In what I am thinking: Our two greatest losses in more than 5 years of business were filling lots, and how the price per acre becomes a dangerous trap when it comes to plots less than ~ 2 acres.
I just thought we had significant successes with filling lots, my threshold to pursue them is already very high. Sometimes, scars must be deeper, and pain felt more thoroughly, to learn the lessons completely.
Lacera loss of $ 35k: when premium characteristics become pricing traps
Our biggest loss to date was a lake pack of two acre West or Dallas. Purchase price of approximately $ 200k: our most star investment at that time (late 2023).
I visited the lot myself. Spectacular landscapes, custom houses everywhere, wild life walking. I would consider being owner of the property there personally.
The lot was the largest in the subdivision, approximately twice the size of most compositions. The price for ACRE analysis suggested that we would go north or $ 400K according to the narrowest LakeeFront plots that sell around $ 200K. The upper real estate agent in the area agreed.
We had crickets for several months. After eight months and numerous price cuts, we sold for only $ 200K. With the commission and closing costs, it was a unpleasant ~ $ 35k lossMore opportunity cost in significant capital.
And perhaps the most important, a Huge black brand in our early history O Property with a higher price, which could collapse the business model if we ate another loss like that.
The pressure was above.
Damage control tactics kept our offers
- Photos of fresh drones after winter (the original photos showed sterile trees)
- Switched runners after 6 months to restore the day timer in the market
- Send neighboring letters, and the owners of nearby LLC, and local builders (together with the cold calling them)
- To take into account, the final buyer came from our direct mail campaign.
- Renegotiated commission to save several thousand at the exit (since the buyer came from Mailer, only paid for the commission of sales agents or 3%)
Critically, The price per acre meant nothing When the market wanted ~ $ 200k lots, not $ 400k+ lots, regardless of size.
Second loser: Tennessee rural stuffed with the view of Lake “Superior”
At the end of 2024, we were hungry for acquisitions after selling mest of our portfolio.
A classic error that even affects larger investment companies: Put capital to work to avoid cash drag when the opportunity does not justify the Investment.
~ 2 acres package with beautiful view of the lake (Although not the shore of the lake), Conservative assessment of approximately $ 55-60K based on comps, under contract for $ 35k.
We anticipate that the upper characteristics would exceed the market. On the other hand, we buy the duration of the Mini Toro before the real estate recession of the second quarter of real estate with greater substantial impact on most markets.
Red flags that we ignore:
- Soil test of the end of the 1960s
- I only thought that the local planning/zoning department confirmed that it was still viable, we knew for previous investments in TN that state septic approval is general required by most buyers.
- Reversion of Boom Covid that affects Tennessee
- Deep rural location with minimal activity, aggravating the previous point
- Several significant market, with filler lots of the market fund closer to ~ $ 30k
A black neighboring scared a $ 55K cash buyer who was under contract with us from the beginning, claiming that our non -slender package (With zero tests, Ugh …)
After that, the activity died. And following a Record nine price cuts laterWe list $ 30K still trying to find the background.
Fortunately, after using the reset timer tactics in the previous market and obtain fresh photos of drones, we obtained two sacrifices within a week of re-lista, including a Full price cash sacrifice Contingent in the septic approach.
Loss of only $ 10k (I thought it was going to be worse), Assuming it closes.
6 brutal $ 45K lessons in filler lots failures
The price per acre makes sense for plots of less than ~ 2 acres (And the price per acre does not have a general sense for landfill lots regardless of the surface). The smallest filling lots tend to maintain a constant independent value of the characteristics. I bet on premium characteristics is a trap unless there is a precedent (Even then, verify your assumptions).
Filling lots have no resource if something goes wrong. Only residential buyers are important. If construction problems arise, or the Resi/Builder market dries, it can be in a world of pain. Multiple plot sacrifice multiple types of buyers and output strategies, even if something is lost the duration.
The downward protection must be extreme. Assume that you will only sell in the lowest complex sold in the area. The superior characteristics rarely justify premium prices for small plots. (Similar to the first lesson, but it is worth repeating, I can’t hammer this house enough).
The reset of the days in the market work. Taking the lists to refresh the timer helped both properties to sell (we also did this for another filling lot in front of the Lake in Go, which dripped a sacrifice with a week of re-lista and fortunate with a decent gain). In combination, fresh photos (Special is a green season) You can also resurrect dead lists.
Losers (potential) such as 5 alarms fires. Personally, I called each builder several times within two hours of the TN property. No task is under you (or your most capable team member) when you face a bad way out. Your business may depend on it, especially in a difficult market/economy.
Market time destroys stuffing lot strategies. Covid Boom investment makes the old hot markets such as TX or TN more dangerous for small plots, depending on residential buyers.
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Are you looking for reliable funds in proven land strategies? Severe terrestrial capital actively seeks larger acquisitions ($ 150k+ preferred purchase price, $ 50k minimum) With a strong output potential and diversity of the buyer.
Our lessons won with so much disaster effort of filling lots mean a better risk assessment and downward protection for their agreements.
Send your treatment!
P.S. Silver Coating Update: The combined output of the TN auction property (which Previously covered) and this TN filling lot will be slightly profitable, instead of the Total potential loss or approximately $ 60-70k We were facing. Sometimes, persistence, intelligent damage control and a healthy dose of luck can save disasters in equilibrium scenarios.
