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First things first, since this is BFC: This is a speculative venture. I acknowledge that real estate transactions are not for everybody, and that I could lose my shirt and be left without so much as a sock to poop in. My wife and I are considering the purchase of a 15.5 acre plot of land that is the rump end of an existing high-end housing development. It's in a desirable location, and has potential for serious appreciation the next time the local real-estate market heads north. Developed plots of similar size went for millions pre-recession, however the adjacent properties to this one are weird. On the east side of the road, a 6,000 sqft, 4br, 4ba home on several acres recently sold for $1m+. On the west side of the road, there is a small trailer park and some corn fields. The property is a rectangle approximately 730' x 920' situated next to an "estate" type development in rural Maryland. It is entirely wooded (mostly 2nd generation softwood growth) and is situated on a 2-lane state road with no access issues. There is ready phone and electric access. The frontage is at least 1,000 feet on the state road, with additional frontage on the public road serving the adjacent development. The property is zoned for 2 acres / house minimum. There is no water or sewer, and the plot has not perc'd, (though the adjacent development had no issues). Wells in the area average around 400 feet deep and produce good water. Though I have not yet done a thorough title search, the seller indicates that there are no encumbrances or covenants that would prevent eventual subdivision into 3 or 4 lots. The asking price per acre is low, and preliminary conversations with the seller hint that there is room to maneuver. My initial research has shown that Citibank, et.al. won't touch a loan application for undeveloped land, since the counter-party risk is too high. Farmer's banks, credit unions, and certain federal programs, seem to be more amenable, but everything I've read has mentioned higher down payments and interest than a traditional mortgage (20-50% down!). What I guess I'm asking is for goons who've been here before to tell me the obvious stuff that's missing and whether we're in front of an oncoming train or the deal of the century, or (more likely) somewhere in between. We aren't emotionally invested in the property, but we see some potential here and figure it's worth checking out and sharing what we learn in the process. Hired_Sellout fucked around with this message at 01:49 on Feb 10, 2015 |
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Feb 10, 2015 01:46
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| # ¿ May 11, 2024 07:53 |
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Thanks for the reply. Sounds like you've danced to this tune before. We're obviously new at this, and there are a lot of unknowns, but this seems like a good deal based on the location of the property and the approx $6,400 / acre asking price. The local market is fairly depressed, despite that one odd sale I mentioned, and I couldn't find any recently sold wooded lots in the area to compare. Listings of wooded parcels further inland and away from towns sit at about $2,500-$4,500 per acre for properties in the 80-100+ acre range. I guess that the seller's reserve price is probably somewhere around $5,000 / acre based on that information, so there may be room to negotiate off the $99,000 asking price for the plot.Devian666 posted:It sounds like you've never done a development like this before. It is higher speculative with the large number of unknowns they will have never come across before. I know people that have made huge amounts on these developments and some who have done this on a smaller scale. You're right. We've never done this before. It's important to us to consider the "stages" of development we're willing to attempt. The simplest thing is to buy the land, do nothing except maybe selectively clear some timber, and wait. We've got plenty of time to sit on it. Next in complexity would be developing it for our own use; an outcome with which I'd be fine. Next, and stop me if I've skipped a step, would be to do perc tests for septic systems, subdivide into X lots, and sort out a road, curbs, drains, and utilities like cable, internet, and grid hookup. That is probably the most complex endeavor we'd be willing to take on. Devian666 posted:The size of the land suggests you could fit a large number of houses and there will be rules relating to land area, spacing between buildings (to prevent fire spread) and site coverage. You will likely need an architect to develop some generic house plans unless you can just sell the land subdivided. Dividing such a large area into only four plots seems low to me but I am accustomed to high density developments on the fringe of cities extending out into rural areas. Yeah, as I mentioned in the OP, the zoning currently limits us to 1 house per 2 acres. We could potentially fit 6-7, but more likely would want 4-5 to keep lot sizes similar to the adjacent development. When that went up 20 years ago, each finished lot sold for $59-79k. We have no interest in building houses on spec. I think that getting the lots to build-able condition is all we're up for unless an experienced third party would take an interest and want to partner.
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Feb 11, 2015 01:02
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