Working in the real estate and custom building business for almost 25 years, I have seen a lot of projects succeed and a few that have failed. The failures were more often than not done by people who owned land and wanted to make a big profit by developing it. I can’t blame them one bit, but at the same time you have to understand there are companies in the business of land development that fail so how does a beginner have a chance?

My advice seek lots of advice before you start, and don’t be afraid to back off if the market is not favorable or a common sense alternative makes more sense currently. Some times the alternative is more profitable, some recent advice and the math that went along with it: I have a friend in the retail business she owns land in the White Mountains (2 acre lot) that she paid about $30,000 for. The property had a 3 bedroom septic design and a town approved driveway permit, the land had decent views but no site work had been started. In order to build there would need to be site clearing, septic and well installed, driveway cut in, and the building designed and constructed.

We figures that the size and style home that would fit the neighborhood would cost about $220,000 to build. So with the land lot this would be a $250,000 investment the recent comparable sales suggested the owner could net $300,000 for this build and sell plan. A $50,000 profit was the working figure (assuming no borrowed funds, or carrying cost which will reduce the return rather quickly). This is a $50,000 gain on a $250,000 investment or about a 20% return.

The Alternative; sell the land net $60,000 as is with no stress or risk, the gross dollar value is less but the return on the investment is 100% vs. 20%. If you had your own crew and needed to keep them busy in between other project than the professional builder would do a spec house, I would advice the owner to sell the land.

We have been involved in multi-lot subdivisions, condo project and retail developments each case will need its own plan and in many cases alternative plans also. Please do not hesitate to contact me if I can be of any assistance to you.

Steve Loynd, Managing Broker
Alpine Lakes Real Estate - Lincoln NH Office