Did I find a potential gold mine?

Question

Hi all,

Sorry for the odd title. Haha. Not sure what else to title it.

I was browsing a tax map to look at a lot of raw land I will be purchasing from a family member for a personal residence. I decided to view the other undeveloped lots on the tax map as well. Intermittently, lots were purchased by a builder for $50,000 in July of 2021. The lots are only assessed at $3,500. Most of them were purchased for less than that between 10-20 years ago. Could this be a gold mine for wholesaling to a builder?

Thanks!

Account Closed · Answer

Most land deals I've read about and heard of are not money makers. They take a very long time to sell, you have to do all of the basics for the builder and then finding a builder in the right economic conditions is iffy. Buying land for yourself is a different matter.

Wayne Brooks · Answer

What the lots are assessed for don’t mean much.  But, if the lots could be bought for $3500, the builder wouldn’t be paying $50k.  Also, you may be seeing the $50k as the price paid for a group of lots, not $50k each.

Andy Bauman · Answer

I specialize in vacant land.

Account Closed - I'm not sure what you are referring to here, but this year I made $143k on a single property flip after only owning it for a few months.  I flip a lot of vacant land, the key is to buy right.  Maybe you are referring to what I call "making it developer ready", in that case there can be some unknowns and it can take a while to get though the upgrades and enhancements for the planning department, utilities, roads, etc...  But the payoff her is usually huge, again; assuming you buy right.

Account Closed - You are correct if you are referring to land in CA.  CA has had Prop 13 on the books for many years and that limits the % increase that can be applied to land until a new property transfer transaction happens.  However, there are many states and the counties that reevaluate land values each year.  Some states and counties keep the assessed value to a percentage of the market value (e.g. 20% to 80%), some attempt to get at full market value, it really just depends.  I have bought and sold land in 6 different states in the last year and they all have different ways to assess land.  In SOME places the assessed value can be very different from the actual market value of the property; in others it is usually very close.

Account Closed mentioned, look into the details of the sales and see if they are buying blocks of lots or single lots.

Account Closed · Answer

Tax maps showed the assessed tax value and those values don't change day-to-day, or month-to-month as market prices change. I am not an expert when it comes to taxes, but I believe that for most areas the assessed value for property tax purposes increases maybe something like by 1% of the tax amount that was paid the previous year, or maybe some areas re-assess the value every few years based on changes in the markets' prices.

So, supposing a land owner has a piece of land worth $3500 and paid $350 for property tax to the assessor last year. Then, maybe, this year the $350 would increase by 1% and this year the owner would pay $353.50 for his property tax. But, the tax assessor does not have the means to re-evaluate the value for every piece of land every year base on changes in marketable prices.

Joe Schmitt · Answer

If a builder owns them, there is very likely a very good reason why they were never developed. My experience as a land investor is that most of the time, the owner of a failed subdivision is not willing to piecemeal them off property by property or even do a release. They typically want to be cashed out all at once. Of course, every situation is different. I would start by contacting the owner to see what kind of interest they have in selling and understand why, from their perspective, the lots were never developed. Then do some extreme due diligence if there is a willingness to sell.

Did I find a potential gold mine?

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