Raw Land for a first deal

Flipper/Rehabber · San Jose/Santa Rosa · Member since 2015 · 8 posts · 5 votes

Hi BP Community!

Would love to get your guidance as I think this might be my very first deal.

-FSBO priced at $80K (free and clear)

-Owner is an elderly man who purchased the lot for $60K nearly 20 years ago through a foreclosure sale. He lives out of the area and is motivated to get rid of it.

-Property is 1/2 acre raw land.

-Property profile report shows the property use is residential/vacant

-Located on block with single family homes valued $500k-$700K with same lot size.

This might be my first deal and I'm so nervous. I told him I'd get back to him on Tues/Weds. Does this sound like an okay deal guys? Raw land? I am completely clueless on what I need to do next. Do I find a lawyer to help me fill out a purchase agreement? I'm sorry for sounding like such a newbie but any guidance would be very much appreciated. :)

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Karen MargraveBusiness Member

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Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes

11y

@Kim Pham You can probably go onto the website for the City, and look at an interactive map that shows zoning, etc Depending on where in San Jose the lot is, it could be worth far more than you are thinking, as a 1/2 lot can be split, depending on the minimum lot size allowed in the neighborhood.

As to the value ratio @Christina R. those are for some areas of California, not all, and things like that are definitely local, so you need to find out for your area. In some areas of California we have to pay ridiculously high prices for land, other areas of the country are sometimes lower.

When a builder is looking at land, we are looking at zoning, location, topography (is the land flat or is it going to require a lot of excavation, retaining walls, etc.) where are utilities in relation to the lot, are there any utilities that will need to be relocated, put underground, etc. What is the minimum lot size, etc. Type of soil (that's more a concern when you are in coastal areas or have sloping lot, etc.)

If you want to send me the address of the lot in a private message, I'd be happy to look it up on google earth an give you a quick opinion of the land, the neighborhood, etc. You don't want to put too much online until you get it tied down. Once you have that done, there's some builders here on BP that are in your area that may be interested.

Sounds like a great opportunity though.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Kim Pham your getting the cart before the horse.. no need to pay an attorney at this stage of the game. a simple contract you can buy at staples would be all you need to tie it up.. then go to the county and figure out what you have.. Unless your paying this lawyer to do your due diligence for you.. ( which is going to be pretty expensive route)
So much of what you need to know is free and on line or a simple walk into the public agencies.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
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The deal might be attractive, because most investors will immediately walk away and feel that it's too complicated, so, not that much competition. I've made pretty good money on vacant lots, not knowing ahead of time and learning as I went.

Builders, typically, don't want to spend their time trying to find owners etc, so, just because the lot hasn't been sold, does not automatically mean that it's a bad lot.

So, stop having this 'glass is half empty' attitude and allow her to hope for a 'glass half full' situation. At the very least it's an incredible learning opportunity for her and there are many here on BP, who can help her along.

Originally posted by @Tom V.:
Why is this deal attractive to you? Sometimes FSBO stands for
Freaking
Stupid
Bad
Opportunity
It sounds like you have never purchased or developed land. Why would you choose this first? It is much more complicated than buying an existing place and trying to flip or hold.
Don't let the low price fool you. If you are uncertain about proceeding and unsure about whether you will lose money, that is your brain telling you that you don't understand enough and that you will probably lose money.
Pick something easier to start with. Surgeons don't go straight into open heart surgery - they learn to stitch up a wound first.
You might get lucky on this deal, sure. If you feel lucky, go to Vegas and bet on red on roulette. You could double your money.
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Karen MargraveBusiness Member
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Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
11y
@Kim Pham After looking up the specific parcel and the property records, along with looking at it on Realist and Google Earth, I'd suggest you pass on this.
As I told you on the phone, there's a notation on the property report on Realist that says vacant land w/problem. I must say, I have never seen that before, and it must be somethng serious in nature for them to make such a notation.
In addition, the property is in a more rural area of Santa Rosa, meaning fewer buyers, and some of the parcels seem to have some slope to them, etc. Quite often property in rural areas will not have public sewer, meaning septics, which can be costly, you can check with the Planning Department on that too.
Though land seems simple to invest in, there's a lot of things that have to be determined on land before you have a clue what it's going to actually cost to develop, and very rarely are things as simple as they seem!
Another thing, I the values don't seem to be as high for the homes in the area as you mentioned. From what I see, they are in 300-400,000 ranges, and there is a few other vacant parcels.
Sorry to be the bearer of bad news! Once again, I'll stress that I think it's always better for new investors to invest close to home, in neighborhoods they know and are familiar with.
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Ed LeGrand
Investment Property Specialist · Santa Clara, CA · Member since 2015 · 90 posts · 16 votes
11y
Hey Kim,
I am local in Santa Clara and could lend some help if you have any further questions.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
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@Karen Margrave ,
good that you were able to look at it. I think this was a nice learning lesson for Kim and for all of us.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Karen Margrave @Kim Pham I cut my teeth selling land in Sonoma county and have been doing it for many decades. there are a lot of antiquated subdivisions in Sonoma county and if this does not have city sewer its probably non buildable.
I just sold two lots I had at Jenner by the sea for 50k total. ( B/C) I could never get them to perc and pass for septic.. these would be 250k lots each if that were the case.
My dad built subdivisions in Monte Rio and Gueneville in the 60's well better stated took existing lots of record and punched roads in and water lines... there are thousands of those type of lots...
this seller is most likely trying to fleece this buyer who knows no better.
If one of you want to send me the parcel number I can give you a good idea of where it is and what if anything can be done... with it...
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Kim Pham
OP
Flipper/Rehabber · San Jose/Santa Rosa · Member since 2015 · 8 posts · 5 votes
11y
This was definitely a learning experience. I'm so glad I reached out and am so thankful for all of your help. I'm going to go back out there and see what other deals I could bring in. Thanks again!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Kim Pham thanks for sending me the APN number this lot although very well located in Bennett valley and surrounded by 500 to 800k homes.. is from looking at the plat map left over slip of land... its only 60 feet wide and its 300 feet long. So most likely it will never meet set backs and the only value is to the homes on either side. although they probably know its unbuildable so why buy it just use it.
the person who owns it I would bet dollars to donuts bought it at a tax sale.. and now is trying to sell it... it was on the Sonoma county tax sale being held by bid for assets but it was removed.. ( taxs probably paid).
Not sure how you found this as your in San Jose and this is 90 miles north in Santa Rosa.
The only play I could see here is contacting the neighbors on either side.. see what if anything they would pay for it... deduct a reasonable profit for yourself then make offer to current owner accordingly.
There are millions of these type of properties through out the US and hundreds of thousands if not a million or more of them in CA alone.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Kim Pham However do not take our on line research as gospel.. it would be a good learning exercise for you to jump in your vehicle.
Drive up the 101 to Santa Rosa go into the city planning department show them your plat map and ask them what can be done with the lot if anything. ITs really the city that is the final determination.
Based on experience though in this arena I suspect its not buildable .. and if it was it would be worth 200 to 300k.. and the seller would not be trying to peddle it that cheap.
Now my lots that I sold out in Jenner by the sea the only reason I got 50k was the buyer is going to park his motor home on it for long weekends which you can do and it has killer view of ocean..
There are many companies that make a living buying this stuff then reselling to the unsuspecting public.. Buyer beware.
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Mark Freeman
Real Estate Investor · Clovis, CA · Member since 2014 · 195 posts · 194 votes
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Originally posted by @Jay Hinrichs:

@Kim Pham However do not take our on line research as gospel.. it would be a good learning exercise for you to jump in your vehicle.
Drive up the 101 to Santa Rosa go into the city planning department show them your plat map and ask them what can be done with the lot if anything. ITs really the city that is the final determination.
This is great advice Jay! Everyday people pay thousands of dollars for guru courses that they get very little out of. A trip to the planning department could be a better education than you could get in most of those courses.
Having said that, even if she thinks she hit a home run after leaving the planning department, I think she would still need more help as there are too many variables in this situation for a first deal.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Mark Freeman Planning and Public works would be appropriate.. Also I would be talking to a good realtor there.. they may know of someone who likes to buy these odd ball deals.
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Orion Walker
Investor · Ukiah, CA · Member since 2014 · 196 posts · 83 votes
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interesting thread. Kind of hard to follow when folks keep mixing up Santa Rosa and Santa Clara :) Karen and jay know their stuff, I'd tend to agree with their assessment. I did like the idea about contacting builders on nearby blocks though. That and asking lots of questions at the local building and planning sounded like good steps. Happy hunting for a better deal.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Orion Walker she lives in Santa Clara county but never mentioned were it was.. so everyone just assumed it was a Santa Clara county property.. when in fact its in Bennet valley which as you probably know is just a little East of downtown SR and quite a nice area.
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Kathy Stewart
Rental Property Investor · Dallas, TX · Member since 2015 · 243 posts · 70 votes
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You did not specify No. Ca. or So. Ca. I have contacts in land development with good grip on all costs/potential sell elements. Let me know if I can help.
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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
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this is an awesome example of bigger pockets at its best. The various opinions flowed in such a spirit of giving, without any selling or other agendas. Kudos to all who participated I say we all should be proud
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David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
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@Kim Pham
I've done a ton of lots and subdivision. I don't recommend it for a first deal. As @Karen Margrave stated zoning, environmental and regulatory issues make it difficult for the newbie.
Some zoning is anti-development. I heard of one zoning where you needed two lots in order to build on one. So if you had one lot you had to buy another and not build on it in order to build on the first.
You need somebody experienced in lots and land to hold your hand or maybe even partner with you on this deal and make sure that you buy at a very low price.
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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
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@Jay Hinrichs, given that I've been buying all kinds of stuff in Santa Rosa for longer than this guy has owned this property, chances are that I've probably seen and passed on this deal at some point over the years. So you are absolutely right when you said it was likely picked over and passed. I don't know which property it is, but a 60' wide property in Bennett Valley wouldn't be all that desirable. With the setbacks and all, you'd have a pretty narrow house surrounded by much larger homes. You gave some great advice here.
@Kim Pham, I agree with Karen and Jay...good thing you thought to ask before jumping into the shark tank.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@David Krulac She sent me the APN # in CA that's Assessor Parcel Number. I then looked it up... this is a left over strip of land in an exisiting subdivision. there are 500 to 800 k houses on either side.. its in a very good area..
however the lots are all 1 acre and better.. and this strip of land is 50 to 60 wide and 300 plus deep.. it will most likely not meet the width to depth requirements of the zoning for that area.. and it may be too small as well... Its only value is to the neighbors.
the current owner no doubt bought it at tax sale were these odd strips of properties are usually bought and sold.
My dad owned hundreds of these in CA .. left overs from tracts he developed he let them go to taxs each year some one would buy them and we would get the overages on them LOL. Sometimes it was pretty stunning to see what people paid for worthless land.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Brian Burke its on Panorama drive... in Bennet valley area.. up by the park. its a nice spot I know. I suspect two things
1. overall lot size is too small and not conforming
2. width to length ratios won't meet set back codes as you mentioned.
value is to the owners on either side...
I sold my Jenner lots last month.. after trying to perc them for 11 years LOL.. Sonoma county wore me out.... !!
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David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
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@Jay Hinrichs
I've seen tax sale lots as narrow as 2 feet. The rest of the property was taken for a highway widening project and this was left over.
People think that no land can be worthless... they haven't seen tax sale properties!
Had a 50' wide lot that the zoning required 10' side setback but a total of both sides to equal 30 '. Leaving a 20' wide envelope in the middle to build. I went for a variance and the neighbors protested and (NIMBY) I was denied the variance. However during the hearing the zoning officer did mention that a mobile home would be permitted. They had to pull the neighbors off the ceiling!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@David Krulac well now a days we are building 12 foot wide homes in Portland.. we call them Portland skinnies.. and I have a lot under contract in Charleston that will be about the same.. 12 ot 15 foot wide home. we are just going back 200 years in building techniques.
With the rise of Uber who needs cars.. there is some scary stats in Oregon how uber and the like is crushing the cab business.. I think they are going to do what craigs list did to the paper advert business :) I digress
These areas of Northern cal to my knowledge have not gotten on the skinny house band wagon @Brian Burke you guys doing any skinnies in SR ?
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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
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Originally posted by @Jay Hinrichs:

@Brian Burke its on Panorama drive... in Bennet valley area.. up by the park. its a nice spot I know. I suspect two things
Ha, funny...I flipped the house three doors down from that lot a few years ago. I don't think you can do much with that lot, and if you could, it wouldn't be in character with the neighborhood. The neighbors ought to buy it...but why should they? They get to use it or look at it without having to buy it.
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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
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Originally posted by @Jay Hinrichs:

These areas of Northern cal to my knowledge have not gotten on the skinny house band wagon @Brian Burke you guys doing any skinnies in SR ?
Nah, man. That's Sebastopol. LOL. Actually that isn't the skinnies, it's the tinys. Whole houses that I could fit in my bedroom and still have room left over. No tiny houses for me...where the heck would I put my pool table?!
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Logan Hicks
Business Owner/Investor · Millersville, MD · Member since 2015 · 191 posts · 71 votes
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For everyone who only buys "land" let me ask you this simple question set.
1. Does land generate good cash flow? (Farm lease, 70-160/acre/year)
2. Does land generate a high level of leverage?
3. Does land appreciate well? (2-4%) on average year over year, FYI
4. Do you pay taxes and upkeep on land? (Yes, yes you do).
5. Do you know what the federal Municipalities funds pay? (~8.4%, tax free)
6. Did you know, that @~8% Interest, your money doubles every roughly every 6 years?
7. Did you know, with 20 years of compounding interest, at 60k, you would have over 320,000.
8. Do you see why land is a bad investment now?
The only way Id buy land is if it came with a house on it, or a missile silo in it.
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John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
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Originally posted by @Kim Pham:

This was definitely a learning experience. I'm so glad I reached out and am so thankful for all of your help. I'm going to go back out there and see what other deals I could bring in. Thanks again!
Great. They won't all be winners. Keep working at it till you find one. That will set you apart from the people that only talk about investing but never take action.
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