Land Development Opportunity

2 Replies

Hi, Bigger Pockets Members, we have just hit a little dilemma, and I'm wondering if anyone has any advice. We have just started in Property Investment and only flipped one house, but we have just come across an opportunity to buy a home that needs work to BRRRR, but the property sits on 2.5 acres of prime development land, right in the middle of a town that is just exploding with development, has excellent schools, a fantastic downtown, and people just want to live in this place ( and so do we, hence why we are moving away from Florida and back to Ohio ) . My wife's parents own the adjacent 2.5 acres, and we have already agreed to buy their property/land within the next few years, then we'll have 5 acres. I am a design professional, my wife's a realtor, and we have already looked into planning the area. From our plans, we can build ten houses on this plot, and if we do this right, each custom house will be worth between $450K-$595K depending on lot size and position. I believe after paying all costs we'll profit $1.4M. The questions are, should we :

1. Buy the house, sit on the land, BRRRR it and develop say 10yrs down the line when we are ready, have our own money and know more about Design & Build

2. Develop now via design and build off plan, building one house at a time

3. Approach a hard money lender and go for it.

As a note, the seller knows the value of his land and is sticking fast to a $30K price over what it is worth right now, but my gut says, pay it, BRRRR it and come back in 5yrs and develop, paying $30K over list price now will mean nothing in 5yrs time and the land will only increase in price due to it's position to schools, parks and downtown.

Any thoughts anyone?

@Michael Brindley It is very difficult to speculate on where values will be five years or 10 years from now. The market is red-hot right now because interest rates are at record lows if the economy changes in interest rates go up it will kill the housing market. 

 If your ultimate goal is to develop the property I would go ahead and do it now as we are definitely at a peak.