Idea for Lot/Home Packages?


#1

Hello to all, and thank you in advance for your help!

I am new to this business. My wife and I have been blessed with a successful mortgage business, and I am looking to put some of our earnings to work in other ventures. Our business does keep us quite busy, so much “hands on” management is not preferred, at least at this time.

That being said, here is somethign I have been mulling over. I was curious if you all could tell me the benefits, and possibly unseen risks of a plan like this:

  1. Purchase a decent sized track of rural land, approximately 1 hour from the metro (200 acres, around $1,000 per acre), near a small town.

  2. Divide the 200 acres into 40 5 acre lots.

  3. Purchase a cheaper, or repo’d mobile home, and have it installed on each lot.

  4. Sell the packages for approximately 100-150% markup (if total cost is $20K, sell for $50K), and carry the notes at 12% interest.

This seems like an incredibly low-risk plan, and in case of a foreclosure, my losses would be minimal, because of the mark up.

My thoughts on total cost are:

  1. 5 Acres @ $5,000

  2. Mobile Home @ $5,000

  3. Installation @ 3,000

  4. Well, Septic, and Utilities @ 10,000.

Am I missing anything here?

Thank you all in adavnce.


#2

Good concept, but your cost estimates are way low. The $1k per acre land may be doable in some areas- but not likely within 1hr of a major metro area ( if you can buy some that meets your description of price &location - you can sell as profitably without doing any improvments). and you will need to build roads, and you will spend a great deal of money with surveyors, and other subdivision type fees.

By the time you get real world cost estimates you will find that you probably can make some money at it, but it won’t be easy or without risk. My guess is that you will probably have invested about $40k per 5acre lot after well, septic, elec. are all installed, and as cheap as other housing options are right now, these won’t sell fast enough to suit you.

My advice is to find a failed land development with all of this expensive infrastructure in place and buy it on the cheap. It always goes back to “you make your money when you buy - you collect your pay when you sell.”


#3

You are missing a whole lot. Check the archives as this has been discussed before. Quick Summary: double your costs (at least) but not your selling price.

I will illustrate with my situation as it fits your criteria: small town (32k) 1 hour from Nashville,TN. These points are in no particular order, just as they came to me.

Land: I assume you want farm land, ie, fairly flat & open (not too many trees). That costs $3-4k per acre & more, even here. I just sold some hilly, scrubby, wooded land that is only good for chasing deer for $1500/acre.

Well: Wells are fraught with danger, high cost with NO guarantees. Try $1500 setup fee, the cost to get the equipment onto your property. Then at least $10/foot. So a 100 ft well costs $1000. This is about 90% art & 10% science. My neighbor had a 50 foot well but I still went 190 feet to get 1/2 gal per minute. The only thing that saved me was that I already had a cistern, so we piped the water into it. Even more fortunately the county came through with water the next year.

Homes: For various reasons discussed here, the price of used homes has increased. If you are going to all the trouble of developing land, I recommend using used doublewides. At least then you will have an exit strategy whereas nobody will finance a sw except you. How long do you plan to finance them? Maybe 10-15 years? Run the numbers & compare them to 30 year financing for a starter home. Around here a 1200 foot 3 br 1.5 ba starter home (your competition) is $95k. Compare a 6% 30 year loan to the payment you are expecting to receive. That is the choice your buyer will be making.

Govt: Even in the country government officials have delusions of grandeur. Say you have 100 acres here. You can cut it into 4 pieces 1 time before you need to file a full development plan with surveys, architects, etc. Big money. The idea is that you can cut 4 lots off the family farm to give to your kids. After that comes the hassle. Unless you have tons of road frontage, you will need blacktop roads for the school buses. Be sure you are sitting down when you price gravel & asphalt.

Country: It is good to fantasize about building way out in the country but who will you sell to & where will they find work? Gas at $2.25 really bites & it will not get better soon.

Hope this gets you thinking. Do some research & drive around.

Dennis


#4

Hey - I may have something that you are looking for.

You can buy it or we can do a JV.

Let me know.

Tim Dorst

(843) 670-8466

tdorst@yahoo.com