How to reliably comp land

Question

Hi, I am intersted in trying to buy land and resell for a profit but I am having trouble figuring out how to reliably comp land and figure out its value due to every lot sale varying in price so much. I was curious if anyone that has any experience in this field could help me out thank you.

Jeremy England · Answer

I only buy infill lots in suburban and urban areas.  So comps are easy to come by.  I look at the counties list of sold properties in the neighborhood (or Zillow) then get 4 comparable lots, see how much they sold for psf, then apply it to the subject property.  That's one method.  The other is to base my offer price on a % of what new construction builds go for in that neighborhood.  As a builder,  I'm looking to pay 10% of my new home value for the land.  It's not a hard rule and doesn't work in every market but I know locally that if I get the land for 10% or less I can be reasonably sure the house will be profitable.

Once I have a base value, I start doing a little online due diligence.  Lot to be cleared? Junk on the property?  Sewer lateral? Water meter?  Power pole?  Underground utilities? Elevation changes?

Everything I have to pay to either get or remove I am factoring into the value of the land.

Don't get me started on flood zones and wetland mitigation.  I screen for those so I shouldnt have to worry about them.

Shema Cochrane · Answer

Bryant made a great point. Land deals definitely don’t move like typical residential deals. Buyers aren’t walking in emotionally like a family buying a house, they’re looking for an exact fit. A lot comes down to how buildable the land actually is. Things like access, shape, and how fast someone can move on it really impact value.

Comps help, but it’s more about what someone can do with the land than just what someone else paid.

Bryant Brislin · Answer

It's a lot of work.  Try to put in some time listening to podcast interviews of guys who do this full-time, those episodes are out there.  Also, join FB groups in land investing (they are out there) and see if someone can mentor you, since it's not a quick, easy answer on underwriting land.  The shortest version is most of those guys are trying to get land at 1/5 of the retail value, close on it with their own or someone else's money, and then put on the MLS for 2/3 or so of the retail value so that is sells quick (assigning a contract can be difficult, because for many pieces of land, finding a buyer is hard without putting it on the market).  A lot of us use LandVision (Lightbox) and/or Propstream, or you can start off using land sales from Redfin.  You have to separate the apples and the oranges and the bananas, as far as if you pull fifteen land sales in a certain area, they can all be so different as far as zoning, topography, utilities, access, regular or irregular parcel shape, drainage, soils, environmental, etc.  Wish you the best!

How to reliably comp land

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