Raw Land and Exit Strategies

[Bryan Blancke]

I am interested in raw land investing. I dont fully understand all the exit strategies one might exercise when buying, holding, or wholesaling raw land. If I purchase a property and I can't get it to move is it priced incorrectly or should i expect that holding time before a sale can be a long time? What else can I do with raw land other than sell it? I am not very interested in doing my own development. Not yet at least.

[David Krulac]

@Bryan Blancke

I've bought and sold hundreds of lots and land.

In general I would not recommend to new investors.

The Great Recession of 2008 had a more drastic effect on vacant land than houses, apartments and buildings.

In many areas in the run up from 2000 to 2008 land prices quadrupled or more; and in many areas there is an over supply of created lots.  and still a buyers market with more sellers than there are buyers.

In a buyers market unless  you are experienced.  You should stay on the side of being a buyer and not being a seller.

For me I'm a buyer and a seller all the time, though it can take longer to sell lots in a buyers market.  In one of the areas where I work prices did quadruple from 2000 to 2008.  It was glorious.  We sold some properties for 40x what we paid!  Grant Cardone talks about 10x in his book of the same name, we were doing 40x.

But on the flip side, those prices have dropped since 2008.  Every year since 2008 in that area, the prices have dropped and the sales volume have dropped.  It like a free fall. I have a classic example.  I sold a lot in 2008, and then sold the identical lot next door in 2013 for 60% LESS.  IOW, the second lot sold for 40% of what the first lot sold for.  I've also sold lots there this year (oh yes I still have lots there that I bought quite a while ago) for 20% of what peak prices were, IOW for 20% of what I previously sold.  In fact the prices that I've recently sold are about the same prices that I sold 20-25 years ago in the same community!

There are a lot of issues with lots like:

wetlands

flood plains

environmental contamination

endangered species, both plant and animal

zoning regulaitons

streams

perking for septic suitability

well depth and costs

All of these can make a property unbuildable.

There is a niche of the market where people buy lots really cheap, sometimes for a few hundreds and re-sell, largely on the internet.  Sometimes their ads are outright lies, sometimes they just forget to mention certain things like failed perk and title issues and unbuidability. 

Don't become that type of fraudster.