Today, we’re talking to real estate investor Dan Haberkost, who focuses on a niche area of the market. In addition to investing in real estate, he buys and sells parcels of land in southern Colorado. He describes himself as a wholesaler but for land. This is a new area for us and one we’re excited to explore.
Dan came on the podcast to discuss how his business works and how it allows him to invest in buy and hold real estate in the Colorado Springs area. To hear more of our conversation, listen to the podcast or check out the YouTube video.
- Listen to the podcast “#81: How Is Buying Land Different from Buying Real Estate?” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
How is Buying Land Different from Buying Real Estate?
Dan buys and sells between 4-8 parcels of land a month in southern Colorado. Land is a very transactional business. Unlike traditional real estate investments, it’s a simple asset and doesn’t require a rapport with buyers. Generally, land owners just want to verify they’re not being scammed. They’ve typically owned the land for a while and simply want to get rid of it.
Because all of the information about the land is a matter of public record, due diligence is minimal.
What Kind of Land Can You Buy?
Many people who buy land are looking for large, recreational acreage, such as places people can park their RVs. However, Dan sticks to smaller infill lots.
Infill lots are those that have already been subdivided and have utilities and roads. The largest parcel he’s purchased is about 1.6 acres. Generally, someone already put a lot of time and effort into getting it to this point, and Dan has the option to either build on the lot himself or sell it to another builder.
How Can You Finance Land Purchases?
Dan usually buys the lots with cash, either from investors or, more typically now, his own. Unless you plan on building your own house on it, you generally need private money opposed to a conventional bank loan.
Because most of the sellers have been sitting on these lots for many years, it’s sometimes possible to get owner financing. There’s generally less urgency with land sales because the owners have been sitting on the land for so long that they aren’t pressured to act quickly.
Who Sells Land and Why?
Typically, developers sell lots within subdivisions to other developers, either smaller mom and pop companies or larger, nationally known ones. Sometimes, they attempted to develop the subdivision but were unable to.
For example, in the northeast side of Pueblo by the college, there is a lot of land that was bought by Canadian developers who had it annexed into the city for utilities. Before they could finish developing it, the 2008 recession hit and the real estate market crashed.
Some of the undeveloped land has been sitting for even longer. In Pueblo West, there is a failed subdivision from the 1970s. At the time it was created, there wasn’t enough demand for it, but now more people are interested in moving into that area.
What Can You Do with Undeveloped Land?
Dan either builds a house on the lot and sells it, or he sells it to another developer. The ideal lot to build on is flat and sitting between other houses. His ultimate decision depends on how much he can get for the lot and what’s going on in the market.
Although Dan is a real estate investor, he doesn’t rent out the homes he builds. The costs are too high to hold onto the property. However, if real estate prices continue to skyrocket, it’s possible renting the homes will make financial sense in the future.
How Do Environmental Issues Impact Land Deals?
Water is an especially sticky issue in Colorado. In Fountain, a town south of Colorado Springs, they put a moratorium on new water taps.
Pueblo West recently made a deal with Pueblo proper to provide more water taps for a $1500 fee per tap. This is a more forward-thinking approach than other places that wait until they’re out of water to take action.
Homes in areas where there are restrictions tend to go up in value. Dan is building a 3 bed/2 bath 1400 sq ft home in Pueblo West that typically sells for $250K. Because development restrictions are constricting supply, he expects the home to sell between $385K-400K.
How Can I Get Involved in Land Sales?
For anyone interested in getting involved in this market, Dan recommends finding a subject matter expert who can mentor you. Dan realizes in hindsight that many things would have been easier if he’d talked to someone who knew more than he did. Finding someone who can teach you what they know will save you time and money.
Connect with Dan
If you want to learn more about Dan’s land business or his real estate investments, connect with him on social media. His website is: https://danhaberkost.com/. You can also find him on Facebook and Instagram. In between pictures of mountains, you can find out more information about the deals he’s doing.