Land purchase options

[Amit Barman]

So we are looking into development a 22 Acres land to build 46 Villas. Land developer already sub divided the land. For a land of this size, what kind of deal you guys go with the Land developer? It would be too much holding cost if we pay the land price up front. Curious to know the possible options that we can present to the land developer.

Thanks for your suggestions!

[Scott Choppin]

Looks good @Amit Barman

Given this set of facts, I would suggest phased closings with seller where you would only purchase a few lots at a time. This it the rolling options method I mentioned before. 

You would propose X number of phased closings in your negotiations, once agreed upon deal, then close on phase 1 purchase, and provide him with option money for the future phases, to incentivize hime to wait for the future closings. If market turns against you, you can bail out, you lose your option payments, but you aren't forced to close future phases unless you want to, and you don't close the whole thing in the beginning and hold land when market turns down. Many large homebuilders use this method to protect against market downturns.

Suggest you get those option payments to be applicable to purchase price. Put some money in his pocket to get him patient, but you pay down your purchase price while you move through the options. 

You only pull trigger once you build out X homes, then roll to the next phase, hence the term rolling options.

Have fun!