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Wholesaling Land - Posted by Joi
Posted by Joi on July 22, 2005 at 23:35:54:
I typically wholesale residential homes, but I have a realtor I have come in contact with that understands what I do and is providing me with great leads for land that I could assign to a developer. I also have some land in CA that I am looking to put under contract.
How is this different from wholesaling residential property? What are the steps that I need to do to find a buyer for land that I put under contract? What information do I need to provide to the buyer in order for them to really want the land. Should I do an assignment of contract or do a simultaneous closing?
I would appreciate any wisdom.
Thanks,
Joi
Re: Wholesaling Land - Posted by Killer Joe
Posted by Killer Joe on July 23, 2005 at 24:32:44:
Hi Joi,
The end buyer, aka the retail buyer, will see the land in terms of their needs, and if it fits their needs they will buy it. Where have we seen this before?
If your goal is to play in the middle, it would behoove you to view these properties in light of their best use. Raw land is like a bare canvass, you can do any number of things with it. (Try that with a 4/2/2 and see how far you get)
In a great many situations the location of the land will have an overwhelming influence on the types of uses for the property. If you find properties that are open to a wide variety of uses, your exit strategy is wider as well.
Look at how the property is zoned. Every jurisdiction has its own guidelines, so don’t do any assuming in this area. Find out exactly what your options are concerning the property and its zoning.
Find out from the local authorities how the zoning works, and how you change the zoning for a particular property. You may need this info to show cause for best use when you are selling it.
Find out who is buying properties in your area, it’s a must if you are going to wholesale. Buying all the property you can get your hands on won’t do much good if your exit strategy is flawed.
Keep this in mind when looking at raw land, in many cases the land is undeveloped due to some hidden defect. This could be in the title, the covenants controlling the use of the land, city or town ordinances, flood plains, the list goes on and on.
Depending on the location of the land it may need to be able to pass a ‘perk’ test if it will every be allowed to have functioning water facilities on the property. In the city this is a mute point, but if you assume a property that lies several miles off the infrastucture doesn’t require extra scutiny, you’re not doing enough due diligence.
I personally see major opportunites in this arena, and am investing in land. For my portfolio it makes sense. Before you go headlong into this market make sure the ‘tendancies’ fit your goals, talants, and education. There is money to be made everywhere. HTH
KJ
Re: Wholesaling Land - Posted by Chuck
Posted by Chuck on July 23, 2005 at 18:37:43:
Good post in all respects, but let me ask a question.
I’ve identified a parcel that can be subdivided into 15 equal size ‘view’ lots. The current zoning allows this split (a rarity there) and all utilites are in the street. It’s located in a resort-type market where .40 acre (similar) lots sell for $450,000-500,000.
Appreciation (both homes and land) is up 23% over the last year, and over 45% of the homes sold there are over $1 million in value. The average 3/2 on a .25 acre lot goes for upwards of $550,000 and there were only two lots in that market, priced less than $200,000 each, back in April of this year.
In short, if this parcel were subdivided and sold as individual homesites, they would retail at over $17 million - if they were developed with the ‘appropiate’ home, the total would be in excess of $22 (million)… I put all this (market) info into my presentation and priced it so the buyer/developer would -double or better- his money on it.
I choose to allow 15 days for due diligance and another 15 for escrow, or a 30 day closing… which is not at all unreasonable considering the market and the fact that I want to move on to the next deal (instead of being a greedy speculator, yada yada)… Even so, I still had a few replies that no-one (in their right mind) would close that fast.
Comments?
Re: Wholesaling Land - Posted by rdlazo
Posted by rdlazo on July 23, 2005 at 07:39:12:
Like KJ said due diligence and
some time you have to pay cash.
It is not unusual to double your
own or borrowed money after
you bought it if you buy it right
after due diligence. You can always put
conditions, escape clause before you buy.
Good thing with land is only developer
and few investors know how to value land.
I do fill in city lots with utilities,
power, sewer and paved asphalt road in place.
Too expensive if you have to put them.
Thats for me small investor. Sometime
it’s like buying a fixer you do little
things, like subdivide for example and
profit can be very very good. I got one
house with 3 lots I can subdivide out of it
and profit will be very good. Location is
critical plus issues I mentioned above.
If you are not careful you might just
be buying somebody’s headache.
Re: Wholesaling Land - Posted by Killer Joe
Posted by Killer Joe on July 23, 2005 at 19:45:42:
Hi Chuck,
I didn’t see the question in your post, so I’ll just paint with a broad stroke.
Even though the current zoning for the property allows for subdividing into 15 lots you may still need to get that ok’d with the local building dept. Things change, and some times they change when ambitious projects are presented for approval. Maybe your plans have passed this stage already.
Additional concerns would be the amount of road frontage that each lot would need in order to meet such things as fire codes and housing density. Find out the required ‘green space’ that will be needed for that amount of land. Unless this is a big rectangular piece where all of the properties have road frontage, you may need to designate some of the land for roads. This can eat up as much as 30% of a master parcel, when you are talking small lots.
If the utilities are in place, water, sewer, electric, you or the builder will have to be sure that they will handle the additional load 15 properties will create. This is not something that you would take for granted. If the municipality did not plan for the additional burden when the infrastructure was put in place, the cost to bring it up to speed can be prohibitive. It is more so if these ‘view’ properties are situated near the top of the elevation for the surrounding land.
As far as getting someone to raise their hand for a bonsai closing on a project like this, I think 30 days to put the pieces in place is way too short a time frame to get all your financing and preliminary approvals from the local depts. If you are just talking about selling the land with only blue sky hopes of it being developed, the price should reflect that, and if an investor, or group of investors is willing to part with thier money that quickly, it could be done. I prefer 15-30 day escrows personally, but I also buy for cash at deep discounts.
If this didn’t answer your question, post back. Much success.
HTH
KJ
Re: Wholesaling Land - Posted by Ronnie (Tx)
Posted by Ronnie (Tx) on July 25, 2005 at 12:29:56:
Just when I think I am getting a pretty good handle on all this, I read a post like that which shows me how little I really know. It is a good thing I am moving forward without feeling completely educated or else I would never get started.
Re: Wholesaling Land - Posted by Killer Joe
Posted by Killer Joe on July 25, 2005 at 13:41:10:
Hi Ronnie,
Don’t feel like the loan ranger. I read posts everyday on this site that confirm the more experience I get at this the more I realize how much there is to learn. I sure wish I had the knowledge JT-IN and Randy (SD) have about REI, that would be some handy info. Heck, if I just knew what Michaela knew, I could do things way beyond what I’m doing now. All the best.
KJ
heh? - Posted by michaela-ATL
Posted by michaela-ATL on July 25, 2005 at 14:55:28:
KJ,
I’m flattered, but I really don’t know that much - I just fake my way through it ;-). I love to jump into something and just ‘wing it’. - What? I’m not supposed to do it that way? Well, noone told me, so I just didn’t know any better - lol
Michaela
Re: Wholesaling Land - Posted by Ronnie (Tx)
Posted by Ronnie (Tx) on July 25, 2005 at 13:44:44:
Thanks Joe.