| >Am I crazy? |
| Posted by: Guest_Darrell Aug 11 2004, 02:12 AM |
| I was reading some of your posted Q&As. Now I truly wander if I am crazy. I have found approx. 150 acreas of clearcut land in a growing area. The price is great for this area, cheap to buy with a chance to sell to sell 5 to 10 times the purchase price (dependant on how it is developed). I am familiar with the general land layout from previous hunting trips. I am wanting to purchase the land and subdivide it into 5 to 10+ acre lots for sell and even build a few homes ($100k+) on it for extra income (possibly being the contractor). My main goal is to profit of coarse, but…overall I do want to evolve into the purchase and development of land. I am the New kid on the block and learning the trade, so to speak. My biggest hurdle is to get financial backing. As this property has just came on the market and I suspect it will not last long, at the asking price and the way the current area is growing. I know of several people that are already doing this type deals, (purchase, develope and sell). I know they are looking at it. I feel that I do not have the time to do a long winded business proposal, the personel, nor the quick available funding to do a complete plan for development of the acreage, before they buy it themselves. I do not have a large savings account to back me. My main question is, am I CRAZY ? No, I really would like to find a way to finance this land then develope it into a nice subdivision. What would be my best course of action? Who would be my best choice to take a short proposal too? Finally, what will I need to add to the proposal, concerning me personally and my financial background. Any help or ideas on this subject will be greatly appreciated. Thank You Darrell (Drulling in Arkansas) 🙂 |
| Posted by: loanuniverse Aug 11 2004, 08:05 AM |
| Ok, I am going to be completely honest here and comment on the assertions that you state. ”I have found approx. 150 acres…..The price is great for this area, cheap to buy with a chance to sell to sell 5 to 10 times the purchase price” You are not telling me the price and you say that you could essentially sell the land for a 400% to 900% profit???? I seriously doubt that the seller has lost its sanity and is actually selling something for 10% to 20% of its value. Have you found out how similarly located land is priced? Can you divide it into lots? ”..(purchase, develope and sell). I know they are looking at it. I feel that I do not have the time to do a long winded business proposal, the personel, nor the quick available funding to do a complete plan for development of the acreage, before they buy it themselves. I do not have a large savings account to back me.” I just realized that you have not even mentioned if you have any experience doing these type of projects. This sounds so speculative, most lenders would not touch it. ”..No, I really would like to find a way to finance this land then develope it into a nice subdivision. What would be my best course of action? Who would be my best choice to take a short proposal too? Finally, what will I need to add to the proposal, concerning me personally and my financial background. Any help or ideas on this subject will be greatly appreciated. .” If you really want to pull this off, you will probably need to buy the land outright with your own funds or pooling together individual investors. Then, you will need to partner with a developer with experience and you will contribute the land. Or even better, flip it to the developer that can actually do this project. I just don’t see anyone lending on raw land to someone without experience. Sorry but it just doesn’t seem like it would fly. For your information, bank lenders usually limit the loan-to-value on raw land to 50%, and a lot of them do not like to have but a small portion of their portfolio on these types of loans. Good luck. |
| Posted by: Darrell Aug 11 2004, 02:11 PM |
| The land is priced to sell the complete 150+ acres as a whole (timber acreage). The asking price is about $2500/acre. An acre of land in the surrounding area (15 mile radius) is selling for approx. $5k to $40K/acre, dependant on how it is developed. While the $30-40K/acre range is lakeside type of property, I know that the property in question will bring $5k divided into 5-10+ acre lots, with just a couple of paved access roads. With a little more work, planning and building restrictions, the price could be pulled up to the $15- 20k/acre range. As I said it all hinges on the type and quality of the development/ developer. Truly unbelievable but this area is really growing fast, as the land is grabbed up by the more seasoned professionals, and I am trying to join in. You are correct, in that I do not have the experiance on the developement end of this. I would need a contractor/ developer to assist in this area. Although I would like to gain the experience from this, for future purchases, and the ability to go it on my on later. I have been living in this area for a little over 40 years watching and learning how things shape up but never getting deeply involved until now. I would love to get in on this trully profitable deal. I am just not sure about the best coarse of action and the type of people I need to talk to. I have one rental trailer on one acre paid for, I have a mortgage payment on the house I grew up in and own, on five acres (my brother currently lives in), and four ajoining acres with a trailer, I live in, with a small mortgage. I was going to use the $4k I have saved to pay off the truck I own (would free up $600/month). Ten years at current employer. Am I just dreaming, or could this be pulled off, to get started in this business. Thanks Darrell |
| Posted by: loanuniverse Aug 11 2004, 03:56 PM |
| It seems to me as if you want to buy $375,000 worth of land with very little equity. This just does not fly. The fact that you have the potential of doubling the value by doing improvements sounds good if you are an equity investor. The lender’s upside is limited by the interest rate that it charges. On the other hand, the downside is substantial if it has to take over the collateral. {the lender will not get into the business of subdividing the property into more marketable parcels and will probably have to sell it as a whole. You need to convince an individual investor to go along with the purchase. Prior to that, you might want to make sure that the property can be subdivided, that the roads can be constructed, the bottom line on the cost of the improvements, the bottom line on the zoning changing expenses, and find out if there are any type of restrictions on development. It might even be worth it if you can just go ahead and sell the parcels instead of getting into the actual construction. Any investor is going to want to see the answers to those questions. Sure, you can make more money if you take ownership of the whole process, but right not I very much doubt you can get financing even for the first step. |
| Posted by: Guest_Darrell Aug 12 2004, 01:17 AM |
| Thank You kindly for your Honesty and Help. I guess I was truly thinking I could hit it lucky (saw them there $$$$ signs :-), and make a good profit to put back into the business, I wish to enjoy in the future. I will have to take it more slowly, and build up to the larger purchases. As I stated there is lot to learn and I am the new kid on the block. Again, Thank You Darrell |
