are going to subdivide and turn parcels into neighborhoods. Who is your targeted seller?
Daniel Apke: Our targeted seller is really people who own land, who don't want their land. And this is very, very common in rural America, because a lot of times these people inherit their land, they've never been to it, they pay taxes on it every year, they were gifted the land for whatever reason, they bought it, they wanted to put a house on it, they never got to it, life got in the way... They need the money for treatment, tuition, car payment, whatever that situation is. It's people who need money, at the end of the day. And that's why I love this business model so much, is because land is not a necessity. It's not someone's shelter; it's not food, it's not water. It's not a necessity for them.
So we're talking about an extra liquid piece of land that they have, that they don't use, and that's when we come in. It's all about timing, right? We send out the mail, they get the letter, they need to pay their kids' tuition... We had someone who opened a bakery, they needed the money to open up a bakery; we've had people who had a kidney failure and needed dialysis; this actually just happened last week, or two weeks ago... But they need that money for whatever reason, and since this is extra to them, it's not their necessity, they look at that and they can liquidate it. So that's kind of where we come in, and that's our sellers.
Break: [00:12:52.19]
Slocomb Reed: Daniel, what I'm hearing you describe is a very, frankly, typical transactional investing strategy that just happens to surround vacant land. And like you said, vacant land has a lot of, frankly, simplicity to it by comparison to other asset classes; as you mentioned, it makes it a lot easier to transact, to invest remotely. We're painting a very rosy picture here... What have been the biggest struggles you've come across so far with this transactional land investing?
Daniel Apke: The biggest struggle is pricing. Like I said, we're sending out offer letters on a purchase agreement. And how do we get those offer letters? That's the biggest question; how do we come up with those offers? It's data. This is highly, highly data-driven. But the problem in rural America - there's not much data for land. You can go to these areas and type in any house that has three, two beds, baths, 1250 square feet to 1500, and get a price 10 data points within a quarter of a mile in a lot of these areas. This is raw land; the transactions are very, very limited, especially in rural America. So the biggest challenge is coming up with accurate pricing to be able to constantly send this mail and acquire deals based off of it.
And then on the flipside, when we get those purchase agreements back and we're negotiating, feeling confident enough in our data to actually purchase that; we're purchasing that ourselves, so we actually have to have the confidence to purchase that, because we're going to list it for more money. But when there's such little data points, that can be a major struggle. So diving into each comps individually, looking how long they took to sell, all the different details... Is that average land, or is it a lakefront property? We dive into individual comps more than look at the whole, I feel like, because there's just such little data. We could be in one county [unintelligible 00:16:38.27] removed from Atlanta, and there only be 10 data points from 2 to 50 acres in the last 24 months. So you're talking very, very scarce data in a lot of this, and I think that's the biggest hurdle for people to overcome.
Slocomb Reed: Daniel, how do you overcome that hurdle in such a data-driven strategy? When your data is that limited, what do you do? Do you just offer low enough that you're certain you'll make money, and you risk just not getting any callbacks on your letters?
Daniel Apke: Yeah, that's a good option... But the problem with that is a lot of times people will just ignore you. That's between your letter going on the fridge or going in the trash a lot of times; and we want to be on the fridge, or the coffee table for them to be thinking about in the back of their heads.
So what we do - we dive into specific comps. Like I said, you have to work with what you have. So if you have 10 comps, you might have none from four to six acres, but you might have some from one to three acres, and six to ten. So analyze the six to ten, analyze the one to three, and then come up with a medium ground in the middle. It should be chronological, because you're bulk-buying. Six to ten should be less priced per acre than one to three. So then you have data for four to six acres; you can kind of understand it should be somewhere in the middle there. And that's kind of how we map it out.
We do take the median, and the average and all that stuff from the comps that we have, but diving in individually to these comps, making sure -- like I said, land is so different. One cannot be a lakefront property and be four times the price of the same acreage that's a few blocks away not on the lake. So you have to make sure what you're looking at is actually average land; you want a price based on the average piece of property, so putting a lot of weight on very strong comps is very important. I'd rather take two to three very, very strong average land pieces of four to six acres, than 20 all over the place.
Slocomb Reed: Daniel, can you give us a recent example of a deal that you were able to get through, that you had serious difficulty due to limited data, or another common complication that you come across, and what your solutions were to the problems that you came across in that transaction?
Daniel Apke: It's a really good question. We have one really recently, that immediately came to mind when you asked this question. We had one in Alabama; I think it was Lee County, Alabama, and it was six acres. We were buying it for $30,000. There was no data period within 10 miles or so, and it was extremely difficult. We had to go outside of counties, look at the pricing on the borders, what's the closest comps to the borders, go outside the county and try to analyze it... Still weren't confident enough in that. We caught about 10 to 20 different realtors, probably three to five got back with us. We wanted a price opinion from them. They came back and gave us a price opinion... The problem was their price opinions were all over the place. One said it would sell for 40, one said it would sell for 80, one said it would sell for 60. They were really all over the place.
Slocomb Reed: Daniel...
Daniel Apke: Yeah.
Slocomb Reed: I want to ask, before I forget - you're talking about a significant amount of due diligence for a $30,000 piece of property that you might sell for 40k to 60k. At what point in the process are you doing all of this due diligence? Is this before you send your letter? Is this the process you go through to make sure your letter ends up on the fridge? Or is this only after you've sent a letter and gotten a response that you're diving this deep?
Daniel Apke: We were under agreement to purchase this property. So they sign their paperwork and sent it back to us. We always, always, always recommend do not do legwork without having a purchase agreement, because this is land, and this is a $30,000 property... But what happened was my brother (he's my business partner) and myself looked at this probably for two to three hours each. We talked to realtors on it... It ended up just becoming gut instinct; we knew worst-case scenario we'd probably sell this for around 45k, and we were okay with those margins being worst case scenario. And it was good land; it was a nice square, it wasn't a weird shape, didn't have much slope... A fairly desirable piece of land. So there was very, very little risk with this. We just didn't know what we were going to sell it for. That was the big question mark.
We ended up listing this property for $60,000, and very, very surprising - this was one of the biggest surprises I've ever had with land investing... It sold for $68,000 that same day. And the data did not really point to that. I knew that worst-case scenario we'd still make money, which would be around $45,000, but I did not think this would sell the same day for 68k. And this was one of those areas where you just didn't have data to support that. When we got that offer for $68,000, I was actually really shocked. There was nothing to show it should sell for that. I don't know why, it just was a hidden demand; there wasn't anything for sale on the market, and there wasn't much sold, but we put it out there and we got crazy response.
Slocomb Reed: That's an awesome result to more than double your purchase sale price. Tell us, Daniel, about a time that things went sideways, and didn't go your way, and why that was.
Daniel Apke: Usually, when things go sideways, it's because somewhere in due diligence we missed something. And I can give you an example... We had a property in Georgia, it was 20 acres... We were under contract with this property I think for $35,000. I found out one of the properties had a defect on it, but the other was okay, it's what I thought. And I kind of overlooked that, because one of the descriptions said something about an old landfill... But I read back and it said the landfill had been covered... And I just didn't do a lot of due diligence on it. I ended up going back to the seller and negotiating it down to I think $25,000 for this 20 acres, and I thought I'd be very safe there, because it's a little over $1,000 in a fairly desirable area. Really, really nice land. So I get the property and we list it for sale, and the response was insane. So many people going and visiting it...
What happened was these potential buyers were contacting the county and the county was telling them, "This isn't buildable. That's an old landfill." There's trash all under that property. And I ended up working with the county trying to figure out what's going on, because they told me I could build on one of the parcels before, and then all of a sudden my buyers are calling them and they're saying it's not buildable, and it's killing my sale.
So we ended up going back and forth with them for a long time. I got the EPA, the Environmental Protection Agency involved, because if there's a landfill, they have to open permits in the state of Georgia, and then it goes to the Environmental Protection Agency, and they should have some information on it. They didn't have any information on it their ever being landfill.
So what happened was that city and county opened an illegal landfill, and closed it out illegally as well. So it was all over the place. What ended up happening - the EPA ended up digging me up some documents that they could find, and where the landfill -- it was on one of the parcels, and they had the outline on a map they could dig up somehow... They ended up sending me a thumb drive of all the documents; they couldn't email or anything. They sent me a thumb drive in the mail. So I'm going through, looking at all these, and I have no idea what I'm looking at. So I had to contact professional engineers to try to look at this, land engineers, and tell me what's going on, because I absolutely have no clue what I'm looking at here.
And they pretty much told me -- there was two 10-acre parcels; the one on the South was a landfill, and they had it, and I ended up sending that to the county, with a written letter from the engineer explaining what's going on, and they ended up granting access to build on the top parcel. On the northern parcel you could build on, staying 300 feet away from the landfill, or something.
So after probably four or five months of going back and forth with that, we finally got it under contract to someone who was willing to take the risk. Obviously, this property would be listed probably at $85,000-$90,000 and sell quick... We ended up having to keep dropping, drop and drop and drop, just to get rid of this property. We did break even on it. I think we made $7,000 to $10,000, somewhere around that... But it was a good learning experience. It was something we definitely could have caught in due diligence, but we got really lucky on that, and the hassle was not worth such low margins.
Slocomb Reed: That does sound like a lot of hassle for a low margin. I hope out of your 550+ deals that that's a very uncommon occurrence. Daniel, are you ready for the Best Ever lightning round?
Daniel Apke: I am.
Slocomb Reed: Excellent. What is the best ever book you've recently read?
Daniel Apke: Start with Why, by Simon Sinek. It just brought purpose into my life. I really think before I read that book I was doing things without understanding my why and my purpose behind them. That really made me step back in life, figure out what I wanted to do, figure out who I'm trying to help, what I want my legacy to be, and just understanding the path to get there. So I'd highly recommend that if you haven't read it.
Slocomb Reed: I have. It's a great book, for sure. What is your best ever way to give back?
Daniel Apke: To the community?
Slocomb Reed: In general.
Daniel Apke: In general. Personally, I like to keep it investor-focused; I love to help people out with their investments. Or if they're trying to get into something, I'm always available for calls. I get a lot of free calls that I give away... And just helping people who were in my same situation. I was 22-23 years old, trying to start my investing career, didn't know where to start... I really like to help give some guidance to people who were in my same spot. [unintelligible 00:25:24.08] always says "Your best capability is to help your previous self", and that's what I'm trying to reach. I'm trying to reach the old me, who was looking for a way to get out of my nine to five, who was struggling financially, who felt locked and just in the nine to five [unintelligible 00:25:38.28] system. I really like to help my past self, being that, anyone looking to help. So we do a ton of free calls... I love to help people in those situations.
Slocomb Reed: We already touched on this partially, but Daniel, what is the biggest mistake you've made, and the best ever lesson that resulted from it?
Daniel Apke: Like I said, I had 10 different businesses, I got extremely stretched out. I was stretched thin.
Slocomb Reed: Was that 10 businesses at the same time?
Daniel Apke: Six at the same time.
Slocomb Reed: Six at the same time. Wow.
Daniel Apke: But they were full-on operational businesses. I'm not talking like real estate rental properties, or anything. I'm talking -- I had a publishing company, my brother and I were starting a juicing company at one point... I had three e-commerce stores, different stores with different operations... And I got so obsessed with entrepreneurship at one point, I wanted to try it all to see what's for me. That's what I tell people why I got into land investing. It's just - out of all those 10+ businesses that I've had, this one was, by far for me personally, the most sustainable in achieving what I wanted to achieve. So I just got stretched out really, really thin, and in return, all my businesses struggled.
I had one business that did really, really well. The rest of them were put on the backburner, and I lost money financially because that. My most success has come from being hyper-focused on one business. So if there's one advice that I could give to new people starting out, it's -- I love trying new things; you should try a ton of new things, I recommend that, but don't stretch yourself too thin with starting a bunch of things at once, or else they're all just gonna go to crap.
Slocomb Reed: On that note, Daniel, what is your best of advice?
Daniel Apke: My best ever advice is action is always greater than no action. I see it time and time when students and members of our community join, they're so motivated; it's almost like they have a rush of dopamine from watching a David Goggins video, or whatever that is. They get all excited, and they join and they take the financial steps to invest in their future, but then they step back. Taking action for your future is very important. I've always thought action is better than no action. You're going to make mistakes sometimes, and that's going to happen, but you're never going to perfect it before you start. 95% or more of the time now is better than in the future, when you think things are going to align. More often than not things get more difficult. You have more priorities come up. You have a family, whatever happens. But I always think action is better, now, than waiting.
Slocomb Reed: Awesome. Daniel, last question - where can people get in touch with you?
Daniel Apke: My website is landinvestingonline.com. You can check that out. Or instagram.com/danielapke. I'm extremely involved in my Instagram; you can message me whatever questions you have. I'm extremely open to chat. So that's the best place.
Slocomb Reed: Awesome. And those links are in the show notes for our listeners. Best Ever listeners, thank you for tuning in. If you've gained value from this conversation about transactional land investing with Daniel Apke, please do subscribe to our show. Leave us a five-star review and share this with a friend who you know will be interested in our conversation today. Thank you, and have a best ever day.
Daniel Apke: Thanks for having me.
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