$134K Payday! .... 4 years in the making - Land investing.

[Douglas Larson]

About four years ago I saw a nasty, old house on decent piece of land about 2 miles from my home in Salt Lake County, Utah. Other investors stayed away because it was obviously not going to be a traditional, cash-flowing property without significant expense. They were absolutely right. My strategy though was a long-term hold and to use the large lot for storage. I boarded up the home and fenced off the lot for safety, but made no other improvements to the land.

The strategy and patience paid off last month with a sale to a developer who also purchased a larger, adjoining piece of land.

My cost for the property, including taxes and other holding costs was a total of just under 70K. The sale price was 205K. There were no commissions or other costs, except the usual title and recording fees. My net gain was about 134K.

I wish I could say that this investment was all genius and foresight, but of course there's always a little luck, and perhaps even some divine intervention!

Now, I won't pretend to be any kind of Donald Trump rival.  Consider that the developer is combining my small 1 acre parcel with an adjoining 35 acres, and I estimate that his company will net between 7 and 9 million bucks after a few years' work and the sale of all residential lots in this project. Now, that's a serious paycheck! ... And, this is just one of several projects they are involved in.

Whenever you evaluate a deal (either projecting potential returns or considering the actual outcome after the sale) you should always ask... "Compared to what?"  On closer inspection, the real cash on cash return was about 30% per year. Without including any of the other important advantages of using the land for storage and some tax benefits, a really smart Wall Street investor could have just invested 70K in Apple stock and done about as well over a 4-year period. 

I am not a savvy stock guru and I like investments I can touch, smell and possibly add value to. I like investing in land and SFR's. Residential lots and homes just make sense to me, and thankfully they also pay dividends.

[Shane Hedeen]

Congrats on the deal @Douglas Larson! That is an excellent story. In the words of the much adored Warren Buffet, "Better to be lucky than smart." Certainly a little luck with the developer coming in and wanting the acre you owned, but kudos to you in seeing some silver lining in an otherwise useless piece of land! Win-win-win, for you, the developers and hopefully the end buyers of the residential piece of property.