Making an offers on vacant lots

5 Replies

I live in CaliforniaI recently found a seller with tax issues on a few properties. Low and behold the properties that I was inquiring about were all vacant lots (huge oversight on my part). Once I spoke to the seller I was given a additional 4 occupied property addresses to look at.  Three are rented with non paying tenants, the fourth is vacant/boarded with delinquent taxes.  I told the seller up front that I was not accustomed to making blind offers.  After hearing the stories of how bad the tenants are I know there is no way for me to get inside the properties to see the interior unless the seller gets the eviction process going.  However I really want the sells.  So I drove by the properties, did my research on the areas and yes....I went ahead and made blind offers all 58-60% below MV to be safe and explained briefly how I achieved my numbers.  The seller took all the information and then asked what I was offering on the vacant lots.  I told the seller that I had not given them any consideration once I began working on the others.  So now the seller wants me to provide offers for the vacant lots (since that is what I was originally acquiring about), then call back the following day with those offers while the seller considered my offers for the occupied properties. 

I am a new investor and I do not feel comfortable making an offer on vacant lots nor am I confident that I will be able to sell them.  Any feedback will be appreciated.  

Is there new construction happening in the area?

Not knowing your market- vacant lots usually sell to builders between 20 and 30% of land to resale value.

So if this is a neighborhood where they will build $400k homes they'd spend around 100k on the lot. The 30% would be for higher end (900+).

Devon - the areas of these vacant lots are in lower end areas. The average house sells for between 75k - 90k. I also did not ask if there was water and electrical. However I know that this information I can find out. There is no new construction in these areas only rehabbing.

@Tami Brooks   if that's the case the lots have Zero value they only have value to a neighbor to add to their holdings.

I just went through that in sacarmento... it killed me but I had an extra lot on a rehab I did I toyed with putting a MH on it.. but building it out the homes sell for less than replacement cost ... so land has zero value.

I sold the lot on terms to the only person who would see value and that is the folks I sold my rehabbed home to.. they paid me 15k and I had to finance it long term.. but I got the lot with zero cost as I made profit on the rehab .. so not the end of the world but long story short lots in areas with under 100k housing have zero value.

think of much of the mid west and any other areas of the country were homes sell for under 100k in those markets the ONLY one who buys vacant lots are habitat for humans ,, churchs, or if some one is doing a land assemblage for a new bigger redevelopment.

I agree with @Jay Hinrichs .  With house prices in the $75-90k range, there is likely anyone can built a house on that lot and sell it for cost. Its likely that $80/ft2 for a small house is the floor on construction costs (1200-1500ft2).  If the lots are in developed areas (house next to the lots), the electrical/water/sewage should not be an issue.

If you think there is some future potential for the area, like multifamily or revitalization. They you could offer little for the lots now and hold on to them. But you will incur costs during holding, not the least would be lawncare and taxes.