Welcome to my 2021 Wrap-up Income Report for our land flipping and land development business.
This report will document how we did in our first year in this business and will serve as a foundation for future reports.
I will be writing one of these reports every month so we can all track our progress.
As you’ll see below, we resold our first property this past March (2021), and it was just the start of a brand new profitable and fun business.
So why in the world would I publish a report like this for the whole world to see?
I’ve got two big reasons for doing this:
#1 – Motivate ourselves to improve our business (nothing like putting it out there to the public to drive progress).
#2 – Motivate you! You’ll see what’s possible and learn valuable lessons (at my expense) that will allow you to become a better real estate investor.
Without further delay, let’s get into the good stuff.
Here are the 2021 Statistics:
I consider 2021 a very successful first year in the land flipping and development business. First, I was in an intense learning mode for most of the year. In fact, I still feel like I’m learning new things each day.
When I started this business, I didn’t know what to expect. I’ve always got big goals, but I didn’t even know what was possible. Few people showed any real details of the deals they were doing or the actual progress of their businesses as a whole.
All I had was anecdotes, like: “I bought this property for $10k and sold it for $30k”
That was great, but I didn’t know the whole picture. I’m a little skeptical when I hear stuff like this because I wonder if they are just talking about their successes and leaving out the deals that didn’t go well. It’s kind of like a gambler when they boast about all the jackpots they’ve hit. But, never talk about the times when they went home broke.
2021 was about proving to myself that I could do it and giving myself a glimpse of what I can accomplish in the land flipping and development business.
Before we get into the numbers, I will lay out a simplified explanation of how this business works. This will help to give you a little bit of context into these numbers in this report.
Here’s how the business works:
- We send letters (actual offers) to land owners.
- Some landowners respond and are interested in selling.
- We come to an agreement on the price and work towards closing the deal.
- In the meantime, we research the property in depth by sending out a photographer, calling the county/city, getting an opinion from a local broker, and many other little things on our checklist.
- Assuming all looks good, we complete the purchase with our own cash through a reputable attorney/title/escrow company.
- After closing, we will sometimes make some minor improvements to the property such as brush clearing, perk test, surveying, or other minor things.
- We list the property using a local broker that will market it in the MLS, to their buyer’s list, and neighboring landowners.
- We negotiate a deal when a buyer steps forward.
- We complete the sale at the negotiated time.
A couple of other notes:
- We buy these properties all over the country and rarely see them in person
- Purchase prices on the properties range from $3k to $315k (in 2021)
That’s about it… It’s really just buying and selling land.
The main thing that makes this business work is that we buy for a good price so we can resell it for an attractive price to buyers. That allows us to sell quickly. We’re able to negotiate good purchase prices because we pay cash and will close quickly.
Now that you know the basics, let’s dig into the numbers.
Starting with revenue, we generated $1,247,935.79 in 2021. That’s the money that hit our bank account after paying all closing costs and commissions.
I’m happy that we hit the $1 million+ milestone in our first year and I know we can blow away that figure next year!
Next is the gross profit which was $658,575.03 in 2021. Gross profit is the amount of money we receive in revenue minus the amount we paid for the property.
That means that our gross profit margin was 52.77% for 2021. On average, we sold our properties for over double what we paid for them even after accounting for commissions and closing costs.
I’m very happy with the gross profit and the gross profit margin. Having results within this range allows us to grow the business and do bigger and better things in future months.
The next important metric we track is the average number of days in inventory. This is the number of days we own these properties before we resell them. For 2021, we averaged 55.46 days.
I had no idea what to expect from this when I started. But, I’m extremely happy when you consider that on average we hold a property for less than 2 months. When you consider annualized returns on the money we spend to buy these properties, the returns are pretty jaw-dropping.
Another important metric we track is the number of pieces of mail sent. In 2021, we sent out 234,691 letters to landowners.
Yes, we spent a lot of money on mail. But, it was well spent and produced an exceptional return on investment.
The final key metric we’re highlighting in this report is the number of purchases completed. In 2021, we bought 38 separate properties. We only sold 32 in 2021, meaning we are carrying some inventory forward to sell in 2022.
In addition, we’re doing some minor lot splits to “create” additional parcels to sell.
Also, some of the properties we bought were a package deal with multiple parcels as part of the deal. The plan is to sell off these parcels individually to maximize our returns.
In this section, I’ll break down each month, one by one.The goal of this is to show how progress fluctuates in this business. I’ll also provide some small notes for each month to give you a little bit of context.
January notes: Nothing much happened this month. In fact, we didn’t even purchase our first property yet. We were under contract to purchase a few properties, but they did not close yet. We did send out a good amount of letters in hopes of generating purchases for future months. The first batch of mail we sent was in November 2020. I made some mistakes with that first mailer, so it produced zero results for us.
February notes: This was a huge month because we closed on the purchase of 5 properties. However, by the end of February, we had not sold any properties. We were under contract to resell 1 of them, so we were very excited about the future. In total, we paid $92,166 for these properties. So, that’s kind of the starter amount of money we invested in the properties. In future months, we added more of our own funds to grow quicker, but this amount got the business jumpstarted. At this point, I was very confident the business would work, but there was a little concern in the back of my head because I had not closed a sale yet.
March notes: We only did $31,300.19 revenue in March, but it was amazing! That’s because we closed our first resale and I proved to myself that this business was real and could work. We spent $17,843.32 to buy this property and got it under contract to sell at $35,000. After closing costs and commissions, we received a wire transfer for $31,300.19. We only held this property for 28 days in total! The only bummer is that we didn’t complete any purchases in March 2021. But, still a big win and a huge confidence builder.
April notes: This is the month that things started to take off. We sold 3 properties this month and made a good profit on each. As a whole, we generated $83k in gross profit this month which was close to the amount of money we invested in January to buy our first 5 properties. This month we brought in $154,372.86. But, we pretty much reinvested all of it to buy more properties and closed on 10 more. This was the month I knew that big things were possible with this business model.
May notes: After a big month in April, May kind of fell a little flat. While we sold 2 properties, we ended up with just over $50k in revenue. We still had a healthy profit margin, and we bought 4 more properties. It wasn’t a terrible month by any measurement but still left me wanting a lot more. We sent 38,146 letters in May which was an investment into future months. It takes a while from when we send a letter to when we realize a profit, so keeping this mail going is a proactive and necessary step to set us up for future success.
June notes: June was another breakthrough month because we sold 6 properties and brought in $181,455.66 in revenue. Our gross profit per deal was down a little bit this month because some smaller dollar properties sold. We also completed 5 purchases! The kicker is that we were on a month-long road trip as a family and I didn’t have much time to dedicate to the business. Ultimately that’s why we didn’t send out any mail this month. As you’ll see, that stunted our purchases in future months, so a lesson was learned: Keep sending mail no matter what!
July notes: After our long road trip, I was back at it trying to grow this new business. We sold 4 properties in July for a total of $114,959.58. I also got back on track with sending mail and got 28,668 letters sent. Overall, another solid month in the books.
August notes: We hit a big milestone in August when we topped $200k in revenue! We also sold a record 6 properties this month at a solid profit margin. The only downer is that we only purchased 1 property this month. The impact of not sending 0 pieces of mail in June is rearing its ugly head!
September notes: Well, this wasn’t the best month ever… In fact, it was the worst…haha. Only 1 sale and $25k in revenue. At this point, I was hoping this month would be an anomaly, and thankfully I was right. We only bought 1 property this month partially because I didn’t send any mail in June.
October notes: We got back on track this month and did $89,098.25 in revenue and a total of 3 sales. Our total profit and average gross profit were a little underwhelming though. At this point, I’m starting to realize that this business has ups and downs.
November notes: Another record month in November for both the revenue of $234,961.76 as well as the total gross profit of $132,271.50. We sold 4 properties and averaged over $33k gross profit per deal. If every month were like this, I would be super happy! I wasn’t thrilled about only buying 1 property this month though. This will definitely impact the sales for future months.
December notes: This was a really strong finish to 2021. The revenue was not a record, but the gross profit was really high. The average gross profit per deal was off the charts because we sold a high-value property. We also finished the year by sending out 25,208 letters which should help in the beginning months of 2022. And, we bought 4 more properties to beef up our inventory a little bit
Overall, it was an amazing first year in this business. I learned so much and know what I need to do to grow the business substantially in 2022.
We’ve built a really solid foundation and look forward to big things in the years to come.
One last thing, if you liked this, you’ll also learn a lot from this video I filmed. It’s our 50 First Deals that we did in the land flipping business. It’s a very detailed breakdown and it gives you a good idea how our business started and how we did on each deal. Get it here.
That wraps up the 2021 Land Flipping and Development income report. I’m hoping that you’ll gain some insight into how this business works which may help you in your own investment journey.
Keep an eye out for our monthly reports for 2022 and beyond which will start publishing at the beginning of February.