Wholesaling homes has become a popular entry point for new real estate investors, but wholesaling land offers a unique financial opportunity with its own upside and challenges. Wholesaling land works nearly the same way as wholesaling houses. Instead of finding a buyer for four walls and a roof, you’re dealing with empty plots of land.
While it’s not as widely discussed, mastering the art of land wholesaling can lead investors to profitable deals with less competition. In this article, we’ll break down everything you need to know about wholesaling land, including its pros and cons, and answer whether or not it’s worth adding to your real estate investing playbook.
What is Land Wholesaling?
Land wholesaling is the method of finding a piece of land at a discounted price, securing a contract with the seller, and then selling that contract to a buyer at a profit — without ever actually purchasing the land. In other words, it’s an investment strategy to make money by acting as a middleman between motivated sellers and buyers in the market for vacant land.
So, how exactly does it work?
Let’s say you find a person in your town willing to sell a plot of land they own for $50,000. After researching comparable sales and identifying that area as “up-and-coming,” you determine that land could sell at a higher price. So, you secure a contract with the seller, giving you the right to buy the land at $50,000.
Instead of buying it yourself, you find a developer interested in the land and offer them the contract for $70,000. The developer agrees, and the deal goes to closing. At that time, you pocket the $20,000 difference.
Home Wholesaling vs Land Wholesaling
The process of wholesaling land is nearly identical to wholesaling homes, but a handful of not-so-obvious factors between the two strategies are important to highlight.
Land valuations are more difficult
In general, land doesn’t have comparable structures or renovation costs to help guide pricing. That means you must rely on zoning, future development plans, and overall location to assess values. Determining a value to pitch to your buyer requires additional legwork and isn’t as cut and dry as a house deal.
Fewer land buyers
Because land deals involve a lack of immediate use, potential zoning restrictions, and limited short-term profit, there tend to be fewer buyers. Additionally, buyers often face costs to make the land usable—installing utilities, building out infrastructure, or handling environmental cleanups.
Longer to sell
Land generally takes longer to sell because it’s less in demand. The main investors in land are developers, who tend to plan out projects on a longer timeline, leading to a longer transaction.
Zoning and land use restrictions
Land can only be used for what fits into its zoning. Yes, you can apply for variances with your local government, but zoning restrictions naturally make land deals trickier than home deals.
The Land Wholesaling Process
Every deal is different, but if you’re interested in land wholesaling, these are the general steps you take to land a deal.
- Find vacant land. Physically drive around neighborhoods or rural areas and watch for “for sale by owner” signs or plots of land that appear abandoned or neglected. Scouring public records for landowners behind their property taxes is also a worthwhile strategy.
- Assess Value. As mentioned, assessing land value is trickier than home values. First, you must identify the land’s zoning and weigh it against nearby developments. That can help you come up with potential future development to put on the land and shape its value.
- Contract With The Seller. Negotiate a purchase price with the seller and include an assignment clause in the contract, which lets you transfer the deal to another buyer.
- Find a Buyer. Find a buyer willing to pay more for the land and assign the contract to them for a fee. Investors tend to wholesale land to developers and home builders with experience purchasing land.
- Assign the Contract. At closing, you’ll pocket the difference between the seller and the buyer you found. You never buy the land — you simply profit off the price difference.
Pros and Cons of Wholesaling Land
Like any real estate investing strategy, there are pros and cons to weigh before jumping into a land wholesaling deal.
- Pros:
- Lower competition compared to wholesaling houses. There are simply not as many people wholesaling land and contacting sellers about land they own. The market is wide open.
- Wholesaling land is a simpler process (no inspections, repairs, or tenants). It eliminates the common complications associated with wholesaling homes.
- Potential for solid profit margins. Since there is some ambiguity with determining market value of land, there is potential to find great deals that fit developers’ criteria and earn large profits.
- Cons:
- Land can be harder to sell and may take longer to find buyers. In general, there’s less demand and fewer buyers for vacant land.
- Lower profit margins in some cases compared to houses. Land is valued at lower prices which generally translates to lower assignment fees.
- Limited demand for certain types of vacant land. Restrictive zoning plays into this, making an already small demand pool even smaller.
Wholesaling Land FAQs
Is Wholesaling Land to Developers a Good Strategy?
If you’re scouting investments in an area with obvious growth and demand for new projects, wholesaling land to developers can be a very lucrative strategy. It requires, however, a strong understanding of what developers are looking for to bring their projects to life. Also, consider home builders, who are always keeping their eyes out for a large piece of land that meets their requirements.
How do I find my first buyer for vacant land?
Real estate investors new to the game should network with real estate developers, home builders, and other investors actively seeking land in your area — the more people you know, the better. As you secure contracts, use online platforms, such as Facebook Marketplace, Craigslist and national real estate investment forums to market your property.
How much profit can I realistically make wholesaling land?
You can expect to make between $3,000 and $10,000 per deal, according to industry experts. Higher margins and bigger paydays are possible in hotter markets, just as lower profits are also a reality in cooler markets.
Are there any risks to wholesaling land?
Longer holding periods are the biggest risks when wholesaling land. Since there is lower demand, you could be stuck waiting for a buyer, holding up the seller and tying up your resources longer than expected. This is why it’s imperative to have a longer due diligence period in your contract with the seller. Depending on the deal, you may need 30 days or more to source an end buyer.
Another big risk is environmental concerns that could pop up after the fact. Your buyer may contract an environmental test on the land, only to discover it’s contaminated — potentially making it too costly to move forward with the deal.
Ready to Jump Into Land Wholesaling?
Now that you’ve learned the ins and outs of land wholesaling, you can decide if it’s the right strategy for your real estate investing career. There is less competition in the land wholesaling space, but there is also less demand, which can make deals difficult to come by. Still, as you develop a network of developers, home builders, and real estate professionals in your area, you’ll better understand the market and increase your chances of finding profitable deals.
With patience and persistence, land wholesaling can become a valuable part of your real estate investment strategy, offering solid returns without the complexities of traditional property wholesaling.
VestRight Land Investing
For more resources and training, we recommend checking out our review of Cody Bjugan’s VestRight training program to see if it’s a good fit for you. Cody has been in the land flipping business for over 10 years and even offers a partnership program if you bring him deals.
Cody Bjugan’s VestRight coaching program can be a great fit if you’re patient and interested in a low-competition side hustle. However, if you prefer quicker returns, you might want to consider flipping houses or wholesaling real estate instead.