When it makes sense to sell the lots instead of build on them: Build to rent lesson No. 4

by R J Palano | Jul 14, 2014 | Article, Topics

I used to be primarily a wholesaler in Florida, but this dried up as investors abandoned the market. The market went up so fast in the early 2000s that is was not sustainable and led to our real estate bubble.

Everyone I know that was in the real estate business took some kind of hit, including me.

But there is always an opportunity when markets shift as greatly as they did from 2006 to 2009.

We reinvented ourselves and started a full-cycle real estate system. This allowed small to mid-size investors to take advantage of market conditions and become truly passive investors because we were handling everything from acquisition to disposition.

Build to rent lesson No. 4 – Sell the lots

We were acquiring 15 to 25 houses per month. But we knew the inventory was going to be dramatically reduced by hedge funds driving up prices on existing inventory as they entered the market.

So we bought hundreds of vacant lots in preparation to build houses so that we would have inventory to sell. It is an easier play to buy lots than to build on them. Building houses requires economies of scale, a lot of supervision, and it is downright stressful.

See my first post in the series here about choosing a builder.

Build-to-rent homes in Hiram, Georgia

The alternative is to just sell the lots to a builder and let him do his thing.

Selling lots is a choice. You do not have to go though the entire build process to make money on lots. Thus, you may start out with the idea of building and later decide on an easier exit plan by selling the lots.

That’s exactly what we did recently, and it took a lot of stress off my shoulders because I no longer had to think about the weather, cost overruns, time delays and quality control.

Lots require very little maintenance and can be a very good place to park some investment money long-term, provided the lots are in the path of progress.

And if you think you want to build? It’s not for newbies.

See my other posts in this series here.

If you are interested in learning more about this business click the link below.

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R J Palano

RJ Palano is the acquisition director of BuyCashFlowProperties.com, a Tampa, Florida-based company that primarily provides turnkey houses for investors in the metropolitan Atlanta and Tampa Bay areas. His property management experience spans more than 35 years, and he has been involved in more than 3,000 real estate transactions in 12 states and more than 50 cities. Contact him at 813-495-3006 or rjp@buycashflowproperties.com.