Avoid Land Mistakes: Zoning, Flood Zones, Title Issues, and Smart Land Investing

Joshua Kagan (00:00)

Well, you know, I have a 15-year-old nephew, okay, who is interested in real estate. And what I’m telling him is like, as soon as he can, maybe when he’s 18, buy the cheapest thing that he can buy and roll up his sleeves and do it because I think many of us fall into the trap of analysis paralysis and spending a lot of time on whiteboards and really trying to create the perfect mousetrap or whatever. For me, at least when I’ve done that, that’s been from a place of fear.

Michelle Kesil (02:07)

Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Joshua Kagan, who is a land investor focusing on helping people get into the land investing business. So really excited to have you here today, Joshua.

Joshua Kagan (02:29)

Thanks, Michelle. It’s great to be here.

Michelle Kesil (02:30)

Great, let’s dive in. So for those new to your world, can you share what your main focus is?

Joshua Kagan (02:37)

Yeah, I have a land arbitrage company called Friendly Acres Land where I buy land off-market through a myriad of ways I could go into. But I buy it pretty inexpensively. And then I sell it to folks who really want the land, either for investment purposes or to one day build a house. It’s all rural vacant land, pretty much one county away from a major metropolitan area. And I provide them the seller financing with terms of up to 10 years to be able to acquire this land. So yeah, that’s kind of a high-level nutshell of what it is.

Michelle Kesil (03:13)

And what markets do you operate in?

Joshua Kagan (03:16)

Well, anywhere in the United States, primarily I’ve had the most success in the Southwest and the Southeast. So markets ranging from North Carolina to Tennessee, Arizona, New Mexico, Nevada, Colorado. I did a really good deal recently in Pennsylvania, but there’s always that age-old dilemma between breadth and depth. And I’m really actually trying to do fewer states and fewer counties and go deeper into just a handful.

Michelle Kesil (03:48)

And how did you get into land investing?

Joshua Kagan (03:52)

It’s a great question. So for folks who don’t know me, among other things, I co-founded Bonfire Capital. It’s a tokenized commercial real estate syndication platform. And unless you’ve been living under a rock, you would know that in 2022, interest rates doubled and commercial real estate transactions fell off a cliff. And we thought with Bonfire, we were going to be sort of providing rescue capital to a bunch of underwater commercial deals. And that thesis didn’t play out. So it was 2024, and with Bonfire, we hadn’t done a deal in a year, and it just wasn’t moving quickly enough.

And I thought to myself, “God, I gotta figure out what I’m gonna do next, because this feels like it’s stalled.” And I was going to Europe, and I always bring a bunch of books with me. I always bring five books to Europe. And I saw this book called Dirt Rich. And it was about land. I was like, “Huh, that’s interesting.” So I took it to Europe and I read it and I was like, “Huh, land.” And then I kind of started diving into it and saw that there are a lot of different arbitrage opportunities because land is so inefficiently priced relative to residential real estate or even commercial real estate. So I just started, you know, getting really curious and going down the rabbit hole. And I thought—I am dyslexic, so I don’t learn well from reading textbooks and manuals; I learn by doing and by making mistakes. I was like, “I’m going to start putting out some mailers and see what I learn,” and kind of the rest is history.

Michelle Kesil (06:13)

Awesome, what have been some of the biggest obstacles or hurdles that you had to overcome and learn from in this journey?

Joshua Kagan (06:20)

Oh my God, I’ve made so many mistakes. I bought properties where I didn’t understand the zoning. Like, I thought because there were houses right by it that it was zoned residential, when the property was zoned industrial. I got lucky that I was able to sell it for a profit still. I didn’t pay attention to things being in a FEMA flood zone and the implications of that. Or, you know, in the beginning days, I used paralegals to do chain of title analysis because I wanted to save money by not paying title companies to do title insurance. And there’s this British expression, “penny wise, pound foolish,” right? And I bought things with clouded title that I didn’t realize.

I mean, just a lot of dumb mistakes, if I’m being honest. It’s part of why I wrote my book, The Smart Land Investor, which was basically to help beginner investors not make the mistakes that I’ve made. Right. So yeah, a lot of obstacles. And then I have obstacles now—now that we’re scaling, I still am too dependent upon certain things. The systems that got me to where I am now are not the systems that are going to get me to the next level, right? But that age-old question of how much time to not transact and spend time to create those systems at potentially the expense of doing deals. I mean, that’s just a scaling question, but it’s an obstacle that I’m facing right now. Yeah, I can go in any of those directions, but I’ve made so many mistakes, Michelle. It’s very humbling.

Michelle Kesil (08:00)

Yeah, of course. And from the lessons that you’ve learned and extracted, what would you share with someone that’s completely new to this industry and potentially wants to get started?

Joshua Kagan (08:14)

Well, you know, I have a 15-year-old nephew who is interested in real estate. And what I’m telling him is like, as soon as he can, maybe when he’s 18, buy the cheapest thing that he can buy and roll up his sleeves and do it because I think many of us fall into the trap of analysis paralysis and spending a lot of time on whiteboards and really trying to create the perfect mousetrap or whatever. For me, at least when I’ve done that, that’s been from a place of fear. But the entrepreneurs I know who are most successful are ones who have a bias towards action.

So I would say, you know, try something. Don’t be stupid, right? Don’t lever up and buy something you can’t afford, but try to see how you can get on a pathway towards doing your first deal. Because for me, I learned more on my first deal—which was a foreclosure in the San Francisco Bay Area in 2010, it was in the Berkeley Hills and it was a short sale which took nine months, and then I bought it, I rented it out, I fixed it, I refinanced it—I learned so much from that one deal that it had an exponential impact on the rest of my life. And so I would just say, figure out where you’re trying to get to and take a step forward and not try to over-engineer what perfect looks like, because we oftentimes can let the perfect be the enemy of the good—or the good enough, I should say.

Michelle Kesil (10:25)

Definitely. And how do you find the land? How does that process work in finding those leads?

Joshua Kagan (10:32)

Yeah, so I have a whole methodology around where I target. I look at counties that have a lot of what I’m going to call velocity, and how I define that is: are there a lot of sales happening, ideally in the last 90, 180, 365 days? And are there more sales in the last year than what’s currently on the market? That’s called the sell-through rate. I’m always looking for areas that have above 100%, meaning that there are more sales than what’s for sale. To me, that’s a really important metric of demand. I look at things like days on market, number of counts, et cetera.

Then I start diving into zip codes and areas within that. I use different data platforms to give me that information. And then I use a different data company to tell me all the names of the people in those areas, how long they’ve owned it, the slope of those properties, is it in a FEMA flood zone, et cetera. And I really hone in on a subset of people to reach out to. And I get about a 1% response rate and then, you know, transact somewhere around 0.2% to 0.3%. But yeah, it all stems from looking at demand.

Michelle Kesil (11:52)

Right, understood. And what does that process look like? So you find the land, you purchase it, then what comes next?

Joshua Kagan (12:02)

Yeah, so I put out these letters. People call me and we have a conversation. I learn more about the property, if there’s some sort of story about something that might be wrong with it. We do our own diligence; we look at proximity to utilities, water, et cetera. And then we close through a title company.

We then sell it one of two ways: either with a real estate agent on the MLS, or we sell it DIY style—do-it-yourself via like Facebook Marketplace or Craigslist, land.com. There’s a variety of bespoke land platforms out there where we sell. And there are trade-offs; I mean, there’s no one right or wrong way. In the last couple of years, land investors will state across the board that demand has slowed, especially sort of the post-COVID hangover. People who were before able just to live anywhere and work from anywhere are now having to go back into offices or feeling more anxious about their careers because of AI. It seems to be harder to dispose of land. So I think people in my shoes are having to get more creative about how they’re thinking about dispositions. But then, yeah, we sell it—about 80% of our sales happen through seller financing. We have a third-party loan servicer that we use to help service it who’s partnered with the banks and the credit card companies, et cetera. So yeah, that’s kind of the process.

Michelle Kesil (13:43)

Sure. And what are you most focused on scaling through this process?

Joshua Kagan (13:52)

Yeah, I’m focused on arbitrage right now. And what I mean by that is finding those areas where I can buy—I’m just going to use round numbers—100 acres at a time and pay a certain price per acre, and chop them up into smaller parcels, like call it 20 acres, and sell it for a higher price per acre. And that way, my offers to the sellers can be at market rates. I can buy off the MLS, but I can capture that price-per-acreage arbitrage of the child parcels relative to the parents. And we have a whole strategy on that.

There are a lot of complex factors, Michelle. You have to really understand county subdivision rules because one thing that’s very interesting about the United States, for better and for worse, is how incredibly local it is and how every single county is in some ways like its own fiefdom. It has its own rules and regulations that sometimes, you know, supersede state law, sometimes don’t. And then you have city rules that can supersede the county and the state and the federal. I mean, it is a smorgasbord of understanding regulations, and not all these counties keep their regulations in a PDF on their website. So you have to call and you have to get things in writing. It’s complicated, which I used to think creates an opportunity because fewer people want to deal with that brain damage, if you will. But I see a great opportunity in subdivisions and providing some infrastructure and repositioning properties and things of that nature. So that’s kind of where we’re going right now.

Michelle Kesil (16:19)

Amazing. And what makes you prefer land versus real estate?

Joshua Kagan (16:26)

When you say real estate, you mean like residential or commercial? Yeah.

Michelle Kesil (16:28)

Sure, like more buildings.

Joshua Kagan (16:31)

I’d say a number of things. Competition is way less. You know, I live in Denver, and if I were to go to some sort of Denver real estate meetup and there are a hundred people in there, okay, my guess is like—I’m just making this up—but, I don’t know, 40 of them are going to be house flippers, and 40 of them are going to be trying to buy apartments, and 19 of them are going to be doing something in the commercial space, whether that’s office or industrial or data centers or whatever. And I’d probably be the only one who’s in land investing.

Now, I have competitors for sure, but it’s not a sexy part of the business. I had a friend—I was in Chicago this weekend, and a friend of mine was like, “I saw one of your postings on Facebook. You’re selling X dollar parcels.” And I walked him through it; I walked him through the economics. He was like, “Whoa, like, I did not understand that.” I’m like, “Exactly.” And that’s great, you know? It doesn’t have to be sexy for it to be profitable. And I like the fact that it’s so hyper-niche that it’s not inviting institutional capital for the most part, at least at the scale that I’m playing in. So the competition tends to be a little bit less professional or organized. I’m not saying I don’t have great, wonderful competitors—I do—but by and large, it’s still very niche, so it feels like there’s a lot of opportunity.

Michelle Kesil (18:02)

And what are the opportunities you’re most excited about or looking forward to?

Joshua Kagan (18:09)

Well, one of the things that I did recently was in April, we published The Smart Land Investor book, and it was the number one new book in real estate on Amazon. And we’re giving 100% of the profits to a non-profit land conservation fund. Why I wrote it was, you know, a lot of people who buy from me on Facebook are just trusting me. They’re trusting me to disclose what I know about the property, they’re trusting that I’ve done chain of title right, et cetera. And I wanted to write a book that empowers people who have never bought land before and gives them a step-by-step guide on what to look for, how to think about demand, and how to think about doing due diligence—because due diligence on land is different than due diligence on a building. It’s very different in a lot of ways. And so I’m excited for people to feel empowered to ask better questions and not get ripped off. So that’s something that’s been extremely rewarding, and I’m excited to see how it impacts other people.

Michelle Kesil (19:19)

Yeah, absolutely. And how did you learn all about land investing? Has it just been through trial and error?

Joshua Kagan (19:27)

Mostly error, a lot of trial. As I said before, being dyslexic means that I don’t learn, I think, the way that typical people learn. And I, for better or worse, have to learn by doing. So I don’t know, it’s just tricky. Like, I tried with my book to lay out sequentially how I analyze a deal kind of soup-to-nuts, and sprinkle in a lot of anecdotes about mistakes. But, you know, it’s written by a dyslexic, so who knows how straightforward it is.

I think, Michelle, my superpower—and I think we all have one, by the way—is the capacity to see a big picture and have a vision of something, a goal if you call it, and then hone in on the details that will get there. And so I think my business is all about toggling between sort of where is this business going in the next 18, 24, 36 months, and evaluating on a quarterly basis, monthly basis, weekly basis, are we meeting our objectives towards accomplishing that?

Michelle Kesil (20:46)

Well, as we begin to wrap up here, if someone wants to reach out, connect and learn more, where can people find you and connect with you?

Joshua Kagan (20:55)

I’m available. You could email me at joshua@friendlyacresland.com. You can find me on LinkedIn if you just go to Joshua Kagan. I’m very responsive; you can find me in either of those places.

Michelle Kesil (21:14)

Well, appreciate your time and your story. Thank you so much for being here.

Joshua Kagan (21:18)

Thank you, Michelle, appreciate your time.

Michelle Kesil (21:19)

And for those tuning into the show, if you got value, make sure you’ve subscribed. We have more conversations with operators like Joshua who are building real businesses and we’ll see you on the next episode.