Strategy Question: How Do Builders Evaluate Infill Lots in Spartanburg?

Question

Working through an infill lot opportunity in Spartanburg SC with utilities at street, no HOA, and strong new-build comps in the $260k+ range.

For those who work with builders or who wholesale land regularly, how do they typically evaluate:

• Lot size • Utility availability • Comps • Dirt condition • Entry price

I shared the full situation in my Classifieds post per BP rules. Just trying to understand how builders in that area run their numbers.

Austin Grant McDowell · Answer

Seeing a lot of builders succeed in building on infill lots. They are trying to make anything happen where they can and usually base the value of the land with just what is round it within a 1 to 2 mile radius (depending on how congested that mile is, city/county location). Seeing it happen in Cherokee county as well. Most of the time utilities have been located extremely close by, if not running right through the front for homes around it.

We just worked with adding three duplexes to a lot a few months ago and it was a success. Based the land off of a recent sale within 3 miles because it was in the country.

Good luck with it and much success to you!

Cornelius Garland · Answer

@Harvey McMurray Great question and right up my alley. I started wholesaling lots, almost exclusively, when I started in 2015. I got lucky because the second deal I did was a lot in an area that a big-time developer in Charleston, SC was eyeing for a while. My buyer connected me with him and we ended up wholesaling around 100 parcels to that developer. The whole area of Union Heights is transformed because of my team's efforts.

An infill lot's value is primarily determined by what similar size lots sold for in the last 3 years. It's fine to go back 3 years to get comps as lot values rarely fluctuate within this timeframe, and it's very difficult to find enough sold comparable lots with the last 6 - 12 months.

If I can find a newly constructed house within a half mile or less then I'll check out the purchase history on the house and see what it sold for to the developer. Let's say the lot sold for $5k and you find similar size lots that sold for $7k and $4k. If all of these were sold by a brokerage, then I know an assignment fee wasn't added, so the resale value of the lot is around $5k. In this scenario, I'll contract it for $1500 - $2k and make a quick $3k spread.

Lots sell for what developers demand. Even though the ARVs may be $260k, this doesn't mean a developer will pay $50k for the lot even if they totally could. Developers have the leverage in this scenario because there are so few of them - especially in Spartanburg.

A rule of thumb that doesn't always hold up is that developers typically pay 20% - 30% of the ARV for a lot. But this is usually reserved for lots where ARVs are over $500k. Anything within the $200k - $300k price range, I'm almost guaranteed most developers will pay $5k - $10k.

I made so much per assignment because I found a developer who would pay me $3k per parcel and most of the land owners in the neighborhood owned 2 - 4 parcels. If they owned one large parcel that could be subdivided, he'd pay me for how many houses he could build on it. On average per closing, we were making $15k in the hood where nobody else in Charleston wanted to wholesale. It was literally my playground, and I had no competition. Fun times! Land is a great niche, so if this one doesn't work out, keep at it.

Strategy Question: How Do Builders Evaluate Infill Lots in Spartanburg?

2 Replies