Are there any possibilities here? Too green to know . . .

[Christina R.]

(Thanks in advance for any suggestions and advice)

There is a SFH property about 2 miles from my house that I drive by twice a day (to and from work). It's had a FSBO sign in front of it almost from the time I moved to this area, which is going on 5 years now.

(Right away that tells me that there is probably no deal here as it would've been snatched up already, right?)

Here are the stats I know so far

* older (over 70) woman wanting to use proceeds from this sale to retire to New England. She told me this house "is (my) retirement."

* inherited house from her deceased parents

* works out of state on contract basis for living money (right now is in the Midwest). So comes and goes to the area.

However, based on my observations she doesn't stay in the property when she's back home - haven't seen turnover with cars, any activity like it's inhabited, etc.

* has a local person who can keep tabs on the property for her

* she "had it appraised" 2 years ago and is asking about 100K more than the appraisal, and about twice as much as FVM for what is selling in the area.

The intriguing thing with this property is that there is acreage that goes with it. She has a good half-acre lot that abuts the property .

Clearly with it FSBOd for several years, she is not a motivated seller in the sense of the word but I keep coming back to the fact that there is this land with this house and that there MAY be something in here -- question is, I'm so new to investing, I don't know where to start outside of the straight I buy, I fix, I resell.

What suggestions would you give me to follow up with her? She told me people keep saying they'll come to see my property but they never do (which I know is because her ask is too high). At some point I'd have to go see it but what can I do PRIOR to that to see if it's even worth the time.

[Rick H.]

Chistina - these kinds of properties can be like an old flame who periodically calls, causing us to ask ourself, 'I wonder if...'

It sounds like you are zeroing in on the land. Maybe there's a deal. Maybe not. I wish the people who moderate and run this site had an icon that would automatically post the question: "What are the numbers?"

Break out the two properties separately (presuming that they are already separate parcels). If not, you'd have to estimate cost of splitting the lot, paying entitlement fees, surveyor, etc. Probably not a good play for a novice.

Sounds like this situation will likely go to the buyer who develops the best relationship with the woman and figures out the secret sauce to make a deal work. Are you ready to sit down with her? Would you rather pursue a different opportunity? Can you drive down a different road?

[Christina R.]

@Rick H.

Thanks for your on-point advice and assessment of the situation (old flame, heh heh).

That's the rub - I'm a novice and have no idea where to start (the land, etc). So here's the conundrum for a novice - being the type A personality I am and wanting to learn (and, honestly, control) as much as I can about this "deal" my first instinct is not to "bug" local investors about it because (a) I want to add value to what I can present, (b) I want to know as much as I can before I put this before someone, (c) I want to control this in some fashion before putting it before someone since i'd be doing a lot of up front with the seller and learning as much as I can about the property, (d) I don't want to waste an investor's time because I don't want that reputation to follow me as I evolve with this business.

But it's like I can't get the outline or roadmap on how to start (with the land, for instance) without going to someone who's been there, done that and effectively negating points a to d.

If YOU were pursuing this based on what I outlined, what would be the FIRST thing you'd do?

[Matt Devincenzo]

Originally posted by @Christina R.:

@Rick H.

If YOU were pursuing this based on what I outlined, what would be the FIRST thing you'd do?

Find out if they are separate parcels, or if you would need to have them split.

You can't determine what values the house and land each have until you know if they are separate, or what it would take to get them separated.

[Tyrus Shivers]

@Christina R.

Seems like you have your answer. She is asking more than what FMV is and is not motivated. I would move on, unless you have a plan. I have a similar situation in which I am trying to make a play on the land. Do you know any developers? If so you could have them look at the land, and see what they could do with it.

But we need more information, what is the condition of the house? What is her asking and what is the FMV? What's the condition of the land, is it flat? What does the block look like? Is there a potential to put two SFHs on the land? There could be something there, but if she is not motivated then you first have to crack the code with her and have a solid plan of what you will do if you do. Does not sound good for a flip. Maybe a lease option depending on the condition of the house.

[Christina R.]

@Matt Devincenzo

-that sounds like the most practical first step. I would confirm from her but from looking at tax records they are one parcel at this point. There are city utilities on this street, the land is flat.

@Tyrus Shivers

- at this point, she's not truly motivated and I need to talk with her more to see what she REALLY needs out of this. I spoke with her last week and since they it's just been in my craw that there may be SOMETHING there - but I agree, not a fix and flip. My gut reaction was to rehab the existing house and build on the land behind and sell both off -- to investigate how this would work and what is involved/how much it costs and THEN go back to her armed with more knowledge than the initial phone call.

Her need is money - she wants the cash out.

[Rick Baggenstoss]

You may not have a motivated seller. What you could do with the property is superfluous if she's not ready to sell.

You need to test and confirm her willingness to sell. Describe a process to her and see if she's willing to go thru it with you.

e.g.

1. Confirm whether the offer is firm or if you have compelling research the property is worth less (or more), would she be willing to consider your input. Ask for a copy of the appraisal.

2. Ask if she wants to sell the property anytime soon? What's more important selling it soon or selling it for the highest amount years down the road.

3. If things are going well, suggest something like:

I'll take a look the property and pull together comps (online, realtors, and investors). I'd base it on the house not the possibility of dividing the land.

2. She needs to come up with the lowest amount she's willing to accept ... a total amount in cash and another offer where she gets a monthly income for her retirement.

3. Compare notes.

Qualify her first, then suggest potential use of the property to your buyers - single family residence or possible lot and SFR.

Rick

[Tyrus Shivers]

@Christina R.

With that information this is what I would do.

1.Obtain recent sales comps of both rehabbed and new construction for the area. (To get a feel of the price you can get for a rehab and new home on the property).

2. Find out how the parcel is divided. Is it city water, septic, etc?

3. Contact someone who develops, surveys or has recently built a new SFH @J Scott may be able to assist. If I am not mistaken he has experience with this sort of situation.

4. Revisit your situation, after you have more information is it worth it to you.

5. Reach out to another investor, I know you wanted to shy away from that, but there are plenty who can give you a couple of steps. I usually ask the developer who built my home all my new construction questions. (Plus he is always looking for land deals) so let him know what I find.

[Patrick L.]

It sounds like she believes the property is worth more than it is and doesn't want to take more than what she thinks it's worth at this point. There's probably not a deal to be made today but this is the type of seller to keep in touch with because her situation may change and she may decide she needs to get rid of it and will become motivated.

I've seen it before where FSBO people were asking $200k for a house and it was on the market for years and then all of the sudden I see in the public records that somebody bought it for $50k. You need to be there at the right time when her motivation changes if you want the deal.

[J Scott]

Christina -

What does new construction sell for in the area? And does it?

[Christina R.]

.

There is new construction but it's more of an apples to oranges in that the new construction is sided colonials and on this particular street the homes are ramblers or older style 2 stories, many of them brick. I'm sure that may pose a problem in comps.

One thing I have done is I dug around last night online and found out in the county that an RR zoning means you can have 2.17 units on an acre. Of course a survey would be the only way to confirm this but it appears that with easements, setbacks, etc., you COULD put a small home (which would be in keeping with the area) on the lot.

So here's the thing. Clearly I would have to front some costs to really determine the potential here and I don't want to do that in the absence of some commitment from the seller. Should I try to option her property for a month and do due diligence on this or do I just make her a numerical offer and then stay in touch with her when she doesn't take it?

Should I just forget about this?

[J Scott]

The reason I asked about new construction values is that the numbers don't sound like they'd work for a rehab, but they might for a tear-down, especially if you can subdivide and build a couple houses.

For example, if she'll sell for $200K and you can build two houses, that's $100K per lot. If you can build two 1500 square foot houses for $120K each, that puts you all-in for each lot at about $250K (including fixed costs). Can you sell a 1500 sf new construction for $300K? If so, it might be a good deal. If not, it probably wouldn't...at least not given those numbers and that sized house.

If you send me the address, I can take a look on the MLS and see if I can find any new construction in the area.