Created on Saturday, October 25, 2014
Updated on Monday, February 26, 2018
by Land Century
Lets take a look at some of the best ways to flip a land property.
Buy and Hold Strategy
Investors often find land to buy at cheap prices. This is deemed a long term investment wherein the investor will hold onto the land until it is more valuable. Essentially, you will want to buy land in a location that is up and coming.
For instance, land in Austin, Texas was much cheaper in 1990 than it is today. The average price for land, including a home, was $89,700. In January of 2014, the average price skyrocketed to $269,000 and has since swelled to $320,000. Based off of these statistics, the price of real estate rose of 200 percent in just 24 years, resulting in an 8 percent profit seen from year-to-year.
Generally, the longer you hold onto property, the higher the price will be.
The key is to choose a desirable property, by:
- Assessing current and future location trends.
- Searching for any proposed commercial structures to be built.
- Choosing land near lakes, rivers or the ocean.
- Choosing land that either has or can have utilities ran with ease.
This may not be the best option to flip a property for fast cash, but it is a way to flip a property in the long-term.
Sometimes, when buying land, you will notice a lot of bids on the property. You may be able to buy and sell land quickly when there are numerous bids present. The key is to buy the land with cash so that the price is lower than with loan or payment terms.
Cash buyers can demand high discounts and sell the property to other potential buyers for 10 30 percent higher in some cases.
Preparing the Property
Properties with utility lines sell for more. Not only is the cost relatively cheap to add utility lines, but you can increase your lands value greatly by having lines installed. The cost to have utilities installed is highly dependent on the location. Some locations will:
- Have electric lines added for free.
- Water lines added for free.
Other utilities, such as septic installation, can cost much more. Again, this is dependent on the location. If you own a property that is near residential centers, you can often have utility lines ran for free. If you own land in rural locations where your nearest neighbor is miles away, you will have to foot the bill.
Utility lines will provide a much easier time selling land. Whether a buyer is going to use the land for residential or commercial purposes, adding in utility lines will be beneficial. As the seller, you can flip this property for a much higher price as a result.
Alternatively, an investor can have the land cleared so that it is ready for a home to be built. This is a major selling point and just one less obstacle a potential buyer will have to traverse when buying the land and starting construction. You will be able to add the cost of clearing the land onto the sale as well as a percentage increase as a result.
Buy During Economic Downturns
When the economy struggles, it is best to buy cheap land and sell it for an increase once the economy recovers. This is not a strategy that can be followed every year because recessions and economic downturns are often sporadic.
The key is to:
- Examine the local economy.
- Analyze historical land prices in the location.
- Choose desirable locations.
Many people in Florida bought property for a major discount when the economy struggled and sold the property, untouched, just 3 4 years later for a major increase.
Build a Structure
The ultimate way to flip property is to have a lot of money to invest. If you buy a property for $10,000 and the total cost to clear the land, run utility lines and ultimately build a home is $150,000, you are investing $160,000. However, in some locations, you will be able to turn around and sell your newly built home for $240,000 or more.
You need to be very careful when building on any property. If electrical lines are ran and paving is present, it will lower the cost of construction considerably. Modular homes are ideal choices because they can be built quickly and for a lower cost than traditional homes.
As an investor, you will need to do your due diligence in the area to ensure that the cost of construction does not outweigh the potential for profit.
You may also buy cheap land that can have a mobile home placed on it. If the area has a demand for mobile homes, you can make your money back quickly. Many mobile homes range between $20,000 and $30,000 and will sell for $50,000+ in most cases.
A word of caution if choosing to place a mobile home on your land, the value depreciates over time. Mobile homes must be flipped quickly to ensure a high return on investment.