My First Land Development Deal - $50k in 6 weeks

[Michelle Ellis]

Investment Info:

Single-family residence wholesale investment in Leander.

Purchase price: $208,000
Cash invested: $400
Sale price: $260,000

7 acres with pre-1968 manufactured home. Sellers wanted to sell quickly without going through the traditional listing process. I got the property under contract, then started to subdivide into 3 smaller tracts of land. Took it as far getting approval to go through the short subdivision process, while simultaneously searching for a money partner. Found the money partner, money partner wanted the property for his personal residence. I assigned the contract to him for $50,000 Win-win-win

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

This is my neighborhood, and I know it well. I have been researching with the county and city what can be done here for the last 2 years, so when I saw this property was available, I already knew the potential.

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

I found the deal through a wholesaler who posted it to a FB group. She was new, made a ton of mistakes, and eventually I terminated with her and worked directly with the seller, who already knew me from my newsletter that I mail out. I offered him $15,000 more than the wholesaler had it under contract for and he decided to sell to me even though his brother-in-law (realtor) was encouraging him to list it.

How did you finance this deal?

I spent just under $2500 out of pocket for inspections, option and earnest money, and then assigned the deal.

How did you add value to the deal?

The seller made it clear from the beginning that he knew he could get a higher offer by listing it, but he wanted simple. I made that my goal for him. I offered him a little less than he would have netted had he had to pay listing and closing fees. I added value to the buyer by thoroughly researching the property (well, septic, adding more electricity) and running thorough comps, including paying for a well inspection and getting the property through the preliminary subdivision process.

What was the outcome?

The seller was happy with the simplicity of the process, from contract to close. The buyers were thrilled to have such a great homesite plus investment opportunity (they plan to subdivide, sell 1-2 lots and build on the 3rd). I made $50,000 in 6 weeks. Win-win-win!

Lessons learned? Challenges?

I learned that I absolutely love land development research and consultation. I have found my real estate niche. I'm already involved in 3 more small land development projects in just the last 2 weeks since the closing. Helping property owners net more (sometimes almost double) what they would have if they had just listed the property is so rewarding. And if they just want to sell as-is, I and my partners can offer them fair market value and a simple, stress-free closing process.

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

When I was considering doing this deal myself (subdividing and re-selling 3 lots), I worked with Jack Lieberman, a hard money lender. Phenomenal guy - he even came out to the property and gave me his opinion, which helped me tremendously. I look forward to working with him in the future. He also does traditional loans.