We tested a new acquisition strategy targeting on-market Zillow listings for minor subdivides, but found that “50 cents on the dollar” offers weren’t landing. This episode details the pivot in our criteria to find actionable spreads without wasting time on dead leads.
Key Takeaways:
- The 1.5x Rule: To make a competitive offer (75% of list price) while maintaining margin, the Child Parcel Price Per Acre (PPA) must be at least 1.5x the Parent Parcel PPA.
- Absorption Velocity: We require a market where sold child parcel volume is at least 2x the volume of parent parcels to ensure liquidity.
- Acreage Pivot: We removed our $1M price cap and increased minimum acreage from 20 to 50+ acres to find better spreads that smaller investors ignore.
Listen to the full episode to hear the exact Zillow filter setup we are using to source these deals daily.
(Podcast transcript below)
Welcome to Get Serious. We’re at Serious Land Capital. We funded over $6 million worth of land deal successfully and have industry leading 41 % operating margins. So today I just wanted to give an update on our in market. Well, on our in market land deal acquisition strategy that we’ve been experimenting with probably
just under a quarter roughly at this point. And the amount of leads that have started coming in have been much more significant, probably seven or eight per day roughly as of the last couple of weeks as we steadily increased the amount of counties that we’re going after as we kind of got comfortable with our system and built it into our workflow.
The whole intention of going after these, I think I have mentioned this on another podcast, is that we’ve gotten a lot more comfortable just underwriting in general. mean, just put any land deal in front of us. We will be able to figure it out. Again, I don’t think anybody gets more reps than we do when it comes to an underwriting perspective here, backed by…
you know, natural talent, and, and expertise built over a long period of time, in regards to this. know, as we want to figure out, you know, okay, bumping revenue and how do we get larger? Like inevitably you have to look at some more creative deals that might take a bit longer possible subdivide or value add plays. and naturally that lends itself to.
potentially exploring on market acquisition opportunities, particularly since it’s such a low cost option to consider from acquisition strategy. And given we are, you know, almost exclusively a funding company, typically our profit margin is going to be more constrained given the profit splits we have built in. So, you know, naturally we have to operate a leaner
business to account for reduced margins. So, you know, if we don’t have as large of a marketing budget to go utilize more traditional acquisition methods, then okay, what are the ones that are less expensive to go after? But you know, our expertise still fits in well, because we have a significant capital backing to work with. And
we’re very comfortable with our ability to underwrite these types of deals. So that just kind of shares some background on why we wanted to explore this strategy. And we’re aware of a few other higher quality operators that have had some success here. And so, you know, we were going into the typical states that, you know, subdividing might be more common in, you know, the Texas and North Carolina’s and so forth, just, just to start. mean, there’s so many more than, than that.
But it’s no surprise to mention that off the bat where regulations are a bit looser and there’s more routinely child parcels that can be sold post-subdivide just given the demand for that type of land in those markets.
You know, we initially started targeting handful of counties. Okay. We can handle more leads. Let’s do more and more and more. And then we were adding, you know, five counties a day. Um, as we ramped up our process and, you know, the overall, you know, what, what fits our criteria might not fit everybody’s, but, know, to start off with who were like, okay. Um, uh, let’s start with minimum.
20 acre parcels up to 100. I regret not doing more than 100 off the bat, which I’ll get into in a moment here. But, you know, we did 20 to 200 acres, you know, anticipating, OK, maybe we can get into, know, that is a pretty good range for possible minor subdivides, you know, especially if you’re trying to do maybe five to 10 acre, 15 acre.
child parcel splits and then purchase prices between a hundred K and a million dollars. Again, a pretty wide ranging, you know, price range to potentially consider, you know, and, and, you know, large acreage range. And so we just set, you know,
triggers on Zillow for all these various counties, pretty much just copy pasting that type of criteria. And then we would set it up so that we would get digests of new listings or price cuts of listings that would hit those particular criteria, anticipating that there could be some interesting minor subdivide plays. And again, we would just, you
within our own team, we would utilize our five step subdivide criteria. Again, really the first four are the more important. It’s like, okay, determine whether there’s child parcels that already exist in the area. You don’t wanna be the first mover. Next, you want to ensure that there is an active market for child parcels in the area. Subsequently, and typically we’re looking for
Yeah, I wrote about this, but typically, you know, if you’re doing a single split, meaning you have one parent parcel trying to split into two child parcels, I want to see at least twice as many child parcels that have sold in a period of time compared to parent parcel acreage within a range, right? It doesn’t need to be exact acreage, you know, roughly for child parcel acreage. And then I want to see, okay, is the child parcel price per acre at least?
1.5x parent parcel acreage on sold comps specifically. Is that achievable? Ideally, you’re looking for 2x, right? But the thing with on market listings is that, yeah, you’re not always necessarily gonna be offering right at 100 % of market value. But if you’re looking for 2x of…
price per acre for child parcels versus parents, then you’d be able to offer whatever the list price is. But more often than not, you’re not necessarily going to find a spread like that in most markets. So it’s like if you can get a 1.5 on it, then all of a sudden you only need to offer 75 cents on the dollar for whatever the list price is.
because then you could just build your 2x margin with that anticipated 1.5x child parcel PPA multiple. So we would look for that and then looking for the adverse selection, know, is it flood zone or different terrain that can really affect the child parcels? You know, the fifth piece of our criteria is, you you have to know all your costs for the actual subdivide, not critical to note when you’re just assessing the market.
But you know, that is a key piece if you’re actually going to purchase something. So we were utilizing that strategy and just, you know, every single day, again, just getting more more reps, just looking at these. it was not the market, at least in those criteria that I mentioned was far more efficient and stable from a per acre pricing range than anticipated. Like you weren’t.
It was very rare, very, very rare to find, you know, almost any type of properties that we could find a 1.5 X on the per acre pricing. the first couple criteria, was easier to find, you know, OK, are there child parcels being sold in the area? Are there?
You know, is there greater multiple of child parcel sold comps being sold in a particular area compared to parent parcel acreage? Like those ones we could find more routinely, but the spread on the per acre pricing was far more uncommon. I mean, we’re talking on uncommon as in like less than 5 % of the time. What was there really an opportunity to consider or.
you know, even if there was some opportunity like the parent parcel, it was more adverse in terms of its characteristics compared to some of those child parcels that were being sold or, you know, might require extra work being done and so forth. Like it was difficult to find those out and we’re like, okay, you know, we want to be efficient with our time here. know, that’s always the
greatest constraint within the business, Is where you’re putting your time in. And if we’re not getting like any solid hits here, yeah, sure. We’re continuing to get better at our underwriting chops and getting these reps in. But what do we have to show for it as far as actually making offers on these deals? And we could make offers on these, but you know, when the per acre pricing is roughly one X, what the child, you know, the anticipated child parcel acreage would be.
you know, we’d basically be having to offer 50 cents on the dollar, which for on market listings that are like just listed. right. These are usually like, you know, trigger prices for, know, fresh properties that just hit the market. Sometimes they’re going to be price cut properties. And, know, usually those there, there was something going on with them. that, made us more hesitant for, okay.
they’re still too far off on pricing. Like we’re still gonna have to cut in half again. And some folks might say, yeah, you should just be making offers and all that. But like we also have to be aware of our own time here. just, I would…
be very surprised, especially if somebody’s putting the effort into putting a property on market, especially if it’s a newer listing. if you get a 50 % cash offer from the underlying asset that you have on the market, it’s just very unlikely to be accepted. That’s why I like, okay, maybe 25%. That’s why a 1.5x threshold would potentially make more sense. Like it might be more
palatable to, to sellers, like, we’re, not going to spend all day just like sending, you know, 50 cent on the dollar offers there. It’s just, it’s unrealistic for, for a hit rate. so I was expecting more of a spread throughout this, throughout this process, that we’d be able to find some more juice that, that we could squeeze out of these, but it really was not turning out that way. And I reviewed.
so many of that, because we had a bit of a backlog over the holidays. I probably reviewed between 30 and 50 parcels myself today. it was just discouraging as far as, have to go back to the drawing board here a bit on why is this not working?
The experiment here is like, okay, the 20 acre minimum seems to be too small. Again, in order to figure out spread. And that’s the thing, like some folks, they might say, well, yeah, you could just chop these up even smaller here. Like, you’re gonna have to go through a planning and zoning process. Okay, sure, yeah, you could chop things up into your 20 acres into one to two acre parcels here.
Usually in a lot of these areas, it’s not necessarily supporting child parcels of that size though. Yeah, if you were looking to do maybe full on development, which might be closer to a major subdivide, and then it’s usually gonna entail, what are the extra utility costs and potentially roads being built in here? I had those options in the back of my mind, but for the most part, for these potential miners that we were anticipating,
20 to 30 acre parcels, parent parcels that might be divided up two to three to four times. It wasn’t, the underlying market and design of the nearby land was not supporting going significantly less than that. But again, some folks might be saying, yeah, you could have done better there. I didn’t see it. So.
With all that mind, it’s like, okay, the 20 acres probably is too low. Let’s just jump up to 50 acres here. Like we need much larger acreage to potentially find enough spread within the per acre pricing. And again, like I mentioned earlier, we kept ourself at a hundred acres. I’m not sure why, that must’ve been my decision. It was an error. So now we’re just gonna remove the max acreage.
So now we’re willing to consider everything. And now, especially, you know, I’m less concerned about capital constraints. I think we can put together the capital if needed. And so I’m just going to remove that one million dollar cap as well, too. So that will kind of correlate with going above 100 acres on a number of these properties as well here and try to start figuring out, OK, what what other opportunities do we have? So.
Just to share some behind the scenes on what we are considering at the moment. Yeah, none of this is rocket science, right? Like this, a lot of folks will use similar strategies or even off market. What are you kind of targeting? A lot of it’s gonna be capital constraints. How much throughput can you actually handle? How many…
500K multi-million dollar deals can, can any one business handle it once? Usually it’s not many. So we’re comfortable sharing what we’re going after just because there’s like, there’s not that many folks pursuing deals of that size anyway. Nor do they necessarily have the underwriting chops to figure it out for like best use case and what is truly a deal. So.
that’s always going to be our number one advantage, underwriting over everything. Like that’s our, that, is our core North star value. So, with all of that in mind, hopefully this is, helpful for your own land investing journey. none of us, have everything figured out. We’re not, we’re certainly not perfect here. So, you know, you can learn from what we’ve, spent our time on the past quarter here and how we’re shifting gears.
Subscribe and share everybody if you’ve got any deals. SeriousLand.Capital to submit 50k minimum purchase price. Take care everybody. Bye.
