Posted by Tony-VA on July 07, 2002 at 12:36:48:
My value of the land is based upon the exit plan I have for that particular lot. The price I pay will be based upon my ability to negotiate.
Exit strategies (the more the better).
Let’s say the plan is to buy the lot, add a home and sell the whole land/home package. In this case, I would work with local dealers to get a hold of a nice used double wide. It will cost me more but it is FAR easier to get financing on a double wide (even on land/home packages) than it is on single wides. Remember, this is not in a park. Lonnie deals in parks I stear clear of double wides but when it is on our own land, double wides are more appealing.
You will find construction type loans from local banks much easier to come by when you are talking double wides on land.
Now let’s say my flip doesn’t pan out. With a double wide I can rent it for more, I can lease / option with a good chance of realizing a cash out at the end because the financing is easier. I would suggest you screen applicants through you mortgage broker (find one if you don’t have one) who can tell you who is likely to qualify for financing soon.
I don’t necessarily want to rent the land/home package if I can flip it but at least this way my payments are covered either way. I may have to refi in order to rent long term but it is better than pulling Tony’s pocket cash out each month to pay for a vacant home. Again, just a safety net.
If you are looking to set up a home and rent the dirt, then a nice (not a typical Lonnie deal) late model single wide can likely be moved in for a reasonable cost. Rent that home or even sell the home Lonnie style and rent the dirt forever. A very good plan in my book.
You state that your lot has been on the market for 11 months. Why not take a trip down to your courthouse and pull the file on that land. Find out what if any underlying loans exist. This lot may be free and clear which gives you room to use the tax estimate as leverage in your negotiation. If the land is encumbered you can usually ballpark what is owed based upon sales price and negotiate from there if you still have room.
Work you numbers backwards. Find out how much utilities are going to cost you to install. Find out how much grading (if necessary) will cost you. Make certain you can put this type of home on this land (single wide vs. double wide). Find out what market rents are in that area for a comperable home. Use this number as you basis of income. If it rents for say $500 then you want to perhaps shoot for monthly costs of $300 (this gives some room for error and profits).
Your seller may well be motivated and often times I find that land/lot owner’s understand that bank financing for just raw land is difficult and they are willing to owner finance. Keep in mind that many times these owner’s get calls from people offering to put $500 down only. Set yourself a part by offering to put down 40% if you can. That usually get’s their attention. But only offer this if they balk at the owner financing idea. I am willing to bet they will change their tune once they see some money coming their way.
Best Wishes,
Tony-VA