This episode details disposition strategy for a 50-acre property south of Dallas purchased for $400K that unexpectedly attracted primarily developer interest (not individual buyers) for the parent parcel, while due diligence revealed water line discrepancies and ETJ status that weren’t initially apparent.
Key Takeaways:
- Child Parcel Assumptions Don’t Always Hold Despite dividing into three 16-acre parcels based on market comps suggesting strong demand, developer offers for the entire parent tract dominated (averaging one every 7-10 days), showing that assumptions about buyer preferences require market validation.
- ETJ Status Changes Development Economics Discovering the property fell within the city of Ennis’s Extra-Territorial Jurisdiction introduced additional regulations and approval timelines that reduce developer returns, information that even experienced local brokers initially missed.
- Water Infrastructure Details Matter Finding that water lines were 8-inch diameter instead of the reported 10-inch affects total allowable lot counts (forcing two-acre instead of one-acre splits), materially impacting development potential and justifying lower offers.
- Spring Timing Reduces Pressure to Accept Listing during peak spring market activity with consistent offer flow every 7-10 days eliminates urgency to accept borderline deals, allowing negotiation for $18-19K per acre instead of settling for $15K.
Listen to the full episode for the complete negotiation framework including how to evaluate four-month close timelines and balance cash certainty against potential higher offers.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. So wanted to discuss some of the updates on the Dispo side, particularly for that 50 acre subdivide that we had purchased just south of Dallas. I know I had remarked on this one several times over the past several weeks.
on the podcast to refresh some of you. This was just an excellent deal that fell into our laps that we ultimately made a funding decision on and funded within a week of it coming to us. It was really tight closed window, but it was just such a superior parcel in relation to other comps. We were getting a killer deal on it, 400K total buy price for 50 acres. So like roughly 8,200.
per acre pricing in the area where 15K per acre seemed to be like the absolute bottom, conservatively to exit at. And other parcels, especially subdivided child parcels, seemed to be going for between 20 and 25K per acre, depending on the overall quality. And it seemed like we had the most superior parcel. So we divided it up into three.
roughly 16 acre parcels and marketed it both from a child parcel perspective as well as just the parent parcel that could have been ripe for development. So when we initially listed this, our firm as well as the broker, we all expected that the child parcels probably would have been getting the most activity just looking at the underlying market in terms of what was more reliably moving.
There were some single family homes across the street, kind of more significant new build development in the area. But you know, that was the great thing about this parcel is that there was real development potential from an RV perspective or just single family lots, you know, roughly one to two acres per parcel that a developer could take a look at. you again, this
specific parcel was within 45 minutes of downtown Dallas, really couldn’t ask for anything better from.
a close to major metro and also having electricity and water at the street for the parcel as well where a lot of other ones had well water setups and had worse terrain in characteristics on average. So that’s just to fill you in again on some of the underlying
information regarding this and so again we were getting we’ve been get averaging a firm offer like roughly every seven to ten days that we’ve had this property on market and some of these offers you know for like pretty much any other parcel I would have just jumped on because yeah we were just getting routinely you know minimum 15k not no one was doing anything below that
which was almost a double and pretty quick closes on average. even if we took that, accounting for our split with our land investor who brought us the deal, we’d each be walking away with 150 cash net in sub two months. Like that is a very solid return no matter the…
what you look at, especially in this macro economy where there’s a lot of uncertainty and we’re still getting so much attention from this particular asset. So normally we would jump on that or try to do like maybe some minimal negotiation to bump the PPA a little bit. But in this case, because we were sitting on such a solid asset, I’m like, yeah, can we really eke out a bit more here? I’d love to walk away with.
at least 200,000 net each. So when we bumped the PPA up like another couple grand, so we were trying to negotiate. Nothing was really moving in that direction there, but again, we were averaging an offer every one to one and a half weeks, so I just wasn’t feeling that much pressure to move. Plus, you know, we’re in the middle of spring or just the start of spring, you know, hottest time of year as far as property.
dispositions.
property dispositions go, so didn’t have that much concern. But again, we were expecting, hey, we’re getting a lot more child parcel interest here, and we only got one firm offer from a child parcel perspective. Pretty much everything was from the parent parcel, a lot more developer interest, and some people who really knew their stuff had actively.
worked on many developments, knew their numbers back and forth, connections within the county and city governments and so forth. And one we got for 18K per acre, but it was gonna be like a total five month close with four months of due diligence time. So that just felt a bit risky. One guy wanted to close for 15K per acre within like three weeks to do RV lots, all cash deal.
We were trying to bump him up a little bit more as well too. So it’s kind of weighing the different options that we could do. And then we just got another offer today for, or at least a verbal offer, 16K closing within four months. And this guy is just very, very well known locally, has done a number of developments, has all these inside connections. And it seemed during his diligence, there were
some other items that were clarified that we thought we had different info on before we bought the property. One being the water lines that were across the street. The operator of the water lines is telling us they were 10 inch diameter pipes, but upon looking at it further, especially when this
developer was involved, it turns out they were eight inch. So some of the records were mistaken. And so that affects like the total amount of parcels that can be added onto this property. So they might have to do like two acre child parcel splits versus one acre. Yeah, it’s a material change, not game breaking or anything. But you know, that was a point not in our favor there. And then it turned out.
what we thought for certain and the broker who’s operated there for certain too that the property was outside of the ETJ of the most nearby city. But it turns out upon much deeper diligence by this developer that it is in fact within the ETJ which introduces all these other various regulations and approval processes might take longer to get development done. So that tends to lower the
possible return for many development projects, not always, but often the case, just based on the cost and regulations to get extra work done. So that was another knock that, you you guys can be saying, yeah, this is, you you guys should have known this from the start, and we really hope we did. I mean, we…
looked into this thoroughly. Our broker was on top of this, who’s operated there a lot. And, you know, we missed it. It’s not a game breaker, again, either. And it took like days for the developer reviewing this property to figure this out anyway. Some of this info can be more difficult to figure out. And we had to move really fast on it. All of this hindsight, you know, it’s still going to work out for us. It just, might lower like the total exit that we can expect.
out of this property and make…
make us have to consider some of these offers a bit more seriously on whether to move forward and we’re not quite going to get the numbers that we might have thought. mean, still again, really good. Like it should be a basically a double on a high purchase price, which is excellent and ideal. It’s in cash offer too. So, and the entire acreage, not just
you know, moving child parcel by child parcel, so it reduced our risk from a days on market and adverse selection perspective. So that’s just something else to account for here. So we’re still sitting pretty and getting offers again routinely here. But yeah, now it’s, you know, we’re having to weigh, okay, there’s a couple factors that are a little bit more negative here, just slightly.
that could affect our total exit. now we have to be a little bit more careful about how we consider these offers and whether we think we can bump the PPA much. So our strategy, at least with this developer, is gonna go back and say, yeah, we’d love to get 19K per acre on this. We’d be willing to move forward at 18K per acre, which would put us at like roughly 900,000 cash exit. We understand from the developer’s numbers that each lot they wanna sell,
could go for roughly $100,000 on the open market and they think they can put 30 to 40 potentially on this property. Again, that would be assuming their one acre splits. I’m not positive that’s gonna be the case. So, you know, it comes down to like a difference of one child parcel in terms of the extra asking price that we’re looking for to move on from this property.
and that these developers supposedly they want to net out at least half a million dollars after all is said and done. So like they have to make their numbers work as well on that side. So all of this has to be balanced. I have to chat more deeply with my partners about this, but I wanted to share you all an update here and how we strategized thinking about disposition of.
Pretty incredible asset within our portfolio. know, inevitably there’s complications that arrive with anything and how we deal with them accordingly. So hopefully this is helpful within managing your own portfolio and looking at dispositions and looking forward to updating you more here shortly. Maybe we’re under contract by the start of next week. With that.
serious land dot capital for any of your funding needs. More leads than ever at the moment and probably only going to keep continuing. It’s great to see. We put in a lot of effort building this business and the payoff is here at the moment. hopefully we’re able to partner together more. And then Land Daily Diligence Facebook group for zero cost review of your land deals. We went through a ton yesterday.
big backlog ready for Monday. And then lambpriced.ai, I’ve been getting more positive feedback even earlier today. Already improved some UX changes to make it much faster to get through the script. And then I’m making some major, major script updates to make it even quicker and easier to utilize as well. So more to come there. Subscribe and share, enjoy the weekend. Take care everybody, bye.
