How to Develop Raw Land Without Losing Money
Job growth and increased community wealth are both economic factors that can arise from raw land development. However, if breaking ground is not well thought out, vast amounts of money can be lost. For example, growth opportunities must be correctly identified. Input from the community must also be taken into consideration. How raw land is purchased directly affects how much money is initially available during the development process. A mind-set of practicing due diligence in research and extensive planning is required to develop raw land without losing money.
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Instructions
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Follow the "path of growth" to locate undeveloped raw land opportunities. Seek the services of an experienced research team to help identify positive geographical growth areas for job creation. Create a network contact team and seek sound advice. The group should consist of business leaders, neighborhood residents, local government officials and construction builders. Skilled advanced research and preparation will help you develop raw land without losing money.
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Use an "option to purchase real estate agreement" to purchase raw land. This contract enables you, the land developer, to have the right to purchase the land at a confirmed price by a specified date. You offer the owner a nonrefundable deposit. You will not lose money if the land is purchased by the agreed-upon date.
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Seek investors after you have drafted the architectural plans. A "visual" is needed for investors to see your vision. Sketches of shopping centers, industrial complexes, planned communities or business parks will encourage investors to help finance raw land development.
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Obtain the required entitlements from county, city, state and the federal government. This step is called "the entitlement process." Without it, raw land development cannot legally proceed. If you do not have the proper approval from government authorities, you may lose money if fines are imposed due to noncompliance.
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Price the land to sell based on its benefits. As "entitled land," its infrastructure has improved. For example, if the entitled land has easy access to roadways and other turn-key benefits, its value increases. It may now be worth three to five times more than what you originally paid for it. Sell the land in parcels or one lot. This pricing and flexible land-selling strategy will bring the most profits in for investors and yourself without losing money.
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Tips & Warnings
Know your industry well so that you can state the positives of your raw land development project with confidence and ease.
Avoid making upfront cash purchases of raw land. After the land is completely developed, it must be sold. Your invested dollars will be unavailable until both occur, leaving you strapped for cash until the finished entitled land is sold.
