What to do with an empty lot?

Question

Hello!  
Not sure which forum to ask this question in, so moderators please move if you need to.  
I searched the forums, but didn't find the exact question I was looking for.

What would you do with an empty lot inside city limits?

The lots are in a part of town where alot of the houses were demo'd 6 or 7 years ago.  The area is now coming back with some new construction and rehabs.  It's not uncommon to see a house about to fall down with a family living in it, next to a burned out house, next to an empty lot, next to a brand new house with a Lexus parked in the drive way.  Not sure if this is common across the states or not, but if you could get a lot dirt cheap - $100 to $500.  Would you want it?  What would you do with it?

- Try to sell the lot again?
- Build and sell?
- Build and rent?
- Hold on to it?
- Try to move a MH onto it? (some of the lots are zoned differently)
- Run away?

Thanks for any insight.  I am definitely new at this and wanting to learn.  Still not sure what kind of investor I want to be when I grow up.

Ray

Will Barnard · Answer

If you are getting the lot for only $500 or $1k, does that come improved with city water hookups and electrical services?

If you can get a lot for that cheap and the city will allow a mobile home on it, that could be your best money maker. Find a repo mobile home for a few thousand, put a few more into it, plus the $3500 or so it takes to move and set it up. You should be into the deal for no more than $10k. Then sell the home on an owner carried note with a down payment of someowhere close to $10k. You get all or most of your principle back upfront, then mailbox money for the next 10 years or so. If they default, evict, rinse and repeat.

Michael R. · Answer

Cant give away empty lots here and it sounds similar to my areas. Most of the new properties are build by habitat for humanity and I think they mostly build on city owned lots so I dont know if who you would be able to retail to

Joel Owens · Answer

I don't buy lots here unless they are commercial lots I can sell for development.

Residential lots if they have a lake,golf course,mountain,ocean view etc. will return in value first before regular vanilla lots.

In my area the cities and counties HATE mobile homes.The only ones around are grandfathered parks.It's a dying breed here in Georgia.The counties and cities would rather have a house with a higher assessment because it brings in more property tax revenues for them.Here some counties require you to have a few acres just to have one anymore to deter them as much as possible.

We have some family friends that own about 50 of them and have been in the business for over 40 years.

If you were in a subdivision with an HOA they would absolutely fight this as it would hurt there values and look and feel of the neighborhood and is probably already outlined in their CC and R's.

Typically here we call these lots "pipe farms".You might have 40 homes built and another 60 empty lots from the market crash.Now the builders won't buy the lots even if free because they can't build and sell a new house for what a bank is selling a 2 year old foreclosure for.

Also even if you want to do septic on a lot they might require you to connect sewer at the street which can get expensive.Some lots here have a bunch of rock in the soil and would require extensive excavation and costs to put a home on it.During the boom times the developers thought every lot would sell no matter what.

Some lots here are for sale for 2,000 but have property taxes of 150 a month and HOA of 175 a month.So 325 a month carrying cost which is 3,900 annually.

In the boom times these lots sold for 18,000.

So if the market recovered some in 3 years to say 14,000 for the lot.

It would look like this before resale costs with commissions and closing.

3,900 times 3 equals 11,700 plus 2,000 original purchase is 13,700.

With resale costs I would lose on this deal.So I don't buy these even if free because of the holding costs.

Sometimes the neighbor will want the land and other times they don't want to pay taxes on it.

I sold a lot for a seller in a lake community but did not have a lake view.he sold it for next to nothing about 1,500 just to get rid of the HOA 95 a month fee and property taxes on it.

The buyer bought it because it came with an almost free golf membership for the community and was a big yearly value if you played a bunch of golf up there.

As far as lots in cities on old streets we have these in Atlanta.If I was rehabbing the house next door I might buy for a larger lot as a selling feature.If not the house has been torn down on the empty lot but the city still has taxes of thousands a year on it.You can file an appeal but they are backed up for 6 months to 1 year before rendering a decision.

So I am saying you can make money with lots but there are tons of landmines.I prefer cash flowing properties I can turn around much more.

Now commercial lots is a whole other ball game.

Will Barnard · Answer

As far as Mobile homes are concerned, make sure to buy from 1977 or newer, the 1976 and before are not up to current code standards.

If I could only get $3k back from a downpayment, would I still do it? Depends. If my buyer was strong and I did not need the other $7k back anytime soon, then yes, I would. However, that $7k over time vs. having it now to re-invest and do another mobile home flip with owner carried note . . . hmmm, I like the returns on the rinse and repeat. With first option, you eventually run out of money, with option 2, you can rinse and repeat forever creating numerous mailbox money income!

Karen Margrave · Answer

Regarding mobile, you might want to go down or call a mobile home dealer, and talk to them. Ask them what the market is in your area, what City/County requires regarding mobiles, etc. They should be able to give you costs involved (utilities, permits, etc.) If you are buying used, be cautious, and make sure it meets all current codes, etc. If you install on a foundation, it is no longer a "mobile", but a modular home, and is the same as a stick built house in most regards. Again, double check everything, because every community is different. Figure your costs, any financing, and what payments will be, then see if it makes sense. If not, forget it. For what you have into it, you can sit on it.

Karen Margrave · Answer

Do comps and find out what's selling in the neighborhood. What's the zoning, can you do mobiles/modulars?  What do houses in the neighborhood comp out at? What is the unemployment rate in the area? Who are the potential buyers? There's a lot of info missing here. No easy answers, gotta do your homework.

Ed O. · Answer

If you own a property that shares a property line, it's great. As I see it, you have 2 options if you don't:
1. Sell it to the neighbors - hopefully they won't realize you're limited.
2. Mow it every 2 weeks for the rest of your life - err. I mean until the market comes back. 
I recently scooped up an empty lot in a slightly nicer neighborhood than your describing, and it butts up to one of my rentals. It will make selling the home a synch when the day comes. The seller was driving 10 minutes each way for 8 years to mow it himself. Barf. Keep this in mind when negotiating. Not many buyers for this sort of thing.

Joe Fairless · Answer

@Ray JohnsonI'm curious, what did you end up doing??

Jeff McCaskey · Answer

Doing homework definitely helps avoid making mistakes. Mistakes made the cheaper the better though!

I however have a question for anyone who has an idea or comment. I just found a list of property where I live for a tax sale coming up in a couple weeks. Several properties are vacant lots, one of which is basically half a city block length wise.

I was trying to figure out whether or not it would even be worth considering making the purchase at auction?? And here is the best idea I had for it yet - if the city would allow this.....

WHAT ABOUT A PAINT BALL COURSE??????

*** I wonder if it could be purchase insanely cheap at auction, then fenced off and used as some sort of membership paint ball course that would return a profit....????

Background on the property:

- it's 5 full lots and several more on one end that could likely be purchased at some point in the future.

- it has a drainage ditch running through it so it's not really a build-able site unless one lot on high ground was used and the rest fenced in as a LARGE property.

- there is a small MH park on the north side of it where lots are owned not rented and just outside of that is the city limit turning into farm ground. On the east, west and south sides there are residential streets with homes on most lots, though there are a few lots that are vacant or a couple properties that should be torn down and redeveloped. There was a MH on this property for many years and was torn down by the city in the last 12 months.

- this property is off the main roads so storage units are probably not a possibility not that they would be located in the best location even if one was allowed to build them there in the first place.

- I'm doing a rehab right now only half a block away and it should appraise for 90k or so when I'm done.

- I don't see much future for the property for development other than a creative use.

- it's located in a small town of about 7,000 people.

Ray Johnson · Answer

Thanks for the advice and insight!

Karen - That's a great tip to check with the local MH dealers.  It seems common sense now that you mention it, but I didn't think of it.

Will - I think I'll go with the Mailbox Money Income.  That sounds nice.

Joel- Thanks for making me think about the math.  The taxes and HOA fees around here must be low.  The millage on the lots are .07 so the taxes are around $80 a year.  There isn't a HOA for most of these, so the only other expense would be maintenence.  I can get my yard mowed, edged, leaves removed, and clean up for $35.  So I think I could get a lot mowed for that much.  I figure 6 times a year so... 210 plus the $80 would be $290 for a year for the lot, round that to $300 for a for sale sign and miscellaneous.  If I pick it up for $500 and held it for three years that would be 500+900= $1400.  Does that change anything in your mind?

Now, one thing that keeps attracting me to this is that it seems cheap to me.  Meaning that I know I am new, and that whenever I am new at something I make mistakes even though I have you guys watching out for me (which I am super grateful for by the way).  But if I am going to make most of my mistakes in the beginning, I want them to be cheap mistakes.  Does that make any sense?

Hopefully that doesn't sound like a negative mindset, I am just trying to be honest with myself.  What do you guys think?

What to do with an empty lot?

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