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Water wells and splits2018-11-20T20:43:16+00:00

LandInvestors.com Forums **Ask A Question** Water wells and splits

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  • Luke Smith
    Moderator
    Post count: 1247

    Was looking through survays today around some land I have. I see others are buying smaller land than mine for more money. They are splitting them up 5 ways with a survey. They are drawing in easements to county roads. They are adding water well sites to the easements. They are drilling a water well and selling the lots.

    I talked to some guys doing this. They are doing well sharing contracts to have the first one developing to pay for the pump and plumbing etc. Second pays all cost less 1/5th then third pays all less 2/3rd cost etc until all the cost are split 5 ways.

    Got me thinking. Would you guys Mail on this process? Either carry it out or sell the land with the plan.

    What pit falls do you foresee.

    Do you think I can sell land contingent on the water well and get it drilled and paid out of title?

    Sell one lot to pay for the land one to pay for the well then three for profits.

    The economics look good. Time line not very long.

    Am I crazy?

    Milan
    Participant
    Post count: 460

    I think I talked to the same guys today too. He was telling me, that they build fountains on lands. But I believe he was talking about fancy looking well, where you can come and refill your water. These are LA based guys and are looking for properties around Show Low AZ. Are these the same guys you talked to Luke?

    Rod Hall
    Participant
    Post count: 249

    Luke, i like the idea. But I think I am missing something. Is the driller getting paid over time as land sells or do the partners pay the driller then it’s part of their costs? And are you saying the water development would be a contendency? Not sure I would go for that if I were a seller. Please clarify.

    Luke Smith
    Moderator
    Post count: 1247

    I was thinking the first one I would pay for to see what it all cast and entails. All with the idea of replicating it many more times. In the future deals when I know the time lines and the cost I could sell the land saying i’ll drill it cooking the cost in there. Get the driller out there as soon as one of the lots sells. Use the money from closing to pay the driller. Pay them right out of escrow. I’d probably have to backstop it in case the buyer goes awol.

    If the margin is big enough the well cost should slide right in there. Same as the surveyor if needed in the area I’m working this on.

    Just think the drilling would not take that much time and make the properties much easier to sell.

    Just price it all into the offers on land that fits the bill to split the way I envision.

    Could buy land an split it up all day long if I get the recipe down. Do it in very desirable areas too.

    Gary Eubanks
    Participant
    Post count: 15

    Luke, I think the concept seems like something worth evaluating! From checking in the past to evaluate the feasibility of drilling wells in certain areas, the Well drilling companies should be able to provide a reasonable estimate for the Water table depth and therefore, somewhat of a reasonable estimate for the well drilling. It also seems you must be seeing a pretty strong Value add from this concept.
    I think it is something to consider.
    The only question may be making sure you do this in an area, where the property desirability will support the increase in price.
    Using A 1 acre parcel in Concho AZ as an example. These types of properties may typically sell between $1250.00 and $3000.00 may not support an additional $3,500. to $7,500. for the well cost.
    I think if the parcel locations you choose, are in very desirable locations, then the model looks looks possibly viable!

    Brandon
    Participant
    Post count: 38

    Hey Luke,

    I know someone who has been doing this for twenty plus years, and he makes a really good living doing it. From what he has told me, he pays for it all up front out of his pocket and then sells off the lots. He will buy a 10-20 acre parcel and splits it up into 1 acre parcels, puts a well in that can be shared with everyone. He also blades roads in for easy access. He is basically developing the land for someone to actually use. I like the idea, but the only issue I see with this is coming up with the money up front to pay for the well and roads. You would have to make a lot more money to make it worth the risk. I’m not sure I want to be a developer.

    I was talking to this guy about finding him the 10-20 acres and then wholesaling it to him so he could do his thing. That way I am out of the deal and move on to the next one.

    Again, I think it would all depend on the numbers and the costs that are involved. If there is huge upside it might be worth the small risk.

    Luke Smith
    Moderator
    Post count: 1247

    Yes guys its all about the numbers and the time to pull it off. I’m looking at 25K buy and selling 5 bits for like 30-50K each. Sell one to pay for the land and one to pay for the well and surveyor. Three for profit.

    Get an area that is repeatable with the same contractors.

    Like House Academy does i’m getting to know more boots on the ground in areas I’m working.

    Don’t even have to do it all but if I lay out the plan numbers to call time lines to do it and the cost someone else takes off with it probably faster than I can pull it off myself.

    Michael Aillon
    Participant
    Post count: 256

    This isn’t a bad idea. Its better than rehabbing a house. A house rehab has so many things that can go wrong with each sub-contractor. The best thing about these improvements is that they can not be stolen, lost, burned or need insurance. However, drilling the well is the biggest unknown and risky.

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