You shouldn't just look for what's wrong with a property. You should also look at what opportunities may exist. Subdividing may be a huge opportunity. But you need to know what to look for. This is a slide from an old presentation that I thought I would share. Are you working on any subdivision projects? Do you want to?
Tip of the day!
There are many regulations that restrict the use of a property. As we know, usability impacts marketability. The more usable a property is, the broader your buyer base. Most of you are aware of zoning restrictions, HOA restrictions and deed restrictions. However, were you aware that there can be restrictions that are recorded on the face of the subdivision map itself that can restrict the use of a property? Those restrictions may prohibit the construction of a home or limit the use of the parcel to a specific land use. If your parcel is part of a platted subdivision it may be wise to contact the County to view a copy of the recorded subdivision map. I've seen lots in subdivisions that look like they can be built on but in the end were highly constrained.
Deal of the century...
.....and it's just for you! Corner lot zoned residential in an existing SFR subdivision in Southern California. Priced right at 15% of the cost of nearby homes, utilities in street too. Walking distance to parks, commuter rail and revitalized downtown with new restaurants and entertainment district. Sounds great! Wonder why it's still available???
You can technically build on this lot. It would take variances and all sorts of other approvals to get something that’s marketable. So the thing sits. Point is, knowing that a property is zoned residential isn’t enough. Especially on infill lots. You have to have a decent idea of if the end product is something that is marketable. If not, then you could end up being stuck holding the bag. Do your research. Buy right so you can sell right.
WTFD? (What's the flippin deal)?
So there are three infill lots sitting right next to each other. Every time I look at a piece of land, I always ask myself why this thing hasn't sold. If this is such a great deal then why is it sitting here. Topography would be a good guess but it isn't quite right. Thoughts?
Is this a legal lot? What is a legal lot anyway? How can you tell? And why does it even matter? In most states, a lot that was not legally created cannot be issued building permits or any government approvals of any kind, even ones that don't include building!
Hey everyone...if I ever recommend anything I typically am not getting anything out of it. If I find something I like and feel it's relative to our business I want to just share it with you. This is not a new book and it's not a real estate book per se, but it has massive implications on our and any business moving forward. If you're a numbers person you'll love it.
I always shoot for the largest pool of buyers and first try and determine if a lot is buildable, I have a full list that I run through to make that determination. Here are SOME of them.........1) Legal and physical access, 2) Zoning, 3) Legal Lot Status, 4) Topography and Hazard Zones, 5) Development Standards, and 6) Utility access, There are various aspects to each that need to be researched. ie. Flood zones aren't the only hazard zones and zoning isn't limited to residential or commercial. If it doesn't pass one of these tests, it doesn't mean that it's not usable, it's just not buildable. You'll have to reprice the offer to reflect that fact.
This property has so many constraints that it severely impacts the usability. The more usable, the more marketable. The more marketable, the faster the sale. It really is that simple. I didn't find this information by looking at a quick aerial photo. I didn't even find it by calling the local planning department. What once looked like a steal at $40k may now essentially be worthless. And so it sits. Vacant. Unused. I know someone is going to tell me that there is a buyer for every property. Maybe so. But do you want to spend your time looking for the person with more cash than smarts? I'd rather know what I'm buying and get it into the hands of the right kind of buyer. Every time you look at a property, ask yourself why has this property not been used
Hypothetical Scenario (Part Deux): How about now? Looks a little different doesn't it? This property has so many constraints that it severely impacts the usability. The more usable, the more marketable. The more marketable, the faster the sale. It really is that simple. I didn't find this information by looking at a quick aerial photo. I didn't even find it by calling the local planning department. What once looked like a steal at $40k may now essentially be worthless. And so it sits. Vacant. Unused. I know someone is going to tell me that there is a buyer for every property. Maybe so. But do you want to spend your time looking for the person with more cash than smarts? I'd rather know what I'm buying and get it into the hands of the right kind of buyer. Every time you look at a property, ask yourself why has this property not been used
Usability vs. buildability
From the outset, it’s important for you to know that what I recommend is not going to be for everyone, and that’s ok.
I understand that it’s human nature to look for the easy button. We want the magic pill that will solve our problems. We want someone else to validate our choices. And I get that. I’d want that too.
But, I don’t have that for you. I’m sorry.
What I recommend can be challenging, frustrating and hard work. If you have been in this business for awhile or plan to be then this shouldn’t scare you.
Anything short of this would be a disservice to you but would also contradict with the reasons I started this group in the first place. I’ve spent years and years watching people make poor land acquisition decisions due not being informed or just being lazy only to result in significant financial loss. In some cases total financial ruin. It shouldn’t be this way. It doesn’t have to be.
Yes, my goal is to get you to sell your land faster so you can make more money. But the way you do that is by making wise acquisition decisions.
You don’t want to be stuck with stagnant inventory, issuing refunds, or just dealing with issues on the back end. I’d prefer to know what I’m getting into up front so I’m not dealing with these issues later. I suspect that many of you are the same.
Remember that a marketable property will sell fast. And a marketable property is one that is usable to the end buyer. If the land isn’t usable to a potential end buyer then TO THEM it’s essentially junk. Hence the term “junk land”. You need to do the work to understand usability so that you can identify a target end buyer. From there, your sales process will flow more effortlessly.
What I do have for you is a process. It’s a process that will give you more peace of mind, will leave you with more confidence and yes, will result in faster sales.
Again, this isn’t for everyone, but I know that it resonates with many of you.
Thanks for being willing to grow in your career and being a part of this community.
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