Does anyone buy vacant land? I've recently found a vacant lot just under 5,000 sq ft in wahiawa whitmore village area. The property Owner is interested in selling it but he wants the amount listed on the Tax Assesors website which is $321k. I know that he bought the property for $200k back in 2007 through a quitclaim deed and currently lives in the property next to it. I've actually come across several vacant lots with similar situations but don't quite know how to negotiate it because my understanding is that banks don't lend that much for vacant land and I have zero experience working with hard money or private lenders.
Ive researched it on oahure and the comps in that area were $350k on the low end and $700k on the high end. Houses don't usually stay on the market that long in that area as it shows most property's sold or went into escrow within 30 days of being listed. The differences is that those property's already had houses on them that were in fair/average condition and some of those property's were bigger by up to 2,000 sq ft.
If anyone can offer any advice or guidance on how to go about negotiating this deal or can point me in the direction of a podcast or book on how I can learn more about this types of deal I would greatly appreciate it. In the meantime I'll continue to read through the forums and links here on BP.
Mahalo in advance.
Whitmore has been selling close to the assessed value, for residential listings. So he may think he's asking a fair price. But this data is for residential properties, not vacant lots.
At the asking price it'd be tough for an investor to make money on this one. Land for $321k, build a home for $150k (1000 sq ft), all in at $471k. That's the price existing homes of similar size are selling for. This is probably where you could negotiate with him. No one is going to buy the land and go through the hassle of building a home, when they could go buy an existing home for the same price and without the hassle of building.
If you're planning on holding on to the vacant lot and selling after it appreciates, Whitmore might not be the place to do it, due to lackluster appreciation.
As for financing, most lenders will have to broker it out since it's vacant land. The terms of the loan aren't as favorable as residential. For example they may require it to be an ARM with a larger downpayment.
With new construction, you'll want to have a plan for how to finance the build and also make the loan payments, while the property isn't generating any income in the mean time.
All the best!
Thank you for responding @Isi Nau . Those were my exact thoughts. That's why I'm not sure how to negotiate it. I've found several vacant properties but they all want the assessed value listed on the property tax website and nothing less. And like you've mentioned it's a narrow margin for profit and most buyers can get a property with a house already on it. So I guess I either need to work on my negotiating skills and or follow up at a later time as there is no motivation to sell.
My three rules of investing
1) evaluate income and expenses for positive cashflow
2) leverage with favorable debt terms
3) hard asset
*gold is a hard asset but does not produce (1) cashflow or (2) leveragable... Of course you could leverage it via Mining Stocks but then you would not be (3) hard asset.
I buy and sell land.
Rules of thumb I abide by:
1. Don't buy unless you can double your money on the land.
2. Only buy where there are home owners next door or it is big enough to subdivide and build (People would like to build there.)
3. Paying market for land and you are not improving it is a bad rule... See Rule 1.
4. Try to buy lots where you can buy multiples and create bigger holdings. isolated lots are hard to flip.
5. If you are not farming it it is likely not a good long term hold.
I bought the lot behind my house last year because my yard was bit cramped. And, I really wanted it because, well, it is the only lot behind my house. They wanted ~$110k. I offered $60k and they said no. A few months went by and the weeds were high so I called the city to get the owner to mow. The yard guys came out and then the next day their realtor called me asking if I was still interested. I offered $70k, take it or leave it and closed.
The point is, you cannot want any asset too much. Offer what you are willing and then they will either say yes or no. Better to pass up a deal than to end up with something that loses money or just breaks even. In my case I may have paid a little too much but I really wanted that lot for my kids so it wasn't exactly a business decision but you get my point.
@John Pate yes thank you I definitely agree with you on the not getting attached to any property. I guess all I can do is wait and follow up again at a later time.
@Account Closed I don't really know much about land investing but I can possibly connect you with someone who plays around with that stuff.
@Lane Kawaoka wow thank you I'd really appreciate that!