What I’m thinking about: The same glaring underwriting mistakes, week after week, that could cripple your business for months (or worse).
Recently, I reviewed land offers from a variety of operators, some with more than 7 figure businesses, and 80% of the offers were up to 100% discount in your estimate of starting prices.
No margin errors of 10-15%. These are operators who underwrite properties at market value purchase prices, expecting completely unrealistic results.
For context, we won’t consider financing (nor recommend purchasing your own equity) unless there is approximately 2x the conservative gross margin (those deals are still available, trust me, we’ve created a substantial operation that ONLY funds them).
Most properties submitted would need to reduce their anticipated purchase price by half (or more) to even come close to what might work.
The reality of $180 per acre: When the starting price goes wrong
Here is an obvious example of a Daily Land Diligence session:
- ~180 acre parcel north of Dallas, expected to be subdivided into 60-75 secondary parcels of ~2 acres each.
- Roadside installation required.
- They sent me a suggested starting price of ~$100k per acre based on comparisons.
My analysis:
- Most parcels in the area are no less than ~20 acres.
- Maybe 1 or 2 comps recently sold in the 2ac range over the last 3 months, with superior features.
- Compositions sold in the 10-20 acre range (which seemed like a more viable path) were moving at ~$20K PPP.
- Smorgasbord of active listings (a sea of green pins on Redfin) with similar/superior features, many on the market for 300+ days.
- Like many Sunbelt markets, North DFW is on a major downward price trend right now, especially for residential lots, adding more pressure.
- The property in question had some interesting features, but with all of the above, I couldn’t justify offering the seller more than ~$10,000 per acre, less than ~80% of what they were looking for.
Almost every point above was a punch in the gut for the potential of subdivision. The alarms went off immediately.
And I still have to ask myself: “How come this level of risk doesn’t register with investors in other countries?“
Look, I understand. Many of you are running operations with insufficient staff to manage lead generation, various marketing channels, competencies, business operations and layout… While we are a category one company that specializes in underwriting real estate transactions all day, every day.
We don’t expect you to be as good as we are at that, just as it’s unrealistic to expect me to be as good at talking to salespeople as your team can be.
My point is that there still seems to be a MASSIVE gap in much of the industry regarding pricing properties appropriately. Even with all the education we and others have provided, there is still a LONG way to go, a problem I couldn’t be more excited about since we’ve been working on a solution for a while; see below…
(And for those of you who say, “Chris, we’re focused on competing properties, no problems here,” big props to you; go ahead and maintain your key advantage. However, for anyone who reads this blog post on a routine basis, even the best fail, and skill needs honey continually.)
This is a topic I will return to often and could probably write about every week given the knowledge gap.
Current market conditions that every land investor should know
Rising market conditions above all. We have tendrils and broker relationships, plus active inventory, across much of the U.S. Local on-the-ground market data is your best friend.
On average, we are seeing even more restlessness/slowness than at the beginning of Q2 2025, when fears of a trade war began. At best, the conditions are the same.
BE CAREFUL, friends! This is the most difficult overall market we have seen in over five years.
Standard sales rates are useless at this time. They typically look at the last 12 months, but we’ve had extreme volatility: a big bull market in late 2024/early 2025, and then big headwinds in most markets after Q2 2025 began.
The characteristic blind spots that cost you deals
Track sold compositions left outstanding after April 1, 2025, specifically. Any comparison outside that range should be viewed with extreme skepticism.
You’re probably not undervaluing active comps enough. Unless you have disgustingly superior features (which most investors overestimate), you should undercut ALL active market prices at least 5-10% (more if you introduce 3 or more secondary packages).
Be smart, of course: get a general foundation of the characteristics of active compensation. For example, it is not necessarily necessary to reduce prices for listings in landlocked countries.
Evaluate features religiously. The only companies recently sold might have newly installed mobile homes, installed utilities or proximity to city centers, advantages that explain why they moved in a difficult market.
For target properties that are in the bottom 25% of features, we won’t touch them, regardless of price. The risk and possible brain damage is simply not worth it at this time.
The Systematic Solution: Why Even Experts Need Processes
Even as experts, my team is overwhelmed when pricing properties when there are 20 to 50 or more viable comps to consider. I catch myself rushing into $500,000+ decisions for the sake of efficiency.
That’s why we created Land Pricer AI. It considers only the most relevant comparisons, adjusts the weighting to current market conditions, and eliminates the overhead of mental calculations while taking into account property characteristics.
Remember: Amateur automation for efficiency. Professionals automate for greater precision.
That 180ac deal in North Dallas made my eyes glaze over and I’m supposed to be one of the best in the business. Precise software is the only viable way forward.
We’re building the most reliable pricing tool on the market because our own business depends on it:
Know the real value before investing
