"We Temporarily Interrupt This Lesson for a Commercial On Buying Land..."

Was in the office late tonight working on a mailing going out this week, when I took a break to watch the news.

Instead of the regular 24/7 news programming, I clicked on to an infomercial advertising an upcoming auction for LAND.
And I think I got a peek into life on MARS :)

People jumping up and down about buying land... "10 acres, 40 acres, 100 acres!!!"

All, of course, going to the highest bidder.

YES! People excited about taking this "wonderful ride of their life" One person even comparing the opportunity to the "RUSH OF VEGAS"

What they failed to say, of course, is just where this wonderful land is located - Oops.

They are having a feeding frenzy and now along comes Sherman to splash some COLD WATER on the party.

Now, please do not get me wrong, I LOVE LAND. More specifically, investing in land.

But the #1 rule of investing in land is that: LAND IS INHERENTLY WORTHLESS! Land gets its value not from being land, but in what you can do with it.

Not saying the people I saw on the infomercial were getting FLEECED, no - not me. But they are probably correct in that they are about to be taken for a ride.

Land has transactional costs, holding costs and more importantly; It appears that the same company that was arranging the auction was also arranging the financing for the buyers. (Is it possible that the promoters are simply going to get a bunch of different fees for selling worthless dirt Oh my...) Not saying it is, but should this land prove to be "worthless", then the folks who bought in will ultimately have probably paid: Real estate commissions, Auction brokerage fees (the auctioneer gets a fee in addition to real estate commissions and normally it is the buyer who pays their fee, not the seller), legal (settlement) fees, interest payments and of course property taxes to the local municipality. In fact, the likely outcome is that after years of paying property taxes on land that has no value, the buyers will simply default and it will be sold at tax-sale (umm another late night opportunity). Actually, John Beck's stuff is not bad if you have not seen it. But back to this land sales program. It could be years before these uninformed buyers even realize just what a wild ride "Mr. Toad" has taken them on.

Real Estate investing is fun, real estate investing can be lucrative, and land (as a sub-category) can be as profitable and fun as any aspect of real estate investing.

In December we will be hosting a 4 day Commercial Property Summit, the correct way to purchase development land will be covered, but until then just remember this - Land is Inherently WORTHLESS. Land gets its value from what you can do with it. So step one in any purchase of land is to figure out what the Exit Strategy will be, then tie it up long enough to confirm that your plan is correct. Unfortunately, buying land (all cash, or with financing) as an impulse buy, with no clue as to what you will do with it cuts against the grain of intelligent real estate investing. The guy in TV got it right - its as close to Vegas as you can get, with Odds also stacked in favor of the house.

What I saw in that brief (but revealing) infomercial was not real estate investing at all - it was symptomatic of a "Get Rich Quick, and the Heck with the Details" mentality that has is evidence when an investment area has reached a peak. We are now in the phase where the idiots come to the party with their entire life's savings in the back of the truck -"looking for someone to give it to".

I think it would be interesting to go to one of these events, just for the entertainment value - But Invest in yourself, invest in learning how to do this real estate thing - the right way, But keep your money in the bank (or your self-directed IRA).

One guy's opinion.

Back to the 11 Strategies - tomorrow...