Valuing land in a flood plane for wholesale or new construction
Hello BP community! First BP forum post and I could really use your help!
I'm trying to evaluate a potential deal involving a 2.2 acre lot located in a flood plane in Harford County, Md. There is a SFH on the property but it is way past saving and is a complete tear-down job. The house is a 3/1 1200 sq./ft 1940s built. There is a creek that runs about 30 ft from the side and back of the house which divides the property into two parts. The owner is about to go into foreclosure and is willing to sell it for what he owes which is right around $25K. House is currently off market. The property was recently appraised at 80K in its current condition (says the owner, I haven't verified). I've looked at comps and talked to a realtor who said the ARV on the existing property if in good condition would be around 175K but she hasn't seen the property. The schools in the area are very good and the area has a strong rental market.
I realize that the property being in a flood plane will have a negative impact on the market value but it still seems like there would be room for profit if I were to wholesale it given the surrounding houses value in the area. The area is fairly rural and has a mixed bag of different aged and sized homes. Within a mile radius, you can find homes ranging from 100K mobile homes up to 1 million. The closest recent comp to it is a .67 acre lot with a mobile home (tear-down) on the same street but not in a flood plane sold for 85K in 10/2014. Similar to this lot, my property would have septic and well access which should add value.
Does anyone have any advise on how to go about finding an accurate wholesale value for the property? I think that the best use for the lot (because in flood plane and not level) would be to put a small modular or mobile home on it and then sell or rent. Should I reach out to a land surveyor to determine the exact boundaries and build-ability, first? Then find out the costs of clearing the land (tear-down), permits, modular or mobile home construction and ARV for each scenario? Then, subtract all costs plus a profit for builder from ARV to determine potential wholesale price. What net profit % do builders look for?
I apologize for the scatter brained way of writing this post but I'm just typing as it comes to mind. As you can tell I'm not sure where to start. This deal kind of just fell into my lap and I realize it may be too much to handle as a newbie but I don't want to pass it up if there is a decent profit to be made, either.
I would greatly appreciate any advice or list of steps to take when determining the value and profitability of land. Thanks!
Brandon from Beltsville, Md.