buying developed lots

Hi all. fairly new to this site but feel a great deal of market wisdom resides here. My wife and I are focusing on two strategies for purchasing RE now and wanted to ask about developed lots. We see opportunity in the large amount coming to market ( through banks ) with targets of 50% off highs and think it is a way to buy and hold a few years before the residential market comes back. We just don't know if this is the best use of our limited funds right now. There seems to be little in the form of funding available but we do have the capital to go into a 10 -20 lot development without leverage. Have been looking for a couple months and feel I am missing something here... Thinking is a 3 -5 year flip to a builder group or to control a whole small subdivision and build out as the market returns. This would obviously skip a potential long step in development costs and government approvals for zoning but would have no income until the market returns. Bottom line is looking at it from a " great deal " on developed land and am interested in someone to shoot holes ( or say go for it ).

Also, my long term goal is to get into development and as there is no market now this could be a way to get in now for a future project.

thanks for your help.
Branham

Edited: 06/26/2010 at 10:24AM

P NW

· OR

1,467 posts
7 awards
56 influence

Nov 06 '09, 05:13 AM

There are some screaming deals on developed lots in my town. Whole subdivisions with all the utilities installed and curbs in and roads paved are going begging.

The reason is that foreclosure houses are selling for less than the cost of building them, let alone the cost of the land. So you can't buy a lot, build a house, and get your expenses back.

However, real estate is cyclical and the developed lots look good for buy and hold. If someone can afford to hold them for a couple of years (and keep the meth heads from digging up the electrical wire), there is some money to be made.

Note: I am talking about my own local market. It might not be true in other markets.

Edited: 06/26/2010 at 10:25AM

Tay Gainey

Commercial Loan Officer · Decatur, Georgia

10 posts
48 influence

Apr 08 '10, 01:30 PM

I have access to investors that will give funds for stalled development projects. And also if you own the land, i have investors that will fund the developing portion.

Edited: 06/26/2010 at 12:24PM

Celine F.

Real Estate Investor · New Orleans, Louisiana

115 posts
1 award
50 influence

Apr 15 '10, 02:04 AM

Branham,

It seems like you are seeing great opportunities to buy and that a successful acquisition of a distressed new subdivision could both save you the hassels of those initial set ups as well as you could prosper at the same time that you help to prevent libilities associated with un-managed properties in your area.

Your ability to leverage into the deal would help determine whether you would only control the property of a while, or you would be able to continue what is left to completion of the construction to make the properties saleable in the near future.

Your ability to leverage also help you keep options open as other investing opportunities comes along the way such as cash flowing properties that you can receive on-going income from while you focus on reselling the homes in your subdivision individually.

There are many great opportunities in this market, however, they are not great opportunities for you if you are not able to get involved. I hope you find partners that could contribute both financial and technical efforts.

Edited: 06/26/2010 at 12:29PM

Matt Mathews

Real Estate Consultant · yucaipa, California

239 posts
1 award
50 influence

Apr 15 '10, 05:42 AM

The most important thing that I can suggest to you is; Go over and above board with your due diligence. Getting clear title should be your number one concern. Also, have the lots been partially dev. Utilities, pads, etc? If so! chances are the property taxes haven't been paid in a while. What stage of development are these lots in? What liens or changes in demographics has the city made-if any? Go to city hall and talk to the city planner if you haven't already done so. Buying raw land in a emerging market to resell to developers is one thing. But Pre-developed land is extremely risky unless you do your home work. Also, one more thing! Ask the city planner if any Contractors and or developers have recently inquired about those lots. If so, get their number and pick their brain and maybe network with them. I'm currently working on 4 REO lots right now, What I'm finding out is exactly what I'm saying here. Good Luck!!

Edited: 06/26/2010 at 12:29PM