Land Development Turned Into an $315,000 Assignment Fee

[Gabriel Graumann]

Investment Info:

Other other investment in Meridian.

Purchase price: $2,050,000
Cash invested: $35,000
Sale price: $2,400,000

Started as a two property assemblage deal, tying up two adjacent parcels each with a single-family house plus acreage. Initially I planned to take the property through the approval process and then sell the approved site plan to a builder.

What made you interested in investing in this type of deal?

I like any deal that has multiple exit strategies. One of the two parcels had a gorgeous 5,000 sf custom built house with mountain views, and from my comps could be sold without the land for $1.1-1.2M after subdividing the remainder of the land. Another major factor was the rapid growth in the Boise, ID market with scarce build ready lots weighed heavily in a land owners favor.

How did you find this deal and how did you negotiate it?

Initially saw the larger property on the MLS, but the smaller adjacent property wasn't listed for sale. I worked through a local real estate to put an offer together, but after a bit of back and forth between brokers that went nowhere, I requested all parties meet in person. When possible, I believe more gets accomplished if a buyer and seller can sit down together and talk through what's most important to each side and work towards an agreement. As broker myself, I can attest to this.

How did you finance this deal?

The contract provided for a short feasibility contingency period to review the most critical items, and then an extended closing of around 9 months. This was a benefit to both the seller, who needed time to relocate in better weather, and for me it allowed additional due diligence and planning for the project. The only money out of pocket was for the earnest money of around $30K.

How did you add value to the deal?

I hired an engineering firm to figure out the best site plan for a small single-family subdivision. We ended up with a layout that could accommodate between 25-30 lots in the 7,000-12,000 sf range each. Various builders in the area were looking for lots like this, so we felt it was a good size to go after. A conceptual site plan was created, and a preliminary meeting with the city confirmed that necessary utilities and services could accommodate this project if it went forward.

What was the outcome?

Once the site plan was completed and the initial feedback from the city was received, I floated the opportunity of an assignment of contract for both parcels on a local social media platform. The platform was real estate and builder focused, and the response was very high. I had two offers within 48 hours from developers who wanted to take over the project and put their own touches on the site plan before the city signed off on what we were creating. The net return made sense, so we accepted.

Lessons learned? Challenges?

Be open to big deals, even with unknowns. This was my first deal in the Boise market and I lived out of state. I had to source a new team of real estate brokers, builders, engineers, planners, etc. Those I hired helped cut the learning curve by years, and I was able to rely on them for most of the planning elements of the project. Also, being able to identify value where others overlook it. The largest portion of this deal was a listed property that others failed see the value in.

[Gabriel Graumann]

@Kerry Noble Jr Yah, this was a fun deal to work on. Took a few trips to Boise over a 3 months period, met several great vendors I'll be using in the future, and ultimately was just a solid deal. The market also played heavily in my decision to both purchase it and to assign it. Boise doesn't have many large employers and their growth exceeds local income, so it's transplant growth reliant on workers using a home office. Not sure how many $1M houses Boise can afford to keep building, and when things shift, markets without strong local jobs get hit hard and recover more slowly.