Real Estate Agent · Member since 2020 · 25 posts · 7 votes
When an Investor is looking to buy land, how do they know if the price for the land is too high? how do they determine an ideal price of the land if they want to do a construction project.
For instance if a lot in a neighborhood is 200k and it’s half an acre, how does he determine if it’s a good lot for construction? Hope the question isn’t confusing.
Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
5y
You have to know where the builders, developers, and homeowners want to be and what they need. Get ahead of them and have the lot they want. For instance, the land I just developed was in a hot school zone. I knew what builders were paying for lots so I went out and found some, cut the lots, and took to market. Path of progress. It's less of a gamble than just buying a parcel and hoping someone will want it one day.
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
5y
@Charles Scott I had a very wise investor tell me "its not about the land, its about what you can do with the land"
Here in Columbus OH we try to focus on opportunity zones, changes in zoning, all of the things that will create a bump in the value of things built on the land.
Real Estate Agent · Member since 2020 · 25 posts · 7 votes
5y
@Steven Wilson thanks for your input Steven, seems to be a very wise quote! I live here in the Las Vegas area so I know there is development daily. Let’s say hypothetically you were to get into land acquisition, who would you target as a buyers list?
Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
5y
You have to know where the builders, developers, and homeowners want to be and what they need. Get ahead of them and have the lot they want. For instance, the land I just developed was in a hot school zone. I knew what builders were paying for lots so I went out and found some, cut the lots, and took to market. Path of progress. It's less of a gamble than just buying a parcel and hoping someone will want it one day.
Real Estate Agent · Member since 2020 · 25 posts · 7 votes
5y
@Clint Shelley good analogy Clint, I live in the Las Vegas area and we have a lot of development lots, I recently noticed multiple lots in a golf course community that are selling for about 450k and new construction in the neighborhood has been multi million dollars homes, so I am considering investing in the lots. But I want to be sure that it is a good investment.
@Steven Wilson thanks for your input Steven, seems to be a very wise quote! I live here in the Las Vegas area so I know there is development daily. Let’s say hypothetically you were to get into land acquisition, who would you target as a buyers list?
Anybody with land! Find out where hot land is, then go through your auditors site and just start calling everyone on the list and see if they'd consider selling.
@Charles Scott We usually use the same formula that we'd use for a rehab.
ARV-Land-Improvement to Land- Buildout -Profit = Price willing to pay for land
Example, if homes are selling for $800K, the land is $200K, improvements $50K, buildout $350K- hopeful profit $100K then it leaves you with $100K for fees, misc expenses, and extra profit. The $200K land price is well worth it, if the ARV would've been at $700K or lower, then you wouldn't have hit your numbers.
Real Estate Agent · Member since 2020 · 25 posts · 7 votes
5y
@Alfonso Giacomucci so if you want to simplify for a second, if I’ve found a lot for 400k and the homes are selling for 2.5 to 3 million then I’d be in a good profit range correct?
@Charles Scott I'd think you'd be safe with that example but to clarify, my advice would be to always run the exact numbers for the property and not generalize. I will say that I sold a property for a little over $300K in Charlotte and the builder tore down the house and turned it into a $1M property with a profit.
Rental Property Investor · Charlotte, NC · Member since 2017 · 23 posts · 34 votes
5y
@Charles Scott You haven’t mentioned the construction costs. That’s the unknown variable in your post.
Also, can you clarify your strategy with these lots? It sounds like the lots are already for sale on the open market, which reduces the likelihood that you can flip it quickly....unless you think you’re a better marketer than the current seller, or the # of lots are limited and you think they’ll sell quickly, or you’ve identified a strategy for highest-and-best use beyond the current million dollar homes in the community. Otherwise, the end-buyer would purchase it directly from the current seller for the current price instead of paying you a premium for the land that you’re trying to flip, right?