I have been buying and selling land since 2015 and recently did a Mailer in Colorado and got a good response although I didn't have as much capital as I wanted. But after listening to some of the Retipster podcast along with some other land investing podcasts I realize I should've did a little more research in that County. One of the best podcasts I ever heard in 5 years was episode 083, “If only I had known”. After 5 years (including a two year hiatus post-divorce in 2017)and @ 30 deals, I felt like I had just started. So now the dilemma is I have two properties. Typically, when I sell, I always sell double of what I paid. I was just curious with some of the season land investors if that's always your rule of thumb of double or if you make $1500 on a property are you happy. I just listened to a podcast recently where they talked about the two to three-month cycle of selling and just let it marinate. Since I started land investing, I have always sold everything within a couple weeks but that could be due to the County that I was in. So, I've kind of reel back a little bit in my anxiety of not selling these properties. I was just concerned with the COVID-19 and things were going to start slowing down on the sell side.
@landbaron, you've been at this pretty much 10 times longer than me and have done about 10 times as many deals, but I thought I'd offer my two cents anyway. I imagine that as with most other things in life, things don't always go exactly as planned, so while any offers that I would make to close on a property in cash (as opposed to wholesaling/assigning the contract without putting funds at risk) I'd like to see a path to at least double my money, once I've closed on it if the offers just aren't coming in the way I expected, I could absolutely see opting for a fast nickel versus a slow dime, depending on other factors. For example, if the property represented a good chunk of my cashflow needed for the business, and the only initial offers I was receiving were lower than I might have hoped for but were still profitable, I'd take the deal and be glad to have the money back to move onto the next. On the other hand, if I didn't need those funds anytime soon, and I felt I knew that particular market well and what I was seeing was most likely just a temporary blip in demand, then I could see waiting for better offers.
I haven't had these conversations with my accountant, yet, but I wonder if there's even a potential silver lining in "getting stuck" holding a property for at least a year, in that maybe the profit would be subject to long-term capital gains rather than short-term / regular income tax? Then again, if the profit either way was likely to end up around $1,500 then it obviously wouldn't be worth worrying about the tax implications, I think.
I think the whole idea of buying for 25% of market value and selling for 50% (i.e. - doubling your money) is a sound idea. There's value in ideas that are easy to digest and understand... but really, every deal is its own unique animal. You don't have to apply a rigid formula to it.
I'm usually trying to buy for around 10% - 20%, and when I list it for sale, my starting price will be anywhere from 50% - 80% market value (depending on the market and how nice the property is). If I think I can sell it for more, then obviously, I'll give that a shot and see if I get any bites... I'm not going to automatically default to 50% just because that's the "ultimate formula".
As for the selling timeframe, I think you're right that some markets will naturally sell much faster on average, because there's just more interest in land in those areas.
In some of the slower markets (I'm looking at you, Michigan), it's just going to take a little more time, and as long as I'm mentally and financially prepared for it, that's okay. I don't need to have panic attack if nothing has happened after 30 days.
I'll be the first to admit, it's not always easy to keep emotions in check and be patient... but as long as you're buying right and doing the due diligence upfront, it always tends to work out in the end.
I've been at this for 6 years, and I still feel new to this, too. I target a $5k profit per deal. I arrived at this number after doing a dozen deals. It is dependent on the type of property and farm area. I want to buy something that will sell to a retail buyer at 10% less than market value. Ideally, I would like to spend <$1,000 and sell for >$6,000 to make my profit target, but for me it's difficult to find desirable properties in my farm area for sub $1K. Lately I've been buying between 30%-50% market value and selling for 80%-100% market value, which doubles my money. However, I would do a deal that is $10K and sell for $15k (if I had a buyer lined up or if I knew it would sell fast), but I would think about a deal that I buy for $20k and have to sell for $25k as it ties up too much capital. These are all generic numbers, and I am including closing costs in my examples. In the past couple of years, I've done about 5 deals, and it's enough for me to cover my overhead, and have profits to use for family vacations. I don't have a hard set formula, but more like guardrails that keep me within a certain criteria.
I depends on the deal. On low priced properties, I try and get 2.5 to 3 times my investment from a cash sale and 4 to 5 from an owner finance.
On larger deals like 20k plus I am happy to double on cash (usually selling around 65 percent market) and sell at full market price for terms deals.
My goal is to double my money, which I typically do average. But time is the other very important axis of this calculation. My goal is to have a contract to sell, within 45 days. I want to turn my money as many times as possible in a fiscal year. That is just as important and gross profit, if not more so. I focus on larger deals up to $50-500K, but still can average doubling my money over the course of the year. Get the best return you can, but either way, flip it and move on to the next one. It's a similar concept to compounding interest. In the long run, I find that prioritizing both percentage return and speed will help me maximize net profit for my business.
Don’t get so hung up on Covid-19. This is a temporary phenomenon, and once we forget about all this. Yes, now many people are experiencing financial instability, someone has failed. But this is no reason to continue to get stuck at this stage and throw all the blame on the pandemic. My financial situation is also difficult. But I try not to be disappointed. While I am unable to change anything, I am trying to develop several options for how to manifest money. The first item on my list is: understand yourself. Yes, I agree, this does not directly relate to my financial freedom and independence. But when I eliminate some moments of my character, I will become more self-confident and purposeful.