Land staging-Investment opportunities
We have proven that Land Staging can dramatically increase land values by following simple techniques outlined in my previous articles. While you can visit those articles on my blog (http://www.realty-capital.us/blog.html), the purpose of this article is to show how third party investors can participate in the landowner's substantial upside.
Very often landowners will understand the benefits to staging their land parcel but not have the money to perform the necessary work. This usually involves a feasibility plan, creating broker drives to the prime sites, stream crossings or entitlements. When we analyze a site, we produce a pro forma of sorts showing the as-is market value, cost of improvements (land staging) and estimated new value. It might look something like this:
While this simplistic pro forma does not take into consideration additional selling costs or taxes due to increased value (a good problem to have) it presents a problem to a landowner who may not have the money to take advantage of a clearly spectacular investment: outlay $23,750 for a return of $230,250!
This creates the Investment Opportunity. A third party investor puts up the land staging money and participates in the increased value. Although each deal is different, we usually target a doubling of the investor's cash out as their return. Most often the investment is structured as a loan and 1st or 2nd mortgage but can also be structured as a membership interest and "buy-back." Interest rate increases over time to induce a sale and there is a balloon in a specified time. Expert counsel is required in the transaction and adherence to State laws are paramount. The investor must also be sophisticated in land investments.
We have developed a "clearinghouse" for investors interested in this type of opportunity (http://www.realty-capital.us/investors.html) and do not charge a fee for this service (we are not registered investment advisors). This basically matches investments to investors who like the deal. The bottom line is everyone wins!
