Hi Jack, Apparently there is a large subdivision in the county that I targeted. About 2500 lots. Beautiful lake in the middle. So even though it is a rural area, this area has high lot values. The asking price is approx $30k for an average lot, and $70k with lake view, and over $150k lake front. Thought the most recent lot sold asking price was $21k and sold for $15k. The assessed value is supposed to be 1/3 of market value (according to county) but I'm finding that the market value above is closer to 6 times the assessed value. 100% of my calls so far have been property owners in this subdivision. Many paid $30k or more for their lot. What number should I base my 25% max offer on? The going rate for a lot of $20k to $30k or 25% of the market value according the assessed value? I know you have mentioned before that sometimes you have different rules for higher value properties. Thanks for your insight!
Looks like you found an area that is good but on the high end of the dollar range (you mention lot values of up to 150K). therefore the 25% max value does not really apply to the high end properties within this subdivision.
It is fairly normal that the actual county rules of thumb (on value) and reality are not a perfect match. Particularly this year and probabyl still next year (2009) the years after the big property price run-ups, there counties are behind in their valuations or properties are again on their way down. In either case the rules of thumb are just that, only estimates. It is good that you check in person what the actual valuations are.
If the going rate of these properties is 20-30K and they sell between 15 and 20 K (you mentioned one being listed for 21K and sold for 15K), I would actually go and offer around 3K to 5K for these. Now that is on the high end in terms of general amount of $$$$ you want to spend on 1 property (i like to distribute my funds around many properties) but for a property that sells for 15-25K CASH, spending 5K is not that much.
Please also remember, the higher you go in property values the lower your response rate will be. Therefore don't worry if out of 100 offers here you might only get 1-2 accepted. But hey, if you send to all 2500 lot owners you should get a couple of hundred calls and should be able to pick up a few properties ar 5K each and sell them at 15-25K each for a good profit.
and then once you sold the first one and realized that you are in deed making good money on it you could even upp the offers for the rest of them a bit to increase your acceptances and your overall profits. Jack
Thanks for your reply! I have another question. Since many of these property owners paid upwards of $20k to $30k for a lot in the middle of the big boom a couple of years ago, and now I will be offering $3k to $5k - should I modify the offer letter to provide an explanation for why my offer is so low? Or just put the offer out there and let it be for what it is?
yes that is a good idea. however you might want to focus on the subset of owners who have owned their properties since before the boom. It is my experience that when someone only owned their property for 2-3 years and paid 20-30K they are not good candidates.
I am currently buying in some similar subdivisions quite a few lots but I am focussing on the owners who had the proeprties since before the boom.