How to Buy Based on Lot Value & Best Exit Strategy

[Sarah S.]

Houston TX     $220K      Comps $385-$500K

3/2.5    2327sf   

Lot Size 5,100 sf

Considering a home in an upcoming area centrally located in Houston.  Property is being sold as-is and for lot value. I am planning a renovation to the home and home has strong and solid bones based on contractors who went to property on my behalf. Buying property based on lot value is very new to me and seems alot of investors are currently buying based on lot value. My questions are:

1. When buying property for lot value is there a certain calculation to analyzing deal to confirm it is a good deal? I usually try to buy homes at 65-70% of ARV but not sure if same applies to lot where a current home stands. I pulled home comps but should I be pulling lot comps in the area instead?

2.  I consulted the father of a friend who was an investor for years and asked him what he would suggest for strategy but he has aged a bit and said he was so out of touch with market he was not sure but said his first thought was if the numbers are good to wholesale this deal and ask Buyer if he/she would be willing to let me shadow the process but he has mixed views because says it may be an opportunity to take a chance and take on the renovation which would net a better profit and some experience. He says to seek a mentor and split profit for their guidance. I would like some feedback on which strategy may be best option for first timer with a big renovation and lot value purchase. I do already have a contractor and crew for projects. Challenges do not frighten me at all, I actually love them but same time can wholesale if better option while I gain more experience.

Thanks in advance for feedback.

[Wayne Brooks]

@Sarah S. Actually, you just need to forget the whole “lot value” idea, it’s an irrelevant number....it sounds like someone is telling you they are selling for “lot value”, just to make it sound like a deal.  The numbers either work, or they don’t, regardless of what real “lot value” may be.