Investing in Yuma Real Estate

[powayseller]

My friend said she is investing in Yuma property, zoned for retail/commercial.

She bought some land a few years ago, and it tripled in value.

Her financial advisor now has another property available, and he picks properties on the outskirts of towns, that increase in value as the town grows. Now, Yuma has another thing going for it: an oil company is almost certainly moving in, bringing with it many jobs. The advisor sounds like he does entitlements or zoning.

I am going to call her financial advisor next week, to find out more. I want to know how certain is this company’s move into Yuma, and what are the wages, because that determines how high house prices can go. Why buy retail lots, when a recession is around the corner? Any other questions I should ask?

[Bugs]

This is a whole different animal than residential real estate. If you’re talking about land the thing to remember is that land isn’t worth anything to anyone until somebody is ready to build.

Here are some questions to ask about retail land:

Zoning on the site – and how those zoning controls affect development for that site.

The availability of utilities
Public improvements (streets, sidewalks, traffic signals)
Applicable bonds or assessments to pay for those improvements
Traffic exposure and traffic patterns
Competition (how many other vacant sites nearby)
Pattern/Rate of growth in this area
Type of businesses nearby
Is Wal-Mart coming to town any time soon
Local residential growth patterns

Really, trying to figure out vacant land – especially commercial land – involves so many considerations that the average residential investor-type is going to be completely in over their head. It’s still possible to make a buck but it involves a lot more luck and trust in the broker’s opinion. Personally, I wouldn’t recommend it to the average rookie investor-type. Fortunes are won and lost on land deals.

Not to come across as self-serving, but this kind of investment is where it starts to make some economic sense to get an appraisal with a detailed market analysis and highest/best use analysis from a knowledgable commercial appraiser.

[Peace]

As I mentioned in another thread – the money isn’t real until you have it in your hot grubby hands. So has your friend actually sold any land yet?
We own a beautiful residential lot in North Scottsdale – about every 6 months we get an unsolicited call from some realtor about how much the property is worth and are we ready to sell? We always say “Show us the money” and then we never hear from them again.
Also the agent’s sales comission is higher on vacant land – I think it is more like 10%
Speculating on land in Yuma sounds crazy, but I would have said the same thing about anything east of El Camino 30 years ago too – so don’t listen to me!

[anxvariety]

I have a positive land story.. I bought some land in Adelanto, CA (Inland Empire / Victorville area) sometime last year or the year before..

My first criteria was that I’d only buy from a private party, not a reseller.. I found a good peice, and I had the land appraised before I bought it (without even asking the land owner). The appraisal cost me $400 bucks.. the appraisal valued the land at 3x the asking price… I bought it cash very quickly.

I built a deal with my realtor so the more it sold for, the higher his comission % would be.. so it was a double positive for him… We had numerous offers and ended up selling it for $46k more than we listed it for.

I think there’s still plenty of land opportunities available, because the people from California are going to have to move somewhere cheap.. I have my eyes set on a few places, and will probably be buying some soon. There’s lots of land that’s undervalued.. most of it is in areas where there aren’t utilities yet or growth, but could possibly be soon..

[Bugs]

Just out of curiosity – how close to your resale price was the appraisal?

[anxvariety]

Bugs, if you were asking me – the appraisal was about 35% less than the sale price(just calculating that in my head). I got the appraisal before I bought it or around 8-10 months before it ended up selling… We listed it higher than the appraisal.

[Bugs]

I’m hoping that market increased by at least 25% during the interim, then. There would normally be a higher margin for error for something like that, but it shouldn’t have been that high unless that market was exploding. Either that, or your buyer was an idiot, which we should not tend to assume.

[anxvariety]

Bugs, it’s hard to say we had lots of offers and RE agent kept increasing price until there were only 2 bidders left… one outbid the other by a couple thousand on the last offer. Also, after I had bought they started building a Stater Brothers and shopping center in the area.. before that the nearest shopping center was like 15-20 miles away.

I wouldn’t buy land if I had no idea when the utitilities were going to be close.. if it were reasonable that they will be in within 1-2 years I will consider buying.. but who knows, every situation is diff and I still haven’t had a losing experience in that market yet – so I don’t consider myself experienced.

Powayseller, as you know the good investors can make money in any kind of market.. just because we’re in a recession doesn’t mean there won’t be any growth.. there just wont be enough for everyone to make a killing like California the last few years.. I predict some desert areas(don’t know much about Yuma) will explode upwards as some of the bubble cities are deflating… maybe these commercial lots that the financial advisor knows of will benefit.

[Bugs]

I wasn’t trying to imply you didn’t know what you or your broker were doing and if it seems like I was then I apologize. My question was limited to trying to ascertain the reasonableness of the appraisal. We don’t often get to verify reasonableness of an appraisal with a subsequent and unrelated sale on the same property. It’s an appraisal geek line of inquiry, and I’m making it because I’m a geek.

Anyways, with a bidding war there was obviously a supply/demand inbalance in that equation somewhere. Was your final price was in excess of your listing price?

Edit: At the time of the appraisal did you or your broker know that the shopping center was coming to town?

[anxvariety]

I didn’t take it that way. I just hired an appraisal company to do the appraisal… I don’t think they took the shopping center into consideration, because I don’t know that there was knowledge of it at that time.. they looked at comps mostly.

I guess there was a bidding war of sorts, mostly between two buyers.. they kept raising their offers and yeah it sold for a good chunk more than we listed it for.. I guestimated what that difference was in an earlier post so I don’t want to guess gain incorreclty. I wasn’t sure I wanted to sell it.. I just wanted to list it and let the offers come in over 6 months and see what the market thought about the land, but after being on the market for about 20 days I decided to accept an offer because it sounded good to me.. especially since LA times started publishing real estate slowdow type stories.

There wasn’t a whole lot of skill invovled.. I was just posting this as a positive experience with buying and selling land, and a few of the techniques I used.. if it were a sure pattern I’d already have done it again by now. Lately I’ve been investing in energy options as reccomended by some of the newsletters I subscribe to.. it’s scarier than the buying land, but the gains have been smiliar so far… I’m going to lower my options positions a little bit tomorrow if they aren’t going up.. sure oil is up and everything, but I don’t like owning stuff at record levels or during the begginigns of a possible new world war 🙂

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