10 Acre Land Investment finally paid off, now what?

Question

Hello my name is Irma and my husband and I purchased two 5 acre blocks 10 years ago as an investment. Now that they are paid off, I'd like to know what I should do with them. We are living in interesting times around here with the creation of The University of Texas - Rio Grande Valley, New Medical School, and Space X coming to the Rio Grande Valley. Yes, this area is going to boom. My 10 acres happen to be directly along the state highway that will probably be developed further since it leads and is in between all three major university campuses. The new university (UTRGV) is set to open in September 2015 and the UTRGV new medical school in September 2016. The location of the land is in a rural area for now. It's zoned agricultural since it's farmland and we've been renting it out to the neighboring farmer. We get 25% of the profits for renting, we don't have to maintain the land, and the agricultural zone taxes are super low.

My questions are:

Do I continue to wait and see what develops around the land?

Do I subdivide to sell into residential lots?

Do I develop into commercial property for business?

Do I develop the land into apartment complex that could serve for future medical students and professors?

I only have the land as initial investment, If I decide to develop, are there special grants for this?

Your advice and guidance is much appreciated.

Thank You

My questions are:

Do I continue to wait and see what develops around the land?

Do I subdivide to sell into residential lots?

Do I develop into commercial property for business?

Do I develop the land into apartment complex that could serve for future medical students and professors?

I only have the land as initial investment, If I decide to develop, are there special grants for this?

Your advice and guidance is much appreciated.

Thank You

Tim Ball · Answer

What about building storage units along the highway?  Not sure your exact location but storage units seems like a low maintenance type operation.  Concrete and metal.  Not many tenant issues I would think.  If area seems like it will boom, building commercial or apartments seems like a good idea too.  Again, not sure how the land or town is set up.

Irma Hermida · Answer

@Joe Fairless  thank you for your advice. I will be scheduling a feasibility study with an Engineering firm. I'll see what the results are from that and go from there. This should help me determine the best use for the land.

@Manolo D. Well insulated dorms...got it! I was so excited this weekend that I actually made a list of all the amenities including laundry, activity center, gym, and other fun things that we could potentially provide in the business center if this project manifests. I had so much fun with that.

Thanks for the 3/2 suggestion. I started to research campus apartments was wondering if it would be good to mix it up with 1B/1B, 2B/1B, 2B/2B, 3B/2B. I'm not sure which would do better.

@Keith Bloemendaal The rezoning is what has me worried. It may take months or years, but I have to start somewhere. I contacted several of my friends this weekend, an engineer, an architectural designer, a real estate agent, a real estate lawyer. I had no idea I already had many resources available and that they also knew other resources that could help me. I already started making my list or resources. BiggerPockets is at the top of my list. Had I not joined I would've probably not have stepped out of my comfort zone and started this journey. I'm so grateful for all your advice

Manolo D. · Answer

@Irma Hermida Medical students, for sure something like well insulated dorms - you know how pressured they are on their studies, perhaps a little business arcade/business centers. Partner with a developer or several to build like 100 doors with 3/2 on each, maybe 5 doors per building, that should give you a lot of cash flow, once you get the first done, do the second one with the same crew so its faster and cheaper. Easier said than done, but you need to spend time and money to get that land re-zoned. You need to start now, as it takes months, if not years to get that done.

Joe Fairless · Answer

@irma

@Irma Hermida you can either develop it, partner with a developer, sell it or hold it. The first thing I'd do is determine what's the highest and best use for the land. Then I'd let that help inform my decision. Ultimately, it's up to you and how much involvement you want in the deal.

Brent Coombs · Answer

When it comes to the potential for Zoning change, what comes first - Apply to subdivide even though the current Zoning likely forbids subdivision (ie. need to have deep pockets to grease the wheels), or waiting for the County to magically hand you new investor-friendly Zoning changes so that your Applications will be a "gimme"? Any way, good fortune is likely to come your way, because you are asking all the right questions, in the right Forum. Cheers...

Carolyn Morales · Answer

Very Awesome! Also why we prefer buying along highways and not in subdivisions where value tops out quickly! Be sure to check DOT for potential eminent domain on road expansions though,  if you build anything, build deep away from the highway

Manolo D. · Answer

That sounded great, do your due and let those REA help you, dont just give them a silver plate when you start to sell/rent. I dont believe 1/1 and 2/2 will work, I would go for studio then 2/1, 3/2, its just that the costa outweighs the benefits. Thinking more like 3/2 for teachers working professionals, 2/1 for students on a budget, and studio for students who are financially blessed and wants their own space. I could imagine the business center loan already coming to an easy acquisition with the 10 acre as collateral. ;)

Jason Mak · Answer

@Irma Hermida   Congrats - sounds like a nice investment

I think the first thing to do is to get educated on the allowable uses of this land beyond the zoning.  Read your city's General Plan (should be on their website).  It's long and dense but it will tell you what the city's strategic mission is.  Often times, there will also "specific plans" which designate specific intentions or strategies for particular areas within a city too.  If you can align your development with the vision of the city, the rezoning and entitlement process would be much easier.  A 30 minute conversation with a city planner could reveal a lot.

From what it sounds like, rezoning to multifamily residential could be the most 'profitable' play, but rezoning to commercial (strip mall, commercial) could be a nice exit as well.

Irma Hermida · Answer

@Tink Macabah That is exactly what I'm hoping for. Due to the land's location and how it's in a corner of the highway and a dirt road, I've recently been caught up in a water district turf war. 7 years ago I granted easement rights to the city so that now that area has access to the water plant that was built across the street. They even compensated me for it and the residents have access to city water now. They used to have to dig wells to get their water. Well this year, I was contacted by the other water district and now they want easement rights to the other side of the land, but at some point they overlap. I don't want to violate the first agreement with the city, so I lawyered up. I'll let the judge decide. I haven't heard from them since. Apparently they have some grant that will allow them to expand and overtake the other one. So based on all the turf fighting by the water districts...I believe I have a good location for development and a big possibilty for rezoning.

10 Acre Land Investment finally paid off, now what?

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