How to Structure Land Deals? Newbie Needs Wisdom!

[Deja Clark]

Hey All,

I have zero experience in real estate. My aspirations include becoming a real estate developer, so I want to learn as much as I can. I heard the deal starts with the land purchase!

How would you structure this deal to make it work for a single family home build?

I entered negotiations with a wholesaler for a vacant lot. The price started at 120k and I counter-offered 90k to which the seller was going to accept. However, they wanted fast close at 10 days when I need 30-40 days to complete the survey. I then lowered the offer price to 70k since I wouldn’t be able to complete the due diligence piece. The seller’s most recent counter-offer was 90k for 30-40 day closing with a 10k non-refundable earnest money deposit.

Location: Tampa, FL

Zoned: RS-50

Lot size: 6,969 sq ft

New construction homes in the area are selling for at least 350k.

*** Also, this deal has lots of red flags including the immediate 30k price drop, the 10-day fast close & the non-refundable 10k EMD. For kicks and giggles, I would still like to know how you guys would make this deal work for you. All insight is appreciated :)

[Jaycee Greene]

Hey @Deja Clark, welcome to the BP Forum! I would pass on this deal given the red flags you share (and the fact you feel there are red flags is generally a bad sign). Most developers look at a piece of land and have a "end goal" in mind and work backwards from there. Much of this analysis is based on the size of the land, how much it will cost to do the horizontal development, and then estimate the cost of the vertical build and ultimate value (aka "sale price")

[Deja Clark]

@Jaycee Greene Thank you for your insight! I definitely ended up passing on this "deal" based on the red flags. Seems like the few people I talked to that are selling land in Florida are trying to sell it above retail without understanding that most of their potential buyers are going to be builders.

[Jay Hinrichs]

Quote from @Deja Clark:

@Jaycee Greene Thank you for your insight! I definitely ended up passing on this "deal" based on the red flags. Seems like the few people I talked to that are selling land in Florida are trying to sell it above retail without understanding that most of their potential buyers are going to be builders.

do Not buy land in FLA without doing full due diligence  on all aspects . there are environmental gotchas that you need to fully suss out prior to waiving due diligence

[Deja Clark]

Quote from @Jay Hinrichs:

Quote from @Deja Clark:

@Jaycee Greene Thank you for your insight! I definitely ended up passing on this "deal" based on the red flags. Seems like the few people I talked to that are selling land in Florida are trying to sell it above retail without understanding that most of their potential buyers are going to be builders.

do Not buy land in FLA without doing full due diligence  on all aspects . there are environmental gotchas that you need to fully suss out prior to waiving due diligence

 Absolutely! I ran from it.

[Kristi Kandel]

Quote from @Deja Clark:

Hey All,

I have zero experience in real estate. My aspirations include becoming a real estate developer, so I want to learn as much as I can. I heard the deal starts with the land purchase!

How would you structure this deal to make it work for a single family home build?

I entered negotiations with a wholesaler for a vacant lot. The price started at 120k and I counter-offered 90k to which the seller was going to accept. However, they wanted fast close at 10 days when I need 30-40 days to complete the survey. I then lowered the offer price to 70k since I wouldn’t be able to complete the due diligence piece. The seller’s most recent counter-offer was 90k for 30-40 day closing with a 10k non-refundable earnest money deposit.

Location: Tampa, FL

Zoned: RS-50

Lot size: 6,969 sq ft

New construction homes in the area are selling for at least 350k.

*** Also, this deal has lots of red flags including the immediate 30k price drop, the 10-day fast close & the non-refundable 10k EMD. For kicks and giggles, I would still like to know how you guys would make this deal work for you. All insight is appreciated :)

 @Deja Clark LOVE your willingness to jump in the game. Development has changed my life. There will be plenty of deals out there so if you're not getting the time you need I wouldn't pursue it. 

Each site you evaluate is another step forward and you'll learn more along the way. I'd start by seeing what pieces you already have lined up for building the project. 

1. Do you have 2-4 contractors that you've built relationships with who build similar homes to what you're looking to do? That way you can work backwards on the land price AND your holding costs while you're designing, permitting, and building the home. 

2. Do you ave 2-4 lenders that you've built relationships with and do you understand their terms for purchasing the land and the construction loan and the exit strategies if you need to hold the home a while before you sell to a buyer? 

I'm happy to talk more. Just shoot me a DM.