?Is this Vacant Land a Deal?

Question

I was offered this property in El Sobrante, CA.  It's vacant land in a neighborhood with other houses.  The lot is 21,000 sqft, it's assessed at $52,000, and the seller wants $35,000.  She owes $800 in back taxes.  The other houses range in price from $300K - $350K (according to Zillow); one house is $575K.  The lot sizes of the other homes vary a lot maybe from 0.2 acres to 0.8 acres.

My thinking was that a developer might spend $200K building a 2000 sqft house.  According to one website I found, getting permits, sewer, water, electric, hardscaping, landscaping, etc. could be as much as $100K.  This seems really close to the price of other homes in the area, and I just wonder if it's worth trying to make this work.

What do you think?

Katherine O. · Answer

@Michaela Graham

Thanks for the advise about vacant lots.  I now think I gave up too soon.  I'll take your advice and Karen's information and at least contact a developer.  I ran into one a few weeks ago.  I'll post back here if anything comes of it.

Charlie Hampton · Answer

I agree with @Larry Roberts  with sending a very low offer.  If they cannot pay taxes chances are they know what will happen if they do not unload the land.  I have 6 acres under contract right now that had back taxes owed.  The owners inherited it and didn't pay the taxes for two years.  They were asking $80k and I offered $15k plus paying the $5k lien and they accepted without a counter.  You can always go higher, but never lower....

Katherine O. · Answer

@Karen Margrave

I didn't realize anyone else had replied to this thread.  Thanks for the advise on what a developer would do.  My goal isn't to become a developer, but I know I need to understand about how to develop land if I'm going to sell vacant land.

Michaela G. · Answer

Granted, I have usually dealt with infill lots and not raw land, so the infrastructure was in place.

If this was me, I would drive around and see what other new construction has happened or is happening there. I would then research what those houses sold for, who the builder is and what they paid for the land.

Then I'd tie it up with a contingency clause of partner's approval or check certain things and then I'd contact all those builders at the same time and see what they have to say.

Karen Margrave · Answer

@Katherine O.  First off, you will need to get some actual comps of properties that have sold, and not rely on Zillow, as they aren't always accurate.

At 21,000 sq. ft., it's a very good size parcel. However; the value is based on the zoning density. The more you can put on the lot, the more value it has. However; right now, it's just a big lot. In order to actually build on it someone needs to split it into parcels. If you're splitting into over 4 parcels, you will need to have a subdivision map drawn up, and go through the approvals with the State of California.

If on the other hand it is zoned for apartments, or some other high density use, it's possible that someone could buy it, and then develop out a multi unit project, etc.

Are there utilities to the property? Sewer available?  Would someone need to install curb, gutter and sidewalk? In theory it seems like it's a great opportunity. However; until you have the details, you won't know. I will tell you this though, developing a piece of property involves a lot more than most people know.

If you can tie it up, you may be able to find a developer and get their input, resell it, or do a joint venture. But, be careful not to get in to deep.

Good luck!

Katherine O. · Answer

One last update:  The seller called, but she will not budge on her original price of $35000.

Katherine O. · Answer

To Everyone:
	I have to say also, thank you for asking questions because that forced me to keep digging around for more answers.  Hopefully, in the future, I'll get better at recognizing real deals.

Katherine O. · Answer

@Michael Heisterkamp

I agree.  The more I investigate this property, the less attractive it becomes.  Anybody I sell this property to will do the same thing I did which is to look at sales in the area.  There really aren't many comps so it's hard to argue that the neighboring property was just a fluke.  I guess I could offer $2500 plus property taxes.  Then hopefully sell it for $5,000 to $10,000.

I called the seller and asked her to call me back.  If she calls back, I'll make the offer, but in the meantime, I'll keep looking around.

Michael Heisterkamp · Answer

A deal is only a deal if you have some way to profit from it.  I could buy all the land I want for dirt cheap but if I can't turn it around into a profit then it doesn't do me much good.  Not to deter you from it but you need an exit plan for this type of investment.

Jon Holdman · Answer

Based on that information I'd guess this property is worth less than $10K.  Probably more like $5K.  Smaller lots are more valuable in terms of $/sq.ft. than large lots.  But this is one sixth the size of a lot that sold for $31K.  There may well be more factors involved here, but I can't see how $35K is even in the ballpark.

?Is this Vacant Land a Deal?

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