Raw Land and Exit Strategies
Engineer · Troy, MI · Member since 2015 · 37 posts · 4 votes
I am interested in raw land investing. I dont fully understand all the exit strategies one might exercise when buying, holding, or wholesaling raw land. If I purchase a property and I can't get it to move is it priced incorrectly or should i expect that holding time before a sale can be a long time? What else can I do with raw land other than sell it? I am not very interested in doing my own development. Not yet at least.
I've bought and sold hundreds of lots and land.
In general I would not recommend to new investors.
The Great Recession of 2008 had a more drastic effect on vacant land than houses, apartments and buildings.
In many areas in the run up from 2000 to 2008 land prices quadrupled or more; and in many areas there is an over supply of created lots. and still a buyers market with more sellers than there are buyers.
In a buyers market unless you are experienced. You should stay on the side of being a buyer and not being a seller.
For me I'm a buyer and a seller all the time, though it can take longer to sell lots in a buyers market. In one of the areas where I work prices did quadruple from 2000 to 2008. It was glorious. We sold some properties for 40x what we paid! Grant Cardone talks about 10x in his book of the same name, we were doing 40x.
But on the flip side, those prices have dropped since 2008. Every year since 2008 in that area, the prices have dropped and the sales volume have dropped. It like a free fall. I have a classic example. I sold a lot in 2008, and then sold the identical lot next door in 2013 for 60% LESS. IOW, the second lot sold for 40% of what the first lot sold for. I've also sold lots there this year (oh yes I still have lots there that I bought quite a while ago) for 20% of what peak prices were, IOW for 20% of what I previously sold. In fact the prices that I've recently sold are about the same prices that I sold 20-25 years ago in the same community!
There are a lot of issues with lots like:
wetlands
flood plains
environmental contamination
endangered species, both plant and animal
zoning regulaitons
streams
perking for septic suitability
well depth and costs
All of these can make a property unbuildable.
There is a niche of the market where people buy lots really cheap, sometimes for a few hundreds and re-sell, largely on the internet. Sometimes their ads are outright lies, sometimes they just forget to mention certain things like failed perk and title issues and unbuidability.
Don't become that type of fraudster.
Where is the land at?
How many acres?
What is it zoned?
What makes it attractive to build?
What is near the land? What are the anchors?
You can do owner finance, sell it to a builder/developer. If it commercial you can submit the land plot detail to various retail and big business, most have real estate division. It really depends on all the questions that are asked above.
Hope this helps
If you're not interested in developing the land what you want is a price that is well below (10-30%) of market value.
There is a lot of rural land out there, like billions of acres. If you markets and negotiate right you absolutely can buy at these prices and turn around and market and negotiate a sale is 3x-10x what you paid. It usually does not happen quick. Land is not like a house or a car that is a need and holds a standard value in a constant market. It is more of a passion product. You are looking to find that right buyer.
I gave done 8 deals. I learned about it from Biggerpockets Podcast episode 39 with Seth Williams. He is a Michigander like you! IF you listen to his podcast and are interested, let me know.
Hey David on average how long did it take you to sell those 8 properties? Over what period of time did you do all of those deals? Were they cash or terms sales?
You could flip the land through Craigslist, ebay, etc A lot of folks end up selling the land with owner financing on a land contract. That enables you to cash flow the property and with the land contract, you the seller still own the property if the buyer defaults. You should search for posts by Mark Podolsky(www.thelandgeek.com) and Seth Williams (retipster.com). There is a great podcast by Seth on http://www.biggerpockets.com/renewsblog/2013/10/10...
Hope this helps.
Joe
You could flip the land through Craigslist, ebay, etc A lot of folks end up selling the land with owner financing on a land contract. That enables you to cash flow the property and with the land contract, you the seller still own the property if the buyer defaults. You should search for posts by Mark Podolsky(www.thelandgeek.com) and Seth Williams (retipster.com). There is a great podcast by Seth on http://www.biggerpockets.com/renewsblog/2013/10/10...
One additional thought would be if the land has acreage, then you could sell the timber on the property.
Hope this helps.
Joe
I've bought and sold hundreds of lots and land.
In general I would not recommend to new investors.
The Great Recession of 2008 had a more drastic effect on vacant land than houses, apartments and buildings.
In many areas in the run up from 2000 to 2008 land prices quadrupled or more; and in many areas there is an over supply of created lots. and still a buyers market with more sellers than there are buyers.
In a buyers market unless you are experienced. You should stay on the side of being a buyer and not being a seller.
For me I'm a buyer and a seller all the time, though it can take longer to sell lots in a buyers market. In one of the areas where I work prices did quadruple from 2000 to 2008. It was glorious. We sold some properties for 40x what we paid! Grant Cardone talks about 10x in his book of the same name, we were doing 40x.
But on the flip side, those prices have dropped since 2008. Every year since 2008 in that area, the prices have dropped and the sales volume have dropped. It like a free fall. I have a classic example. I sold a lot in 2008, and then sold the identical lot next door in 2013 for 60% LESS. IOW, the second lot sold for 40% of what the first lot sold for. I've also sold lots there this year (oh yes I still have lots there that I bought quite a while ago) for 20% of what peak prices were, IOW for 20% of what I previously sold. In fact the prices that I've recently sold are about the same prices that I sold 20-25 years ago in the same community!
There are a lot of issues with lots like:
wetlands
flood plains
environmental contamination
endangered species, both plant and animal
zoning regulaitons
streams
perking for septic suitability
well depth and costs
All of these can make a property unbuildable.
There is a niche of the market where people buy lots really cheap, sometimes for a few hundreds and re-sell, largely on the internet. Sometimes their ads are outright lies, sometimes they just forget to mention certain things like failed perk and title issues and unbuidability.
Don't become that type of fraudster.
The average is around 8 months. I have been at it for about 19 months. Three of the sales have been on payments and the rest were cash. You can get top dollar for something if you're willing to finance it.
I am interested in raw land investing. I dont fully understand all the exit strategies one might exercise when buying, holding, or wholesaling raw land. If I purchase a property and I can't get it to move is it priced incorrectly or should i expect that holding time before a sale can be a long time? What else can I do with raw land other than sell it? I am not very interested in doing my own development. Not yet at least.
Yes - if it is not selling you have either priced it too high or you are not reaching the right people. That's it. Been doing this since '99 and that has always been our experience.
I do exactly what you are talking about. I buy/sell/finance rural land. Some I will quickly flip, others I take payments for months/years. Tons of interest in vacant land and you do not have to do anything to it.
Especially seeing more interest as tiny houses and eco friendly trailers are getting more popular. Easier and cheaper for folks to figure out water, power, etc. on their own. I love how "living off the grid" is becoming a cool thing.
Hope that helps!
Jill