A quick review: Mr. Adams purchased an Option for $450 to buy 40 acres of land for $40,000. He then did research with County Planning & Zoning, utility companies, and an engineer. He then determined 1) The 40 acres could be developed into 40 one acre lots, the size of the lots, 2) The close proximity of the property to the city and 3) Assurance that zoning would allow manufactured homes to be place on the lots. Doing the math shows the following:
Gross Sales proceeds from 40 lots @ $32,500 per lot is $1,300,000
Less: Cost for streets & other off-sites $160,000
On-site improvements for 40 lots $400,000
Cost for sales commission (20%) and other overhead $260,000
TOTAL ESTIMATED COST TO DEVELOP & SELL is $820,000
NET ESTIMATED PROFIT…………$480,000
Mr. Adams compiled the above and other promotional information into sales presentation brochures and presented them to several developers already experienced in developing and selling lots for manufactured home owners.
Mr. Adams decided that a 100% Gross Profit would be a fair return on money that he didn’t even have to pay. Therefore, he asked $40,000 for his Option to purchase the land. Hardly had he made the presentation to the first developer when his offer was accepted. As stated before, lots acceptable for mobile homes were in short supply. The developer could see a quick profit of $400,000 as soon as he could get the site work done.
So our hero, Mr. Adams, with a little research work was able to make a profit of $39,550 in a few weeks. Not bad!
There are deals like this available in any market at anytime. It takes a little knowledge about the Real Estate market. Even if you don’t have this knowledge, you can find assistance. Ask around for a good Realtor who knows the market. Many of them do.
These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.
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