Anyone familiar w/ this raw land investing strategy?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @JD Martin:
Talk to @Jay Hinrichs if you want to know all things land. He's been buying & selling land probably longer than you've been alive, all over the country.
thanks for the mention JD.. its called being a land developer and there are 100 ways to skin this cat.
the most money is made buying from the farmer and in the path of progress and let the zoning and market come to you..
next is entitlement process which is what the OP is talking about getting some sort of design and plans approved them flipping.
Next is ( as it relates to SFR) putting the infrastructure in and selling shovel ready lots.
then you have soup to nuts buy raw land entitle it develop it and build your product be it resi or commercial or what have you.
Each jurisdiction is wildly different. There are still counties in the US that have no formal zoning code and then you have counties or cities that have super restrictive zoning and land use. And of course things are constantly changing and rarely are these changes made to make things easier. Last administration tried to cut red tape current one though we are back to tougher rules for development at least on a federal level.
Texas has always had a reputation of being one of the easier states to develop in. Although I hear that Austin ( the city can be just as tough as say a California city ).
18 Replies
- Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes4y
I do not know if there is a name for it, but it’s frequently used. Shovel ready land will save the buyer a lot of time and effort, and therefore command a higher price.
not just for commercial land, but also for residential land. Thanks @David Song. Any idea where I'd start to learn about this strategy?
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes4y
Talk to @Jay Hinrichs if you want to know all things land. He's been buying & selling land probably longer than you've been alive, all over the country.
Skyline Properties - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes4y
Would get with land owners in the area and see what they're doing. I know flex space is hot now
- Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes4yI do not know if there is any official source for leaning, but most of the valuation is kind of common sense.
Quote from @Greg R.:
Thanks @David Song. Any idea where I'd start to learn about this strategy?
When I look for land to buy, I want to build something on it.
1. Zoning, what is allowed, floor area ratio, set back, height, units, etc.
2. In CA, I usually ask an architect to talk to the planning department to figure out what the building envelop is, and draft some preliminary plan.
3. to get to final approval, takes a minimum of 1 year and 50 k.
So if the seller is willing to get all those things done, I will certainly pay more for it.
As far as how much extra value it is, that will be case by case. Some land has very low value, if the seller is not sure about what it can be used for. If the seller already has the plan approved, the valuation will be much easier.
land price + construction cost + profit margin = estimated building value (ARV)
This will simplify it as a flip model. - Real Estate Broker · Medford, NJ · Member since 2018 · 236 posts · 177 votes4y
@Greg R. Raw land is the hardest of all real estate to invest in but can be very lucrative if done correctly. Make sure you do all of your due diligence. Get a great land use attorney to walk you through the process. You’ll also need a great architect throughout the process. Speak with the township and find out what it’s currently approved for and what process you’d have to go through to get your project approved, that would be my first step.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @JD Martin:
Talk to @Jay Hinrichs if you want to know all things land. He's been buying & selling land probably longer than you've been alive, all over the country.
thanks for the mention JD.. its called being a land developer and there are 100 ways to skin this cat.
the most money is made buying from the farmer and in the path of progress and let the zoning and market come to you..
next is entitlement process which is what the OP is talking about getting some sort of design and plans approved them flipping.
Next is ( as it relates to SFR) putting the infrastructure in and selling shovel ready lots.
then you have soup to nuts buy raw land entitle it develop it and build your product be it resi or commercial or what have you.
Each jurisdiction is wildly different. There are still counties in the US that have no formal zoning code and then you have counties or cities that have super restrictive zoning and land use. And of course things are constantly changing and rarely are these changes made to make things easier. Last administration tried to cut red tape current one though we are back to tougher rules for development at least on a federal level.
Texas has always had a reputation of being one of the easier states to develop in. Although I hear that Austin ( the city can be just as tough as say a California city ).
- Thank you David.
Quote from @David Song:
I do not know if there is any official source for leaning, but most of the valuation is kind of common sense.Quote from @Greg R.:
Thanks @David Song. Any idea where I'd start to learn about this strategy?
When I look for land to buy, I want to build something on it.
1. Zoning, what is allowed, floor area ratio, set back, height, units, etc.
2. In CA, I usually ask an architect to talk to the planning department to figure out what the building envelop is, and draft some preliminary plan.
3. to get to final approval, takes a minimum of 1 year and 50 k.
So if the seller is willing to get all those things done, I will certainly pay more for it.
As far as how much extra value it is, that will be case by case. Some land has very low value, if the seller is not sure about what it can be used for. If the seller already has the plan approved, the valuation will be much easier.
land price + construction cost + profit margin = estimated building value (ARV)
This will simplify it as a flip model. - Thanks much Jay, great info.
Quote from @Jay Hinrichs:
Quote from @JD Martin:
Talk to @Jay Hinrichs if you want to know all things land. He's been buying & selling land probably longer than you've been alive, all over the country.
thanks for the mention JD.. its called being a land developer and there are 100 ways to skin this cat.
the most money is made buying from the farmer and in the path of progress and let the zoning and market come to you..
next is entitlement process which is what the OP is talking about getting some sort of design and plans approved them flipping.
Next is ( as it relates to SFR) putting the infrastructure in and selling shovel ready lots.
then you have soup to nuts buy raw land entitle it develop it and build your product be it resi or commercial or what have you.
Each jurisdiction is wildly different. There are still counties in the US that have no formal zoning code and then you have counties or cities that have super restrictive zoning and land use. And of course things are constantly changing and rarely are these changes made to make things easier. Last administration tried to cut red tape current one though we are back to tougher rules for development at least on a federal level.
Texas has always had a reputation of being one of the easier states to develop in. Although I hear that Austin ( the city can be just as tough as say a California city ).
- New to Real Estate · Mitchell, OR · Member since 2020 · 12 posts · 8 votes4y
@Greg R. I have been trying to learn more about this strategy and others in commercial real estate. I found a course by Greg Dickerson and it has been great for me. Also lots of info for the price.
- Investor · Austin, TX · Member since 2019 · 19 posts · 28 votes4y
Quote from @Jay Hinrichs:
Quote from @JD Martin:
Talk to @Jay Hinrichs if you want to know all things land. He's been buying & selling land probably longer than you've been alive, all over the country.
thanks for the mention JD.. its called being a land developer and there are 100 ways to skin this cat.
the most money is made buying from the farmer and in the path of progress and let the zoning and market come to you..
next is entitlement process which is what the OP is talking about getting some sort of design and plans approved them flipping.
Next is ( as it relates to SFR) putting the infrastructure in and selling shovel ready lots.
then you have soup to nuts buy raw land entitle it develop it and build your product be it resi or commercial or what have you.
Each jurisdiction is wildly different. There are still counties in the US that have no formal zoning code and then you have counties or cities that have super restrictive zoning and land use. And of course things are constantly changing and rarely are these changes made to make things easier. Last administration tried to cut red tape current one though we are back to tougher rules for development at least on a federal level.
Texas has always had a reputation of being one of the easier states to develop in. Although I hear that Austin ( the city can be just as tough as say a California city ).
I can corroborate the statement that Austin is difficult to permit in. I'm a civil engineer over here and have been working in land development for the last 5 years. It seems like everyday one of the various councils or committees finds a creative way to add red tape to an already overly-bureaucratic process. I can appreciate a lot of the regulations related to safety/the public good and overall planning for growth, but some of the additional oversight can get ridiculous. That being said, it is a genuinely FUN field to be in. As others have mentioned, it is a high-risk, high-reward industry.
As I learn more about the real estate side of things I have begun to create a list of many questions of my own - a lot of them related to the finance side of land development. It seems like the main way people afford deals is by having investor-connections. I am on a mission to make connections and learn as much as I can about that side of the industry so I can put my land development/civil engineering skills to use on my own developments. I'm tired of just being a consultant for the guys making huge returns.
If anyone has specific questions on any projects in central Texas am happy to provide insight from an engineering/development perspective in exchange for a good connection. Please feel free to reach out any time! Thanks @Campbell Key. Just sent you a DM
- Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes4y
Quote from @Greg R.:
Hello all,
A colleague mentioned purchasing raw land with the intention of getting plans for commercial buildings. He would get the architectural plans drawn up and get permits from the city and then sell the land with the plans/ permits.
Is there a name for this strategy, or does anyone have any resources where I can learn about this type of investing?
Thx.
This particular strategy is called "entitlement flip". I have lot's of resources on this in my course and Real Estate Development playlist on my Youtube channel as well.
- Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes4y
Quote from @Jake Tolton:
@Greg R. I have been trying to learn more about this strategy and others in commercial real estate. I found a course by Greg Dickerson and it has been great for me. Also lots of info for the price.
Thank you for the kind words. Glad to hear the course has helped you!
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes4y
Just be careful, from what i've seen land investing has been speculation. This company is coming and that then hype builds around an area, next thing you know they announce they aren't moving to that city. Make sure there's TRUE demand
- Lender · Nationwide · Member since 2018 · 571 posts · 310 votes4y
A framework I've found useful is The Real Estate Development Matrix developed by Lawrence Kohlhepp, who is a real estate professor at Johns Hopkins.
He calls the process you describe land packaging, which consists of paper improvements such as city approvals, engineering, architecturals, and a more clearly defined vision of the future use fo the property.
The next stage in the matrix is called land development which consists of horizontal physical improvements like grading soil, installing wet and dry utilities, street improvements and flatwork (pouring streets and sidewalk, etc.).
Sometimes one or both of these are called land development. Investors do not have well defined language for this, so what it's called depends on who you're talking to.
But paper improvements and horizontal improvements require different skillsets, and have different risk profiles. You'll make clearer decisions distinguishing them as separate steps in your mind.
I may have some resources if you'd like to connect off the forums.
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Couple different approaches
A. Look for property that has more than one side with road frontage
B. Poetry with wider road frontage versus deeper
C. Nasty property. Run down farm with oak, mesquite, and ditches all over. I see cheap ponds. Existing landscape and a country housing development
D. Nasty property. Old shopping center or manufacturing with lots of concrete parking. Near low income, bad neighborhoods. Turn into auto shops and the parking becomes annual semi parking lot.
E. Texas. No zoning in the country side
F. Google interstate 14.
G. Country subdivision. See my posts on our two projects. Journeys End and Silver Lake
H. Texas. Has the greatest tax sale laws. Only do land and not houses though.
I. Oil boom bust. They just had a Bust about 3 years ago. Pick up oil support properties.As mentioned above lots of angles. Basically look at the oldest listings. Nastiest properties. Etc. Put your imagination to it. Everyone can see a beautiful property and see a beautiful property. Costs more and lower profit margin.
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