Can You Get a Good Return on Land?

Can You Get a Good Return on Land? by

William D. Roberts

Yesterday (Sunday) I wanted to go to the fair. But as usual my wife was really slow to get ready. By the time she was ready I didn't think we would have enough time to do it right (after driving 100 miles to get there) so we went to Lake Gregory instead.

We still had to drive 100 miles (it seems everything is 100 miles from home, at least all the things that we like to do) but we could still enjoy the day.

Lake Gregory is in the San Bernardino Mountains near Lake Arrowhead and not that far from Big Bear. It is a small lake used for recreation and fire prevention. All that water and not a drop to drink!

We bought a lot there about four years ago for only $12,000.00. It is only one short block from the lake with magnificent views.

I was curious what the lot was worth today. We stopped into the real estate office where we bought the lot. They had a new name. Upon inquiry, we found out that the broker had died. A whole new crew was there.

The young man who helped us was very pleasant and knowledgeable about Lake Gregory. He wanted to see the actual lot so we first printed out a plat map from the tax assessors rolls. Then we drove the short distance to the lot. The day was beautiful, which made the views of the lake even better.

After he did his analysis, he came up with a valuation of around $75,000.00. Not a bad ROI in only 4 years. It made me wish that I had bought 10 of them.

Houses in the neighborhood are in the four hundred thousand to five hundred thousand price range for approximately 2000 square feet.

Afterwards, we met with a local builder who had just completed a custom home nearby. He did it for a local Realtor who had it on the market for $475,000.00. He told us that the construction (including site work) cost $280,000.00. This particular house did not have a lake view but it is very nice, three stories, 2000 square feet with entry at the top level.

So the question is:

            Do we sell the lot for $75,000.00?

            Do we build on the lot for an additional $300,000.00?

            Or do we just wait a few more years (land banking) to decide what to do?

We originally bought the lot with the intention of building a "cabin" there to put on the weekly rental market. We could still do that. That will take a little research into what the weekly rates are (that would "guarantee" us at least an 80% occupancy rate) and what our expenses would be.

The young man that helped us was so nice I invited him to join ActiveRain. I hope he does.

All in all, it was a very good day, but I still want to go to the Los Angeles County Fair.