This episode addresses recurring red flags appearing two to three times daily in deal submissions, focusing on properties with recent sales (under five years), active mortgages, LLC ownership, and wetlands complications that signal sellers trying to offload problem parcels to unsuspecting buyers.
Key Takeaways:
- Recent Sales Plus Mortgages Equal Problems Properties purchased within the last five years that still carry mortgages (especially when owned by LLCs) strongly indicate underwater sellers or failed development plans being passed to greater fools, requiring extreme skepticism regardless of asking price.
- LLC Sellers Demand Extra Scrutiny Corporate entities tend to be more sophisticated operators who bought with development intentions, and when they’re exiting quickly it signals discovered problems (access, wetlands, zoning) they’re trying to shift onto less informed buyers.
- Wetlands Credits Destroy Deal Economics Properties where developers already sold buildable acreage but are now offloading wetlands-heavy parcels likely discovered that federal wetlands credits cost far more than anticipated, making development economically impossible.
- Multiple Parcels With Single Mortgages Create Lien Confusion When LLCs acquired several properties under one loan and now want to sell individual parcels, the lien structure becomes unclear and risks buyers not receiving free-and-clear title even after paying full price.
Listen to the full episode for the complete red flag checklist including specific examples from recent deal submissions and why staying power in land investing requires constant vigilance against problem properties.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Uh, today I wanted to comment on a situation that we see routinely, even, uh, I think two or three times a day, um, on the land daily diligence, uh, Facebook live session, um, I I reviewed like upwards of eight or nine parcels today. And this came up at least two of them, maybe three. And then there was another
property that this came up with on AJ’s group earlier this week and that is when there is seemingly an active mortgage associated with a property in combination with a more recent sale that the property underwent and to complicate matters even further is that when the buyer is an LLC or an Inc. I get even more skeptical about
these properties. Actually, let’s complicate it even further. Then there’s also sometimes when there’s multiple parcels involved and one of these companies want to sell off one or two pieces that might be the least viable in terms of development, but still might have an associated mortgage on top of it. So you’re not
exactly certain what that lien situation is going to be if you were ever to try to purchase the property free and clear in any case. So to me, mean, just knocking out those points one by one, I know I comment all the time about properties that have been bought within the last five years or so. Very, very skeptical about buying those properties, whether
the seller is getting a profit from your offer or you’re buying them out at the price that they might have bought it at or even below. It’s possible they’re just distressed enough that they want to exit it or there’s just like something still wrong with the property. So I’d be very, very cautious of that. Yes, of course, if you are looking to do much more substantial value add work.
like a much larger parcel, carving it up into various child parcels, or if you’re possibly doing horizontal or vertical development, I know that’s not in the cards for 99 % of people within the land flipping investing industry. But that is something you could do, or even some potential value add, throw a driveway on.
clear out an area for a house. I mean, that can add some, like really affecting the price per acre a lot, it’s usually not as much of a boost in many areas as you might expect. Like you really have to do aggressive research to figure out what’s worth it or not when it comes to doing some more of that value add work.
Outside of you know kind of full vertical construction or trying to force appreciation from a child parcel side some areas It works a lot better some not So that is definitely one piece again that you always got to be concerned about And then yeah mean if there’s a mortgage associated with the property and they’re trying to move on from it quickly You see they bought it within the last year or two again, or you know sub five years Decent chance they might have even gotten underwater themselves behind on payments and
the chance that you’re going to be able to purchase low enough to still make it worth your while. Again, assuming you’re not doing like some major value add for the property and still be able to purchase the property free and clear. Even if the mortgage is coming out entirely out of the proceeds in the sale, more than likely, if it’s a significant mortgage, the seller might.
still have to end up paying outside of their own pockets or move the lien regardless. So a lot of the times I’m very skeptical about that. Especially if it’s more of like commercial property or again owned by an all C or an ink. You know, they tend to be more sophisticated buyers. You know, the higher the price point of the properties, the more sophisticated buyers you tend you tend to encounter.
but that’s even like especially true for LLC and inks. know, I don’t really ever deal with sellers on a kind of direct communication perspective, but I’m always skeptical about the information that they’re providing. And, you know, you want to make the assumption that there’s a lot of honest operators just in any industry that you’re in. But, you know, you always have to double check.
Anyway, especially when I see some of those warning signs, okay, being sold by an LLC, recent sale, maybe a mortgage on it or a combination thereof. I’m going to want to do extra homework to ensure that I’m not being sold a lemon for the particular deal that I’m exploring. you know, this company bought something, thought they could do something with it, and now they’re trying to pass on.
a problem to somebody else like finding a greater fool is always a risk within this business. And then like kind of that worst combination I saw earlier today was, you know, Sim LLC that had bought, you know, over a million dollars worth of commercial and like higher density residential property. A lot of it was within wetlands and flood zone. seemed like it could be developed on, but it appeared to be, you know, where there were some
conservation easements added or not necessarily easements, you know, kind of dedicated acreage within wetland, some of the wetlands areas that might’ve allowed some of the acreage to be developed. You know, if you want a longer discussion of this, check out that recent podcast that, you Nari Tipster, Seth did with Dave Hansen about having to like purchase.
wetlands credits in order to build on wetlands, know, these federally, protected grounds. so, my guess is that, you know, they had bought this property within the last year, this corporation, they already sold some acreage that seemed to been built on some of the wetlands, but then they were trying to offload, the most wetlands impacted acreage out of all of it. And
probably try to shift the problem onto somebody else. Cause maybe the wetlands credits are like way too expensive in the area or they just didn’t understand, didn’t do their own DD about building on wetlands even before they bought it. And now are trying to get out from a problem they created for themselves. That’s where my mind starts to go. You might think, yeah, Christian is interesting, but like, we’ve been doing this a long time and you just, have to be asking these questions.
because even with honest operators, it’s hard enough to get land right anyway. like never forget, like this is there’s a reason again, people turn in and out of this industry all the time because to have staying power, it is difficult to do well. you know, market conditions, not withstanding. so. You know, you, you gotta be on top of things no matter what. from the most simple type of.
uh, transactions to some of these that are like potentially more complex and have like some major red flags associated with them. Like, you know, when you’re doing these kinds of spray and pray, uh, target, you know, um, targeted outreach to, uh, you know, various, um, owners of land around the country, like you’re going to get all kinds. Like some people are just, okay, yeah, I just, you know, finding your greater fool. Like I just mentioned before, so
Got to be aware of that. So this topic comes up routinely. I’m sure I will return to it many more times in the future, but wanted to share a few more examples and reminders of what to look out for just because people continue to send deals like this to us all the time and ones that I think are like obvious major red flags, like run away as fast as you can. But if you’re newer to the industry, you might still be getting tripped up there.
I’m going to continue to try to educate as much as possible. Hopefully this is helpful. Serious Land Capital for any of your funding needs. I mentioned Land Daily Diligence Facebook group for zero cost review of your land deals and LandPricer.ai. I was doing a lot more work on that earlier. Script updates to come. Most simple and accurate way to price land. Beta testing ongoing. Take care, subscribe and share. Bye.
