The Great Recession changed everything with land acquisition. Before 2008, there were major developers in every significant market and buildable lots were plentiful. Since the recovery, lot inventory has been exhausted and most markets are experiencing shortages. What’s worse, big builders buy up parcels just to have them. In many cases the land is tied up before it’s even listed by a Realtor, leaving many smaller builders with few or poor options for their projects.
The good news is that land is available. You just need to see and evaluate viable sites before they’re gone. So how do you find the best of what’s left? Here are 10 suggestions.
1) Be Targeted
Looking for land to buy and develop is not exactly like looking for a needle in a haystack, but it can feel that way. Searching an entire metro area for proper pieces can prove frustrating if not fruitless. You’re better off finding submarkets within the larger community that fit precisely what you’re trying to do rather than searching every corner of the market for pieces that may not.
2) Do Your Research
There are dozens of tools you can use to learn about land in the markets you’re targeting (tax records, GIS maps, online listings, etc.). But if you want to find ideal parcels for your projects, you probably want to dig a little deeper. Study the demographics, traffic patterns, utilities, and zoning and future land use for the subareas and parcels you might be interested in, too. That data will tell you a great deal more than just what’s available. It can tell you whether your project will actually work.
Since so many buildable sites never hit the market, it’s important to find an inside line. Often that means mining and expanding your professional and social circles. Find out who the land brokers are within your markets, subareas and social networks. Then reach out and build relationships with them, so you can get first looks at sites. Once you’ve created those relationships, be sure to be specific about what you’re doing, what you need and be persistent.
4) Know Your Criteria
You should never have to justify a site. You should know immediately whether it’s right. That means having rock-solid criteria and sticking to them. Does it have good visibility? Are utilities well located? Are there acceptable uses next door? Is it near amenities your buyers want? If the answer to any of those questions is no, yours should be, too.
5) Be Patient
Timing is everything, particularly with land acquisition. It’s easy to get impatient when you’re eager to start a project. Remind yourself that you’re looking for AAA sites. Ideally, you’ll find them in a matter of months, but if it takes a year and the site is right, you, your buyers, and the community will all be better served.
6) Buy Competitively
Expensive sites make you more conservative. That’s human nature. But it’s better to overpay for a great site than underpay for a lousy one. If the site is bad, the project will be a fight from start to finish. Just focus on median home values and on being as competitive as anyone in the market. If you do that, you’ll always be a viable buyer.
7) Bring the Data
Not all sales are slam dunks. Sometimes you have to work the ball around a bit before you score. That means being as savvy as you are competitive. You can do that by showing the seller the true value of the development and your ability to deliver value. That means knowing the features of the site, what’s useable, and what each lot is actually worth. It could mean convincing the seller that your project is the better fit and use, that you’re more likely to get zoning approval, or that you’ll deliver more attractive buyers and a better development in the end. Data like that can be compelling to some sellers and help you overcome a higher offer.
8) Start Small
It’s easy to get overeager when a project finally gets off the ground, but sometimes discretion is the better part of valor. Rather than building all the homes in your planned development at once, you might want to consider building the first 20 and seeing how they sell first. Sales velocity is invaluable, and starting small can either confirm the premise of your development or give you the opportunity to adjust to the market.
9) One at a Time
If your research, planning, patience, and execution lead you to a lot that works and a development that sells, count yourself lucky. Getting out of the gate and making one work is the hardest part. You’ve got momentum now. You can build on that. And the lessons you learned will make projects two through five much easier.
10) Partner Up
If you’re a builder and not a developer, land acquisition might be more than you’d care to take on. If that’s the case, becoming a franchise builder can help bridge the gap. Franchise builders have access to the systems, models, and resources of a large builder (i.e., market studies, demographics, site selection, pricing, entitlement, budgeting, marketing and sales) without the overhead. They get advice on what will work where, who they’re competing with, and what it should cost based on historical data from markets all over the country. For a lot of small builders, it’s a path to bigger things.
Perfect sites aren’t necessarily plentiful these days, but they are out there. And with the right information, evaluation and approach, you’re sure to find one that’s ideal for your next successful project.