Do any body think this is a good idea?

Question

OK this is what i want to do , I want to buy 30 acers of land.I'll clear out the land and divided it in to sections. Each section will be two acers( thats 15 section).Next ill pave the road so i can bring the value up on the land .


One acer of land cost $7,500 dollars. A section will cost 15,000 thousand dollars.I get a loan for 225,000 dollars to buy the 30 acers of land. I'll add $4,000 so i can make a profit , plus i paved the road with concrete .So the value will be $19,000 dollars.


$225,000 + 2% intrest =238,500 the money i made will be $285,000. 285,000 - 238,500=46,500.So i make a 46,500 dollars profit.

Well guys is this a good idea?

Answer 1

I fail to see where you allocated money for the paving of this road. If you really want to make money and not get laughed at, you will need a real deal road, and those are expensive. You should look into that cost before going any further with this real estate venture.

Answer 2

The general rule of thumb is 1/3 of the final sale price is land cost, 1/3 for marketing and development cost, and 1/3 profit.

I would for sure look at how long it will really take, in California and most of Oregon and Washington if will take you from 6 months to several years IF it is currently zoned for your development. If it requires a zoning change or a variance, count on from 9 months to forever. I’m not kidding, I have a 5 acre parcel in CA that has been undergoing a zoning change SINCE THE 1960s - and I’m not exaggerating!

Now for the road. If you are going to have a private road, you are way underestimating the cost of the road (probably by a factor of 8 to 10 times), if it is going to be a public road figure on $150,000 a mile (minimum). This is for excavation, compaction, base rock, compaction, top rock, compaction, 2 or more lifts of asphalt (cheaper than concrete unless you live in a very few parts of the country). Look at other subdivisions in your area and see what the lower end ones are using for street surfacing. If it is asphalt – there’s a reason for it.. None of this includes underground utilities or infrastructure.

You need to do a lot more research before you put down any money. At the very least talk to the governing body of the land you are considering and find out from them the timeline for the subdivision will be.

Good luck

Answer 3

Lets see, just off the top of my head, there may be a few expenses involved. Property taxes for the length of time you own the land, land surveys, building permits, inspection fees, legal and state fees to register 15 properties, mortgage insurance and loan fees, etc. Clearing an acre of land and laying road will probably be roughly 4 grand. And where the heck can anyone get that size of a loan for two percent interest?

Oh, and then there's the expense of finding 15 people to buy 2 acres of land with no water or utility links for 15 grand.

Buy lottery tickets. Better chance at losing only half the money.

Answer 4

I wouldn't spend that $46,500 quite yet.

Do you have good reason to believe you will be able to sell the lots at the price you have in mind (e.g. recent sales of similar lots nearby)? Is there a market for these lots?

Have you considered the legal expenses, costs to survey the property, real estate taxes while you hold the property, interest on the loan, etc?

Are there any legal restrictions on what you plan to do (e.g. some farm areas have laws that say you cannot build on less than a certain number of acres, like 20)?

How is the property zoned (i.e. what would the people who buy it from you be allowed to do with it)?

What governmental bodies will you need approvals from (e.g. cities, townships, counties)?

What regulations will you be subject to if you develop the property? Some places require you to set aside a certain amount of green space. You might need approval from the county engineer regarding the traffic situation. You're probably subject to regulations to the extent that you are impacting the watershed.

Sounds like this is your first venture into real estate development. I would suggest you start on a smaller scale and get some experience under your belt. This seems overly ambitious for a novice.

Answer 5

ONLY a local real estate appraiser with significant knowledge of land values in your area can answer this question accurately.

Don't just ask a real estate agent - they're just as likely to just tell you what you want to hear. A professional, licensed appraiser works for you (you have to pay them) and they must tell you factual information, not wishful thinking.

There is NO telling how much you would make on this unless you know exactly how much you can sell it for and what your other expenses will be. There can be many hidden expenses in real estate ownership and real estate transactions.

You also need to find out the following:
- whether the county will let you subdivide the land in the way you want to;
- whether there are specific rules about paving roads (how it's done, with what materials, inspection, etc.);
- what the tax situation will be - your scheme could be waylaid by having to pay taxes that you can't recoup;
- whether you have particular liabilities (things that you would have to have insurance for, which would also eat up your investment);
- whether there is clear title on the land, whether you own the water and mineral rights for the land, and whether there are any easements or rights-of-way to the land.

Call a local real estate appraiser.

Answer 6

Good idea, but I think you might be able to do more, because you need to think about water and sewage, etc...more expense for you, but also more opportunity for profit if those things are already in line. I'm not sure where you got your numbers either, or the math which will be partially based on what your local market can sustain.

The more paperwork and permitting you can get done before hand the more money you can make in the end.

Also, depending on the type of trees on the land, you may be able to work with a local firewood / lumber mill to pay you for the lumber that is cut down.

Answer 7

where the heck are you going to get a loan at 2% interest??? I guess this all depends on location, location, location... if the location is desirable and not in a nulear waste dump, then I guess it's OK.. I have done some developing and you need to realize that the overhead costs are significant before you will even have a chance of showing profit, unless you have elves that can clear out the land, dig the septic holes, get your permits, pay for the concrete and the land development project page, as well as advertise for you, oh, and they need to be lawyer elves too... just a few things to think about.....

Answer 8

You need to factor in the cost of processing and changing the qualifications for the land. The government will take a chunk of money, get informed how much that would be first.

I think you'll need to raise the price to at least 25K per lot.

PS: If the lots are intended for human habitation, factor in the cost of water, electrivity and sewage for each.

Answer 9

Its a good idea is the land will sell for that much.
What kind of area is it?
Is it very country? Is it more city?
If it does not sell you will have to pay property tax.

Do more research but it sounds ok if you think you can get people to buy

Answer 10

Good idea if thats how it works...but buddy...I would not be surprised if you get nailed with all kinds of taxes, etc. If you sell to soon, its capital gains you'll have to pay. If you don't develop the lands fast enough, or don't sell fast enough, you'll be paying more then what you will be earning. Other then that ts a good idea...good luck!