This episode dissects a 26-acre Virginia property with a 1930s 900-square-foot home and month-to-month tenant, demonstrating how to separate land value from improvement value and handle occupancy complications.
Key Takeaways:
- Large-Acreage Comps Don’t Prove Home Value Using 10-15 acre improved property sales to justify $80K home valuation fails because land itself dominates value—only sub-2-acre or infill lot comps reliably isolate improvement worth.
- Underwrite Improvements at Zero Pre-1950 small homes in poor condition on rural land get valued at $0 in acquisition models—if buyers see value-add that’s bonus upside, but never rely on improvement pricing for deal economics.
- Month-to-Month Requires Lease Documentation Before acquiring tenant-occupied property, obtain rental agreements to verify termination clauses, understand state eviction protections, and negotiate seller-managed tenant removal or draft legally sound termination notices.
Listen to the full episode for strategies on handling complex property acquisitions with residential improvements and occupancy issues.
(Podcast transcript below)
Welcome to Get Serious. So today I wanted to comment on this deal that got sent over to us. I reviewed it on the Facebook Land Daily Diligence the other day here. So this was a 26, 26 acre property out in Virginia.
Mostly cleared property and about seven of the acres I think were for a tobacco field. It’s unclear if it was actively farmed or not. I don’t think so. But the remainder was, you know, pretty nice lot of land. And then there was a 1930 build of a roughly 900, 950 square foot home on the property with a month to month tenant.
So, interestingly, the land investor who sent this over to us, they thought, okay, possible subdivide play to do here. I disagreed. The market is not particularly robust for child parcels or parent parcel acreage, nor is there much of a differentiation between child parcel and parent parcel PPA.
You know, usual, usual kind of baseline distinction is if child parcel PPA isn’t at least 1.5 X what the parent parcel would look at, then it’s just worth doing the parent parcel to account for days on market risk primarily and possibly adverse selection between the different child parcels. talk about this all the time. So in regard to this.
you know, we would have just considered it as a 26 acre play. And I thought with the comps that were available, you know, it was looking close to like a 6K per acre exit, maybe a little bit less than that, but felt pretty confident, know, seller stress situation, they owe a lot of money on the property. So again, we’re finding that more and more like this is especially in this economy, like
financial distress of sellers, like I’ve noticed that’s creeping up more. And so you just have to be prepared to strike. But interestingly, the land investor considered the house to be worth like roughly 80k or so. But the comps they were using to justify that were on larger acreage tracks of land, know, 10-ish plus 10 15 acre tracks.
that had some type of residential improvement. So the problem with doing that is you’re discounting the value of the land itself here. So like with houses, like if you’re just trying to figure out valuation house, assuming you don’t have any type of appraisal or anything, it’s going to be a bit easier if you’re looking at smaller acreage tracks or really where the
you know, residential improvement dominates the value of a lot. if it’s like a, you know, sub 0.2 acre lot, or even if you have kind of more cookie cutter, I don’t know, sub two acre ish, in fill lots primarily, and have like a bit more of robust sold comp market for, you know, homes.
on plots of land like that, then you can determine kind of the improvement value a bit more since the underlying land is going to be just less valuable inherently based on just having less of it for the most part. Again, if it’s like a more trophy area, really kind of unique features, know, what lands in demand for that.
for that infill lot area can be a bit different, but for the most part, that would be a safer bet for determining value from improvement. But if you’re looking at 10 to 15 acres, like it’s entirely possible that the land could still be worth most of the inherent valuation from, you know, whatever it sold for. So that was kind of a key concern from that standpoint. And generally, like if we’re considering a
Parcel with an improvement on it. Like we don’t really want to engage in those if the improvement is going to be worth more than half of the underlying value of the property and Even if it is less like we are going to significantly discount like we’re not in the business of you know valuing
improvements, especially residential improvements. you know, if it’s like storage or barns, so like, actually feel a bit more confident with that from a value add compared to, a house. so like normally we’re just going to slash the price or even just like underwrite the cost or the value of the, resi improvement is zero. and then yeah, if it’s like a possible benefit to, the, and then buyer great.
Um, but we’re not going to count on that. So, um, I basically underwrote the houses as a, as a zero. mean, yeah, 1930 build apparently not in great shape. mean, livable apparently, but, um, you know, less than a thousand square foot. Like we know for a fact, like that’s just not going to be, um, particularly valuable there, especially out deep rural area, um, with, with other available land, um, to, uh, to work with.
and even with that in mind, I still thought the deal was pretty interesting from evaluation perspective. So I think the land investor who sent us the deal, they overvalued the home, but undervalued the land. Usually that’s pretty rare. Usually, folks are overvaluing from both perspectives. So, at least that that’s kind of what, what I arrived at from an initial, impression there. So that kind of handles the home piece now.
I would have considered buying it because we have bought properties with improvements on it. Again, generally not home. Maybe sometime in MAH, like depending on what type of.
you know, condition that it might be. We bought one with like a shop on it that was a fully stick built somewhat recently. so, you know, they’re not completely deal breakers. you know, we, again, we just need to account for, not valuing that, the, the improvement or significantly discounting the value for the most part. And, the key factor here is that there there’s an existing tenant. So we tried asking some more.
questions about that, because it’s like, there’s really no circumstance that I would want to acquire a property, even one with significant acreage, and you could possibly subdivide them out. I guess it’s generally not going to be worth the hassle sometimes. it depends how much money is in the deal. Everything usually comes down to like, it depends if you could buy something for like a dollar, right? You’re probably going to take that option, even if there’s a
Uh, there’s a tenant on the property, but you know, this person paying month for month for like 575 bucks a month, like is not even really be that interesting from a cashflow perspective for a future buyer. It’s going to be more of a hassle. And like, I don’t know any of the, you know, rental regulations in that particular area. So like we could investigate them, but to me, it would be like, okay, if we were to require this, I’d want to figure out the rent, like get, them off the property. Like that’s just one.
one headache that we’re not going to have to deal with or get stuck with in the future here. Cause I know a lot of folks struggle with that. and there’s like a lot of. Protections related to, you know, kicking people out of where they live or rental like that, you know, evictions and so forth. I know that was a huge thing, since the start of COVID. So, like you can open up a huge can of worms here.
If you’re coming at it from like a landlord perspective or like new ownership and so forth. So, my understanding of this situation was it’s just a month to month agreement. don’t know how long this, this person was there, but it seemed like from the seller’s perspective, yeah, they’re like, they’re not in hurt. Like the person living there isn’t in a hurry to move, but it’s still technically month to month. I haven’t seen the rental agreement. It’s probably not very sophisticated. if they even have one in, in writing.
Um, or, and so like, went back to the land investor who brought us to steel and I’m like, well, can you just get more info about this? Like, um, you know, know they want to close quick. have financial obligations, but, know, we got to figure out this tenant situation, especially if it’s month to month. Okay. Like get the paperwork. Let’s figure out. Are there any clauses that might, um, you know, require a certain, you know,
one, two, three months notice before terminating the lease agreement or like truly month to month, you can just cancel it at any time. Like, yeah, you you kind of got to move on. Again, you want to handle this like ethically here. You know, if people don’t have another route to get like, it’s just, know, you can kind of get into a nasty situation, right? Just from a human perspective. So that’s like even.
Even more messy to consider situations like this, like, you know, nevertheless, it’s at least worth just asking around. you know, it’s hard enough to find acquisitions as it is. So if you find something that’s priced properly seller and real distress, then, you know, try to investigate it, see what can be done before just, you know, moving on. Like, you know, most properties that we look at now, like they have some type of hair on it. You gotta, you gotta work for your wins here.
That’s what we always come back to. like, okay, take a look at it. Is there any type of documentation that we could work with? Um, can you buy some more, you know, time with, okay, the seller, they’re like trying to, uh, you know, get this deal done, not deal with the tenant, but like, can go back to them and say, Hey, it’s, um, you know, we’re still your fastest option to get out of this deal. Um, you know, if it’s truly months to month, we can work with you to get this done, but like, you know, keep in mind pretty much any other investor is going to want the same thing. So, you know,
If you don’t want to work with us, you’re have to go back, get another offer. they’re probably going to be investigating and asking the same questions. Maybe you’ll get lucky and somebody just wants to acquire with tenant, but that’s a real gamble there when they’re already feeling financial pressure and owing a lot of money, tens of thousands of dollars. So, that to me would be a negotiation tactic to go after. And then, you know, I would be much more hesitant to do it this route, but I would still want to investigate. It’s like, okay.
You know, even if the seller doesn’t want to play balls as now as this guy would, this would be your guys problem. Um, then at least get a copy of the paperwork, if any of the rental agreement and, and also I’ll backtrack. I was like, you can go back to the seller and say, Hey, like we can assist like prepping a termination agreement and so forth, like help with doc prep. That’s no problem, especially in day of AI. can prep this type of stuff pretty simply. Um, and even according to like state local codes, whatever.
Um, so, you know, you can provide a little bit more value add from that perspective, but, know, yeah, let’s say seller didn’t want to do that, still ask for the docs and then you can investigate, okay. You know, could we draft our own docs to terminate this rent agreement if we were to acquire this without solving the tenant situation beforehand and thoroughly understand any state or county local regulations regarding, you know, renter protection laws, et cetera. So I.
If there was a really thorough understanding and it was pretty clean cut that you could remove the renter, um, if, if needed and try to do it as nicely as possible. Um, then that’s at least worth taking a look at too. So, um, you know, I’d be more hesitant to do that certainly, but if there was a clear path then possibly, um, like this is, you know, we dealt with something similar in a different situation, but like for a farming lease where, you know, a guy was actively leasing, uh,
the farmland, you we want to determinate it for a potential future buyer, at least have a termination clause. And so like we prepped a whole bunch of other documentation to make it a much more favorable lease agreement for the owner of the property. So they could cancel really at any time. But you know, still had inherent fair clauses for the current lessee. So that’s always another option as well as like, can you
take it over, adjust the documentation so it’s more favorable to you. And then, you you have a whole bunch of legal protections to handle the situation as it is. Then, you know, it’s worth exploring. Cause again, properties to acquire are hard to find. you know, take a look, try to do the work before just like throwing up your hands and like, yeah, you know, I’ll never consider a property with a tenant in, on, you know, the land here. So.
it’s at least, you know, at least you’ll probably learn something regardless of whether it works out or not. So just wanted to share that, as far as our thinking, regarding a deal like this, again, shows flexibility, which you just, you need to succeed in, this, in this market here. So hopefully this one is helpful. SeriousLand.Capital for, any of your funding needs 50 K plus purchase price. Got a whole bunch of deals that came in yesterday. yeah, it’s,
Solid to see some of that volume come in. Some big clothes is coming up here shortly too. Maybe our biggest one to date. Keep saying that like every few months. Land Daily Diligence, I mentioned that. The Facebook group and then land price or day. I had another meeting with my CTO earlier today. I’m working on some other engineering pricing updates on this right after this.
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