Not Sure Of What Direction To Take This Property.
This is a repost, now in the proper forum.
Here is the situation I find myself in.
I am currently living in out of state
I own a house in Las Vegas, NV. Built in 1970. 1800 sq Feet on 1.50 acres.
Current financing:
1st $150k @ 6.75%
HELOC $100k @ 4.00%
Home/Land Value: $510,000 (85-90% value in the land)
Home is currently listed @ $525,000 (lowered from $600,000) and has been on the market for about 3-mos.
Notes:
Market in Vegas has leveled off, but houses are still selling. 3-mos is a long time on the market.
The house is a 2-br, but was a 3-br and could easily be converted back but......
We started renovating the home, but only got halfway done. Half of the house is in ROUGH shape. I think there is $20-30k to make the home livable again.
This property is in a very NEW are of Las Vegas and is surrounded by several other $200-600K (new) homes on postage stamp sized lots. My 1.53 is zoned Rural Preservation (.5 acre lots or larger.) The reason I haven't put any money into finishing the rehab is that I believe any purchaser will either demo the house for construction of a new house. Demo the house and split the lot into 3 lots and develop. Or demo the house and rezone (smaller lots) and develop.
There is a developer that has purchased the 2 parcels (raw land) behind my home (11ac) for $3m. They made an offer on my property for $570k with a closing of 6mos out. It was to be accompanied by $1000 earnest money, with a long contingency period and several "outs" for the development company (financial feasibility, blah blah blah.) I don't even have to go into why I don't like this.
The property is vacant. I have also been offered $425K as-is.
I have liquid reserves of 100k+ and I am looking into other RE investments, however, my focus is on taking card of this property first. I have several options.
Continue to wait for a buyer as it is currently listed. Should the price be adjusted down even further?
Finish the rehab, and keep listed.
Finish (or don't finish) the rehab and pull from the market when the listing expires then list as FSBO and offer a Lease Option.
Try and joint venture with a builder for large estate on 1.5ac, or 3 nice houses on .5ac (well and septic would have to be abandoned and new connection to public sewer/water would be required for each new parcel if divided)
Approach the owner/developer of the property adjacent? (what would be an appropriate direction for this angle?)
Other options?
Can someone give me some feedback as to what they would/would not do and why/why-not.
After considerable reading in the forums, my easiest option may be to lease-option the property.
Some things we've started to discuss are the possibility of getting approvals and/or permits for dividing the property then selling to a developer as a project.
This actually looks like it might be pricy and time consuming.... Believe it or not, the planning commission in vegas is pretty busy....
I hate to ask a question like this, but here goes anyway.
--How much would this increase the value of the property?
--A lot?
--A little?
--Just an insignificant amount, but make the property more attractive and easier to sell?
Note:
tuckr2000 had already posted this on the TCI residential site (blue tab above) an I suggested that he post it here as well. If you wish you may go to the "Wholesaling" forum to see what advice he as already been given.
I suspect that the amount of value you add by getting the subdivision approved is proportionate to the amount of hassle involved in getting it done. The more difficult this is (or the more difficult this is percieved to be in the eyes of developers) the more they are willing to pay for having it done already.
In addition you could examine comparable sales in your area to see how much .5 acre lots are worth compared to 1.5 acre lots to see whether the work is "worth the candle" as they say.
tuckr,
I've read your posts in the Wholesaling Forum and the replies. Here are my thoughts.
The "financial feasibility" contingency is customary. Developers need this because basically everything they need to know about the property is not visible and can only be determined after the buyer does due diligence and testing, survey, topo, environmental analysis, etc. This period usually shouldn't be more than 90-120 days. It is also typical for developers to include contingencies for municipal approvals. After all, the property has value to them only if it meets their needs. Value is relative to use.
As you know, the value of your land is going to depend on the # of lots that can be subdivided, the value of the new construction and the cost of installing improvements like streets, curbing, sidewalk. A 1.5 AC property doesn't necessarily translate into three half-AC lots. That depends on physical characteristics, layout and subdivision ordinance provisions.
Would each of the lots have frontage on the existing road or would a developer have to construct a new road? What do you think the new homes would realistically sell for on your property--$500K, $750K?
Your property might qualify for an expedited subdivision process because of the # of lots. This depends on the town's land development & subdivision ordinance. "Expedited" is relative, of course, but in subdivision approval work, getting approvals in 6 months IS expedited. Subdivisions can take much longer than that.
You indicated that you thought subdividing your property would be expensive and time-consuming. If I were you, I'd look into this further. Talk with a local civil engineer and surveyor to get a handle on site yield, cost for getting approvals and time frame for getting it done. Then you would have a better idea of the development potential of the property. Your property would have increased value with those approvals, particularly if you can get 3 lots.
I would have been able to divide the lot into three .5 acre lots as the property is on a corner and roughly 200x300.... making each lot 100x200 but....
I did some preliminary research with the county and pulled some comps on 1/2 lots... their really wouldn't be much money to be made by dividing it unless you were to develop it yourself. The time for approvals is extensive.... and somewhat pricey.
I called the company that made the offer and left a message with the secretary for the person that signed the offer. I got a call back from his partner in about 45minutes. Motivated buyer?? perhaps! He seemed very willing to work something out with me on the sale. I have sent 2 counter offers. One with a continued marketing clause, upping the price a bit. Another with a clause for the buyer to lease the property during the contingency period with credit back at close for the lease payments.
When I talked to him on the phone, both ideas were acceptable to him... but he had to "go to the principle investors" (another contingency) None the less, he asked me to draw up something, put it on paper and submit it.....
As a side note, it looks like the brother of one of the principles is on the planning commission. This should help secure zoning and planning approval for their project.
Thanks for the ideas
as a developer, I would have to really want a property to sign a contract w/ your continued marketing clause. In fact, I'd have to really want it and also know that I would not be spending a lot of money in due dilligence. Keep in mind that it is common to spend upwards of $20,000-$30,000 on feasibility study work...for a small lot like yours it could be around $5,000 to $10,000. Give him the time to look over the property but put this one item in the contract: if the buyer fails to close then buyer must deliver to seller one copy of all feasibility study data generated, including but not limited to, any surveys, site plans, environmental or soil reviews, etc. None of that is the exact language I use in my contracts when I am the seller or representing the seller, but you get the idea. The feasibility study data is very expensive to generate and if you make them give you a copy and certify your use of that data, it is basically found money for you and makes your property that much easier to market...unless of course they find out you have enviro issues or something, in which case you may wish you never knew such things.
Developers are in an extremely risky business and as such they absolutely have to mitigate that risk and contracts is one of those steps they have to take.
If you are that convinced that the house is a demo job under any scenerio you might go ahead and demo it now. Doesn't sound like its adding any value to your lot and it might be hurting you.
A couple of years back a buddy of mine bought this really ugly but very large building in a pretty hot neighborhood (although that is starting to describe practically every neighborhood). He had the building taken down, put up a sign that the lot was "available".
Suddenly the very ugly corner building was a very attractive corner lot. I think he ended up making about $500,000 on the flip.