A potential home run? Killer land deal or a dud??

Real Estate Investing Raw Land
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So, there’s this deal that I’m kinda working on in New York State. It’s an 88 acre tract, in a somewhat rural area, located about 20 minutes in either direction from a couple of big summer resort towns. The guy that owns it uses the land as his personal summer retreat, keeping a camper there. He’s done 4 man made lakes, drains swells, a septic system, a well, as well as having cut roads into the property. He’s made some attempt at subdividing it, having gotten approvals for about 15 1 acre home sites, and theres room for another 40 or so. Great mountain views surround the place, and it seems to me the two best options for this property would be to subdivide or keep it together and have someone build a country getaway on the land (hunting, fishing, watersports, snowmobiling, and skiing are all the big to-do’s in this area).

I found this property on craigslist, and he’s been apparently trying to sell it for a couple years at least. Doesn’t seem to be in a big hurry, but he does want the right buyer, someone who knows what they’re doing and with the money to back it up. He’s offering it for about $490,000, and willing to carry back some financing as well, if the down payment is worthwhile.

So, I’m thinking, what if I got him $100,000 for a down payment, and he carried back the other $390,000… then what if I sold this same property on some kind of wrap around- like $550,000 (on terms), with me asking for like 20% down ($110,000), which puts some cash in my pocket, and then tacking on a point or two of interest to make a spread every month. Or just try and straight flip the property to a cash buyer for like $510,000 (putting $20,000 in my pocket.) Either way, this seems like a potentially good deal for me.

I have two questions- one, I assume that if I can line up my buyer first, and then put the deal together, it shouldn’t cost me anything much out of pocket, right?? I’m not exactly rolling in dough these days. Two, aside from listing with a real estate agent (which since I don’t own this land, I assume I can’t anyways), what other options do I have to get this deal on the desk of developers? I can’t sell them something they don’t know exists, right? Any suggestions???

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If this has been for sale for two years, why no other takers?

Have you looked at all the downsides?

Infastructure, roads, curbs , gutters sidewalks, utilities, water, sewer, gas, electric??

Is this in the path of progress?

How long to build out and sell?

Is it actually feasible to do?

What do the numbers say?

What are the TRUE potential returns versus the risk?

Land develoopment is very risky. It is also very rearding.

Personally I would do a LOT MORE due diligence BEFORE I jumped in as the water can be very deep.

For instance, the seller can say it is subdividable…any permits?

Talk is very cheap…action cost $$$ and development action costs lots of $$$.

Do some more checking and then make your decision.

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re:

Thanks for the response, and to try and answer your questions-

  1. I don’t believe he’s been motivated to sell. He’s basically sitting on it waiting for the right buyer. It’s only been marketed on craigslist, as far as I can tell.

  2. Downsides? I haven’t put a dollar into this yet, nor do I intend to, until I know I have a deal put together (with an exit buyer in place for me.)

  3. The infrastructure is very basic. It’s out in the woods, in a rural area. The roads are dirt paths, cut throughout the property.

  4. I wouldn’t call this property being in the path of progress. It’s a little off the beaten path, but I believe thats one of its selling points, as a getaway.

  5. As of now, nothing has been built on the land, and since I’m not familiar with construction or development, I’d guess a couple years to fully develop, give or take.

  6. As far as I know, it is feasible. He has approvals in place for about 15 homesites, and is in the process with another 40 or so.

  7. I think the best reward would come to whomever took on this project, and subdivided and then sold the lots separately. He wants $490,000 for it. There are about 50 potential lots to be subdivided. They are all 1 acre a piece. Assuming a sales price of $10,000 per lot (which I’d assume is below their marketable value), we’re talking about roughly $500,000 in sales. I’m fairly certain they could be sold for significantly more, similar lots in the area sell for $20-40,000.

  8. I’ve done all the homework I know how to do, since I’m new at this. What else do I need to know, and where do I find that info from??

Also, how do I find potential regional developers, who I can sell this job to? I don’t have the resources or the pockets to pull off a job like this, but there has to be a way to make a buck out of it??

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The big question is, and you asked it yourself: “…how do I find potential regional developers, who I can sell this job to”? EXACTLY!

Unless you are adding value to the transaction, why should anyone pay you MORE than they can get it for from the current (no-hurry) Seller? Cheers…

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re: land

The key point of value that I’m able to offer is that I’ve talked the seller into financing the property. Therefore I’m able to sell it with seller financing in place. A potential developer would be able to hold onto most of their capital, after giving a small down payment, and instead be able to deploy that money in the actual development.

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RE: Answer to “A potential home run? Killer land deal or a dud??”

Hi veryloco,

Seeing that he’s not in a hurry and you want to secure this deal with little outlay, why don’t you purchase it on option with the initial deposit to be paid in 6 months and full payment in 18 months.

You’ll control the property in 6 months which will give you time to either:

  1. get the other 40 for DA approvals which will increase the value of the property

2a. you can then find a developer to onsell the option to, or:
2b. find some funds to develop yourself, or;
2c. find a jv partner to develop the land, or jv with the owner to develop it (splitting profits), or;
2d. refinance the property from the increased value and pay off current seller

  1. You give the property back if:
    3a. You can’t sell the option
    3b. You can’t do the DA
    3c. You can’t develop the property
    (Only outlay costs will be your initial option and legal costs)

  2. You’re in profit if:
    4a. You can sell your option, or
    4b. You can do the DA, or
    4c. You can develop the property

Hope this helps and good luck.

Cheers,
Armand