What to look for when buying raw land

Someone is looking at a piece of raw land in Michigan. It has 169 acres, with a 40-acre lake in the middle of it. The family is asking for two million-five fifty. Does that seem a little high to you?

Their asking price seems very, very high. A realtor may tell you this land "might be worth more" or maybe "it will skyrocket with rezoning". But that's not what it's worth now.

Well what it is worth in the future has nothing to do with your negotiating and buying it now. You need to know what it will appraise for right now as is, where is. Just like if you were buying it. This is a common mistake that people make in the land business. If it's worth 42 thousand dollars an acre (after all is said and done)-why should you pay 42 thousand an acre? It's like paying somebody a repaired price for a junker. Does that make sense to you?

You are the one who is going to get it to where it needs to be. You are the one who is going make it worth 42. It's not worth 42 now. So you know that's a nice sales tool from the realtor's point of view but it's not worth anywhere near twenty grand an acre. Also the lake is virtually worthless. You know you're not really excited about buying water. The lots around the lake are worth more. You're literally not buying those 40 acres as you can't do anything with them.

We know what you may be thinking. You are trying to think in terms of the fact that it will become an all-sports lake that the township is wanting with areas to be built.
That may sound great but you have to deal with the as is, where is, value and you cannot pay that even.

You need to get it well below market price and then you can talk about how to structure the financing. And don't offer them all cash for that land. Why? They would take more than their financing.

Start by finding out what you think the true market value is, as is, and that's not going to be difficult. There's other land around there that's selling. What is it selling for in large tracts like that? Do not let them give you a comp on a five-acre tract or so. Five-acre tracts are not what you're looking for. You need a large tract of land. What's it sell for around there? You can factor the lake in; sure you're buying some water front property, but not that much of it. So start by finding out what you think it is really worth. Then go from there.

When it comes to real estate investing, I highly recommend information from Ron LeGrand . For vauable information regarding investing in homes visit RonLeGrand.com. You can also find useful investor resources in the free newsletter at MillionaireMakerNewsletter.com