Commercial Real Estate Strategy Tips

You Can Rehab Land Parcels As Well As Buildings

by Marvin Levin

In 1959, I filed my first subdivision map for 25 lots on Hwy 20 in Lake County, California. Based on comparable sales, my partner and I thought that the lots should sell for about $4,000 each.

We had one lot at the corner of the highway and the entrance road that was approximately one third of an acre. This lot was flat and had collected runoff water for centuries. As a result, it was overgrown with manzanita, scrub brush and about a dozen tall pine trees. However, the brush was so thick one could not walk more than a few feet in any direction without running into a solid wall of foliage.

Directly across the entrance road from the lot lived a senior citizen. I do not remember his name, but I do remember that he was a retired captain of a Danish cruise ship. One day, he approached me and, with an almost unintelligible accent, asked me if I would sell the lot to him. I told him that the asking price was $5,000. He took out his checkbook and wrote a check to Lake County Title Company for $4,200, handed it to me and said that we could make a deal at that price. This was my first potential sale in the subdivision.

The land and improvements cost a little bit less than $2,000 per lot, so I grabbed the check and said let’s go to the title company. The sale closed a few days later, and I was in seventh heaven.

My elation ceased a month later when I returned to visit the subdivision. The new owner had hired a tractor driver to clear every piece of foliage on the lot except for the pine trees I remember thinking that the property now looked like Big Basin Park in the Santa Cruz Mountains, which I remembered from the 1930s. It was an absolutely beautiful piece of land. The retired sea captain subsequently put a sign on the corner declaring “For Sale by Owner - $9,750,” which was a little more than twice his cost. It sold in less than a week.

What a humbling experience. Although I understood how to rehab homes and income property, I simply didn’t know how to rehab land parcels. I certainly learned from that experience, and that experience profited me many times in the ensuing decades.

A few years earlier, I had graduated from University of California-Berkeley. At that time, the tuition (believe it or not) was $37 per semester. My tuition on how to rehab land parcels had just cost me more than $5,000, but it turned out to be money well spent. (It tends to confirm my present view that old age and experience will overcome youth and brilliance most of the time.)

If you know of a troubled land parcel for sale, please contact me.