The Horse Trading Begins
“How much is a block of land in Citrus Springs these days?” I asked just out of curiosity.
“You can pick up a block for under five grand. We had one sell recently for $2,500. Never seen prices this low.” Said Walt the sales agent.
“Can you find me a block for that price?” I replied. I was being a bit playful. Thinking there can’t be many of those cheap blocks floating around.
“I got one right now. Guy’s asking $3,500 for a residential lot.”
“Uh Oh!” I thought to myself. What do I do now? I don’t want a piece of vacant land. There’s no income. It just sits there doing nothing; not earning it’s keep. But then I remembered …
Flashback
I remembered about 6 or 7 years ago looking at land in Citrus Springs. They couldn’t give it away. It was selling for about the same price, $2,500 for a residential block. Quarter acre blocks; that’s about 1,000 square meters for those operating in the metric system (like me!). Nice sized lots; plenty of room for a house and a nice sized yard.
I also remembered not buying. I didn’t buy because it was vacant land. No income. Not interested.
Another Flashback
Then my mind flashed back to about 4 or 5 years ago when I returned to find these same blocks of land selling for over $30,000. I remember sitting with my property manager for lunch and laughing about how we missed the opportunity.
“Why didn’t I buy at least one block?” I questioned looking back in hindsight.
“Me too! I was right here and I didn’t buy any.” Exclaimed my property manager. “Who woulda thought they go up that much?” She continued.
Back to Reality and the Sales Agent
Now my mind raced. This appeared to be a second opportunity to buy the land at rock bottom prices. I had the opportunity 6 or 7 years ago, I passed it up. Would I do it again.
I made a decision.
I would not leave without getting at least one of these vacant blocks. The price is too good and the window of opportunity is open now. Am I going to walk away a second time? No way.
The holding costs are minimal; about $250 in taxes every year. And, I figured out how to pay for them. I’ll talk about that later.
So, the land was very cheap and I had plan to pay for the holding costs. I couldn’t let the opportunity slide past this time. I was ready to buy.
Make an Offer
“I’ve got one that just came on the market. It’s a builder and he wants to get rid of it.” Said the agent in a manner that suggested I look at this deal first.
“What does he want for it?” I replied.
“Make an offer.”
“Well, let’s see. I don’t really need a block of land in Citrus Springs. Is he a motivated seller?” I queried.
“He wants to sell. Just make an offer and I’ll take it to him.”
I wanted the land but I also wanted to get the best price I could. Keep the risk as low as possible. So, I figured, why not just offer something low and let them bargain.
“Would he take $2,000?” I finally said.
“I call him and get back with you.”
I left the office and headed back home. I was surprised. The agent never batted an eye. He just took the offer and ran. Didn’t even try to get me to raise it. I had a good feeling.
I picked up my ringing mobile phone and answered. It was the agent.
“He countered with $2,500. But, if that’s too high just come back with another offer. The owner just wants a little more.”
“Will he take $2,300?” I asked.
“I’m sure he will. I’ll get right back.”
We got the block for $2,300. I was amazed.
The next day I asked the agent, “Do you have anything else? Maybe a commercial block?”
He did. A .6 acre commercial block; over 2,400 square meters. Price tag; $7,900.
Via a very similar negotiation process as for the residential block, we got it. We initially offered $5,000; we got it for $6,000.
Numbers don’t make sense.
That evening I received a phone call from the agent. Settlement would take place the next day. For a cash transaction on a vacant piece of land, things can move fast.
“Bring two checks. One for $2,260.56 another for $5,754.53. Then come by the office and we’ll walk two doors down to sign the paperwork.” Said the agent over the phone.
I wrote down the figures and hung up the phone. Then I thought about these numbers. They didn’t make sense. The amounts were less than the selling price.
When we arrived at the agent’s office, I couldn’t resist asking the obvious question, “How come the settlement checks are less than the selling price?”
I figured he was going to redo all the paperwork and there would be a delay. But, I just had to know. I’d never seen this before; pay less than the agreed upon selling price? Doesn’t make sense.
“Oh, that’s because the buyer is paying for most of the costs. And, you’re getting an adjustment for county taxes. These are paid for by the seller. See here on the form. So, the final amount comes out less.” Explain Walt dutifully.
I looked at the form. Saw the county taxes adjustment and sure enough the final total was less than the agreed upon selling price. I was amazed. There always seems to be fees, taxes, adjustments and such to bring the final total higher. I don’t think I’ve ever bought real estate where I paid less; it’s always more. At least until now.
Plan to Pay Holding Costs
One of my big objections to vacant land is the holding costs. I don’t want to have to come up with the money every month to hold something that isn’t earning income. But, for these blocks of land I had an idea. I worked out how I wouldn’t have to worry about paying holding costs.
Here’s what I came up with …
Buy several income producing assets that more than cover themselves with extra left over. This extra left over income could be used to pay the minimal holding costs for these vacant blocks of land.
But, where to get these income producing assets? Easy. Right there in Citrus Springs.
I’d already entered into contracts on two rental houses. The return for each would be at least 10% and I was paying cash. The passive income would be very healthy. More than enough to cover these vacant land holding costs.
I felt very good about this deal. Get the land for an incredibly low price and have a way to pay the holding costs.
Final Thoughts
Would I recommend buying vacant land in Citrus Springs, Florida? Not especially.
But, if you know the market, you have extra cash, you get a good deal and you have a plan to mitigate or eliminate the out of pocket holding costs … then you might consider it.