Real Estate Articles » Land Investing

"Buy Low Sell High" Not Just A Cliche'!

By: Paul Breden
Submitted: 11:20AM on Monday 01 December 2008

OK - so you already know that "Buy low - sell high" is a workable strategy. How, then, do you identify the property with the lowest potential purchase price?

There are two sources of pricing information. Both are available to the general public, and both may be available online. The first is current asking prices for the type property you are seeking. The second is accurate recent sale prices that other sellers have accepted. The difference between the two can be significant.

As an example, in my local market here in the North Carolina mountains, the average asking price for raw land over 50 acres in Watauga County, as of November 21, 2008, was $39,408 per acre, while the average selling price in '08 has been around $7,500/acre. The average asking price for the adjoining county, Wilkes County, was $7,382/acre, while the average selling price in '08 was $4,505/acre. See what I mean about asking vs. selling prices?

Learning both asking and selling prices is relatively simple. For the first, asking prices, open a website for a reputable local real estate company and look for properties listed in the local MLS. Most brokers will have not only their own property listings, but also a link to all properties listed in the local MLS (Multiple Listing Service).

Once you find your way into the MLS listings, get specific as to what type properties you would like to see. For example, choose a category entitled "Farms' or "Land" over 100 acres. There usually won't be many. Enter any available information about all of these properties, i.e. location, features, price, etc., into an Excel spreadsheet. Let the spreadsheet calculate the total acreage, total asking price, and average asking price per acre. Bingo, you now know all you need to know about asking prices.

The second thing you need is actual selling prices for large parcels - over 100 acres - in the past 12-24 months. There are two potential sources for this information.

First, look online. Try googling "[county name, state, GIS". You are looking for the site that is a "GIS" site for property in your county. Many of these sites allow you to "query" for more information, i.e. "all properties over 100 acres that have sold in the current year". If your county offers this service, you'll have a list of all properties recently sold as indicated by 1) their sale price and 2) their date of sale. As before, enter all available information on these properties into an Excel spreadsheet, and let it calculate the average sale price per acre.

If no GIS is available for your county, or it doesn't allow you to "query" by size and sale date, you can go directly to your county tax office. Ask for either a printout or a CD with the following fields included: 1) owner name, 2) address, 3) sale date, 4) acreage over 100, 5) sale price, 6) deed book/page where recorded, and 7) tax value. Using the information provided, create a table with the data provided and hand-calculate the needed figures.

You now know the average asking and selling prices. From this information, isolate properties currently for sale that fall at or below the average sale price per acre for the current year. At the very least, determine which are priced below the average current asking price.

Once you have 2-3 properties identified, do a drive-by appraisal to determine whether they are in an area that would support a resale. If so, these properties will be your target, and your target purchase price should be at or below the average selling (not asking) prices. Don't hesitate to make your offer based on a price that is 20-25% below the average selling price. You can always allow the seller to negotiate upwards to an acceptable price (which should still be below the average selling prices).

In summary, you make your profit when you buy, not when you sell. You can rarely sell a property for more than "fair market" value, but you can always buy below fair market. As my first partner taught me: "We're going to pass up the GOOD deals when we find them." "Why?", I asked. His answer: "because we're going to wait for the GREAT ones!"