Value Add real estate acquisitions are properties that require improvements which will enhance their value and ultimately increase its cash flow.  Certain real estate investors target these properties to earn higher returns than normal, stabilized properties.  This type of investment requires expert knowledge identifying the areas of the property where value can be added and failure to determine accurate costs, timelines and absorption to stabilization can result in lower or disastrous returns.  However, buying at the right price after identifying areas to increase the value, can result in higher yields.
Value add components of a property deal can include renovations, repairs, building reconfiguration, additions, subdivisions, vacancy lease ups, assemblage of other properties, zone changes, debt restructuring to name a few.  The analysis can be substantial and if done too quickly may result in missed items or underestimation of costs.
Once the opportunities for improvements have been identified it is necessary to perform a back of the napkin analysis to determine costs and if the price of the property will support the costs along with a projected lease up or sale.
We target properties that have elements of value add along with a method of identifying purchases ripe for negotiation.

Its hard enough selling land in a good market let alone one such as this.  To gain an edge you need to make sure the property is “user friendly.”  This means you need to open it up to as many other agents as possible with customers.  To make it user friendly try the following:

1)      In your advertising or listing make sure you have a map showing the correct address.  Most land parcels are not numbered and web map search engines can get it wrong.  Play around with it so the arrow points to the exact location.  On a physical map use an intersecting street or landmark and say, “500 feet from Maple Street on the east side.”

2)      When a customer/agent finds the site they most often will find a company sign with an agent’s name.  Make sure the sign has a map drawn on it and shows the outline of the land with a house location and “You are here” mark. 

3)      Mark a trail or better yet have the owner install a “broker drive” to get the customers to the house site.  Agents don’t want to go hiking and are not on a Lewis and Clark expedition.  They don’t want to figure out where the house site is and how to get there.  Make it easy and time efficient for the agent and they will bring other customers

4)      In your advertising/listing include a printable map with the house location, property tax map/survey and bulleted list of assets the land has.  A customer/agent should have a treasure map to carry with them.

You will find the majority of land listings don’t have all of the above and by doing this your land will be very accessible, easy to access and understandable.  Mark De Pecol is a 30 year veteran in land development, brokerage and education.  He has been pioneering the concept of “land staging.”  For more info, go to realty-capital.us.

Land staging-Investment opportunities

 

We have proven that Land Staging can dramatically increase land values by following simple techniques outlined in my previous articles.  While you can visit those articles on my blog (http://www.realty-capital.us/blog.html), the purpose of this article is to show how third party investors can participate in the landowner’s substantial upside. 

Very often landowners will understand the benefits to staging their land parcel but not have the money to perform the necessary work.  This usually involves a feasibility plan, creating broker drives to the prime sites, stream crossings or entitlements.  When we analyze a site, we produce a pro forma of sorts showing the as-is market value, cost of improvements (land staging) and estimated new value.  It might look something like this:

As-is value                                                                  $300,000

Recommended staging          

Feasibility plan                                     $2,500

Temporary stream crossing                    3,000

Broker drive to two sites                       8,000

Viewscapes                                            5,000

Website & Broker handout map               500

Staging fee                                             4,000

Misc.                                                      1,000

Total staging cost                                           $23,750

New Value                                                   $550,000

            Increase in value                                250,000

            Less staging cost                                  23,750

Increased profit                                          $226,250

While this simplistic pro forma does not take into consideration additional selling costs or taxes due to increased value (a good problem to have) it presents a problem to a landowner who may not have the money to take advantage of a clearly spectacular investment:  outlay $23,750 for a return of $226,250!

This creates the Investment Opportunity.  A third party investor puts up the land staging money and participates in the increased value.  Although each deal is different, we usually target a doubling of the investor’s cash out as their return.  Most often the investment is structured as a loan and 1st or 2nd mortgage but can also be structured as a membership interest and “buy-back.”  Interest rate increases over time to induce a sale and there is a balloon in a specified time. Expert counsel is required in the transaction and adherence to State laws are paramount.  The investor must also be sophisticated in land investments.

We have developed a “clearinghouse” for investors interested in this type of opportunity (http://www.realty-capital.us/investors.html)  and do not charge a fee for this service (we are not registered investment advisors).  This basically matches investments to investors who like the deal.  The bottom line is everyone wins!

 

Land Staging-The 4 Steps

I am often asked by agents and landowners what is involved in land staging.  The process involves seven crucial steps which I will briefly explain in this article.  They are as follows:

1)      Collecting data

2)      Determining highest and best use

3)      Feasibility plan

4)      Staging

#1) Collecting data.  The first step is to collect data on the property including zoning, wetland, soils, topography, utilities, perimeter survey, easements, micro/macro market info, environmental, assessment information and legal issues.  A site visit and walking the property is also essential as one may pick up crucial things that do not appear on maps (is that an old dump? Wow, look at those views!)  This information establishes the basis for what you can do or not do with the land.  There are a number of helpful websites and software that can provide much of the info.

#2) Determining highest and best use.  Of course this is the most important element in land staging.  What is the land best used for?  This is often not what you might think.  While it may be zoned for a 5 lot subdivision, possibly it has a higher market value as 2 lots with a tax deductable conservation easement or a high density affordable housing project that supersedes zoning density.  A clear concept and specific location for the use(s) is a must.

#3) Feasibility plan.  Once the use is determined a plan showing the location and how to get to it must be created.  If it is two building sites, for example, we must show where exactly they are located, possible viewscapes or other enhancements, stream crossings, and driveway location.  This will show us how the property will be staged and the plan can be used in the future for marketing.

#4) Staging.  This involves the actual improvements to the land to show its inherent qualities to a buyer.  It will also improve the property’s value as it shows highest and best use and delivers the customer to what I call the sweet spots.  These are the areas of the land that sell the land (the building sites, the conserved area, the enhancements, etc.).  The sweet spots must have convenient access to them such as a broker drive (a driveway good enough to get a broker and their customer to) or a walking path.  Cutting viewscapes are a necessity as well as clearing the building site, providing walkways to other sweet spots (water assets, rock formations, open space, etc.).   Finally, marking the property lines and other significant points that coincide with the feasibility plan is essential.

While no one can guarantee a sale, land staging will put a land parcel far ahead of the other land on the market that require imagination to figure out.

Land Staging-The magic of access

 

Not providing convenient access to the proposed house site(s) on a parcel of land is like trying to show a house with the door locked.  This is one of the most important principals in land staging and overlooked by most owner/agents marketing land-provide convenient access.  Providing access also forces us determine what the highest and best use is and where we should be leading the customers to exactly.  There are five rules explained below:

Rule #1 Show the sweet spot(s).  If the land has a great building site or two, you need to determine where that is and clear an area so the customer knows they have arrived.  Putting a picnic table at the house site and clearing some views would be a big help.  The sweet spot is primarily what you are selling.

Rule #2 provide a plan.  The customer (and other brokers) need a plan to show them where they are.  Customers want to orientate themselves.  Would you go on a camping trip without a map?

Rule #3 Flag and mark important points.  It’s very helpful to flag property lines, proposed house sites, and strategic points so guessing does not occur.  Neon survey flagging is sold at hardware stores and carry a magic marker to write on the flagging what the point is.

Rule #4 Provide convenient access.  The customer needs to be able to walk or drive to the sweet spot easily and safely.  I always assume a female broker with a city couple will be driving a Lexus SUV to the sweet spot.  This forces me to make the “broker drive” safe, easily navigable and free of branches and twigs that will scratch vehicles.

Rule #5 Don’t over do it.  Don’t cut anymore trees than necessary, swerve around big trees and never put in a major drive as the new owner may want to change the location.

Remember, people buying land are not on a Lewis & Clark expedition and need to access the sweet spots easily, quickly and safely.  Furthermore, other brokers will feel comfortable showing their clients.  Providing convenient access will increase the chances of selling your land exponentially.

Buying land in Northwest CT-for New Yorkers

Ever dream of buying a bucolic parcel of land at the foot of the Berkshires and building a second home?  Just a short ride from New York City, Northwest CT offers peace & tranquility, fresh air, slow paced living, natural attractions, and quality living.  However, picking that perfect property is extremely tricky.  Read on for tricks of the trade.

1. Each town is very different.  It’s not good enough to determine you want to be in NW CT, you have to know what town to locate in.  Ease to get to (remember country miles), property values, cache, restaurants & shopping are all very different.
2. Choose the right broker.  This is probably your most important decision.  Unfortunately, most real estate agents don’t know a lot about land.  While they may have extensive knowledge about the town, buying land involves a deep understanding of complex issues (see below).
3. Complex issues.  Land buying is much different than buying a house (which you should consider if you do not have the proper expertise or guidance).  Some of these are as follows:
1. Location.  Once you know the town you would like to locate in there are “micro markets” to consider which will affect ultimate property values.
2. Property assets.  Views, water features, acreage, frontage, soils, ledge outcroppings and timber quality all have a bearing on the land quality.
3. Soils.  In the country, soils are a huge factor which will determine septic system size and expense, house location, cost of improvements, subdivision potential and land value.
4. Topography.  Topo determines where you situate a house site, how you get to it and if you can achieve views.  Most towns have limitations on driveway grades (normally 15%) so if you want to build on a peak, you may not be able to.
4. Buying right.  You can save 10% to 50% on land right now if you know what you are doing.  Not only that, with larger parcels you can buy such that it won’t cost you anything if it has subdivision potential!  You need to know the history of the land, time on the market and hidden value.

Just like in the early 1990’s (after the crash) now is the best time to buy and will be for the next few years.  It can be a fantastic investment for the savvy buyer.

About the author.  Mark De Pecol has been a land developer in CT for over 30 years and owns a development, brokerage, consulting and educational business.  You can visit the website at www.realty-capital.us.

What is Land Staging?

 

While most savvy real estate professionals know that “staging” a house for sale will enhance the sale price and entice more potential buyers, few know that staging land for sale can sometimes double or triple the value of a parcel!   At a bare minimum, it will allow more sales activity and support the sale price.  What is land staging?

Land staging is basically the same as house staging in that it involves making enhancements to a property that increases value and allows it to “show” better.  However, land staging takes a completely different skill set and knowledge base to get dramatic results.  With a house, you might mow the lawn, fix a door, paint the interior or just bake bread for a homey smell at an open house.  With land you might show how it can be subdivided, mark out property lines or cut a convenient path to a house site.

The most ignored opportunity.

Most people selling land ignore this incredible opportunity.  It can often make the difference between selling land at the right price or selling it at a huge discount.

Dramatic results can be accomplished by knowing how to stage land.  I have purchased and developed hundreds of acres of land and had to become an expert in making the land parcels sell easily.  The key elements are as follows:

1)      You or your land expert must have experience.  Huge mistakes can be made.

2)      Highest and best use of the parcel must be determined.  Extensive market knowledge is required.

3)      Geophysical analysis.  Careful study of soils, topography and land features are critical.

4)      Land use & political considerations.  Land use regulations are the rulebook which determines how you can stage.  Simple things like stream crossings become important.

5)      Cost benefit analysis.  You need to know where to spend the money.  Sometimes just having a feasibility plan is good enough.

Land staging does not have to be expensive depending on how far the landowner wants to increase the value of the property.  Sometimes, just having a plan and cutting a walking path can make all the difference.

About the author:  Mark De Pecol has 30 years experience developing residential and commercial land.  You can see more about land staging at http://www.realty-capital.us/land-staging.html 

You can make a fortune in land.  Having said that, I will not sugarcoat what is probably one of the most difficult types of real estate investing.  The reason you can double, triple (or more) your money in land is because it is one of the least understood real estate investments.  This provides incredible upside if you know what to look for and what to do because very few people know what to do.  This is no different than any business however.  Think about used cars, for instance.  If you know cars inside and out, you will be able to buy a great deal from a person selling their car and doesn't know its value.  You can then turn around and sell it at a profit.  You have capitalized on your knowledge.  You can fix the fender, buff and shine and even make more money.  The same thing applies to land only hardly anyone knows anything about land.

The key elements in making money land are the following:
1.  Know your market.  Don't even think of buying land outside of the market area you know intimately.  Little things can trip you up even if it looks like nothing can go wrong.  Start looking at every land parcel in your market.
2.  Dream team.  You can't do it alone.  You will need to have close relationships with a civil engineer, land attorney, Zoning official, site contractor, real estate agent and lender.
3.  Understand what sells.  You have to know what type of land is selling in your market and at what price.  You will need to have better quality at a lower price.  Land is the hardest asset class to sell and has no cash flow.  This is very important.
4.  Know your zoning.  Almost every town has zoning regulations which describe in a table, usually, the basic requirements to have a legal lot.  Frontage, acreage, setbacks, etc.  In areas without public water & sewer, you will also need to know health codes, soils, and wetland issues  Essential to know.
and finally,
5.  Create value.  This is what its all about.  You can buy land at a discount and flip it or you can really make money by improving it, then selling.  The types of improvements include, zone changes, approvals for a building lot, subdividing, land enhancements (access drives, viewscapes, & beautification), free cuts, merging of title and conservation tax easements, to name a few.

Once you have a land parcel targeted, there is another major step involved which is the Purchase Agreement or Option.  How you structure this can make the difference between making money and making A LOT of money.  But that is left for another article.
Don't think you are going to go out and make a fortune in land without first having a lot of knowledge.  You will get hurt.  On the other hand, study and learn and you will profit handsomely. 
Go to my website www.realty-capital.us and read my course under education if you like.  I give specific examples of land deals I have done.  Thanks!

Welcome.  It is my hope to be of value to all who invest in land and new developments.  I have over 30 years experience in developing and have a lot of resources to help with your knowledge and development of land.  I look forward to your comments.
Mark