What I’m thinking about: Even after reviewing tens of thousands of land transactions, we still found new levels of nuance in underwriting.
Just when you think your team is ready and loaded, when you’ve set up your systems and your composition analysis has been down to a science (or at least as close to a science as the terrain allows), the market throws you a curveball that reveals another layer of complexity you hadn’t fully considered.
And honestly? That’s exactly what keeps this business interesting.
Case in point: We are about to finance a property in East Texas right now. Rural area, 20+ acres, purchase price $3,000 per acre.
Composites sold in this area range from approximately $4,000 per acre to $7,500 per acre. An almost double change in starting price… all within the same general market area.
So which number do you subscribe to?
This is where most domestic investors (even experienced ones) greatly overestimate their own capabilities.
The PPA (average price per acre) problem
For the above, if you simply take the average of all those comparisons, you would get around $5,200 per acre for your assumed output.
Connect it to your spreadsheet. Finish.
(This sounds so simplistic, to the point where I debated including this section, but I still see this all the time. From real estate agents to land investors and large lenders with “sophisticated” appraisal equipment).
And most of the time, the PPA average gives you a number greater than the actual value of the property in question. Some people certainly leave opportunities on the table by not pulling the trigger when there is more margin available than they realize, but in our experience, that is extremely rare.
Property characteristics and CURRENT market conditions rule. “Current” does not mean 12 months ago, much less 24 or 36 months ago. Current = now.
And in this buyer’s market (generally throughout the United States, but never forget that real estate is hyperlocal, do your own research), the margin for error is slimmer than ever.
How we actually score comps
We use a 1-5 scoring system in our written due diligence questionnaire, or DDQ (feel free to save a copy), which mathematically weights prices based on score.
This is how it breaks down:
- Rank 1: To the limit, not even a comparison. Barely relevant, included for informational purposes.
- Rank 2: Weak comp, with big differences in key features.
- Rank 3: Decent compensation with multiple differences.
- Rank 4: Strong comparison with only subtle differences.
- Rank 5: Effectively identical to the subject property (the subject property is the property you are reviewing for possible purchase).
Here’s the trick: After reviewing thousands of properties using this system, I don’t think we’ve ever rated a comparison a 5. (These would typically be in ready-made infill markets, which are often too low in value to be a financing target.)
At best, they reach a 4. Subtle differences still exist (e.g. property geometry, neighborhood quality, or total road frontage).
Naturally, there’s significant subjectivity involved in that scoring system, and the team needs to be trained to routinely weigh competitions by the same standard, but that should tell you something about the level of nuance needed to get it right.
Comp weighting is generally where I spend the most time doing a final review before approving financing, and if we don’t have at least one comp that rates a 4, particularly one that’s sold or is pending, then it’s too risky to pull the trigger unless the discount is absolutely spectacular.
Confidentiality states make this even more difficult
In non-disclosure states, like Texas, you can’t simply pull sales prices from public records.
We have an algorithm that helps us estimate sales prices based on days on market (DOM), the number of days properties were listed after the previous price cut, among other factors, but nothing beats the actual data.
We ALWAYS send our sold compositions to our real estate agent and ask them to verify the true asking price through MLS access. Sometimes our estimates are accurate and other times they are very wrong.
(Notably, the asking price can only be confirmed for properties that sold on the MLS. If a property was sold off-market and the buyer did not use conventional financing, those sales prices will still be hidden.)
Many people might accept a comparative market analysis (CMA) from a real estate agent with an actual asking price, but you or your team should always prepare your own compensation list. I can count on one hand the number of times a real estate agent, even the most experienced ones, has put together a comprehensive listing that matched our in-house listing in quality and comprehensiveness.
When your capital is at stake, no one will care as much as you. Never forget that. Trust, but verify.
And, in particular, for sold comps that our real estate agent listed, or where he was the buying agent (we typically hire real estate agents based on their recent success in the market, so they must have at least one relevant sold comp), we question them about the exact circumstances of the sale and how the property features align in relation to the subject property we have under contract.
For this East Texas property, here are some of the questions we had to answer before committing:
- What does “compensation” really mean in this market? Our real estate agent suggested mulching and clearing the land for the subject property, and came back with a quote of $4,000. However, not all glades are the same. We showed the realtor photos of approved comps that sold for ~$7,500 per acre and confirmed that our contractor could match that quality with the current quote, reinforcing our fixed valuation.
- What is the true cost of public services? Most competitions have public access to the water. But what if a buyer doesn’t have access? Wells cost $25,000 or more in this area. This is a huge surcharge that dramatically impacts value and could destroy the profitability we expected.
- Where exactly is the access to water? This one was complicated. We had to contact ~5-6 different numbers (including the local volunteer fire department) to confirm that the property in question had access to public water. Although three other competitions on the same road said they had water, we made no assumptions. We did our own research.
- How long were the compositions really on the market? One composition took more than 500 days to sell. Another moved in 17 days. The weighted rankings were different for each of those comparisons, with our package in question closest to the comparison that sold out in 17 days, a critical distinction when trying to price a ~3-6 month outing.
- Quality of the vegetation on the property? The subject has mature, visually appealing trees, compared to a sold composition that has only been in a wood regeneration phase for about 4 years (hard to discern from an antenna, but our real estate agent was able to notice this since they had listed the sold composition in the process of regeneration).
This is not a busy job. This is the difference between a profitable business and a loss.
This is the reason even after funding over $6 million in land deals with industry-leading 41% operating marginsWe are still learning something new at each property.
Eyes wide open. Be curious. Ask all the questions… until there are none left. Trust and perfect the process.
Where did we reach this agreement?
Based on a thorough, feature-by-feature analysis of each comp in relation to the parcel in question (the clearing we are adding, the superior trees, the best buildability and location in relation to population centers), we are setting this property at a Starting at $6,000 per acre.
Not the average $5,200. Not the high-end compensation of $7,500. It is not the worst case scenario for a PPA of $4,000.
Could we be wrong? Sure, we’ve been through it before and it will happen again. But that is why we value the negative scenario. We made sure there was no foreseeable scenario in which the property would sell for less than $4,000 per acre, before we even began considering the upgrade.
Rule number 1 in investing (any asset class): don’t lose money.
But we’ve done our best to make sure we don’t miss anything critical.
And that’s the game. Every time.
Why this market is the perfect training ground
As noted endlessly in this newsletter, and even in the mainstream media, this is a challenging real estate market.
Buyer inquiries have decreased. Properties stay longer. If you are not focused on the subscription, you will burn out.
Just remember that this is the perfect battlefield to hone your skills, because what works in a down market works. even better in a bull market.
Conservative subscription. Ruthless attention to detail. Triple check assumptions before transferring funds.
Because before the cable goes out, you can ALWAYS say no. Once it comes out? There is no turning back.
This is when you build your reputation. This is how you show the industry that you have staying power.
And when the market changes? You will continue standing.
The infinite game
Underwriting is not a skill you master and move on from.
It’s an infinite game. Each offer teaches you something new. Each market shift reveals another layer of complexity.
And the operators who understand that (that respects the basics, who keep digging and don’t assume they have it all figured out) are the ones who win in the long run.
We’re playing the 50+ game here. The investor with the longest time horizon wins.
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Originally published in https://seriousland.capital on December 22, 2025.
