I'm looking to buy a single lot to build a single family house in NJ, at the RIGHT price. The problem I find is that all the land advertised on Zillow or Realtor.com is either not worth it or over priced.
How do I find land at a better deal? I'm willing to buy an existing property and knock it down, provided I can still turn a profit.
Is auctions the way to go? REO's? Other?
Any advice is greatly appreciated.
For what you're looking to do, forget about those sites. Once you've identified the areas you want to build, find a local realtor who can help you find buildable vacant lands or homes that you can knock down. You might consider subscribing to njtaxrecords.com so you can easily determine land assessments. If you can buy the land close to its assessment value, you should be able to turn a profit.
Thanks John. With realtors, I've been given mixed advice. Some have said find one that invests on their own so they understand what you are looking for. But others said that creates a conflict of interest, since they invest they will take the best properties for themselves.
Is this latter statement valid or just someone that had a bad experience?
Personally, I have not experienced a Realtor take a deal away from me, after they've agreed to work and represent me.
You do not have to educate your Realtor about what you do, you just have to give them a mandate on what to look. Also, to show how serious you are, show them proof of funds (if you can).
If one Realtor does not work out, fire him or her and just get another one.
I have a GREAT realtor who I love and cherish. We have a great business and working relationship. Our relationship turned into a real friendship! If you treat a realtor right, they are the best asset you can have. Mine is one of the top agents so she often see the best deals and I have even had a few pocket listings. That being said, she doesn't write 100's of low ball offers, etc. You also get what you pay for.
So far my business model has been all about my connections with a realtor and I feel like I have been successful.
That's a good perspective. I'm glad to hear that your experiences with a realtor have been positive, especially since this seems like the most direct route to acquire lots/properties.
Mitch - if the area you are prospecting is competitive for new construction and there is a lot of investment happening the MLS might not be a great resource. I didn't marry myself to a single realtor b/c the only assistance they could provide in my search was MLS listings (which incidentally i already had). You will find some brokerage firms don't push data to realtor.com albeit a small amount. Your best approach is to get familiar with the agents working in your target area and reach out to them letting them know your needs. The more agents you talk to the more likely they would be to contact you with a listing pre MLS. The agent who brings you a tear-down can earn their fee by helping you draft an offer- in short, don't marry yourself to any single agent. Work for yourself in the search and you don't have to worry about other peoples agendas.
Knock on doors or write letters.
@Mark D, saying that "the only assistance they could provide in my search was MLS listings (which incidentally i already had)." is as silly as saying that why marry a single accountant they all give you the same advice and use the same tax law, Right?
That is absurd. A good agent that works with you and finds you great properties is worth a great deal. Yes many agents who don't know you and don't know if you are "for real" won't spend a lot of time for you until they know you are serious. They likely will only give you mls printouts. Someone who is active in their community and does a lot of business as an agent will know about far more properties than what is on mls.
I mean accountants work on commission just like agents right? Would you spend much time with someone who asked you to review their entire small business and make recommendations for free knowing that likely you would never see any of their business.
By using many agents you are proving your point none of them wants to spend any serious time looking for you. I use agents to purchase properties for me and use them again and again because the more I use their knowledge and connections the better the properties they bring to me before they hit the market.
@Mitch Bernstein Though many agents take land listings, etc., most of them don't know that niche. There's a lot that goes into determining the value of a parcel of land, and I know here in Orange County, vacant parcels are rare. When they do come up, it seems as if the agent looks on MLS, sees what other parcels are listed for, and that's how the determination for a price is made. Many times there's no rhyme or reason for the asking price.
In areas such as these, where listings are few and far between, most agents aren't working land listings, and the best parcels aren't going to be on MLS. You'll have to get out and pound the pavement. The question is, what do you know about land and values? Do you know what it will take to develop that parcel and get it to be a buildable parcel?
Martin- I did not mean to minimize the effectiveness of working with a realtor in a general sense. I'm sorry if it offended you as maybe your personal preference differs than mine. I was just relaying my experience in my search for land, and tried to frame my realtor experience in a personal context. In fact, I would advocate for networking with as many realtors as possible! But as the other poster pointed out, the usefulness of the MLS system in finding a building site was marginal in my target area.
To the OP- you really do have to hit the pavement as mentioned! If you can find a realtor to canvass the neighborhood, cold call, and develop direct mail campaigns, then by all means let them earn their commission! In my case it required a full year of effort and the possibility a realtor could sustain the level of effort for a couple points in commission on a lot was remote. In fact, many realtors in my area planned to earn their commission by setting up automatic email alerts and occasionally checking in. MLS alerts are not going to find you a building site in a competitive market.
I was not offended, just pointing out that building a relationship is very important and that it works both ways. Just looking at mls is definitely foolish that is certain. Finding parcels not listed and writing letters is the most effective way to get the property you want. I put together a group of 21 lots for an investor it took 2 years to do but constant contact with the owners is finally what got them all for the investor. Some of those folks got as many as 20 pieces of mail before they finally picked up the phone. That is targeting specific lots because I think blanket mailouts are a waste of time and money. too often I hear mailouts don't make the phone ring and people give up. You have mail and mail and mail to the same people if you want results.
We got 20 additional lots from these same owners for our client so it worked very well. AND, this was in 2006 and 2007 the most competitive market I have encountered.
@Karen Margrave All good points. Seems like "pounding the pavement" is the most focused strategy. I assume this means driving around the area to see if there's any land/tear downs for sale by owner. I'm guessing it also means writing letters to owners and knocking on doors. Is this about right or are there other things I could do as well?
As far as assessing land value, that is more murky to me. My contractor partner can provide the cost of what it needs to become buildable, i.e. septic/sewer connections, utilities, etc. But what the VALUE is, I can't say I'd know more, other than looking at nearby homes and determining what it cost to build the house, then subtract that from something like a Zillow estimate to determine land value comps. Is there a better/more accurate way to go about this?
@Martin Scherer With respect to direct mailing, is there a particular method you use or is it simply keep mailing until you get a response? Do you include an email or just a phone number so they are forced to actually pick up the phone?
@Mark D. I like your idea and think it makes sense, if nothing else to increase the odds that a pre-MLS property will be brought to my attention. To Martin's point, maintaining a good relationship will only help those odds.
Yes Mitch we did include an email address as well as a phone number. For us a contact was a win. Once we got them talking we were able to get 21 of the 23 lots we set out to get. Apparently we made our client happy and the sellers because as I said we got 20 additional lots from the sellers. Follow up is he key as far as I am concerned.
I get fliers and letters trying to buy my rentals all the time and I get one maybe two contacts from these people or agents; that isn't sufficient. Even worse if I call back I am lucky if I get one sender on the phone. What a waste of postage and time.
@Mitch Bernstein As to value, once you know what the costs to get the lot to where you can actually start building, you have won most of the battle. Then you figure your construction costs, and what a finished house in the area will go for, along with your costs to finance, etc. and see if the margins are within your target. Most builders have a percentage of the finished value that they want to keep finished lot costs, and you will need to determine yours. As for zillow and those sites, I wouldn't put any stock in their values. Good comps from agents, or title companies of actual sales are the only way to go. If there are none, then you have to rely on deciding what you can pay based on all the things I've listed above. In the end, you want to know what YOU can pay for the lot, develop and build on it, and still make a profit. That is its value to you.
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