Land is always at the top of investments by real estate professionals. Before any building project can be planned, the land must be available. At all times, real estate assemblers are looking at and acquiring under-utilized sites within cities or in suburbs. Here are some ideas on how those professionals do it.
- A thorough knowledge. Only purchase or option property in well-known localities to reduce the risk of unexpected surprises. If the locality is not familiar, seek out local professionals for their opinions.
- Be a follower. Being the first to buy increases the risk of being wrong and may mean an unexpectedly long wait until values rise. It is often better to go in after values have begun to increase or after some development has started.
- Government maps. Local governments often have maps and plans for projected roads and highways. These can point the way to desirable acquisitions.
- Prepare an acreage map. The map should show the ownership of all tracts in the locality and (if known) the asking price of each. This step marks the prime difference between the professional and the non-professional land acquirer.
- Seek out builders. Try to find a builder willing to let you act as an intermediary in acquiring land.
- Option or installment contract. When acquiring property, get a firm commitment from the landowner without the buyer having to pay out cash. This can be done either with an installment contract under which the buyer can pay interest only for the period of years with a right to walk away without further penalty.
Note: An investor or investment group retained by a builder to find land is obligated to give the builder the first opportunity to buy in all cases. However, any land the builder does not want may be a good investment for the assembler since its value is likely to increase as new construction occurs.