Unique commercial land flip

[Don Spafford]

Investment Info:

Other commercial investment investment.

Purchase price: $650,000

This is a unique land flip opportunity. I got sent the unlisted deal by my agent there. Purchase price was well below value. Because of things that are happening in the area this lot was too good to pass up. 2.3 acres of prime commercial land with lots of development going on around it. Found a partner who brought the cash and we are splitting the profits when we sell. I put $0 into the deal but was able to lock it up under contract even with 2 other offers behind mine for more money. The plan now is to wait a bit for later this year or early next year to list it for 3-4 times the purchase price. At that point I plan to do a 1031 exchange to not pay taxes, purchase a large MF, then do a cash out refi to get most of the cash back to then deploy into other properties as I find them and keep some cash for myself as well, but deferring all the taxes from the sale of the land.

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

I wasn't looking for it, the deal was sent to me by my agent in the area and even with a high purchase price, I saw the huge potential.

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

My agent called me and told me about it and we put it under contract for the asking price. I knew the deal was amazing and I coudl find the cash somehow.

How did you finance this deal?

I contacted several people first, some were not able because the cash wasn't available at the moment, some needed more time to review it (we only had a few weeks to close), some did not want to invest in land. I finally got down to two potential partners who wanted to get in on it. I chose the one I did because he is local to the area and has other connections with large cash reserves. He contacted one of his private lenders and he paid all the cash.

How did you add value to the deal?

I brought the deal, got it under contract at a price about half the current value. Then found the right partner to help me close on it.

What was the outcome?

We bought it in a partnership. We now hold it and I am part owner of this 2.3 acre lot with no money down. We plan to sell it, preferably in a year to pay less taxes but will sell it sooner if we get an acceptable offer. We expect to sell it around $2 Million. The money lender also wanted in on it, so the deal will be split 3 ways, but I'm fine with it since I'm still getting a part of something big with no money in the deal.

Lessons learned? Challenges?

It was a bit harder than anticipated to find someone with the cash since many are afraid to invest in land. I knew with two other backup offers, we could easily sell it right away for a small profit if necessary. I called and emailed or otherwise contacted everybody I could think of to try to give them the opportunity to get in on this.
What I learned though is that the saying is true "if the deal is good enough, the money will come". And don't give up! I was losing hope but was persistent.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My awesome agent was the one who thought of me and called me when another agent called her and told her about this opportunity. It was unlisted land that the owner was fire-selling at well-below market prices. She probably knew I didn't have the cash to buy it but knew that I was motivated and could find a way to make it happen. And I did!
And of course the partner I chose is great and really helped seal the deal. It was honestly divine intervention that helped me choose which partner to use.