What’s a fair offer?

Question

There a piece of land (1.6 acres) listed for $40900

In SC. it’s been on the market for a year. It’s requires and engineered septic tank. I know the seller is highly motivated to sell. What would be a good starting offer during COVID times? Cash or financed ? TY

Carlos Lizarazo · Answer

@Daniel A.

Thank you so much for your advice. It was really helpful

Daniel A. · Answer

Hello Carlos,

There are a lot of factors to consider in determining what would be a good starting offer.

The main thing to take into consideration would be, what are you planning to do with the property?

Once your plans are established, you want to consider its relative location in conjunction to your plans. Considering zoning restrictions, are you planning to build a house, a multifamily building, a commercial complex? Are you looking to toss on some mobile homes? A storage unit?

If the property is valued at $40,900 and you are planning on building a 3 bed, 2 bath single family home ("SFH"), will the all-in cost be less than that of comparable properties? If you buy the property for $40,900 and it costs you, say, $120,000 to build an SFH, your all in would be $160,900. Are other 3 bed / 2 baths being sold for less-than or more-than that point? If you're looking to rent the property out, what are the rental rates of comparable properties in the area? If the monthly rental rates would not cover the estimated mortgage payments, then it would not be worth it. Apply this thought process to whatever you plan to build.

Determine first the cost of what you want built on the property. Get multiple bids to get a better spread. Once you get a good idea on what the construction costs will be, then you can see where the property needs to be valued at for it to be a good deal for you.