A property manager weighing an off-market land offer from a client, buy outright or option first

Option, not purchase. No development experience and a client relationship worth keeping changes the calculus. Buying the land and having the rezone fail means owning 40 acres of 5 acre lots at a price that only works if the rezone succeeded. One caution on the relationship. Collecting rent for the owner and buying an asset from her at the same time can sit inside a fiduciary or agency duty and may trigger disclosure or written consent requirements, and in some states a license issue on top of that. Get a real estate attorney in the state to look at it before anyone shakes hands, and have her get her own counsel to look at it too. She's 78 and her accountant is pushing her, which is exactly the fact pattern a relative shows up angry about later.

Thatch's point about her having her own lawyer matters more than the price. I'd want that in writing even if she waves it off.

Run the by-right case as the floor and see if you can live there. 8 lots at $110,000 is $880,000 against $720,000 plus whatever a shared driveway, well permits, and septic feasibility per lot costs you. That spread is thin enough that a single surprise puts you underwater. If the by-right case doesn't stand up on its own you're making a pure bet on the rezone, and you should size your money accordingly.

No sewer is the whole thread. Everything else is detail until you know whether the utility will extend and who pays. Have you found out where the nearest sewer main actually is? Distance matters enormously because extension is usually priced by the foot and the developer usually pays it.

Numbers as stated, and they don't work yet. $720,000 / 40 = $18,000 an acre. At 8 by-right lots that's $90,000 of dirt per lot before improvements, against a $110,000 sale price. $20,000 a lot to build a road, drill or permit wells, do septic perc, survey, plat, and pay carry. Not happening. At the rezone case, say a deal nets 2.5 units an acre after roads and stormwater and the wetland, call it 85 lots. Dirt drops to about $8,500 a lot. Now the sewer extension and the in-tract infrastructure become the whole question. If those run $45,000 a lot and finished lots sell at $75,000, that clears about $21,500 a lot before carry and soft costs. Also plausible that extension costs push improvements past $60,000 a lot and the deal is dead. So the answer to the actual question is that a purchase cannot be priced today. Price an option instead.

Ledger's $90,000 a lot on the by-right case is the line that should end the purchase conversation. That's a builder's lot cost with none of the work done.

Separately, that wooded strip. Clearing and hauling is real money and it depends on what's in it. I've had 3 acres of scrub cost almost nothing and 1 acre of mature hardwood with no market for the timber cost $14,000 to get off site.

On an option like this, the terms that matter, and an attorney in the relevant state should draft it since option enforceability and recording practice both vary: Length. Long enough for a rezone cycle plus appeal window. Eighteen to twenty four months is common on entitlement plays, sometimes with extensions purchased separately. Price. An option fee, often 1 to 3 percent of purchase price for a first term, sometimes credited to the price at closing, sometimes not. The credit is worth negotiating. Extensions. Priced steps, each one non-refundable, each one buying six months. Access and authority. Right to enter for soils, survey, and wetland work, and written authority to file zoning applications in the owner's name or as agent. Without that clause the one thing the option is for cannot happen. Assignability. Bringing in a developer partner later is common. If the option cannot be assigned, that path is lost. And whether a memorandum of the option can be recorded so it clouds title against the owner selling out from under the option holder. That is state specific.

The thing that surprises operators crossing from buildings to land is becoming the general contractor on horizontal work with almost none of the same subs. Earthwork, storm, sanitary, water, paving, and a survey crew on site constantly setting and resetting stakes. Pay applications, retainage, and a bonded set of public improvements the town holds until acceptance. That last one catches people. Many jurisdictions require a performance bond or letter of credit for the public improvements, and they do not release it until final acceptance, which can be a year after lots have sold. That is capital sitting still. Asking the town what its bonding requirement and release process looks like, in writing, is the first move before anything else.

I've got no deals at all, so what I don't understand is why you'd do this instead of finding a developer and taking a fee or a piece. You said you know two builders who need lots. Is there a reason you're the one who has to do the entitlement?

Ember, that's the question I'd want answered too. Trellis, what would a referral or a joint venture position actually be worth here? Because your edge is the relationship and the local knowledge, and neither of those requires you to own the earthwork risk.

Taking the option and then shopping the entitled deal is the sounder path here. That way payment comes for the two things actually being done well, without needing to learn horizontal construction on a 40 acre project with a client's name on the note.

I'll push back on the assumption everybody's making, which is that the rezone is the only way this works.

I've held rural land for a long time. In exurb locations 45 minutes from a metro, 5 acre estate lots on well and septic sometimes sell for a lot more than $110,000, and they sell without a sewer extension, without a wetland fight, and without a bond. Eight lots, a gravel or paved shared access, perc tests, and a plat is a project one person can run.

Your $110,000 number is where I'd focus. Where did it come from? If comparable 5 acre wooded homesites in that county are trading at $150,000 or $170,000 the by-right case is a real business at a lower price than $720,000, and you can offer her that price honestly. The rezone play needs capital and patience you've told us you don't have yet.

Orchard is right that the by-right case deserves a real look, but it needs a real price. At $720,000 it's dead. At $450,000 with her carrying most of it, 8 estate lots is a project you could actually finish. Whether she'll take $450,000 is a different conversation and the accountant's clock might help you there.

Basic question I want to ask out loud. If there's no sewer in the area at all, does the county even want 85 lots there? Their plan might cap that whole area at low density on purpose, and no amount of engineering fixes a policy decision. Has anyone read the comprehensive plan for this parcel?

Compass just asked the only question that matters and it takes an afternoon to answer. Pull the future land use map. If it shows this as rural or agricultural preservation, the rezone is a long shot and every number above it is fiction.

Two more diligence items before you sign anything.

Mineral and water rights. Inherited rural land often has severed mineral rights, and in some states severed water rights, and either can complicate a subdivision. Title work will show it.

Agricultural tax classification. If the land sits in a preferential ag assessment program, changing use can trigger a rollback of deferred taxes, sometimes for multiple prior years, and the buyer usually eats it. That varies by state and county, so ask the assessor directly and get the answer in writing.

A rollback tax point has cost buyers in similar counties tens of thousands of dollars they hadn't budgeted for. Ask the assessor before signing, not after.

You said she'd carry paper on part of it, terms unspecified. That's the clause I'd read hardest. Seller financing on land routinely includes a release schedule, meaning you can only get clear title to lots as you pay down principal, and the release price per lot is negotiated. If it's set badly you sell your first 15 lots and hand every dollar to her while your improvement lender waits. Also look for whether her deed of trust or mortgage subordinates to a development loan. If it doesn't, no construction lender will fund, and the deal is over on that one word. Get an attorney in your state to structure the release and subordination language.

Fathom, that subordination point is new to me. So a seller who won't subordinate effectively blocks any real development even if she wants the sale to happen?

Yes, that is the practical effect. A lender funding roads and pipes wants first position on the dirt. If the seller keeps first position, the lender does not lend. Some sellers will subordinate for a higher price or a bigger down payment, some will not at any price, and it is worth finding out early rather than losing a year to it.

The thing I'd sit with is that you have a 78 year old client, an accountant with a deadline, and a purchase price nobody in this thread thinks works. Slowing down costs you a deal. Not slowing down could cost you the management contract and the relationship. I'd take thatch's advice and get her in front of her own lawyer before anything else happens.