Investment, Tips Real Estate

Finding the Best County for Land Investing

“Which counties are the best for finding land deals?”

If there’s any question I’ve heard hundreds of times, it’s probably this one.

It’s a great question, because choosing the right market can and will have a HUGE impact on your ability to find great acquisition opportunities that are cheap enough, and yet still have a big enough margin to resell them for a pile of cash.

When people ask this question, my sense is that they’re looking for a concise, “1 + 1 = 2” kind of answer.

I wish the answer was this straightforward, I really do (it would save me a ton of time explaining it to people), but as with most things – there are SEVERAL variables that can make a county an ideal or less-than-ideal place to start pursuing vacant land properties.

In this blog post, I’m going to explain the 7 most important attributes I pay attention to when evaluating new areas to invest in. With any luck, it might just help steer you in the right direction.

1. Population & Proximity

One of the first things I look at when deciding which county to pursue is not only the population of that area, but also it’s proximity to the nearest major metropolitan area.

Why? Because when you’re working as a vacant land investor, you’re going to find FAR more acquisition opportunities in counties that are RURAL, with a sparse population, than in counties that are densely populated.

How sparse is “sparse enough”? It’s not an exact science, but to give myself some boundaries, I try to look at counties that have a population of less than 100 people per square mile.

City-Data.com

One way to figure this out is to check out a website like City-Data.com. Just type in the county and state you’re thinking about, and you can find a TON of relevant decision-making data. Most importantly for us, we can see the the most recent population stats relative to the land area of the county.

Check out this example from Door County, Wisconsin:

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Another way is to simply check the most recent population density map from the US Census Results (this information can be a bit older, but it’s still a helpful visual aid with current-enough information).

Here’s the most recent one from 2010:

2010 Census Population Density Map of United States

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“Sparsely Populated Areas”

As you can probably see – the lower half of the color key gives you a pretty clear indicator of which counties are “sparse enough” to fit into this box.

…;but on the same coin, it’s not enough to ONLY look at the counties with a sparse population. I also want these counties to be reasonably close to a place where people live.

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“Major Metropolitan Areas”

To give myself some clear boundaries, I try to stay anywhere within 1 – 2 hours (and no more than 150 miles away) from the nearest major metropolitan area (i.e. – counties with more than 500 people per square mile).

These areas are close enough for the bulk of the population to have easy access to the property – whether they think of it as a vacation property, retirement property or an investment property.

And keep in mind, you don’t have to be this rigid in your judgment of which counties are worth pursuing (there are always exceptions to the rule). A simpler way to approach it would be to simply find a big city and start looking the the surrounding counties, like I explain in the video above.

2. Desirability

When we’re talking about vacant land, there is a lot of perceived value tied up in the property’s desirability. Before you sink your investment dollars into any property, always ask yourself…;

Is this the type of property most people want to own?

To answer this question, we have to ask ourselves…; what makes a property desirable in the first place? Most people could guess that it has a great deal to do with the property’s geographic location, but more than its the mere proximity to the nearest notable city, it also helps if you’re selling real estate in an area where people want to be.

For example, let’s think about the types of places people choose to go on vacation.

  • Warm places (Southern States)
  • Areas near large bodies of water (West Coast, East Coast, Great Lakes, Islands & Peninsulas)
  • Areas with mountains and geographic beauty (Rocky Mountains, Smoky Mountains, Grand Canyon, California Coast, etc.)
  • Areas near big national parks (California, Washington, Texas, Montana, Wyoming)
  • Areas with things to do (hunting, fishing, hiking, skiing, snowmobiling, camping, horse back riding, theme parks, etc.)

It’s never quite as simple as labeling an entire state as “good” or “bad”, you need to evaluate the specifics of each individual county to get an accurate perspective of what an area has to offer.

Every state has counties that are awesome for land investing, and counties that are a very bad idea to work in…; so before you say,

“The state of ________ is perfect for land investors.”

Make sure you understand what each specific COUNTY has to offer before you jump in.

3. Property Types

There’s a reason we DON’T want to work in densely populated counties.

When you think about all the vacant land that’s available in a big city, it almost always falls into one of two categories:

Category A: Extremely valuable parcels in high traffic areas.

Category B: Dumpy parcels in terrible parts of town.

When you come across those “Category A” parcels, it is highly unlikely that you’ll get them for a low price. It’s not impossible (I’ve done it before), but the chances are NOT in your favor…; even when you’re doing everything right. It’s kind of like winning the lottery, and it’s not something you should plan your entire business model around.

When you come across those “Category B” parcels AND the seller actually accepts your low-ball offer – these types of properties are typically NOT the kind of thing you (or anyone else) will actually want to buy. Trust me.

In my first year of land investing, I almost made the mistake of buying this half lot in the inner city of a dumpy town:

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It looked fine from the satellite map, but when I saw it (and the surrounding area) in-person, my common sense kicked in and I ran away before it was too late.

The problem with small lots in big cities is that they only have one practical usenew construction.

New construction is expensive, and nobody in their right mind is going to spend $125+ per square foot to build ANYTHING in the middle of a place where nobody wants to be.

Do people buy land for the purpose of new construction in the rural suburbs? Absolutely.

Do people buy land for the purpose of new construction in the rattiest part of a decaying city? Rarely.

…;it’s not that there are ZERO vacant land opportunities in cities, but your chances of finding a good opportunity are much less likely than the abundance you’ll find in a rural area.

4. Property Values

Something most people don’t realize is that it’s fairly easy to figure out how much a hypothetical property will sell for in any given market.

When I started investing in land, it was VERY difficult to find comparable sales data for vacant lots, because websites like Zillow, Trulia and Redfin were a relatively new thing – and they hadn’t grown to the highly sophisticated systems they are today.

As I explain in this blog post, most areas within these systems make it very easy to find sales data going back 3 years or more on almost any type of property you can think of. I’ll show you how it works in this video…;

The beauty of this is that in many markets, Zillow allows you to see real, precise sales figures for what properties sold for in your county of choice. These numbers are much more accurate than the county’s “assessed value”, which is usually WAY out of bounds from reality.

When you have this kind of information at your disposal, there’s really no reason to wonder how valuable properties will be in your target market – because you can see exactly what they’ve been selling for (and what they’re currently listed for) over the past few months or years.

If you’re not sure what kind of market you’re getting into and whether the price ranges will be in the right place relative to your budget, a little bit of sales comp research will get you up to speed pretty quickly!

5. County Resources

Screen Shot 2016-06-05 at 3.52.51 PMIf you’re like most land investors (especially those who rely on delinquent tax lists, conduct self-closings and/or do their own title searches), something you’ll inevitably have to deal with is the county office. When you start working with these county office workers and their systems, you’ll learn pretty quickly that some counties are fantastic to work with and others are an absolute nightmare.

It’s not easy to call county after county, only to encounter CONSTANT resistance to your requests, poor communication on the phone and ridiculous costs for access to things that ought to be freely available online. There is a WIDE range of “helpful” vs. “unhelpful” out there.

How easy is the county’s website to work with?

Depending on what markets you’re working in – the county website can be a very helpful place to find the information you’re looking for.

Start by googling “County Name, State Name” of the area you’d like to work in. Click on the county website and poke around for a while.

  • Can you find the Treasurer’s, Assessor’s, Equalizer’s & Recorder’s information?
  • Can you find the county’s GIS mapping system (i.e. – does it even exist)?
  • Can you find the current and prior ownership information of any property? Sales prices? Legal descriptions? Parcel numbers?
  • Can you find current tax information on each parcel (taxes owed, tax paid, etc)?

In my experience – it seems like no two counties ever use the exact same system. Often times the information is there, but it isn’t easy to find (and/or it isn’t user-friendly to use) – which can make things a bit more tricky. Nevertheless, if you’re serious about working in any particular county, it’s definitely worth your time and effort to learn the county’s website and figure out what kind of information you do (and don’t) have at your disposal.

How easy is the county to communicate with?

This essentially boils down to “human relations” – but it does count for something. Most of the time, you’ll get a feel for this if/when you call the county Treasurer (aka – Tax Collector) to order a tax delinquent list.

As you’re talking to them on the phone, take note of a few things:

  • Do these people sound competent?
  • Do they seem to know what they’re talking about?
  • Are they able to legitimately help you with your request?
  • Do they understand what you’re asking for, or do they act clueless?
  • Do they show a willingness and desire to help you or are they unwilling to give you the time of day?

You’ll find the full range of attitudes in the various counties you talk to. It isn’t necessarily a “deal killer” when people are difficult to work with, but it can definitely enhance the experience when you’re dealing with people who are nice to work with.

When you’re just starting out, finding counties that will make things easy can be one of the most difficult obstacles to overcome (and a lot of people quit before they ever get past this initial phase). Sometimes you can get lucky and find a great county on your first try, but many times – you’ll have to try at least a few (perhaps several) before you find one that will help you connect the dots.

I hear from many people who encounter SERIOUS fatigue as they’re trying to find the right counties. When you’re starting from scratch, it can take a lot of work to figure this out – and the only way to get there is to start trying and keep trying. As you go through this process, remember that with every contact you make, you are learning crucial information about which counties WILL and WON’T be sustainable markets to work in…; and the only way to really learn this information is to start exploring what’s out there and take good notes about which counties make the process easy and which counties make it WAY harder than it needs to be.

6. Data Availability

real estate dataMany counties do a great job of making their public property information databases readily available online (or even through a paid data service).

This information is extremely helpful (some might even say it’s crucial) when it comes to pulling your direct mail lists and/or doing property research.

Unfortunately, some counties do an awful job (sometimes even a non-existent job) of making this information available to the general public.

GIS mapping data, delinquent tax data, property ownership information, assessed values, prior sale prices and comparable values in the surrounding area…; it’s all part of the overall need for public data. When you can get it, your job as a land investor will be MUCH easier…; but when you can’t get it (i.e. – if one or more of these components is either missing or extremely inconvenient to get), your job will start getting much more difficult.

Now, if you can’t get 100% of data you need, I wouldn’t necessarily say a county is a “lost cause”, but at some point, it will get VERY difficult to work in some markets when you can’t get easy access to the information you need.

Poor access to data doesn’t mean there are no opportunities there (if anything, there may be even more opportunities in these areas, because the lack of data makes it harder for everyone to work there), most of us have to draw the line somewhere and decide how much B.S. we’re willing to tolerate in the running of our business. If a county makes the data-gathering process difficult, this is definitely an issue you’ll want to factor into your decision.

7. State Laws & Regulations

In some ways, these can be some of the trickiest issues to maneuver, because even though most state laws are not detrimental to the land investing business, there can be some very random issues and nuances that arise in some parts of the country, and you’ll want to steer clear of them. Here are just a few examples…;

1. Tax Laws

One day when I was researching a potential purchase in the state of Vermont, I learned that this state imposes a land gains tax on anyone who buys and sells vacant land that isn’t part of their principal residence.

Essentially, if you flip a parcel of vacant land in a shorter time period than 7 years, there is a massive tax penalty you’ll have to pay. This is the kind of restrictive tax law that (although extremely unique and random) would make it extremely difficult to run a sustainable, profitable land business.

2. Seller Financing

Some states have laws surrounding seller financing that can make it much more expensive and time consuming to repossess a property if/when a buyer defaults on their payments (something I explain in this blog post).

This doesn’t necessarily make it impossible to run your business there (because there are usually ways to mitigate these restrictive rules), but if you’re planning to rely on seller financing as a big part of your business model, it can be a potential drawback to take into account if you’re working in those areas, and you’ll definitely want to familiarize yourself with the specifics of how seller financing works in your state of choice.

3. Tax Sale Overages & Excess Proceeds

Collecting excess proceeds (aka – tax sale overages) has never been part of my business (because it’s a very time-consuming, luck-oriented way to make a profit), but some land investors like to weave this strategy into their overall business model.

Unfortunately, nearly half the states in the U.S. don’t allow for the collection of excess proceeds, so if you’re planning to apply this strategy to collect an alternative source of income from your properties, this is something you’ll want to be aware of, so you can stay OUT of the states where collecting overages isn’t even allowed.

4. Title Agencies vs. Closing Attorneys

Many states (particularly, on the eastern side of the U.S.) have laws that require all real estate closings to be conducted by real estate attorneys, rather than title agencies. This essentially doubles the normal cost of closing deals in those states. Case in point…;

My title company in Michigan charges a standard closing fee of $500.

My closing attorney in Alabama charges a standard closing fee of $950.

They’re both doing the exact same thing. The only difference is that Michigan allows title agencies to close deals, whereas Alabama only allows real estate attorneys to handle closings.

Now, if you’re closing on a $100,000 transaction, your profit margin will probably be big enough to cover the slightly higher closing fee – so in many instances, this isn’t a deal-killer. However, if you’re closing on a deal that costs $1,000…; this 2x higher closing fee will start to become more problematic.

Identifying Issues

Most of the time, it’s fairly easy to figure out which states are going to create obstacles and which states won’t, but every so often (like in the case of Vermont, mentioned above), identifying these problems isn’t always straightforward. When you learn about these issues, take note of them and factor these issues into the overall viability of running your land investing business in that market.

Most issues won’t mean you CAN’T do business, but if you keep encountering problems from several different angles…; realize that these issues aren’t likely to go away. In most cases, they will consistently be there, working against you and your goals…; and if the situation is bad enough, it may be worth looking someplace else.

Putting it All Together

As you explore more and more counties across the country, you’ll eventually start to learn that some markets are best to avoid. Not because they’re impossible to work in, but simply because working in them requires more trouble than they’re worth.

I’ve found that in the end, I don’t really “need” more than 6 – 8 solid counties at my disposal. When I finally nailed down which counties would cover me from most (if not all) of the issues listed above, life got MUCH easier, because I could continually work and rework these counties, over and over again.

Keep searching until you find those counties.

In my home state alone, I’ve attempted to work in approximately 30 different counties. Of those 30 counties, no more than 10 of them were the kinds of counties I actually wanted to go back and do repeat business in. Granted, if my life depended on it…; I could probably make it work in almost all of those 30 counties, but only 10 of them made the process easy and repeatable for me.

The Hidden Value of Inconvenience

Lastly, keep in mind – when a county appears to be “difficult” in some way (perhaps you can’t get the list in the right format, or the county has a very poor GIS mapping system online)…; while this does create some challenges for people like you and me, it creates the same challenges for every other competing real estate investor looking for deals in that market.

Vacant land is known for it’s overall lack of competition compared to most other real estate investing niches – but when you can find a county that has virtually never been touched (because of it’s various barriers to entry), the results from even a mediocre marketing effort in these counties can be quite powerful.

Is it hard to work in counties that are inherently difficult? Of course…; but there are also some side benefits that come with the territory when nobody else is willing to do the heavy lifting.