Reality TV shows highlight the high-risk, high-reward world of house flippers. These made-for-television dramas follow seemingly everyday people through challenges such as finding mold behind walls. In the end, they either ramp up their investment and turn a profit or lose it all.
The prospect of losing often deters would-be flippers from rolling the dice on what might evolve into a lucrative business. The solution some turn to involves purchasing land to minimize risk and turn a profit. Land flipping can deliver a high reward with less financial risk.
The practice of land flipping mirrors that of house flipping. You purchase a parcel of land substantially below market value, often 5-35%. The goal is to resell the property at between 50-80% of its estimated value. After subtracting fees, land flippers can turn a tidy profit with limited risk and effort.
Like any enterprise, land flippers must have a thorough knowledge of the sale and purchase process. They must also have a knack for spotting a good deal and the ability to calculate the return on investment benefits accurately.
The internet makes finding land and conducting due diligence increasingly easy. Buyers and sellers can peruse real estate platforms for parcels that fall into your initial budget. Many listings provide a property value history that can indicate whether the tract’s value is on the rise or decline. You can also set search parameters for properties that have been reduced. Familiarity with online resources ranks among the top skills land-flippers should develop.
Successful land deals typically require taking a hands-on approach once you have narrowed the possibilities. Consider the following initial due diligence before making the purchase.
If you are satisfied that nothing will significantly impede up-selling the land, consider brokering a deal. Prompt cash payments often help land buyers to negotiate a reduced price. This holds particularly true when a parcel lingers on the market.
After the closing, don’t hesitate to list the parcel at a price that delivers a quick return on investment. Flipping land is all about moving it quickly and pocketing a profit. That being said, you can improve a property’s perceived value by getting a dumpster, raking leaves, and tossing any debris into it. Real estate professionals typically call this “curbside appeal.”
The next steps usually include bulldozing a space to build. This move attracts contractors and people looking to build a new home. By now listing the property as a “buildable lot,” you have effectively increased its value.
Although every property presents unique challenges, the land flipping process remains relatively the same. Conduct your research, due diligence, and buy land below market value, often with the help of an agent. Tidy it up, remarket it and sell it closer to true market value.
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