Does anyone know how i would go about making any real profit buying raw land? Any books, or other resources someone can point me to. Thanks.
Well, I don’t know about books, but I know that you can sometimes get some great deals on land on the internet or in auctions, then take some time to sell the land at market price through a real estate agent. I sometimes buy land through SunnyLand.com at their auctions. I have really made some good money buying land, then flipping it for about 5K to 15K more then what I bought it for. You do have to do your research though. Some of the land is in growing areas and you wont get much of a return on your investment (if any).
The key is do research and find out where there is a high expected growth rate and get the land at a discounted rate at auctions (like sunnyland.com) and on ebay.
Seriously though, its all relative. If you can find land selling below 50% of the value… you can get a hard money loan on it. You could also just cut up the lots and put in the infrastructure then sell them off. You can also buy land and rezone and triple the value. Remember to verify value with an MAI appraisal and to get a phase 1 evironmental inspection to check for poisoning. Have fun.
buy low sell high!
Rezoning and Upzoning are the two biggest money makers; however, there has to be a demand for the change and it must fit the infrastructure in place.
Good Luck,
Cap
Before you get in raw land, find BIG developers in your pocket. Put the land under contract. Sell it to the developer. Do not be greedy. They all know one another.
I’ve heard land development is very speculative, and risky, compared to most types of real estate. However if you have the cash to buy a big piece of land, or already own it - and can sit on it for a while - there’s nothing stopping you from making great money. I think the guys who REALLY make the good money with land around Texas buy large tracts…say dozens or hundreds of acres…right outside where they think the suburbs will grow over the next 10-20 years…zone it agricultural so they pay virtually no property taxes [note that TX law requires you to hold it for 5 years to really take advantage of this loophole]…put a few cattle or sheep on it…and just wait, and wait. Bam, 5, 10 or 20 years later you’re looking at making an absolute killing. It’s theoretically possible to get yields of 20-50%+ or more per year if you do it right. But it’s a crapshoot too. But what isn’t? LOL.
What type of land development / reselling / etc do you want to do…I know of a couple good books on the subject?
I deal with land parcels for commercial potential and it can be very lucrative if you take the right steps and come across the right deals. The way I do it is by owner financing-zoning,annexing-then turn it to a developer. To get these types of deals its good to network with land brokers consistantly with your criteria of what your looking for. I have broker’s that send me more deals then I can handle that fits my criteria. It’s also very good to have a financial backing(private investors with vasted interest) for these types of projects. ;D
No books that I know of but I am currently doing a bit of investing in land. 50% is ok but I look for that as a minimum these days. There are a lot of ways in the investing industry to make good money. Many people equate it will “high risk”. I think that is a matter of opinion and what it really comes down to is personal comfort level and managing risk. The risk is always there but if you are willing to look at what is happening and manage the risk you will make more. Don’t put all your eggs in one basket. I have several investments going and I don’t usually put everything I have into one deal. If you have an area that is growing and the economy looks strong for the state and that area then buying land is a great opportunity. I have a couple lots in a new residential sub division. I expect a return of somewhere between 100% to 600% but I am basing the return on how much money I am putting into the deal myself. If I base it on the value and potential loan amount of the land it is less but I don’t consider that part of my risk. I am really only tying up what I put into the deal. Perspective is a big part of your investment strategy I guess.
Easy way to make money on raw land is by buying raw land and selling UDI’s to individuals.
UDI stands for undivided interest.
For example: If you buy 100 acres of land for $1,000,000 ($10,000)
You could sell UDI’s to individuals at the fair market value ie: @ $15,000/ Acre for a total of 100 UDI ( 100 Acres ) = $1.5 Million therefore your profit would be 0.5 Million.
UDI is issued by the goverment that gives title to the land.
Sorab
All the responses here are great; I would just like to add that there is a lot to learn about investing in raw land - you should look to partner with an experienced investor who knows the ropes and learn from them for a while before doing it on your own. The development costs are potentially very high and there is a lot that can hurt you if you don’t know.
You can make great money doing it if you know what you are doing. Be prepared for a very long holding time. Here in east texas, i’ve known two people who were very successful at it, one on a very large scale (wouldn’t look at a deal if it was under 5,000 acres)and the second dealing with 100-200 acre tracts.
both would buy former pine plantations from the timber companies, these can range in size from 100 acres up to 50,000, sell off timber to put roads though and some clearings, and dig ponds and lakes to sell the dirt to aggregate companies (usually they would stock the ponds as well as an added selling point) , The large scale guy would then flip it to a developer. The small scale guy would subdivide into 10-20 acre tracts and retail it for 4-5,000 an acre after a 2-3 year holding period. Both guys effective price would usually be less than 1,000 an acre after factoring in timber and aggregate sales,
If you live in or near a metropolitan area it will be hard to find a piece of raw land that a developer hasn’t tried to snoop around already.
Quickly contradicting myself, i also find that a personable investor who establishes a good raport with the seller might be able to strike a good deal where the big developers could not.
Even still, Johnny Q is right. If land is the way to go, make friends with developers, because they will often be your best exit strategy if you don’t plan to go vertical.
You can take raw land through the entitlement process to increase value and then sell or develop, but sometimes it might be easier to tie up a property with an option, get it entitled and then assign the contract. Less risk, and much less money involved. That goes back to the raport thing. You might need to have a few converstaions with the seller to let you tie up the property.
As far as books are concerned, check out the ULI, urban land institute (www.uli.org). They have a great library with case studies and articles about development.
Good luck,
Craig