Hi all,
I’ve never done any deals yet but wants to start. I found a property that’s condemned/abandoned. I know what the market value of the land is but does anyone want to share how much % of the land value, the property should go for?
This question CANNOT be answered with the information given…there are waaaaaaaay too many variables involved.
Keith
Thanks for your response Keith. I’m not sure what the variables to look for though. I could only think of the neighborhood, size of lot…
You cannot say if the land is worth $X, then the land with a house must be worth $X + Y%…it doesn’t work like that at all!
Keith
You could have a plot of land and build a $100,000 house.
or on the same land you could build a $750,000 house.
;D
I wish you success
Bruce
What you can do to assertain the value of the house, is two fold; you can check your county records and see what the last recorded value was and subtract the value of the repairs needed. Or you can check the city, county land bank ( a holding of properties seized by city, county that are abandoned and/or seized because of tax non-payment). The properties in city, county land banks are usually well below market value. 
Thank you. That makes sense. The house on this property would need to be demolished. It is in the neighborhood where nothing sells under 500k. If I have to buy it, a new house needs to be constructed. I was just wondering how much % of the land value I should offer so I could still profitably flip it. I appreciate your input.
I would get a comp on the property. That is find out what houses just like it in the same area have sold for in the past year. I would add to or subtract from that figure based on the condition of the property. If your question is really what should you offer for the property? I would offer the amount that I need to get it for in order to make the amount of money I want to make on the deal. In other words, your offer is concerned with market prices only because you need to know what you will get you sell it. You use that figure as a ceiling that you subtract all the costs (including the price, fix-up, holding costs, and profit) from. What is left over is what you offer.
If you have to teardown and rebuild, the cost of the house is a negative to the cost of the land. Because before you can use the land, you have to spend money to get rid of the house. Think of it as a big old junk pile on the land. You wouldn’t pay as much for a lot that had a junk pile on it as one that was clean and ready to build on.
Thank you Bluemoon06. I wasn’t really sure if it’s going to be a profitable buy. I just seem to remember some of the guru’s books that I have read before seem to say, " the uglier the better". But having heard what you have to say, I would say specially with today’s market, it might be a difficult item to flip. Point well taken.
You can also look up the breakdown of the assessment to get a rough idea. The city assessor’s department would break down the land and improvement value. Just a rough guide, probably not that accurate because in the Boston area, land is typically in the $100-$150k range to start and go up from there.
Also, have you looked into getting a construction loan, check the zoning to see what you can build and hopefully there’s no historical society…
Thank you for your response henryinma. No I haven’t looked into getting a construction loan yet. I’m just trying to weigh my options, not sure if this purchase could get profitable especially with how real estate in MA is nowadays.
I’m so new in real estate, I don’t even know how the historical society could prevent me from possibly improving this property. ??? I’m going to look into it too, thank you.
If there is a historical society, they’re not going to prevent you from improving the property, they’re just going to make it expensive to improve the property. For instance in Boston there’s a historical commission for Back Bay, there’s one for the South End and maybe a few others. So maybe you want to replace the windows with some cheap vinyl ones, but there were wooden windows there so they’re going to make you replace them with wooden ones. Those will just cost more money. It just drives up your costs that’s all.
Oh, it also depends where it is in the city and what city. Check the zoning to see what you can build there. In certain areas, the neighbors will fight you if you try to put up a building that’s too tall as it may block their view. You’ll probably win eventually or go through a few redesigns, but court fights are expensive. Hopefully the building isn’t on the historical register and you don’t get blocked from tearing it down.
Hello henryinma,
I was just wondering if indeed this property is listed under the historic, I was just wondering, then maybe I might aven be able to get a government loan for restoring a historical building. That much I have heard of. I’ll check the town’s site, to see if I could find out anything. Thanks again.