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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: CrazyIT on March 22, 2018, 07:56:29 AM

Title: Anyone sold their house/property to land developers?
Post by: CrazyIT on March 22, 2018, 07:56:29 AM
I live in a growing area that building\development has been happening all around me for the past several years.  A couple years ago I was contacted by a realtor/land broker that is working with the city to develop several acres on my block.   I have contacted the city and they tell me building is going to happen as soon as the plumbing and infrastructure is in place.  I don't feel too much pressure to sell yet and only one soft verbal off has been made to me which I think is very low.  The broker touches base with me more frequently lately so I need to put some thought in to this.

It seems that the home/property owners next to me are not interested in selling/moving but the broker is still interested in my property because I have enough land to still develop on.   My property is a side by side duplex and I live on one half and rent the other.  Its paid for and produces a nice hassle free income for me plus I enjoy having a large lot and privacy.  But with that said everyone has a price and I do too.

I have contacted the city to inquire about what my assessments would be but haven't gotten any sort of answers yet.

I'm just looking for someone that has gone through this or is in the business and would like to offer any advice.

Should I stay or go? should I try and hold out for more money?  Should I shop around for competitive offers?  What questions should i be asking and to whom?
Title: Re: Anyone sold their house/property to land developers?
Post by: Car Jack on March 22, 2018, 01:49:24 PM
Decide your minimum that you would accept.  Then go ahead and have a developer look.  For a time, when the prices were going through the roof, I got solicitations all the time because we've got over 13 acres.  I took up one developer.  He came and we walked the property.  His offer was less than half what I would take, so that was that.
Title: Re: Anyone sold their house/property to land developers?
Post by: Michael in ABQ on March 22, 2018, 02:04:47 PM
In real estate the value attributed to assembling a larger property is known as plottage. If each lot on a block was worth $100,000 by itself, but the 10 lots together in one block were worth $2 million, then the last holdout (assuming everyone else sold for $100,000) would now have a lot that was worth about a million to that developer. Of course if you get too greedy they might decide to just build around you.

You can probably back into what the developer can afford to pay on a per acre/per square foot basis. If you're asking more than that, unless they got some neighbors to sell for cheap it's not going to happen.

In rough numbers the land is usually about 1/4 of the value of the finished home. So a $300,000 house is probably going to be built on a $75,000 lot. This can vary greatly obviously if you're in a very expensive market where the land could be the majority of the final value of the residence. So if the developer can get say 5 lots per acre that's $375,000 per acre. Of course to build out the infrastructure to get those finished lots, plus the holding costs and risk, they need to acquire the land at maybe $100,000 - $200,000 per acre. Infrastructure costs typically run about $20,000 - $30,000 per lot but once again can vary greatly between small dense townhome lots or larger detached residential lots where there might be a lot more streets and utilities to install. So, if you aren't willing to sell for less than $300,000 per acre and the developer figures he can only sell lots in that location for $75,000 at 5 per acre, the deal isn't going to happen.
Title: Re: Anyone sold their house/property to land developers?
Post by: Car Jack on March 23, 2018, 08:34:14 AM
Good explanation, Michael.  There can be more to it, however.  With a large plot that's subdividable, how many lots will perc?  (on my property....not many.  Lots of test holes from when the original purchaser was looking for a place to put the house).  How difficult is it to put in roads and infrastructure?  We live in an area that's lots of glacier deposited granite and ledge.  It's pretty common to have some nice, relatively flat wet land and then a 70 degree incline to a plateau.  That plateau would be spectacular for views of the lake and surrounding land.......if the buyer is willing to put a helipad on his roof.  We actually have a 35 acre plot down the street that's exactly that.  If they could avoid the wetlands to get a road in, property way in the back could support 10 small lots with houses.  That brings the second problem......  In our town, no dead end streets are allowed.  To build any new development, there must be 2 ways in/out that are accepted roads.  That was one of the downsides of my property.  However, there was a neighboring set of 4 lots along the road that backed up to my property where a second entrance could be made.  Of course the builder would have to secure these properties as well and I know first hand that the price for those was high as they offered them to me for that exact purpose.