All Forum Posts by: Account Closed

Value Add real estate acquisitions are properties that require improvements which will enhance their value and ultimately increase its cash flow. Certain real estate investors target these properties to earn higher returns than normal, stabilized properties. This type of investment requires expert knowledge identifying the areas of the property where value can be added and failure to determine accurate costs, timelines and absorption to stabilization can result in lower or disastrous returns. However, buying at the right price after identifying areas to increase the value, can result in higher yields.
Value add components of a property deal can include renovations, repairs, building reconfiguration, additions, subdivisions, vacancy lease ups, assemblage of other properties, zone changes, debt restructuring to name a few. The analysis can be substantial and if done too quickly may result in missed items or underestimation of costs.
Once the opportunities for improvements have been identified it is necessary to perform a back of the napkin analysis to determine costs and if the price of the property will support the costs along with a projected lease up or sale.
[REMOVED]

Its hard enough selling land in a good market let alone one such as this. To gain an edge you need to make sure the property is “user friendly.†This means you need to open it up to as many other agents as possible with customers.

Land Staging-The 4 Steps

I am often asked by agents and landowners what is involved in land staging. The process involves seven crucial steps which I will briefly explain in this article. They are as follows:

1) Collecting data
2) Determining highest and best use
3) Feasibility plan
4) Staging

#1) Collecting data. The first step is to collect data on the property including zoning, wetland, soils, topography, utilities, perimeter survey, easements, micro/macro market info, environmental, assessment information and legal issues. A site visit and walking the property is also essential as one may pick up crucial things that do not appear on maps (is that an old dump? Wow, look at those views!) This information establishes the basis for what you can do or not do with the land. There are a number of helpful websites and software that can provide much of the info.

#2) Determining highest and best use. Of course this is the most important element in land staging. What is the land best used for? This is often not what you might think. While it may be zoned for a 5 lot subdivision, possibly it has a higher market value as 2 lots with a tax deductable conservation easement or a high density affordable housing project that supersedes zoning density. A clear concept and specific location for the use(s) is a must.

#3) Feasibility plan. Once the use is determined a plan showing the location and how to get to it must be created. If it is two building sites, for example, we must show where exactly they are located, possible viewscapes or other enhancements, stream crossings, and driveway location. This will show us how the property will be staged and the plan can be used in the future for marketing.

#4) Staging. This involves the actual improvements to the land to show its inherent qualities to a buyer. It will also improve the property’s value as it shows highest and best use and delivers the customer to what I call the sweet spots. These are the areas of the land that sell the land (the building sites, the conserved area, the enhancements, etc.). The sweet spots must have convenient access to them such as a broker drive (a driveway good enough to get a broker and their customer to) or a walking path. Cutting viewscapes are a necessity as well as clearing the building site, providing walkways to other sweet spots (water assets, rock formations, open space, etc.). Finally, marking the property lines and other significant points that coincide with the feasibility plan is essential.

While no one can guarantee a sale, land staging will put a land parcel far ahead of the other land on the market that require imagination to figure out.

Land Staging-The magic of access

Not providing convenient access to the proposed house site(s) on a parcel of land is like trying to show a house with the door locked. This is one of the most important principals in land staging and overlooked by most owner/agents marketing land-provide convenient access. Providing access also forces us determine what the highest and best use is and where we should be leading the customers to exactly. There are five rules explained below:

Rule #1 Show the sweet spot(s). If the land has a great building site or two, you need to determine where that is and clear an area so the customer knows they have arrived. Putting a picnic table at the house site and clearing some views would be a big help. The sweet spot is primarily what you are selling.

Rule #2 provide a plan. The customer (and other brokers) need a plan to show them where they are. Customers want to orientate themselves. Would you go on a camping trip without a map?

Rule #3 Flag and mark important points. It’s very helpful to flag property lines, proposed house sites, and strategic points so guessing does not occur. Neon survey flagging is sold at hardware stores and carry a magic marker to write on the flagging what the point is.

Rule #4 Provide convenient access. The customer needs to be able to walk or drive to the sweet spot easily and safely. I always assume a female broker with a city couple will be driving a Lexus SUV to the sweet spot. This forces me to make the “broker drive†safe, easily navigable and free of branches and twigs that will scratch vehicles.

Rule #5 Don’t over do it. Don’t cut anymore trees than necessary, swerve around big trees and never put in a major drive as the new owner may want to change the location.

Remember, people buying land are not on a Lewis & Clark expedition and need to access the sweet spots easily, quickly and safely. Furthermore, other brokers will feel comfortable showing their clients. Providing convenient access will increase the chances of selling your land exponentially.

You can make a fortune in land. Having said that, I will not sugarcoat what is probably one of the most difficult types of real estate investing. The reason you can double, triple (or more) your money in land is because it is one of the least understood real estate investments. This provides incredible upside if you know what to look for and what to do because very few people know what to do. This is no different than any business however. Think about used cars, for instance. If you know cars inside and out, you will be able to buy a great deal from a person selling their car and doesn't know its value. You can then turn around and sell it at a profit. You have capitalized on your knowledge. You can fix the fender, buff and shine and even make more money. The same thing applies to land only hardly anyone knows anything about land.

The key elements in making money land are the following:
1. Know your market. Don't even think of buying land outside of the market area you know intimately. Little things can trip you up even if it looks like nothing can go wrong. Start looking at every land parcel in your market.
2. Dream team. You can't do it alone. You will need to have close relationships with a civil engineer, land attorney, Zoning official, site contractor, real estate agent and lender.
3. Understand what sells. You have to know what type of land is selling in your market and at what price. You will need to have better quality at a lower price. Land is the hardest asset class to sell and has no cash flow. This is very important.
4. Know your zoning. Almost every town has zoning regulations which describe in a table, usually, the basic requirements to have a legal lot. Frontage, acreage, setbacks, etc. In areas without public water & sewer, you will also need to know health codes, soils, and wetland issues Essential to know.
and finally,
5. Create value. This is what its all about. You can buy land at a discount and flip it or you can really make money by improving it, then selling. The types of improvements include, zone changes, approvals for a building lot, subdividing, land enhancements (access drives, viewscapes, & beautification), free cuts, merging of title and conservation tax easements, to name a few.

Once you have a land parcel targeted, there is another major step involved which is the Purchase Agreement or Option. How you structure this can make the difference between making money and making A LOT of money. But that is left for another article.
Don't think you are going to go out and make a fortune in land without first having a lot of knowledge. You will get hurt. On the other hand, study and learn and you will profit handsomely.

Remy is a cheap date compared to screwing around with Rehab. Geive me a shout, I'm in CT too.
Mark

Thanks Mike

We are seeking investors interested in a secured note on our rehab projects. This "gap" financing is a second to a hard money 1st and never exceeds 90% LTV (after rehab value). We are paying 20% annual interest.
We are very experienced contractors and an MBA and credit scores are in upper 700's. We operate only in our market area of CT with income producing multifamilies. All mortgages are prepared by your local attorney which we pay for.
An example of the way it works is our hard money lender has the after repair value of our project appraised (say 300k). We buy for 150k and it needs 75k of rehab. The hard money lender will lend 75% of ARV or 225k but requires interest reserve of 25k (6 months). Our working capital amounts to another 25k so we have a cash flow deficeit of about 50k on each project.
We look for a second mortgage in the amount of 15% of the ARV or, in this case, 45k with 6 months interest deducted. We complete each project in about 60 days and refinance to take out both loans. (Also, the property is usually worth 10% more than when first appraised.)
Any interest, please reply.
Thank you.

Whats the best burglar alarm system to use that is not complicated and can be taken from one rehab to another.
Thanks

We are seeking investors interested in a secured note on our rehab projects. This "gap" financing is a second to a hard money 1st and never exceeds 90% LTV (after rehab value). We are paying 20% annual interest.
We are very experienced contractors and an MBA and credit scores are in upper 700's. We operate only in our market area of CT with income producing multifamilies. All mortgages are prepared by your local attorney which we pay for.
An example of the way it works is our hard money lender has the after repair value of our project appraised (say 300k). We buy for 150k and it needs 75k of rehab. The hard money lender will lend 75% of ARV or 225k but requires interest reserve of 25k (6 months). Our working capital amounts to another 25k so we have a cash flow deficeit of about 50k on each project.
We look for a second mortgage in the amount of 15% of the ARV or, in this case, 45k with 6 months interest deducted. We complete each project in about 60 days and refinance to take out both loans. (Also, the property is usually worth 10% more than when first appraised.)
Any interest, please reply.
Thank you.