How much are you willing to pay for a piece of property? Personally, I am willing to buy at 30-33% of perceived market value. How much are you guys willing to go? 20%, 30% or even 50%?
I don't think I've ever paid over 30% of what the comps seem to indicate. I know some folks will go higher in a more competitive area, but I'd rather err on the side of being too conservative and losing a deal than going out on a limb and having too much capital tied up in one property.
With that said, it's not always that simple. There are other considerations to think about too.
If it's a VERY hot property in a VERY hot market, and if you're able to get VERY confident about its value (which is pretty hard to do in most rural areas, but much easier to do in more densely populated places), like a half acre vacant lot in the middle of Manhattan, then yeah, it would be easy to justify a higher price, because there are far fewer question marks about the deal... but when there's a lot of ambiguity (and there usually is with land), it's important to give yourself a BIG profit margin, because if you happen to over-estimate the value, you'll want a big buffer of protection.
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@kayarbe
Great question, and one I've wondered myself as well lately. I think as a whole, it's pretty well known that land investors are coached between the various course platforms out there anywhere from 10%-25%/30%. I know that people have gotten land for the 10% and even lower, 5% and so on...but in my world, that just seems crazy to me. Yet, we have the creator of this course in @retipsterseth just having posted a video this past year of a ridiculous deal he got, hard to even quantify what percentage he ended up paying relative to the sale price.
As I've been getting back into land this year, and as I've made several offers from my first round of mailers, it's made me question the "reality" of the 20% world. Again, I know it's real, but in moments of frustration when I've offered significantly more than most investors have (verified by the sellers themselves) and still get nothing but rejections, it's frustrating for sure. I personally have been going higher for sure on this round, maybe just out of frustration and wanting to actually get a deal. Ideally, I'm in the 30% range, but I have one under contract that's in the 40% range, and another one that we have a verbal agreement on for about 55%. But in my mind, I guess I'm more ok with the idea of - in the first deal, I'm paying $25k for a $60-$65k market value so if I sell for $45-$50k, can I really complain about a $20k profit with a near 70% ROI in 3-4 months? Second deal - we've agreed on an $81k price, for market value of around $150k...again, if I sold for around $125k, I have a hard time thinking I'd be upset about a $35k profit with a 40%+ ROI in however many months. I think these ROIs for most seasoned land investors are not high enough though, and I get it - the biggest thing is wanting to mitigate risk due to the relative uncertainty of land values especially vs houses, definitely makes sense and I agree with the need for caution for sure. But b/c my background is more in houses, the "smaller" ROIs I mentioned are still really nice sums as far as I'm concerned. And I believe even at the percentages that I'm willing to buy at, there's enough buffer for safety with the value range that these specific ones are in.
Now with all that said, if we're talking about properties that are a bit lower in value, say $10k-$15k sale price, then yes, I do definitely shoot for closer to 20-25% for sure just to account for all the costs being a much higher percentage relative to the values. This all being said, I've only done a handful of land deals and am still relatively green to the niche...there's probably a reason why the most seasoned folks are successful - b/c they do a great job of staying disciplined to their pricing criteria, much better than myself.
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On my first couple deals, I got properties under contract for about 40 or 50 percent market. Luckily they had title problems and I couldn't close. Then i realized there were more fish in the ocean. The number one thing that protects a land deal IMO is getting it dirt cheap (another is cheap holding costs-taxes). So basically, if you get it cheap enough that you don't care, you can alway sell it and profit.
I have also found that if you send enough mail, someone will accept, or at least write back and negotiate their price. I also have found in FL for building lots I need to pay about 30-35% market value, maybe because there is more competition. Other rural markets I can buy for 15-20% easily.