Purchase option for infill lots

[Jeremy England]

So as a small volume builder, I am constantly trying to balance operating capital with production.  Meaning I want to have a constant flow of new homes to put on the market but I can't afford to buy dozens of lots at a time like the big builders.  

I've recently started looking into purchase option contracts.  The contract gives me the option to purchase for a specified amount of time at a given price.  If they agree, I market a presale home on the lot and if I get a buyer then I exercise the option to purchase the land.  

I've just recently started direct mail marketing to lot owners in the area.  

Don't know if any other builders in this group have succeeded with that approach.  I know that is a common method big builders use to acquire the larger tracts.  I don't know if it will work with single infill lots.  But I'm about to find out I guess.  

I can see it as beneficial for all parties involved.  The land owner sells a parcel of land for more than a wholesaler will pay him and he doesn't have to market it.  I get a parcel of land under control that I can build a house on should someone want the design and the land I offer and I don't have to commit 20-80k to do it.  

[Shema Cochrane]

Hey Jeremy

This method can definitely work with infill lots too. I’ve got a couple builders in my circle doing exactly that. They’ll put the land under contract for 60 days, create a photo render of a home on the lot, and start marketing it as a presale. Once they’ve got a buyer, they go ahead and close on the land.

I spend most of my time helping landowners figure out next steps for their property, so if I come across someone who’s ready to sell and the lot fits what one of my builders is looking for, I just connect them directly. If it moves forward and closes, I collect a finder’s fee for making the intro.