How are you all determining the ‘market value’ of land in the areas where you invest?
I’m fairly new to this, and have been doing a bit of research. All of the articles, videos, podcasts etc. keep talking about buying at X% of market value and selling at Y% of market value. However, I’ve found scant little information (so far) on how one determines what the market value is in the first place. I also don’t know of a reliable method to obtain recent sales comps for small vacant land deals.
So, if anyone would be willing to share - how exactly do you come up with your market values? (This seems critical since you’re buying and selling price ranges are derived from your market value estimate.)
@mizugori it’s a very good and important question you’re asking. The bad news is, there oftentimes isn’t a way to get pinpoint accuracy on what a vacant lot is worth (it’s a bit more ambiguous than trying to appraise a house because a lot of the data used in appraising houses simply doesn’t exist for land). However, there are a lot of things you can look at to get a reasonably confident assessment of what it’s most likely worth.
There are also tools like PriceBoss and PRYCD that have done a good job of trying to make this job easier, and if the comp data is available in the market where you’re looking, these tools can help a lot - but the fact remains, a lot of vacant lots are truly one-of-a-kind in their market and there are no directly comparable properties that make sense to use as a comparison.
At the end of the day, given the inherent difficulty with narrowing down a precise market value for some lots, it also underscores the importance of making really low offers, because if you end up being wrong about the market value (say, if you overestimate what it’s worth), the fact that you got it for such a low price will act as a hedge of protection to make sure you can still make money on it after all is said and done.