Interested in starting - Land deals

General Real Estate Investing
1

Good Sunday morning and thank you for your time reading this and your comments.

I had inherited about 5 acres of land that my grandfather bought for tax delinquent money back in the mid 80’s. I have had the land in my name for a few years and have really sparked my interest last year on how could I do the same and possibly turn the land for profit. I have been browsing the tax listings in my home state of Arkansas and drove by a few of these parcels and they look good. My plan was to attend a few of the county auctions and get a feel for it from the bidders and searching the internet for more information. I know a starting bid is only the starting point so I want to find out how much these really are selling for. I know it does take a year at least before you can get it transferred into your name here.

I don’t have a lot of money to get into it since I have 2 kids and 50+ hours a week at work but I do have a desire to move to Real Estate. I know I need to go slow and plan on it taking 5 years or more if I am just looking at land and not houses. My question is should I prep the 5 acres I have now (no drive onto the land from the road) and clear some of the underbrush to turn the property to get started? Also is there truly money to be made in buying land only or is it in the houses? I am looking for something I would be able to research in the evenings and work on during the weekends. With my time schedule that is why I am more interested in land than houses. We have a realtor that we are family friends with and I have yet to approach them on this idea. I guess all in all I am looking for some direction to go from here.

I have patience, time, drive and a little money. I would like to get going and yes I will make some mistakes along the way but need to keep the costly ones to a minim to keep going.

2

Hi,

Getting into land speculating is a real tough business if you don't possess some advanced skills in construction and real estate investing as there are a bunch of things you have to know, a huge list of due diligence items and you have to be able to discern and predict values at a future point in time.

Since you have a full time job you will have a tough time fulfilling hours and hours of due diligence in a 1 to 4 week due diligence period while in contract. With out knowledge and real skills and experience in commercial or residential building (Construction) it is hard to understand what important points to look for in a piece of raw land.

Knowing the building codes, understanding planned urban development, zoning, environmental, plot plans, submittals, surveying, soils testing, perk testing, on & off site work, excavation, grading, over excavation and recompaction, blue line certifications, off sets, set backs, sewer, water, gas, storm drain, electric, cable and phone which are better known as wet and dry utilities.

Road design, road construction, road base, asphault, curbing, gutters, sidewalks, codes, etc.

Owning 5 acres is great, but value is predicated on whether utilities are available? Access? If sewer is not available will the property Perk? If not is alternative septic an option? Drainage? Flood plain? Survey? What is zoning? Is the land subdividable?
Is an Environmental Impact Report required? Has there been a soils test? Etc, Etc, Etc.

Good luck,

             GR
3

In general real estate is a great business but look at it like a business. Raw land speculating is a lot like flipping. It depends on the greater fool theory. You buy the land and hope a person will come along (the greater fool) and pay you more than you paid for it. It is more like gambling than investing.

On the other hand if you took that same money and put it into a building you can still wait for that greater fool to amble by and buy it from you but in the mean time you get income from the rents paid while you hold the building. Everybody in real estate is going to sell their property but the time between buying it and selling it is what makes real estate such a great investment. You can actually fund your lifestyle and pay for the acquired property while you wait to sell for the big payday.

4

Thank you both for your input, that is what I was looking for. I knew there were matters that I just had not thought of and the reasoning behind my questions. I guess what I am “thinking” is I could buy land at a discounted rate due to either out of state non-tax payers or out of luck people and then flip it in a few years after the due time has expired for their back payment.

5

Flipping land requires a lot less due diligence than flipping homes. Buying vacant land at tax sales/auctions can be a great way to supplement your income. There are two ways buying property from a sheriff sale (auction) can make you money.

#1: Redemption Period Payback. Arkansas is both a judicial and non-judicial foreclosure state. If the tax foreclosures was a judicial one, then the original owner has one year to redeem the property (i.e. you cannot do anything with the property during that time). But, if the owner redeems the property, you receive your money back PLUS interest. (You need to check into this locally. Some of my sources say AK does not charge interest and others say they do.) Non-judicial foreclosures do not have any rights to redemption.

#2: Resale/Flipping. Your profit here is dependent on the amount of discounting plus your holding and resale costs. You must know what the value of vacant land is in your area based on the zoning and developmental potential. How long does it take to sell vacant land? What about mineral rights? A good real estate agent or appraiser can help answer these questions.

6

Just another question, would it be to my benefit to get my Real Estate license? I am a good study and the classes offered locally are very good and have weekend openings. Cost doesn’t seem to bad for the training and getting ready for the test and I thought that might be a good way to learn more.

7

If you are going to pursue a career in real estate investing, having a real estate license is definitely a perk. In fact, I would recommend getting your Broker’s license. Here are a few reasons:

  1. Access to MLS information.
  2. Good source of industry data, networking peers and mentors
  3. Standardized real estate training necessary for licensing
  4. You are not paying commissions for properties you purchase, you get paid commission.
  5. Brokers can work for themselves.
  6. Credibility is increased which is good when getting loans and negotiating.

Reasons you may not want to get licensed:

  1. Fees for education.
  2. Fees for licensing
  3. Fees for MLS access.
  4. Must have your agent’s license with a company until have Broker license.
  5. Con-Ed takes too much time.

You have to weigh your options and see what works best for you - but I personally recommend getting licensed if you are looking at doing this full-time. If you are just looking for some education, check out your local REI clubs and forums like these.