Today we’re gonna get into 3 ways you can technically add value to raw land. I will tell you, I’m biased towards one of them and it’s really where the magic happens for the biggest paydays. So, come on with me and we’ll dive into it.
It. Alright. So, the first one is cash flow. This is where you buy the raw land, you sit on it, you land bank it. And by the way, I don’t actively do this model, but I am not I won’t discourage you from doing this model.
As long as you’re getting into the cash flow of land to bank it for future development potential. But what are some ways you can get raw land to cash flow? Well, you could farm it. Right? That’s a business.
You get into the farming business. 2, you know what you’re in the farming business? Lease it to a farmer. Or 3, or a third example, I’m not saying the jurisdiction will always allow you to do this long term, but people will take this raw land, and they’ll allow people to do boat and RV storage on it. Right?
They’ll gravel the property, maybe put up a fence, and people can store their boats and RV’s there. And there’s several other options, but at the end of the day, you can take that land, bank it, and get it to cash flow. Alright. Number 2. And by the way, I go through this process all the time.
Is what’s called annexation and zoning. And basically, what that means is let’s say you have a piece of property that’s in the county. You’re going to annex it into say the city and they’re going to rezone the property to be a different zoning or future land use than what it is currently in the county. That’s in essence simple terms what annexation and zoning is. Okay.
Why does the value of land increase? Is it the opportunity that’s created through annexation and zoning? Because usually, when you annex and zone a property, you annex it into the city and then they rezone it. Here’s the reality. More than likely, they’re gonna annex that because they want to do something with it in the future related to it being developable.
And when a piece of land goes from say agricultural in the county and being a farmland to all of a sudden being in the city, which and say is I don’t know. Let’s just say they rezone it r five, which is 5,000 square foot residential lots. The value of that land just increased. Number 3, and where the magic happens, what I’ve dedicated my career to, where the big paydays are, where you bring the most value to land, which creates the big paydays, is again entitlements. And see, with land, lands only is worth as much as what you can do with it.
Alright? Next is land entitlements is the process of obtaining development approvals from the jurisdiction. And then lastly, it dramatically, dramatically, like I said a moment ago, increases the value of the land. Okay? So we talked about 1 was cash flow, 2 was annexation and zoning, and 3 entitlements.
Let’s quickly hit on 1. I just want to back to 1 for a second. I want you to clearly understand. The only way me personally that I would ever get into the the idea of adding value to land because of cash flow is that if I was buying the land because I knew I was going to entitle it in the future. Meaning, I was going to land bank it because I knew it’d be developable in 5 to 7 years.
Otherwise, I wouldn’t waste my time with the cash flow model related to adding value to land. Number 2, annexation and zoning. I mentioned it numerous. I mentioned I go through annexation and zoning all the time, but the only reason I go through annexation and zoning is because I’m setting the property up so that I can go through this entitlement process. okay?
Otherwise, I wouldn’t even waste my time with the annexation and zoning. It’s only if I’m setting it up for entitlements. Because remember, this is where the money is made. This is where you bring tremendous value to the asset. You need to learn, and what I’ve dedicated my life to, is how to take raw land that has development potential, and turn it into approved developments.
You’re serving our community. You’re serving our nation. You’re serving your buyers. You’re taking care of the sellers. The jurisdictions are loving you because you’re helping the growth of their city, so on and so forth.
At the end of the day, this is where the magic happens. So you can obviously tell that I’m very biased to entitlements. Right? It’s the big kahuna, it’s where the magic happens. But let me let me get into a couple quick things real quick.
If you’re going to get into the entitlement game by the way, congratulations. It’s a great space to play in. But make sure as you get into this game, that you have an idea what your exit strategy is before you ever enter a deal. Okay? It’s very important, and you hear people talk about this sometimes, know your exit strategy up front.
2, get to know who your buyers are, who your potential clients or customers are. We do this way upfront as we’re entering into a new market, is we get to know who our potential buyers are, and what they’re looking for, so that we can serve them. We can bring them value. And at the end of the day before you even worry about those first two things I just said as far as your exit or your buyers, you have got to get educated. And that’s the whole reason why I started Vestright, is so that people like you, you can get educated.
You can learn what entitlements is all about. And because last thing I want you to do is try to come play in this space without the appropriate education, and have all the failures and make all the mistakes I did, oh, 21 years ago. Right? That’s the whole point of Vestright, is so you can learn from my life experiences, from my from my process. So with that said, if you want to learn more about entitlements and what I’ve dedicated my life to, you’ve got to you’ve got to get to know Vestright, get connected with Vestright.