Joe:  Welcome. This is the Real Estate Investing Mastery Podcast. Hey, what's up guys? Joe McCall, Real Estate Investing Mastery Podcast. Today I've got a special guest, Clay Hepler. We're going to be talking about a lot of things, but one of the main things I wanted to get Clay on the podcast for is something I've seen him talk about on other podcasts and on social media: offering sellers creative financing options to buy their vacant land with either cash or owner financing or some kind of mixture of both, and then selling on creative terms as well. What if instead of trying to raise all of this private capital, you made the seller the bank, and then you became the bank? That's all banks do anyway, right? They just arbitrage money. They borrow it from somewhere and lend it out somewhere else. So that's kind of what we're doing with land. Clay's a real busy guy. He's doing some really cool things and he's also raising some private money for his own fund. He'll be talking about that later. If you like Clay and you want to invest with him in some deals, hang on to the end. Clay, how are you, man?

Clay:  Joe, it's great to be on the podcast. I'm doing really well. Actually, after this podcast, this is my last podcast of the day. I'm going to be going golfing after this. So it's good. I'm doing really, really well. You live in Pennsylvania.

Joe:  How long have you been doing land investing?

Clay:  I've been investing in land close to four years at this point. But I've also flipped multifamily properties, wholesaled multifamily, and flipped over 250 houses. So my time in land investing is not just, hey, I'm just a land investor. I do have experience in real estate outside of land.

Joe:  What attracted you to land from the residential multifamily side of the business?

Clay:  When I was getting into real estate, I worked for a local guy who had a couple hundred units. He was a very successful real estate entrepreneur and I learned how to evaluate deals from him. Along the way I became basically the director of acquisitions and we scaled his wholesaling and house flipping company. I had aspirations to acquire properties myself. I was a really big BiggerPockets listener at that point. Late 2010s, early 2020s. I did the house hack with a 3% FHA loan and bought my first three-unit building and kept buying. Another three-unit, a six-unit, a single-family home. I basically used the BRRRR model to scale over about 18 months to over 85 units. But real estate is a cash hog. It just consumes capital, especially when you're dealing with old Midwestern buildings. We scaled very, very quickly and I found out I was incredibly good at finding the properties but much less equipped at managing them. I made a couple of mistakes with property managers and it cost me dearly. Then in 2022 and 2023, interest rates spiked exponentially. For those of us who were investing on variable rate or short-term debt, the debt service coverage ratios started to compress. Banks wouldn't finance us to the amount we wanted when we tried to refinance. We were over-leveraged, rents were lower than we underwrote for, debt service was a higher percentage of rent, and really bad property management. It just killed me, man. I was young, pretty immature as a business owner. All hat, no cattle, as my father-in-law from West Texas says.

Joe:  That's where I was in 2008, 2009, 2010.

Clay:  So how did I get to land? I said, look, I need to create income quickly. Land is a business where you can create income quite quickly if you find the right opportunities. That would have been late 2022, beginning of 2023. I was going to do life insurance, or virtual wholesaling, or some other internet-related stuff like e-commerce. But I chose land because I grew up on a farm and had the real estate experience, and I thought land was a really good asset class to get into.

Joe:  Did you hear about land from a podcast or a video, or did you just hear people talking about it?

Clay:  I remember it was like an Instagram ad, I think. And then I went down the rabbit hole and listened to the REtipster podcast, the whole thing, and then bought a course and then bought another course. I think the courses were fine. The first one left a ton to be desired. The other one was decent. And then I just went all in. Here's what's really interesting. Once you get the information, whether a course is good or less good, people want to blame the person that gave them the course. But like, it actually just comes down to you. If you commit, you can make any business work. People want to play victim and blame someone else. But I was like, dude, I have to make money. I had to pay for my wedding, I had all this overhead. So I was going to spend this money and make it work.

Joe:  Man, I love what you're saying. That is so good because I was that way. My first coaching program, I spent $13,000 on it, with my wife's approval. We agreed together to max out our cards. And looking back today, knowing what I know now, if I would have done what that program told me to do, I would have done deals and gotten to my goal to quit my job three or four years faster. I thought I was smarter than the program. I wasn't.

Clay:  People feel inspired to make a change at the beginning of every year, but as adults we have fewer of those big change moments. I think people need a commitment mechanism. If you pay money to join a community or a course, you're committing. Some courses are total garbage. I won't sugarcoat that. But it's still up to you. The line is in the sand and you either do it or you don't. My orientation going into land was: if it is to be, it's up to me.

Joe:  People were complaining when I got started doing land. When I started doing houses in 2009, people were complaining it was too competitive, too difficult. I heard that every year since. People are still complaining about land now, but guess what? They're still doing deals. When you were starting to do land, what kind of marketing were you doing and how has that changed over the years?

Clay:  I was doing direct mail when I started. That was before texting and before cold calling in land. Direct mail at that point was very different from what it is today. And honestly, I was doing it in a kind of lazy way. I sent out a bunch of mailers to Florida infill lots and most of them were full wetlands, because you couldn't pull wetland and floodplain data like you can today. I was sending blind offers. To Florida infill lots. And I didn't get a deal for 15,000 mailers.

Joe:  Holy smokes. Well, I know why. I hate blind offers. Most people would quit after 500 or a thousand mailers.

Clay:  That doesn't make any sense to me, but yes, I didn't quit. I kept going and I got a deal, and then it snowballed from there. Then I got a subdivide on my second deal. It was in Orangeburg County, South Carolina. We cut it up into three lots and made, I don't know, somewhere around six figures on that deal. So we were able to recoup our costs and then we just kept scaling. We bought a portfolio of infill lots in Calhoun County right next to St. Matthews. Then Hampton County, which is close by. South Carolina is kind of picked over right now. We kept going with direct mail and started doing some outbound texting. We did about $650,000 in gross profit our first year.

Joe:  $650 grand in gross profit your first year. Sending blind offers, which I don't like, but here you are.

Clay:  To be fair, I stopped sending blind offers somewhere around May or June of that year. That's when Callan Faulkner was talking about the texting thing, and we shifted to that type of marketing because it was so much cheaper. And then we learned the whole texting game.

Joe:  It's a tough game. Are you still doing it now?

Clay:  We are selectively and compliantly reaching out to people. Very sniper approach. And yes, we are still doing direct mail as well.

Joe:  Okay. How are you doing your direct mail? What are you sending and who are you sending it to?

Clay:  The way I believe you scale a land business comes down to getting to three to five transactions a month. Anything over that becomes a very hard business because you have to hire so many people and the margins start to compress. We found that at around 1.5 million, it gets really hard. So we made the mistake of scaling like crazy to 15 deals a month and our margins just got crushed. So I'd say three to five deals a month is ideal, and every year we've just stair-stepped in our profit per deal. We've gone from $20K a deal to $30K to $50K and up, and we just quality control. So we've gone upstream and we're more deliberate on our targeting. We target opportunities where we can add value. We do commercial stuff, subdivides, mobile homes on land. And one of the core reasons, which is why you and I got on this podcast, is we can offer sellers a variety of different approaches, which allows us to be more competitive relative to people who are doing mass marketing with direct mail. But we'll still do outbound, we'll call people, we'll do direct mail.

Joe:  Yeah. I'd love to talk about how you are offering sellers options. What I've always done is send neutral postcards that get really good response rates. We're averaging 4% to 5% response rates. They say something like, urgent or third notice, it's really important we talk to you about your property in XYZ County, I've recorded a brief voicemail, just call or text this number and listen to our 24-7 pre-recorded voicemail. The voicemail is about 45 seconds long. It says hey, normally when you want to sell your land you're faced with a couple of options, either listing it with an agent or selling it on your own. But now you have a third choice. If you're interested in selling it for cash, we can pay cash and close in 30 days. We get a ton of calls from that. About 25% are hangups, 35% leave a voicemail, and the rest text us a reference ID. We send every single lead an offer and then follow up every 30 days. Send them another offer, another postcard, a letter, a text, an email, a voicemail. Now what I'd like to know is, when you're chasing these bigger deals, are you sending a neutral letter first to get them to call you, and then giving them multiple options? Or are you giving them multiple options in that initial blind offer?

Clay:  We want to have as many at-bats as possible, but qualified ones. The most important thing we track on our front end is how many qualified leads per week we're getting. So our metric is not quantity, it's quality. I would implore any listener to consider what your ideal property is in any marketing campaign, because then you can reverse engineer your profit goals. We have a very specific criterion and we follow it. We have a standard intake appointment setter who determines, is this person serious? Because I believe in 2026, 2027, and beyond, the number of quality conversations matters more than the number of conversations. Once we have an initial conversation, our sales process is rooted in building credibility and trust. There's a famous book called Influence by Robert Cialdini. He talks about what persuades a person to do a certain outcome. Likability, credibility, trust. Our ability to give a creative offer is proportionate to our ability to establish trust with the seller. We don't rush them. We wait to understand what this person actually needs. We believe there are three different types of offers: the cash offer, the wholesale offer, and the owner financing offer. Most of the time with land, people have a ton of equity. So when we're offering a seller financing opportunity, that's how they get the most equity out of their property. And we don't say, will you hold the note? We say, do you want a more tax-advantaged sale? Because installment sales are more tax advantaged. Do you want recurring income? We also send over credibility packets. Here's who we are, here's our track record, these are all the deals we've done, here's all the brokers that have vouched for us, here's all the title companies. So the conversation becomes very easy.

Joe:  Okay, that's fascinating. Could you talk about how you structure these offers? When you're on the phone with them, you've built some rapport, you've found out what they really need. How do you structure each of those three offers?

Clay:  With a cash or wholesale offer, we're going to be at 45% to 65% of what we believe we're going to end up in the property, based on current market value, not improved market value. So if we think we could sell it for $200,000 and the market value is $100,000, we can offer the current market value. Your offers are also dependent on your funding situation. If you have a good relationship with a funder who's flexible and knows you as an operator, they'll extend a little more flexibility. Because of our funding relationships, we can offer up to 60% to 65% of current market value on a cash offer, sometimes more. On wholesale deals we're always looking to make a minimum of 20% to 25%, but most of the time we're trying to get to 35% to 40% after expenses and broker fees. Because it's harder now to wholesale on the market. When it comes to seller financing, we try to do no interest, just principal. If we can't do that, we do interest only. If we can't do that, we do principal and interest with the least amount of interest possible. I'll give you a live example. We have a deal right outside of Spokane, Washington. We're subdividing it. It's 356 acres and we're getting it for somewhere in the neighborhood of $12 to $15 per acre. We have this big road frontage, we're dividing it up into 40-acre lots, 27-acre lots, about 10 lots total.

Clay:  Let me walk you through the deal structure. We try to do two things: arbitrage the down payment and arbitrage the interest rate. On this deal, we're buying it for $350,000. We're putting $25,000 down. The loan term is 24 months. Our monthly payment is $1,500 a month, and that's literally principal only. No interest at all. We negotiated that. Why would the seller do that? Because they want to defer the gains each year. They want to take a down payment this year, then take payments of about $18,000 to $20,000 next year, and so on. Each of these 10 lots is going to be somewhere in the neighborhood of $87,000. So we're all in at probably around $325,000, and we'll exit theoretically around $870,000. Really good arbitrage. But that's not even the best part. When we sell these lots, we'll offer buyers 10% to 15% down and attach an interest rate of somewhere around 12%. We only need to sell about three or four lots on owner financing to pay back our entire down payment, while still having the arbitrage on the remaining lots.

Joe:  Is your goal to sell all of them on owner financing?

Clay:  We'll probably sell most of them on owner financing because I just like the notes. But we'll probably sell three to four over time on cash. And yes, we do have a two-year balloon with the seller. But here's what we do: we can sell these notes on the secondary market. Note buyers will buy these notes and we can originate them at maybe 85% of loan value. So even if we financed the whole thing, we'd still have $700,000 of equity. The interest payments are really good. Even if we did everything on owner financing, we'd have somewhere around $85,000 in down payments alone, which covers a big chunk of our basis. Then at the balloon date, if we need to make the seller whole, we could just sell one or two or three of the notes. Those notes will be even more valuable to a lender because they'll have been seasoned for 24 months of payments. So we can cash out at any point. Notes can sell in about 30 to 45 days.

Joe:  Man, this is fascinating. So just so everyone knows what you're talking about: you've got two years to pay the owner off, you bought it for about $350,000, you're dividing it up, and you're going to be selling each lot individually on owner financing. After those notes have seasoned for a few months, you can sell them to a note buyer at about 85% of face value. So if you sold maybe three of those notes, you'd have enough cash to pay off the seller. That's really interesting. I've been spending a lot of time lately with this guy, Eddie Speed. I don't know if you know Eddie Speed. He's done over 50,000 notes, including about 20,000 on vacant land deals. He loves these bigger deals. One of the things he was telling me about was structuring your deals on a 10 to 12 year term if you can, and offering the seller a stepped-up interest rate. So the first two years it's 3%, then 4%, stepping up to maybe 8%. Because you can show them: the longer you finance me, the higher the interest rate you get. The effective rate is really about 4.5%, but it allows you to give the seller a much higher price and keep the payment the same every month. And here's the key thing: most of the interest you pay is at the beginning of the amortization schedule. As that interest rate steps up over time, you're actually paying less interest in real terms. But what's fascinating is that now you've got this 10 or 12 year note. If the seller wants some money upfront, you can sell a partial of that note to an investor. Let me explain what that means.

Clay:  Oh, this is great. I'm learning right now. Keep going.

Joe:  So say it's a $70,000 loan over 12 years. You tell a note buyer: I'll sell you a third of the term, which is four years. You give the seller $70,000 divided by three, so $23,333 now, for the first four years of that note. The note buyer pays the $23,333 upfront, and then your monthly payments for the first four years go to the note buyer. After four years, those payments revert back to the seller of the property. So the seller gets a big chunk of cash now and a much higher price. They're getting a higher interest rate because it's stepped up. The note buyer is getting four years of payments but only paying for three years' worth, so that's where their profit is coming from. And your cash flow is 300 to 500 bucks a month from the difference between what you're paying and what you're collecting. Then two to three years down the road, you can often negotiate a discount on whatever is remaining with the original seller. Eddie says 75% to 85% of the time, they'll say yes. I'm still learning this myself. We're actually doing a four-week class with Eddie for my audience called Dirt Notes, teaching all of this. But the idea is: give the sellers a really good price on good terms, a stepped-up interest rate, and if they want cash now, you don't frame it as a down payment. You frame it as, I'm going to sell a third of what I owe you for a third of the term, and I'll bring in a note buyer to fund that. Clear as mud?

Clay:  It's clear. And it gets really exciting when you have a big deal like this one. You're buying for $350,000 and selling for $870,000. And then you can add an extra $200,000 of profit with interest. That's where it gets really crazy, and how you can build wealth really fast.

Joe:  I love what you're doing here because I've always been a quick nickel over a slow dime kind of person. I've wholesaled houses and land forever. I got rid of all my rentals because I hate being a landlord. That's absolutely the worst business model in the world, I think. But now I'm thinking more in terms of creating notes. The cash now is great when you're wholesaling, but once you stop wholesaling, you stop making money. My acquisitions manager wants to wholesale everything. God bless him, he's got five little girls. But I'm going to start selling more deals on owner financing. And what if instead of raising private money, I could find creative ways to make the seller be the bank? Do you have another example of how you've structured an owner financing deal with a seller?

Clay:  We're buying 700 acres for $1.5 million, though in this case we're getting a bank loan on it and then we'll turn around and seller finance the individual lots. With a bank you can do partial releases, so you can sell some lots for cash and some with wrapped mortgages, as long as the bank is okay with it since they're the first lien holder. It's a little more complicated than a straight seller finance, but it's very doable. One other thing: the way we've structured compensation for my acquisitions guy is I give him a percentage of the net cash flow after the basis is paid back. He gets five to ten percent of net cash flow. At the beginning it's nothing, but as you build a portfolio, he's building his own stream of income. And he has to stay with the company to keep getting that payment, so there's a retention element built in. Sales guys actually love it once they understand it.

Joe:  I love that. Okay, last thing before we wrap up. Are you intentionally now focusing on nicer properties? My sweet spot has always been $25,000 to $50,000 properties, but now I'm leaning toward bigger, nicer properties to get better buyers with a lower default rate. I heard Seth Williams interview a guy who was completely open and honest about having hundreds of tiny notes on cheap Florida properties and basically losing his shorts. Bad properties, bad buyers. It never wins in the end. You can get an 85% default rate on cheap properties. What's your philosophy on that?

Clay:  Owner financing, in my opinion, works best between $20,000 and $150,000 in origination. Anything above that and the buyer will have the ability to go to a bank. So I wouldn't owner finance something priced at $450,000. I think that's a very important sweet spot. If I'm building a business, I always look at contribution margin, which is profit per deal. You cannot build a business off $3,000 a deal when your cost per deal is $1,500 to $2,000. There are guys on Instagram talking about wholesaling infill lots for $3,000 a deal and acting like they're crushing it. You can't hire good people at that margin. You can't scale that business. If I'm flipping, I want to be as big as possible while still maintaining margin, which means value add. The owner of an $800,000 property knows what it's worth. You're not going to lowball them at $400,000. You give them a fair price, maybe $650,000, then add value. That's where the land business is going. And adding value doesn't have to mean huge price tags. It could be the note thing, putting a mobile home on land, putting an RV on. Creative stuff. That's the evolution of the land business and that's what we're betting on.

Joe:  I love it. Man, we could talk a lot more, Clay, and maybe we could do another interview sometime. I agree we need to stay away from those little desert squares and quarter-acre infill lots. We see a lot of people in Florida trying to sell properties for $10,000 to $15,000 on owner financing, 99 down, 99 a month. That is an accident waiting to happen. And people who are doing that are not as successful as they make it sound, in my opinion.

Clay:  I'll be straightforward: they are definitely not as successful as they make it sound. If your cost per deal is $1,500 to $2,000 and you're making $3,000 a deal, you do not have a healthy business. Period. There's no way you're making real money that way.

Joe:  That's good, man. Clay, how can people get ahold of you? And you're raising some money, putting a fund together?

Clay:  Yeah. It is for accredited investors only. If you don't know what an accredited investor is, you're probably not one. But we are raising a fund to take down these amazing opportunities. I think the land space is still the single greatest asset class in real estate for creating outsized returns, period. We are so overflowed with opportunity in 2026 that I'm having to turn down opportunities because I cannot finance them fast enough. Anyone saying this is overcrowded is playing in the wrong pond. If you are an accredited investor, I'm Clay Hepler on social media everywhere. Joe will put my email in the show notes. We are also doing funding if you're interested in getting into these larger opportunities. And if you need a little more handholding, I do take some people on a select basis for consulting.

Joe:  I love it. Thank you, Clay. Really appreciate it. Clay Hepler, everybody. Any final words of advice you want to throw out there for people?

Clay:  There is no silver bullet in this game. The people who are successful in any business venture, especially this one, which has more opportunity than most, it's what's between the ears. Psychology is the biggest thing you need to work on. If you blame the market, your employees, lack of capital, anything else, you're blaming the wrong thing. Your business is always limited by you as an entrepreneur. Once you realize that, you set yourself free. You take total ownership and it's the greatest feeling in the world. It hurts at first, but after you get through that hurt, there's a lot of beauty and a lot of growth to help you hit what you're looking for. Look within and you can really grow this business.

Joe:  I've always said this business is 80% mindset, 20% tactics. I didn't want to believe that for the longest time, but the more I do this and coach other people, I realize that's the truth. All right, Clay, thank you so much for being on the show. Appreciate you.

Clay:  Thanks, Joe.