Combining Active & Passive Income with Infill Lot Development with Dan Haberkost

Dan, thank you for joining us today. 

Thanks for having me, Taylor, excited to share a bit with your audience. 

I’m looking forward to learning about what you have to say and your experience and all of that for our listeners out there who don’t know about you and your business. Can you tell us about your background and how you invest in real estate?

Sure. I live in Colorado Springs and am originally from Ohio. And as of today, I have an active business, which is the Front Range Land. And really, I think the easiest way to describe that is if you think of a wholesaling business that’s centered around marketing to get off-market deals of houses or apartments, my business gets off-market deals at 30 to 50 cents on the dollar for land.

And then what we do with that land ranges between. Building houses on it, simply closing on it and flipping on it, or selling it on a note. So that’s the active business and it’s really just an assembly line of leads bringing me land at a huge discount. And then that active business feeds the passive business, which is simply investing in rentals, which are all residential up to this point.

And the two are very synergistic because of the passive. Obviously reduces the tax burden on the active and then the active feeds the passive as far as just having capital for it because real estate investing is a cash-intensive venture. Now that sounds very well thought out in hindsight, but it would not, it was not that thought out as I have been building it over the years.

So we can talk about that. But yeah, I bought my first rental property when I was 21 in college and it’s grown from there slowly and steadily. 

That’s great. That’s great. I think a lot of our listeners, even those who are busy professionals can relate to that, right? Because they’ve got their job that provides active income and they may be looking to build a passive income on the side through rentals or other strategies.

And real quick, I wanted to dive into the land side of the business because especially right now properties that are already existing are ridiculously expensive. And many people, myself included have been thinking, Hey, maybe I’ll buy some land and build something on it. And that will be my method for buying a new primary residence or getting a rental going or whatever you can tell us about the changes in the landmark that you’ve seen, especially throughout.

Yeah. So there’s a lot there. I’m trying to bookmark each point. I want to make, let’s take a step back on a high level and look at the big picture. And as far as land goes I want to make a distinction between what I’m working with versus what a lot of people are. I have focused almost entirely on infill lots.

And what do I mean by that? Take one of the primary markets on building in Pueblo, west in the seventies, the same developer that did lake Havasu in Arizona, for anyone who’s familiar with that follow the army Corps of engineers, to where they were damming up the Colorado River and creating reservoirs.

And he was buying huge tracks around it and subdividing. So he. The thousands of acres that were there around the reservoir, he did all the work that was involved in planting it, bringing in utilities, getting it to the point where you have, that pretty zoning pitcher with the different zoning and the roads, or excuse me, the, all the lines and so on and so forth.

He did all of that upfront work, leaving you with 20,000 or 20 some thousand infill lots. Shovel-ready right. Entitlements are done. Utilities are. You don’t have to do anything further to the land in order to develop it. So that is the type of land I’ve been working with, which makes the whole process substantially easier.

Another way that some people approach the land is they go after raw land where none of that has been done. And if you want to build on it at a minimum, you’re going to have to do a well and aseptic or potentially extend utility lines. At most you might have to do quite a bit more as far as. Dealing with the city and getting different approvals and zoning.

There’s a lot that goes into it. I’m not going to have a detailed discussion on it, but I think it’s important to be clear that I’ve been working with the infill lots because there’s tech, and there are millions of dollars that have already been invested in the land, making it very easy. So to answer your question, I really wouldn’t recommend anything.

Pursues building something unless they really want to make a business out of it. Cause doing the first one is the hardest part. Granted, if we’re talking about just the passion project of building your dream home for you and your family. Sure. Go ahead and figure it out. Build a house. But if not, if we’re talking about building rentals, getting the right contract.

Learning the process, and putting the pieces and parts in place to do it is the hardest part. And then once it’s set up building simple houses, this is fairly passive. If you’ve set it up properly and you’re dealing with infill lots. So that was a lot there, but I wanted to make that distinction because a lot of people don’t understand the difference between the raw land and a piece of land that’s developed.

It’s just an infill lot. 

I certainly appreciate you drawing that distinction and really as a general comment, any aspect of real estate investing, at least that I have found always has a niche within a niche, you’re really niching down into your aspects. So can you tell me? Your specific strategy when it comes to investing infill lots.

Yeah. So got the marketing machine set up that I talked about. I started with mail, but I know people that have been successful texting or cold calling. So I don’t think with marketing in general, it’s that one strategy is the best. I think it’s consistently over long periods of time with a single strategy or a couple of strategies.

So important caveat 

there. So comment on that, the calls and the texts are really fricking annoying how the mail is much appreciated. I’ll take the mail. Any guy, please continue. 

Yeah. Yeah. We’re getting a lot of calls lately, specifically from a wholesalers employee who I know they don’t, they haven’t taken me off the stupid list, but anyways so once you have that.

I’ve got a couple of markets I’ve targeted here in Colorado that is on the path of progress. And because I want to build, it’s really important that you understand where the market is. As far as is it like Denver where it’s a mature market that’s largely built out and more people are just doing scrapes where they’re knocking down old buildings or is it.

In Colorado, it’s really just the path of progress that goes right down the front range down at 25. Is it somewhere way down south where just nothing’s going on? I don’t want to beat either of those markets. I want to be somewhere in the middle where the market is starting to get built out, but it’s not a mature market like Denver.

So that’s really important. All the markets I’m in, they’re all secondary or tertiary markets of the major metros that have grown. So for example, here in Colorado Springs, as we were talking about. Five years. It’s really blown up here. The market has matured. A lot of people have moved. Businesses have moved in.

It’s gotten very expensive. So people are getting pushed out to some of the markets further down I 25 and that’s where I’m building. So those markets were very sleepy four or five, six years ago. Now they’re starting to get built out. So they’re prime for development. When I get all these leads for lots at a discount, I have many exit strategies because it’s growing, I could build on it myself, or I could sell it to one of the other developers.

I know a lot of developers or builders don’t know anything about investing. So they buy lots at 90, 95 cents on the dollar. They have no idea how to buy at a discount. Yeah, it’s really crazy. Or I could close on it, be listed on the market, and get that moment. And users who are buying a lot for themselves to build on.

So knowing where your market is at is really important. If I tried to do this here in Colorado Springs, it’s feasible, but my cost per lead would be astronomical. There’s just so much competition up here cause it’s a far more mature market and there just isn’t a lot of infills, lots left. You’d really have to go out east way out east towards the airport.

Timing is important. So I have a build that’ll close here, hopefully, this week, maybe next week. And that. It’s even further down south, but an hour and a half from Colorado Springs. And three years ago, when I started down there, all I was doing was buying and selling lots. Nobody was building, but there was a little bit of activity on the land.

So it was very easy to buy at 10 or 20 cents on the dollar, but a little harder to sell now, or let’s rewind about a year ago, I got to lead down there and I was driving through, and all of a sudden. Foundations popping up you a dozen foundations and there’s a couple of builders down there. And of course, I called them up, chatted with them and they’re all, pre-sold every single one of them pre-sold let go.

Wow. There’s demand down here because it’s gotten so expensive up north. And so I started building there last year and consistently building there because the timing made sense. I stopped just buying and selling land. It’s a lot harder to get a discount there than it was two years ago, but now I can build, and there’s a substantial margin.

You have to understand where the markets at and in your market where the path of progress is. So it’s very simple here in Colorado. We have mountains on the way west side, right? So the main artery, the main highway I 25 and then out east, it’s very rural. So sure the cities expand out east, but they tend to go straight down.

I-25 straight down the highway. Another example is a buddy of mine who is in Texas and he was trying to figure out where to look for his land business. I said, Just looking at the map. I don’t know, Texas, but the major highways between the big cities like Austin and Dallas, or, that sort of thing. So looking ahead and understanding where your market is and how it’s growing or where it’s growing will help you determine where this sort of business makes sense.

Cause again, if I try and go to Los Angeles and mail for infill lots, it’s not going to work very well. So where the market’s at in, in being built out as important. 

Nice. Yeah, I can imagine that. Going along the mountains. If I was going to move to Colorado or want to be in Colorado, I want to be able to see some mountains.

I don’t want to be all the way out east in the Plains, but that’s just me. 

Yeah. No, and that’s most people, 

so yeah. Yeah. Being part of Colorado. Learning how to develop a property is a whole other, subset or knowledge category that you had to, build, to get involved with that part of the process.

So how did you take those steps to start getting involved there? 

Yeah, so that goes back to when I first moved here at the local real estate group that I actually host now, I didn’t at the time there was a guy who stood up at the end of one of the meetings and goes up and in real estate for 40 years, I’ve built all over the world storage unit.

Commercial buildings, single-family, everything you could imagine. He goes, I need help in my business. And in return, I’m happy to, teach someone who wants to learn. And of course, everyone gathered around him and everyone got his number and only two people called him me and one other. Yeah.

Yeah. And he lived about an hour south, but it was very clear to me. He knew what I wanted to know. So I went down there every weekend. We worked together learned from him, we developed just a friendship over time. And he’s the one who really taught me about building houses or building anything really.

Cause it’s quite simple once you know how to do it. I remember he told me that building single-family homes are child’s play. And at the time that was so intimidating to me. But in hindsight, he’s absolutely right. It’s very simple. Now for anyone who’s new. That was a bit of learning from a firehose cause he had so much experience and was showing me so many different strategies and moves in different markets all over the country.