This episode dissects a Pacific Northwest infill lot opportunity that appeared attractive based on ocean views and strong comparable sales but collapsed during due diligence when a required sewer line extension was quoted at $30-50K for just 50+ feet. Combined with $20K+ in timber clearing costs, the deal’s margin completely evaporated despite initially promising fundamentals.
Key Takeaways:
- Half-Acre Minimum for Septic Systems Properties under 0.5 acres almost always require sewer connections rather than septic, making sewer availability a critical due diligence item for small infill lots in any market.
- Force Ballpark Estimates Before Hard Quotes Push engineers and contractors for rough numbers (even if they’re off by $10K) to quickly determine if projects fall within viable cost ranges before investing weeks in detailed quotations.
- Previous Failed Listings Signal Hidden Problems When sellers relist properties after failed sales attempts within the past five years, assume they’ve already discovered deal-killing issues and investigate those failure points aggressively.
Listen to the full episode for the detailed process of uncovering utility extension costs through multiple city department contacts, contractor consultations, and strategic questioning techniques.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital Vacant Land Funding Partner. Today wanted to go over a due diligence issue in relation to land.
mainly regarding wastewater, especially in areas where sewers are more present. So wanted to share a story of a deal that we’ve dealt with and just a little bit more general tactics relating to this particular subject. generally,
There’s really only two avenues to handle wastewater for properties that are going to have some type of structural improvement on them and yeah structural improvements that are You know going to be more residential or potentially commercial in in folk and in focus, you know, if you have a Cabin out and a larger rural property. Yeah, it’s possible. You could just have you know, like an outhouse type setup or
you know, just go pee in the woods or whatever, but that’s going to be not the most common type of scenario, you know, if you’re to have any type of…
you know, bathrooms set up on site, is usually a safe assumption for any type of structural improvements. You’re going to be looking at either a sewer line being needed or some type of septic system. Now there’s multiple types of septic systems out there. That’s a whole nother topic, you know, conventional or aerobic alternative system. So, all that can be covered another time. but.
Generally, if you’re looking at infill lots, and I know I’ve talked about those and there can be some gray area between what’s considered an infill lot versus not an infill lot or just more rural in general. But on average, infill lots will be more ripe for having a possible sewer system, in particular, a rough guideline for the cutoff.
in most states. Again, I’m including all these qualifiers because there’s no guarantees. is the exact regulations and guidelines for everywhere in the country. But in general, a property needs to be at least a half acre in size to support a septic system. Maybe very occasionally you can get down to like a quarter acre, but probably no lower than that. And usually half acre is going to be
the rough guideline for a cutoff. So, just keeping that in mind, know, anytime you’re seeing a property that is under a half acre in size, almost always it’s going to be in a infill lot type situation. And so you’re going to have to be thinking about, right, what is the sewer situation?
So, you know, always key avenue for that is figuring out, where the city utilities department, call them up, see if there’s an online map, figure out, are there sewer lines available right outside the property? In the first place, some areas of the country and municipalities are going to be much easier to find.
Online maps showing exactly where those sewer lines are some you might have to get that info over a phone call some you know, you might need to dive a bit deeper and You know have kind of a site visit maybe a contractor who Is part of the city’s department or maybe you know an engineer who can figure out yeah, is there really sewer
available for this particular property. Again, I’m offering a little bit of nebulous guidelines because it varies so much in our experience. Usually it’s pretty easy to figure out for various infill lots. And even if you are, you should always be confirming precisely the lot that you’re looking at. But you can usually have pretty high confidence. Okay, can you see?
Yeah. Are the neighboring lots improved or, know, there, maybe there are some like recent sales within the neighborhoods and can see on the existing listings, what type of utilities they had and so forth. So, that can also be helpful or your range of site visit. can notice, you know, like sewer grates on the street and all that type, of, visual cues that are going to be indicative as well. So those are other avenues to have more confidence there.
Um, but, uh, you know, in situations where you’re not really getting a clear answer and maybe there’s not direct improvements right next to the property that, um, uh, you’re looking at, and maybe it’s a bit more of a side street and, uh, you know, if, you’re able to get a, you know, I’m kind of beating around the bush here just, just to make this a little bit more concrete.
So there was a infill lot that we were looking at in Pacific Northwest. And this one was a while back, but you know, we spent a lot of time on it. So I’m still familiar with the details. But this lot was kind of tucked away in between two main streets, but had some pretty like wild valuations there. I mean, it was…
you know, had some views of the Pacific Ocean just, yeah, it was just an inherent value to lots like this and some like really solid comps that, you know, just had a wild price per acres associated with them. like inherently interesting to that. But, you you got to have utilities, right? So, and it was definitely below the half acre threshold. It was definitely below even a quarter acre. So, you know, like sewer.
was, you know, absolute requirement for that. but when we were trying to talk to the city and looking at the, various utility maps, it did not appear that there was sewer kind of going right along the street where this particular property was. and, again, there, there, weren’t other structural improvements on that same side street. So.
It was a bit concerning for us and sort of like, okay, there’s, it seems like we might have to get a sewer line extension. after enough kind of routine questioning of the city utilities department, they’re like, yeah, this appears to be a, an extension is going to be needed, but they couldn’t really provide an answer. So they were able to provide.
and I actually think we got this through a realtor who we had already consulted there. And so they actually helped because, know, some of these city departments are just more difficult to work with. again, it’s, been a while since this one happened. I’m trying to repiece together all of the, key info. And so, yeah, it was probably the broker who put us in touch with a, engineer who could handle.
sewer extensions and You know oftentimes when you’re asking for quotes like this You really can’t get a hard quote because sometimes you got to pay even to get an appointment or it could be You know two or three weeks out to even consider Or for them to you know, even get back to you on a potential quote. So I’ll always just try to get you know, like
Can you give me as back of the napkin, rough numbers as possible? I don’t care. You could be off by 10 grand, maybe even a little bit more. But can you give me rough guidelines looking at where this property is based on our perimeter measurements? Maybe it’s like, I don’t know, 70 feet away from where the city indicates that there are sewer lines. What approximately?
might it cost to extend, we looking at 10 grand, 15 grand, 50 grand, like just ballpark type numbers. so, sometimes you can really try to force the issue a little bit more to get an answer a little bit quicker and understand whether this is gonna be much more significant or not. And so we use that strategy.
to get a rough ballpark estimate and it came back very significant. think it was, I’d have to go back to the initial notes, but it was way more than we thought. It ended up being somewhere between like 30 to 50 grand to extend the sewer line. Yeah, a little over 50 feet if my memory serves. Like a major expense that basically just blew up all of the anticipated margin.
because us as land flippers, we wouldn’t be undertaking a sewer line extension generally. mean, maybe for a much higher value add type of property or where we can negotiate with the seller and maybe reduce the purchase price enough to still make the anticipated margin work on the deal. Either way, that’s still, it’s a
pretty significant risk to take there. Usually if there’s some type of utility type extension, we’ll try to just credit and then buyer or bake that into anticipated discount on exit price accordingly there. But because the margin was already so narrow and even with the seller, we didn’t have much room to even get lower. Plus they had a previous listing on the property.
within like the last five years. And I’m always cagey about that type of situation. Are they trying to sell a lemon? And it seemed like this was the case. They probably came across the exact same issue or they realized, oh my gosh, this is super high cost for, you know, to even build, consider building on this property. And it had like massive, you know, hard timber, huge trees that were probably going to be like another 20K.
to possibly remove at least even on a small property like that. So all of a sudden, like the clearing costs, sewer line extension, like it removed all of the possible margin in the deal. And we would have had a listed at like 10 or 15 K accounting for all of these costs to the end buyer to even like possibly.
fit within a reasonable paradigm to try to sell the property. Otherwise, like it wasn’t going to be that interesting for people. And so like, just blew up the deal. but like we, got really deep into the process reviewing this and it required multiple calls with brokers and contractors, think more than one contractor, city department and so forth to uncover this issue. And it was obviously a deal killer. So, and like not that easy to figure out. So I just share that.
again, because you just, you got to be extra, extra certain in this industry. Like it’s so easy to get burned or you rush through your comping process or just making blanket assumptions. That is the way to lose money. and we speak from experience, there’s some stuff that slipped past us and we’ve made bigger mistakes. Fortunately, we caught that one in time before we purchased it. So.
word to the wise on checking out those type of items. Hopefully that helps as far as some of the tactics could be concerned for uncovering those issues. With that, if you’re looking for funding SeriousLand.Capital or zero cost review of your land deals at Land Daily Diligence Facebook group and landpricer.ai for the most simple and accurate way to price land deals. Hopefully this is helpful. Share it with anybody.
who might find this valuable or is routinely looking at infill lots, subscribe, getting a lot of great feedback about this pod. So appreciate you listening with that. Take care, bye.
