Raw land development, 3 years, 63% profit

[Nate Wiger]

Investment Info:

Vacant coastal CA land purchased off market, improved, sold. We took a piece of raw land and made it "turnkey ready" for a buyer wanting to build their own home. This one took us a long time - 3 years - but we were not in a hurry for cash flow.

Purchase price (off market): $595k

Improvements cost: $76k

Seller note interest paid: $53k

Property taxes paid: $11k

Total cost basis: $735k

Selling price (in escrow): $1.2M

Gross profit: $465k (63% of $735k)

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

I have a W-2 job and dabble in land deals because I enjoy developing things from nothing. This was a below market land deal that we were able to put some legwork in to add value. It took us 3 years but that's not unusual in coastal CA.

How did you finance this deal?

Cash

How did you add value to the deal?

For this lot, we did all the environmental studies, grading plans, fire approvals, and landscaping plans, along with a preliminary architectural design since it helps with the sale if the buyer can "see" themselves living in the property. A blank piece of land with no house design is generally too much to grok for people. We didn't actually do any grading or road work.

What would you do differently?

We sold it due to the shifting market but in different conditions, we would probably have taken the time to grade the lot, improve the road, and get all the utilities setup. Probably an additional $200k in costs for $500-700k more in profit. I also chose an overpriced and overworked civil engineer who probably added 1 year to the project... will not use him again.

[Jay Hinrichs]

Quote from @Nate Wiger:

This was through a contractor connection. Owner was mildly interested in selling and the contractor convinced them to entertain an offer. I've also handwritten letters to land owners I find via vacant parcel searches. Very time consuming, but lots of land is owned by retirees who bought it 30 years ago and have no idea how much it's worth in today's market.  They aren't really motivated to sell because it takes a lot of work and emotional energy. Presenting an all cash offer, quick close can be compelling to some of them. But it's a low hit rate TBH.

good one.. this is how I bought timber land in Oregon Wa and northern Ca for over a decade..  Land game has far less competition but is more cash intensive but a ton of fun..  congrats on the deal.