LandInvestors.com Forums **Ask A Question** Would you do this deal?

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    Roy
    Participant
    Post count: 10

    I mailed a new county (never mailed there before) with higher priced lots in better areas. I got a response from a seller who notified me that the property is listed with a broker on the MLS for a few months now for considerably more than what I offered, but he agreed to take my offer.

    Lot size: 2ac List price: $71K. My offer: $48K. The area is a gated community with homes in the $400-$500K range, and previous lots sold for around $70-80K in that subdivision. Property is surveyed, staked, and even passed a perc test.

    I figured I’d purchase it, and resell it at $65K ($10-$15K profit). But now I’m not so sure. I’ve never done a deal in this price range before, and not sure if I can make it work at $48K, now that there’s a broker involved. Would you do this deal? Any suggestions?

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  • Kevin Farrell
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    Post count: 1035
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    Roy – Nice deal! You have done everything right. I would try to negotiate so the seller pays the broker or at least splits the commission. The only unknown will be how long will it take to sell it. Even though I am not working in that price range, I believe that your numbers will work perfectly.

    How many deals like that do you need per month to “get by”? Keep us informed on this one.

    Roy
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    Post count: 10
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    I’m kind of nervous about it since it’s not selling at $70K on the market now, and tying up $50K to make $10K is a bit daunting for me. Anyone have experience in this price range?

    Kevin – what do you mean by “deals per month to get by”? I typically do lower priced deals, at around $5K-$20K.

    Kevin Farrell
    Moderator
    Post count: 1035
    ProAdvanced

    Roy – I am just suggesting that most of us would do well to close 2 or 3 $10K deals a month. I will have to agree with you that it would be nicer to make $15K on the deal. If this property sells in 2 weeks and you net about $10K, then it’s great use of your $50K. If it is on the market for months, then not so good. I think it is worth the risk. I would do it.

    Michael Aillon
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    Post count: 282
    Pro

    I would ask the owner if he can cancel the agreement with the broker. If so, make sure he gets a release of the agreement before you go any further. Otherwise, he (or you) will be paying that brokers commission.

    If the market is hot in that area, and you know you can sell it, go for it. The beauty of Jack and Jill’s education is getting accepted offers on real property in which you KNOW (or at least have a very high probability of) that you can sell it for more. In addition to selling it for more, you should be 100% confident that at the very minimum you can sell it for what you paid for it. If your gut is not confident of that, seek other advice or walk away.

    Roy
    Participant
    Post count: 10
    Pro

    Michael – Thanks for chiming in. The broker’s agreement ends in May 2018 with no possibility to cancel in advance. So I’ll have to foot the bill here. I’m sure the broker won’t be very happy with such a low commission, but not my problem.

    The market is not that hot in the area. It’s an A-class gated community, but is a pocket surrounded by a rural area. Not a lot of lot sales around. This property is listed on the MLS and has not sold in months, along with one more in the subdivision for around the same price.

    My gut isn’t confident of a quick sale, that’s why I’m hesitant. This is pretty much the only place I know to turn to for advice. What other advice do you recommend I get?

    Michael Aillon
    Participant
    Post count: 282
    Pro

    I’m still too new at this to give concrete advice. But I’ll add another .02 cents to my original comment.

    I think the cornerstone of our business is buying “unwanted” land. Not good land at a good price; unwanted land at “garage sale”/”get it out of my life” prices. If it’s not a “Hell ya!”, then be careful.

    With that said, I think most of us agree that moving any one piece of land can be slow. Land requires vision and sometimes it takes a while to find the right buyer. The market is limited to cash buyers and less is liquid when compared to houses. The only way to mitigate a slow-moving land business is to send out more mail and do more/other deals! Eventually, everything sells (as Jack says).

    If you’re unsure, ask for a delayed closing or take an option agreement.

    I hope that helps. Be sure to get the opinion of other folks. You just might want to book a call with Jack on this one.

    Milan
    Participant
    Post count: 511

    Roy, in my opinion this is not a good deal. It requires too much capital from you.

    Your capital you have for cash purchases is limited most likely and it is ultimately you biggest power.

    This would be no deal for me.

    Roy
    Participant
    Post count: 10
    Pro

    Michael – I get what you’re saying about the “unwanted land” but I think it can work for any kind of land, just not at 10%-30% of market value. More like 50%-60% if it’s “good land”…which is also good, but becomes more about the dollar value of profit, rather than the percentage. So you won’t be selling a $1000 property at $5K for a 400% profit, rather a $40K property at $52K for a 30% profit, which is $12K.

    Milan, thanks for commenting. The cash isn’t an issue. I’m nervous about it since I’m not sure I’ll be able to sell it fast enough and make the profit I’m looking for, thereby reducing my turnover profit (potential profit made from turning that $40K several times more during my holding time).

    Blake Jones
    Participant
    Post count: 56
    Pro

    The comps are everything. How many lots have sold recently and for what price? Also, I would not drop that kind of cash to buy sight unseen. How does the property compare with the comps – better or worse? My gut tells me the price is too high. There’s very little room for a problem or a surprise.

    Roy
    Participant
    Post count: 10
    Pro

    Blake – thanks for chiming in here. Solds in the subdivision are $70K-$80K. Problem is I’m seeing 3 lots for sale in the subdivision for the $70K’s and they’re not selling for a while.
    Mind you, this is a very pricey subdivision. It’s a gated-community but nestled in a rural area with lower prices.

    Since my original post I’ve gotten calls from 2 other interested parties in that same subdivision to sell me their properties for around $30K(!), so I’m not sure what’s going on there but it’s making me nervous to see too many eager sellers in the same subdivision so willing to sell at these prices.

    My plan is to call brokers in the area and find out a bit more about it and about the demand in the area.

    Kevin Farrell
    Moderator
    Post count: 1035
    ProAdvanced

    Roy – This is much different than the “unwanted” property that is the basis for the Land Academy training. Many people have moved on to work in richer areas like this. It takes more study and there is more risk at first. If you buy one of these you can see how the market responds.

    I recently mailed to a coastal area with very few comps. My offers per acre were 500 times higher than in the desert. I got several who accepted. I was still not sure of how this would play out so I bought one beach property and two off beach properties. I knew that I could at least sell them for what I paid if necessary. The beach property got 3 calls the same day I put the advertisements out there. The fourth caller on the next day bought it for cash. Later that week, I got a few calls on the off-beach properties. I went back and bought 8 more beach properties.

    It could have gone the other way and I would eventually sell that first property, but sometimes the great markets are hiding right in front of us. I think this comes down to how comfortable you are with risk. Others have given really good advice on this thread and you have been looking at this deal for almost a month now. Review all the information and decide what you can be comfortable with. You may not have your money tied up in this purchase but you have your attention and energy focused on this deal when you could be working on something else.

    You have money, time, and energy – use all three wisely.

    Good luck and let us know what you decide to do.

    Blake Jones
    Participant
    Post count: 56
    Pro

    I’d try to lock one of those 30,000 deals up with an option and see what happens. You can potentially make some good $ but don’t have the risk plus you can test the market.

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