5 acres for $50,000

Huntsville, Alabama
Land & New Construction
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5 acres for $50,000

Samuel CoronadoPro Member
Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes

I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Alecia Loveless:

@Samuel Coronado My experience with building lot purchases is they’re usually only worth what you pay for them once. Then they go down in value.

I bought a lot 18 years ago with the intention of building a home and moving there because my best friends lived next door. They ended up bankrupt and foreclosed on and I moved somewhere else.

14 years later my lot in a town where building had boomed, housing prices were up about 40% and there was solid population growth had gone from being worth $28,500 to being sold for $19,000. And I had paid over $20,000 in property taxes on it.

The reason your seller hasn’t sold the lot for $50,000 is because it’s overpriced.


land has very little value if existing homes are selling for less than New build replacement costs. which is pretty much half of the US.. and especially in the mid west and rust belt areas.. building lots have value in dense urban areas where new infill is going on in a big way.. Like Charleston SC or pretty much any West coast bigger city  , North side of Chicago , and the finer areas of the US.

There is a whole land flipping niche out there in the RE space I fund a few of them and frankly they kill it if you know what your doing and where to make your buys. Far more profitable than SFR s given the capital required and time to flip them..  I funded one in Feb for 65k and it sold for 115k in 7 days cash out cash in .. split profit with my client he finds them I provide the money its a wonderful business..

The terms the OP was offered are STELLAR for land only purchase Not sure what he expects I am surprised he got anyone to lend with that little downpayment on dirt.
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Samuel Coronado:

    I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 


     see if the seller will do seller financing. Also if it is 1 buildable lot, the additional acreage may not add a ton of value. For example a 5 acre lot is not worht 5x a 1acre lot if it can only support one home. But based on what you wrote, lenders will not touch something that small.

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  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Chris Seveney:
    Quote from @Samuel Coronado:

    I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 


     see if the seller will do seller financing. Also if it is 1 buildable lot, the additional acreage may not add a ton of value. For example a 5 acre lot is not worht 5x a 1acre lot if it can only support one home. But based on what you wrote, lenders will not touch something that small.

    Very true. This has been a tough seller. We first started talking in November. She wanted 50k. I told her I would do 60k with 10k down and then the rest when I developed the land and sold it. The whole process would have taken maybe 3 months. She didn't like it and said someone had offered her over 100k. I said 100k is a great deal for her and take it fast. lol. I saw her casually on social media later and re-engaged. She said everyone who offered to buy was a scammer. We had the discussion about how I was a local buyer and we can meet in person, I can provide references, etc. She's stuck on it being worth 50k, which in a time when there is no land for sale below 30k an acre, I still see it as a great deal even the back 3 acres aren't the best and can't be developed. It may actually be a selling point as the back 40, so to speak, is against a huge plot of private hunting land that won't ever be developed because of the topography. 

    On the lending front, I did find a couple of lenders. One with brutal, silly terms. The other with much more reasonable terms. Silly terms were 10.35% floating rate for 10 years with 35% down! The reasonable one was 15% down at 8.5% for 20 years. I am looking for this to be a short term development so however I can structure the deal where it's the lowest payment, I am happy. Going with the latter and hoping to establish a relationship with the local lender going forward. 
    0Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Samuel Coronado My experience with building lot purchases is they’re usually only worth what you pay for them once. Then they go down in value.

    I bought a lot 18 years ago with the intention of building a home and moving there because my best friends lived next door. They ended up bankrupt and foreclosed on and I moved somewhere else.

    14 years later my lot in a town where building had boomed, housing prices were up about 40% and there was solid population growth had gone from being worth $28,500 to being sold for $19,000. And I had paid over $20,000 in property taxes on it.

    The reason your seller hasn’t sold the lot for $50,000 is because it’s overpriced.

    0Reply
  • Edgar U.
    Real Estate Agent · VA · Member since 2008 · 420 posts · 175 votes
    2y

    Try Agcredit or similar for your area, local banks, credit unions, etc. You can always look at new contruction loans. I do think in my opinon most will require at least 20% down though. However, I would shop around.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Samuel Coronado

    10.35% for land is still really good as well. Our last three deals which had real property were 15%, 13.5% and 13%.

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    2y

    @Samuel Coronado

    Right. Unlike developed land, you normally can't borrow much. I only heard of LTV's of 50% or LOWER. So, 35%-40% down is really good. Granted, I've never done a land deal. Remember, you can't get a conforming loan. So, anything you get will be a commercial loan so it won't look nearly as good as buying a developed property.

    Sounds like usual seller over valuing the property.  You mainly just have to wear her down, and wait until she is more worn down.

    Good luck.

    0Reply
  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Alecia Loveless:

    @Samuel Coronado My experience with building lot purchases is they’re usually only worth what you pay for them once. Then they go down in value.

    I bought a lot 18 years ago with the intention of building a home and moving there because my best friends lived next door. They ended up bankrupt and foreclosed on and I moved somewhere else.

    14 years later my lot in a town where building had boomed, housing prices were up about 40% and there was solid population growth had gone from being worth $28,500 to being sold for $19,000. And I had paid over $20,000 in property taxes on it.

    The reason your seller hasn’t sold the lot for $50,000 is because it’s overpriced.

    Wow. That's a shocking story. I've never tried landbanking for years like that, but I have done some value-add stuff to force appreciation. 
    0Reply
  • Jordan Ray
    Developer · Palm City, FL · Member since 2018 · 326 posts · 99 votes
    2y
    Quote from @Samuel Coronado:

    I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 

    Best of luck on this project! If you need any site work resources feel free to connect. 
    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Samuel Coronado

    How did this turn out ?

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  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    2y
    Quote from @Samuel Coronado:

    I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 


     I wouldn't buy land with a loan ever

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  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Jordan Ray:
    Quote from @Samuel Coronado:

    I have some land about to be under contract where I plan to clear it, reinstall the utilities, and either build on it or have a smaller new home built on it. I'm having trouble finding someone to lend on this. I am confident the land will appraise by itself as smaller 1 acre pieces are going for 20k a piece right next to it. I've called a couple banks and they say they don't lend that low or they want 35-40% down, which would take away from my working capital and slow down the process. I am gathering some investor friends now to go in, but was hoping to do this small development without giving up equity. 

    Best of luck on this project! If you need any site work resources feel free to connect. 

     I think you're a bit too far away from my current area of operations right now. 

    0Reply
  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y

    Follow up to this one: I think it would be great for someone who wanted to live there long term, but it doesn't meet the criteria for what I am looking for at this time. The seller and I have parted ways. 

    0Reply
  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    2y

    @Samuel Coronado - appreciate the update.  Now that you've passed on the deal, can you disclose where the land was located?  I'm just curious - we've bought one piece of land since 2018, and not likely going to buy any more in the immediate future.  

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Alecia Loveless:

    @Samuel Coronado My experience with building lot purchases is they’re usually only worth what you pay for them once. Then they go down in value.

    I bought a lot 18 years ago with the intention of building a home and moving there because my best friends lived next door. They ended up bankrupt and foreclosed on and I moved somewhere else.

    14 years later my lot in a town where building had boomed, housing prices were up about 40% and there was solid population growth had gone from being worth $28,500 to being sold for $19,000. And I had paid over $20,000 in property taxes on it.

    The reason your seller hasn’t sold the lot for $50,000 is because it’s overpriced.


    land has very little value if existing homes are selling for less than New build replacement costs. which is pretty much half of the US.. and especially in the mid west and rust belt areas.. building lots have value in dense urban areas where new infill is going on in a big way.. Like Charleston SC or pretty much any West coast bigger city  , North side of Chicago , and the finer areas of the US.

    There is a whole land flipping niche out there in the RE space I fund a few of them and frankly they kill it if you know what your doing and where to make your buys. Far more profitable than SFR s given the capital required and time to flip them..  I funded one in Feb for 65k and it sold for 115k in 7 days cash out cash in .. split profit with my client he finds them I provide the money its a wonderful business..

    The terms the OP was offered are STELLAR for land only purchase Not sure what he expects I am surprised he got anyone to lend with that little downpayment on dirt.
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  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Alecia Loveless:

    @Samuel Coronado My experience with building lot purchases is they’re usually only worth what you pay for them once. Then they go down in value.

    I bought a lot 18 years ago with the intention of building a home and moving there because my best friends lived next door. They ended up bankrupt and foreclosed on and I moved somewhere else.

    14 years later my lot in a town where building had boomed, housing prices were up about 40% and there was solid population growth had gone from being worth $28,500 to being sold for $19,000. And I had paid over $20,000 in property taxes on it.

    The reason your seller hasn’t sold the lot for $50,000 is because it’s overpriced.


    land has very little value if existing homes are selling for less than New build replacement costs. which is pretty much half of the US.. and especially in the mid west and rust belt areas.. building lots have value in dense urban areas where new infill is going on in a big way.. Like Charleston SC or pretty much any West coast bigger city  , North side of Chicago , and the finer areas of the US.

    There is a whole land flipping niche out there in the RE space I fund a few of them and frankly they kill it if you know what your doing and where to make your buys. Far more profitable than SFR s given the capital required and time to flip them..  I funded one in Feb for 65k and it sold for 115k in 7 days cash out cash in .. split profit with my client he finds them I provide the money its a wonderful business..

    The terms the OP was offered are STELLAR for land only purchase Not sure what he expects I am surprised he got anyone to lend with that little downpayment on dirt.

     We found a local credit union with a 15% down payment. I passed on the land, but was able to make a great connection in the land lending department for sure. 

    0Reply
  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Michael S.:

    @Samuel Coronado - appreciate the update.  Now that you've passed on the deal, can you disclose where the land was located?  I'm just curious - we've bought one piece of land since 2018, and not likely going to buy any more in the immediate future.  


    https://www.zillow.com/homes/11491-Glass-Hollow-Rd-Athens,-A...

    Seller decided to list with an agent for 115k. lol
    0Reply
  • Eric Blair
    Member since 2024 · 70 posts · 40 votes
    2y

    @Samuel Coronado

    Did you try a local credit union? I got a $50k loan with zero down by using a local credit union

    0Reply
  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y
    Quote from @Eric Blair:

    @Samuel Coronado

    Did you try a local credit union? I got a $50k loan with zero down by using a local credit union


     Yes, sir. I was able to establish a great relationship with a local lender who will be my very first call when it comes to the next deal. 

    0Reply
  • Samuel CoronadoPro Member
    OP
    Investor · Huntsville, AL · Member since 2016 · 334 posts · 181 votes
    2y

    update: the property was taken off market as of July 2024, unsold at the desired price. 

    0Reply
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