Land is easier to buy sight unseen. Houses are easier to sell. Pick your problem.

Question

I've been running both remotely and the tradeoff has gotten clearer, so I want to know how the room weighs it.

Land suits the virtual model almost too well. There's no roof, no mold, no tenant, and the condition questions are mostly answerable from a desk: parcel maps, topography, flood layers, road access, whether the county will issue a septic permit. My local person walks it for photos and to confirm nobody has parked three cars and a shed on it. Acquisition risk is genuinely low.

The exit is the hard part. Land buyer pools are thin and specific. I've had lots sit 90 days with a price that looked right on comps, then move at 15% under because the one buyer who wanted it knew he was the one buyer. In a dozen states sale prices aren't public at all, which makes land comps worse than house comps in the exact markets where I'd want help.

Houses invert it. Buyer list is deep, cash investors will look at anything with a number on it, and I can usually get a contract moved in two weeks. But every unseen house is condition risk I'm pricing off photos taken by someone who isn't a contractor, and a $30,000 miss on scope is a dead assignment or a renegotiation.

So: cheap acquisition risk with a slow exit, or fast exit with condition risk you can't see. Which would you rather carry remotely, and why?

mikeoconnell7 · Answer

Land, and mostly because the local help is cheaper and easier to find. A person with a phone and a truck can give me what I need on a lot. Getting useful house photos means someone who knows what a foundation crack looks like and what a panel should say, and that person has better paying work.

The slow exit you describe sounds like a marketing cost rather than a risk. 90 days at a 15% haircut is bad, but it's a number you can see coming.

renee_dubois · Answer

@lantern the haircut isn't the risk, the earnest money and the contract clock are. If your land contract is 30 days and your buyer takes 90 to show up, you're extending with a seller who's losing patience or you're eating the deposit.

I'd take houses. Condition risk is bounded if you build the inspection contingency properly and actually use it. Buyer scarcity isn't bounded by anything. On my small multifamily stuff the deals that hurt were always the ones where I misjudged who would want it, never the ones where the scope was worse than I thought.

brandonlee36 · Answer

Houses, but I'd narrow harder than @cairn is suggesting. One product type, one price band, and a buyer list you've actually talked to before you contract anything. The condition risk on unseen houses drops a lot when you're only ever underwriting the same shape of building, because you already know what the surprises cost.

@parcel your land example is the thing I keep seeing. Comps in a state that doesn't publish prices means you're building value off asking prices and old listings, and asking prices on rural land are fiction about half the time.

Land is easier to buy sight unseen. Houses are easier to sell. Pick your problem.

3 replies