What's the Best Way to Sell an Acre Approved for 6 Lots?

Question

I have a client who owns 1.15 acres of land that was previously approved by the city for 5 additional lots. Although, the timing on the permits has passed, and they would need to be applied for again. But they did have an engineer draw up some plans for them already, and they still have them.

There is currently a 2/1 house on the property that's 1,300 sq ft and was built in 1948. It's dated, but clean and extremely well kept. With a little renovation and updating it'd really shine. The median home value for the zip code is $270k.

My client wants to sell the property in the most profitable way possible. There seem to be several ways we can approach this:

• Sell the property as-is
• Split the lots and sell them individually
• Possible joint-venture with builder / developer
• Client does not have funds to develop property themselves

I wanted to get some opinions from experienced land developers on how you think we should proceed or what the best course of action would be. And if you know someone in the Sacramento area who might be interested, please let me know. Thanks so much for your help.

Jake Weir · Answer

I'd be curious if your client could develop 3 lots after doing the lot split and selling off one or two of the lots to fund the development.  Is there any infill/new build in the area fetching higher prices than $270k?  Might be tough to pencil, depending on the cost basis.

Wes Blackwell · Answer

@Chris Isaacson -- thanks for the response! I've always been one to say that a fast nickel is better than a slow dime, and dealing with builders and constructing new homes probably isn't worth the headache. It is for the ambitious, but for the elderly I just see it being a pain in the butt.

I posted about it in the Sacramento forums to see if I could find some local developers who may be interested, and we even have a brand new duplex being built up the street so I'll run it by them too. Right now it's off-market, but if the right offer comes along my client will certainly take it.

My girlfriend's father is a contractor who's made his living building homes from the ground up and selling them, so I'm going to discuss the prospects with him tomorrow over turkey and see what he thinks.

I'll be sending you a pm, and thanks for the tip about the in-house agents and getting in front of the builders!

Chris Isaacson · Answer

Hey @Wes Blackwell I would like to give my input on this. I am far from an authority with subdividing but I have worked on a couple recently. We worked on 10 acres in to 14 lots in Sutter County and 9 acres in to 6 lots in Placer County.

JV with a builder/developer doesn't seem to be to common around here but you may be able to structure some sort of creative arrangement if your seller is willing to subordinate (obviously there is risk).

I would focus on marketing the property for sale and forget splitting the lots, or JV. Simply for the sake of time and money.

A lot of builders even low volume builders have an in house agent so blast it out to them and focus on getting in front of the builder or at least a phone conversation.

Small builders in my experience are hyperlocal, many don't seem to even venture out of their city, but it doesn't hurt to ask. This is mainly due to relations with the building/planning department I assume.

With that said I am interested in possibly purchasing if you could send me a few details through pm.

Wes Blackwell · Answer

Well, they are selling their current owner occupied home, which will give them roughly $300k to work with towards development. If they split off the home on that acreage and sold it they might add another $225k or so. So your idea is possible...

But, my client is in their 80's, and so it might be simply too much to take on for them. Plus timing is a concern, as that may simply take too long.

It might just be better to sell the property as is and 1031 exchange it into a new rental in the Rocklin / Roseville area where they are moving too. Their main concern is leaving something to their children, not maximizing profits for building their own future.

I estimate the property is worth approx. $300-325k as is. There are several homes nearby built in 2005-2008 in that sold for $350-400k... 2,200-2,600 sq ft on .15 acre lots. Another home sold nearby that was built in 2015 for $560k on a half acre. So there's lot of options...

I'll be speaking with a builder tomorrow about the possibilities and post their thoughts here.

What's the Best Way to Sell an Acre Approved for 6 Lots?

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