Avoid Costly Real Estate Mistakes: Insights from Land Investor Steve Hokanson

Steve Hokanson (00:00)
I was able to grow pretty quickly in that space because there were a lot of land investors in the space at that time. And in particular, installment sales. There’s special accounting that goes with installment sales with vacant land. And I taught myself that and then marketed myself to other land investors who do it. So there was a need for it and I and I took the opportunity—

Cody Crabb (01:55)
Hello and welcome to the Real Estate Pros Podcast by Investor Fuel. I’m your host, Cody Crabb, and today I’m talking to Steve Hokanson. Steve came out of corporate accounting, got into land investing in short-term rentals, and now runs a bookkeeping business for land investors. We’re going to talk about what he sees behind the scenes in investors’ books and what he’s learned owning short-term rentals in both Minnesota and Tennessee. Thanks for hopping on today, Steve. I appreciate it.

Steve Hokanson (02:19)
Absolutely. Thanks for having me.

Cody Crabb (02:20)
So, I would love it if you could kind of tell our listeners a little bit about how you got into the industry. You— you mentioned that you were in corporate accounting for quite a long time, and you kind of jumped— jumped from the ship, as it were, to— to the world of— of real estate. I’d love to hear that story. Our audience loves a good— a good story, especially one like that. So, how did that happen for you?

Steve Hokanson (02:43)
Sure. I mean, I just— I got— I got steadily rose up in that in that— in that profession and got to a point where I knew I had to leave for a variety of stress-related reasons. You get— you get into a— a corporate setting and things can be extremely stressful, especially if you work for a— a publicly held company. So for a variety of reasons I had to leave that, and I— so I ended up quitting that job cold turkey back in twenty twenty one. And prior to that, my wife and I had started doing this education program with land investing. And so we had— we had this plan for me to leave my corporate job and I— and I ultimately did back in twenty twenty one. And land investing back then, this was right in the height of COVID, land investing was— it— it was easy to do business. That first year we were in it, we probably sold eighty properties. And we were doing, you know, desert squares in Arizona. That was— you know, the core of what we were doing, just like so many other land investors were doing back in those days. And you know, th— this is the other thing that I’ll— I’ll back up here. If you want to course in humbleness, humble pie, so to speak, is you know, you know, I was a fairly high-level manager and you’d— you go to that, you— you— you— you come out of that world and you’re at the same level as these twenty-f— twenty-five-year-olds who have different skills, let’s just say that. And they can run circles around you. I— I was used to hiring people like that who had a two-year learning curve to understand the business. Yeah. Now all of a sudden I’m at that— I’m at that same level as them and they’re running circles and— and not doing anywhere a fraction of what they’re doing. So that was quite a humbling experience. Nothing— nothing wrong with that, I just mentioned that for any of your listeners are in a similar boat. Yeah.

Cody Crabb (04:47)
Well, nothing as humbling as seeing a sixteen-year-old do something that you’re— that you think you’re pretty good at. Yeah, what would the hardest part for you in— in the corporate, you know, a corporate structure, everything is structured and managed, then land investing is like you’re the machine. Like if you hop off, the machine stops. So what was that like? How did you kinda handle that?

Steve Hokanson (04:53)
Absolutely. It was a— I— I was ready for a challenge like that and my wife and I, we made a pretty good team. I wouldn’t have said that maybe earlier in our marriage, but then as our marriage went on, it was a good spot at for us to be working together. We found ourselves having very dissimilar or very— very different skill sets, but skill sets that worked in the business. They complemented each other, so that worked out really well. And so we worked— we still work together in the land business. We’ve kind of shifted away from the land business because—

Cody Crabb (06:22)
Yeah.

Steve Hokanson (06:34)
A couple of years into it, actually fairly r— early into it, it was obvious that the people in that space were entrepreneurial and they did not want to deal with bookkeeping. And I had an accounting background, I just decided to start doing bookkeeping for land investors, start a business like that. And we had connections with all other— all kinds of other land investors, and it was not hard to get clients. I was able to grow pretty quickly in that space because there were a lot of land investors in the space at that time. And in particular, installment sales. There’s special accounting that goes with installment sales with vacant land. And I taught myself that and then marketed myself to other land investors who do it. So there was a need for it and I— and I took the— so even—

Cody Crabb (07:24)
What was— what was then, just before I— before you go any further, I’d be curious to know, like what was the need you were seeing? Like, was it just people hate doing this and everyone you talk to is like, “This is the worst part of my—” like, I— I’m just curious what you saw.

Steve Hokanson (07:34)
Yes, but they don’t want to do them, you know? They want to— and it— it’s especially installment sales, that’s a special accounting that people don’t wanna learn. So I was happy to— yeah, I was happy to step in and help them with that.

Cody Crabb (07:47)
Yeah. Yeah, I mean, and it’s— it— this sounds like a little more than just QuickBooks. Like, this is one of those, you know, when you— I remember when I started freelancing and I started doing a couple of, you know, gigs or whatever, and I would— it’d be like, “This is fine.” And then I started to get enough where I’m like, “Okay, I maybe need to get some professional to help me not go to jail.” It sounds like you’re that person that’s like, “You know, I— I actually need a real human being to help me with this now.” So yeah, what is— looking at land investing specifically, when someone— what was that?

Steve Hokanson (08:23)
A CPA. I said I’m— I’m not a sp— CPA specifically.

Cody Crabb (08:27)
Right. But I just mean that like, someone needs to help me get things in order. Yeah, I know— I know.

Steve Hokanson (08:31)
Absolutely. The other thing is that many CPAs don’t— don’t know that you can use the installment sale method on vacant residential lands. So I’ve— I have to educate, you know, how do I do this without, you know, doing things improperly?

Cody Crabb (08:44)
Yeah, totally. Okay. Well, so I think that— I mean, that gives— I feel like that gives you a huge advantage being kind of familiar with the industry because that allows you to kind of know these things that even somebody seasoned like that may not even be aware of because they just are not, you know, they don’t have all that background. Yeah.

Steve Hokanson (09:01)
Yeah, that’s absolutely true. I’ve seen some very experienced people not use that method, so we can— we can— we can fix that. So I’m happy to do that, anyway.

Cody Crabb (09:06)
Yeah. Go ahead. Yeah. So when you talk to— so land investing is a part of what we see on this podcast sometimes, not— not typically a majority of it. We’re talking, you know, when you say land, like what is— what is it that you’re referring to exactly? Are these like vacant lots, property in the backwoods somewhere? Like, what are you talking about?

Steve Hokanson (10:05)
Yeah. The— the basis of land investing is to find a piece of land that you— you find an owner that’s motivated, wants to get rid of it. Maybe they inherited it and they don’t even know where it is. Maybe they bought it forty years ago and have— their plans for it never materialized. You’re finding— you’re trying to find motivated sellers and buy it at a discount. You— they could go list it with a realtor, they could sell it on their own, but you offer them a cash offer for, you know, less than market value, obviously, because you’re giving them a way out. And then you turn around and flip it. And this was— this was worked really well about five years ago, a lot of people got it into it. It’s a whole lot more difficult to work in that space. It still works. I still have land investors that make lots of money, but they’ve had to shift to more outside of the flipping model that— you know, flipping still works, but they’ve wor— gone into things like subdivides, distressed title, all sorts of other ways to get land below market value so that you can sell it for market value and make money that way. So does that make sense? Yeah.

Cody Crabb (11:17)
Does, yeah. I think la— land, hearing land is like it— it’s— people can wrap their head around, “Well, yeah, you buy— you buy a— a single family home, you rent it out, someone pays you rent, and then you— you know, you can profit.” So this is some people kind of have not even considered that this is a thing. How do you go about— someone that kind of is— is interested in the— in the land investing part of this, how would someone go about finding some of those— some of those prop— properties to— to actually purchase? You said that you kind of look for people that are looking for a way out.

Steve Hokanson (11:48)
Yeah. I mean, you— you f— you find an area where you decide what you’re where you’re gonna work, and there’s some counties that work better than others. Not all counties work, but there are— there’s three thousand counties in the US. You can w— you can decide to work in anywhere, and I’ve seen people work all— owns a five-acre parcel in whatever county. You kind of spray— this— this is the way it worked, you s— you sprayed the county before, and maybe one percent, half a percent will respond to you, and a smaller percentage of that you ended up buying. But you know, you gotta do your due diligence. You need to make sure that it’s a good deal, that someone’s not trying to scam you, that you gotta make sure they own it and all those things. But the on the title side of things, but not— but not on— you don’t have to do inspections. You don’t have to worry about rodents. You don’t have to worry about anything going— anything with a piece of— with a building or anything. It’s just land. Yeah. So you know, make sure you don’t buy a mountain or the side of a hill, but that’s what goes th— through the due diligence process. So—

Cody Crabb (12:48)
That’s— that’s interesting because that’s certainly not the— the way that a lot of people end up looking at real estate. Like, they— they just don’t think of this as real estate, I think. so that’s pretty interesting. so as far as the investors you work with, what numbers do you see that they’re maybe not aware of that maybe they should be super way more aware of because they’re more real— it’s more relevant than they think?

Steve Hokanson (13:12)
Yeah, so look, the one thing I will say is the most successful land investors, real estate investors are the ones that are super organized. They have a good handle, at least on the periphery of their numbers. The people that have stuff all over the place is— if you— if you’re doing that with your books, you’re probably doing that with other parts of your business. So or—

Cody Crabb (13:24)
Yeah. In your life. Yeah. You should look at my car. Yeah.

Steve Hokanson (13:40)
platforms that my clients use. And you know, and also, you know, when you’re— when you’re buying— when you’re buying and selling, you have HUD statements, making sure that those are available, making sure that your deal sheets matching the actual numbers. That’s all super important to— to get accurate.

Cody Crabb (14:44)
Love that. Yeah, it’s— it’s a little bit like the, you know, best time to deal with it was five years ago. Best— the next best time is right now cause that’s only— like you said, it’s only gonna get worse. Steve, this has been really interesting for our audience, I think. so tell us a little bit about the services you provide and if maybe our listeners want to get in touch with you, how can they learn more and how do they know if they’d be a good fit to work with you?

Steve Hokanson (15:04)
Sure. So I do— I do bookkeeping and I use QuickBooks and— and Xero. My clients either use one or the other of those. I— I do booking for land investors and realistic son and you know, I— I can— I understand the business because I’ve been a land investor. I also think it’s in my own books. So I’m happy to talk ch— with anybody in the— in— in in in land investing, real estate investing, any— anywhere in that realm.

Cody Crabb (15:34)
Gotcha. And how can they get in touch with you?

Steve Hokanson (15:36)
Yeah, so probably the easiest way is email. My email is [email protected] and we can put a link in— in the notes.

Cody Crabb (15:48)
Sure. We’ll do that. We’ll put a link in the notes for sure. Yeah. Well, I think this has been super informative. I like when we get— when we get insights from people that aren’t just like doing the solely the investing thing, because I think you can give— learn a lot from someone who has not only experience in another area, but like relevant experience in another area. Like, you know, you see some things that people don’t. So I appreciate all of you shared.

Steve Hokanson (16:13)
Th— there was one other thing that I wanted to share here is, yeah, that was one reason why I got into it ’cause I heard all of these stories about how much people— how much money people were making in land investing and I wanted to see it myself. So yeah, no good. I can see the—

Cody Crabb (16:28)
Yeah, I either— I either usually hear that or I read Rich Dad Poor Dad and I had to act on it, or I— or it’s like I found the Bigger Pockets podcast and I had to do something about it. So yeah, it’s— that is very much in line with the— the— the real estate investor kind of mindset for sure. but once again, Steve, thank you so much for hopping on today. I really appreciate your time. And listeners, I really appreciate your time as well. If you liked today’s episode, make sure to follow us so you don’t miss another great conversation like this one, Steve. Thanks so much for— for giving us some wise words today, and you have a good weekend.