Finding the Value of a piece of land to flip to builders or build myself
I've been developing a relationship with a homeowner who sits on a piece of land hidden in a very nice residential area in Orange, CA. With a teardown the land could be subdivided into 5 or possibly 6 lots. This is prime flat land surrounded by all the utilities. The home is a very old farm home and the owner is showing interest in selling ... at least a piece of the property. My problem is I don't know how to price the land such that she's motivated to sell but is low enough to attract developers. Actually I don't think it's going to be difficult to find builders. This is a developers dream with a new home selling up to $650k. I just don't know how to go about pricing the land so to get an option on it and flip it (or build myself). The numbers confuse me. I am an active real estate agent and know how to prep comps.
Thank you for any feedback.
Have you considered hiring an appraiser? That will cost you a little but you would have an answer with a basis for it. A good real estate agent or broker who deals with land might be able to help if you can find one. The value will be most reliable if there have been sales of similar lots recently.
Thank you, Jeff for a quick and excellent response. I'm pretty much able to comp the land. I'm just not sure how to price it for a developer. Will a developer pay fair market value?
In my opinion, you have to work backwords. You start with what a builders would typically pay for that type of lot. Then you look at the costs to turn a piece of land into lots. This can be quite high when you consider city fees, etc. The price of a lot minus cost of developing -Developers profit = what developer will pay.
Good Luck.
Bill
Thank you, Bill. That's exactly where I'm stuck. How do I work that backwards when I'm not a builder (yet). There must be a place to talk to local builders. Any ideas? Anyone?
We found the piece of property first. It had been a mobile home park before so there was lower development fees. bankrupt A developer had purchased but then went bankrupt. We then went to another developer/builder. He was willing to tell us what he would pay. He bought the property and built 52 houses on it. Since we found the property he allowed my wife (an agent) to sell each of the properties. We have, since, found other properties.
I guess the first step is to find a property that is large enough. It ideally should have the proper zoning. You can find out what the city or county fees will be. Then contact builders. You learn by doing.
Good Luck.
Bill
Hey @Robert Pfeiler I know a guy building SFH's in Orange County. He may even be interested in buying the property if you can get it under contract. He'd be a good person to talk to about this. Send me your phone number and I can pass it on to him if you are interested.
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@Robert Pfeiler As a developer/builder it's good to see an agent trying to find out what the actual value of a parcel of land is, rather than going on to MLS seeing what other agents are "listing" for and picking a number out of the sky.
First, what a developer is going to look at is what it costs to get the property to the point of being buildable. Current zoning. Size of the lot. Are there structures that need torn down?(that's a cost) Are utilities available, etc. Is it flat? What's the neighborhood like? Proximity to freeway, etc.?
As to the potential of splitting it, once you go over 4 lots, you are doing a subdivision and that requires State approval, it may not make sense, but it may, depending on the size of the lot, location, etc.
I will be at the next meetup if you'd like to discuss it. My son will be there with me too and he can discuss different things like setbacks, etc. If you'd like to email me more specifics, an address, parcel number or ? I'd be happy to look it up on Google Earth and give you an opinion on whether or not we as builders (or other builders) would find it buildable, etc. I too am an agent, and will keep the information confidential.
Here's the link for the Meetup. Orange County Meetup - Lake Forest - November
Thank you also Karen and Bruce. Would love to connect with both of you.
By the way, this is a flat piece of land at the end of a cul-de-sac in an upper middle class neighborhood surrounded by all the utilities. Zoning supports 5 lots on this property. 6 could be pushed if someone wanted to go through the rezoning process. 20 plus year-old homes are selling for up to $650k in the neighborhood. New homes would go for higher.