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4 Acres and $40,000

by Gary Haga, Virginia   

I would like to share one of my personal favorites. I didn't retire on this real estate investment, but it was very satisfying. It was winter of 1990 during the Iraq conflict when a Realtor showed me a starter home on four acres. It had been on the market for only two days and the existing financing was assumable.

The home was well maintained, but otherwise rather ordinary. What caught my attention, however, were a number of other factors primarily related to the land. There was road frontage (lots of it), and the Realtor said that the zoning allowed one acre lots.

The asking price was $92,000, which I felt was about $10,000 below market considering the acreage. If the land would perk, there existed the possibility of immediately subdividing and creating two additional lots, since the existing home occupied a central position on the parcel. Since I felt the deal was sound with or without the additional lots, I made an offer and got accepted on the same day an offer of $90,000.

It turned out that the land perked just fine, but the land area required for one lot was encumbered by the water well serving the existing house and the land area required for the second lot was encumbered by the drain field serving the existing house. The execution of a water well access easement solved the first problem.

To get around the second problem, I constructed a new drain field to serve the existing house ($1,500.), thus freeing up the second parcel. I was unsuccessful in obtaining a release from the lender to enable the marketing of the newly created lots, so I sold the existing house (now on 1.5 acres) for $90,000.

Bottom line: I acquired two building lots (one complete with drain field) worth approximately $40,000 for the cost of a survey and miscellaneous fees related to the required minor subdivision and drain field approvals.

 
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