Joint Venture - Unserviced lots? What questions do I need to ask?

  • JordanCartwright

    Status: Forum Member

    Posts: 10
    Joined: 9 Jun 2008
    From: Calgary AB

    Hi All,
    My neighbor has come to me with a "deal" that involves the purchase of two lake lots close to Calgary. The land is currently undeveloped and will require additional cash outlay for services to be installed which I have concerns I may be on the hook for at some point..

    His plan is to hold it for 6mo. to 1 year and turn the property over to a developer.

    For my part he's looking for about $20,000, and will put my name on the title..

    His projections for profit seem unrealistic, and overall, this seems like a 'too good to be true' situation, but at this point, I really don't know any better one way or another.

    I would appreciate any and all suggestions or feedback:
    - what sort of questions I should be asking to ensure this is legit?
    - what sort of contracts I should be signing (or insisting upon)?
    - what sort of scams are associated with this type deal?
    - Is it wise for my name to be on the title for such a small amount of money, or is it recommended?
    - what sort of (realistic) returns can be expected from the turnover of undeveloped land after services are put in?

    Any thoughts would be appreciated.
    Jordan
  • JordanCartwright

    Status: Forum Member

    Posts: 10
    Joined: 9 Jun 2008
    From: Calgary AB

    Err.. 43 views and no comments? Am I way off base with something or...?

    -J
  • ThomasBeyer

    Status: REIN™ Member

    Posts: 9,611
    Joined: 30 Aug 2007
    From: Alberta and BC - The Top 2 Places on the Planet to live and invest !

    land development is VERY high risk .. but can be VERY profitable .. 100% to 200% cash-on-cash in a year or 2 is not unheard of .. if done well !!

    ask (and get PROOF IN WRITING) for the following issues:

    a) what is the current zoning of the lot (duplex ? single family ? campground ? commercial ? agricultural ?) .. i.e. can you actually build there .. or do you need to re-zone the land ?

    b) what are the building and lot restrictions ? i.e. set back from water front, minimum side and rear yard setbacks , height of building ..

    c) where is the nearest hookup for: water, gas, sewer, telephone lines, electricity

    d) how much does it cost to bring in these services ? It could be as little as $20,000 or as high as $500,000 depending on distance !!

    e) what do similar serviced lots sell for ? Keeping in mind that vacation properties have a high risk .. and that the demand has plummeted recently .. due to less $s available by people who used to get fat oil stock options and are now unemployed .. I just came back from Vernon this weekend .. and my god, is there ever a lot for sale at super-inflated prices ...

    f) what do similar UNserviced lots sell for ?

    g) what is the timeline for c) and d) .. ATCO gas might say: apply now (late 2008, for a late 2009 approval and 2010 installation ..) .. and then TELUS might say: sorry, no telephone until 2012 .. or never ..

    It may all be well .. he may just have lost his bank financing .. so you are now the bank .. it may be a great project close to the finish line .. or it may be just a pipe dream with costs 10x higher than anticipated .. and a money drain for years .. proceed with caution !
    Thomas Beyer, Honorary REIN Member & Member REIN Advisory Board
    President, Prestigious Properties [@facebook .. @twitter]
    T: 403-678-3330 E: tbeyer at prestprop dot com - www.prestprop.com

    >>> Read here how use your RRSP or TFSA for real estate or  here for our latest investment opportunity in Alberta for as little as $20,000 <<<
    >> My book "80 Lessons Learned on the road from $80,000 to $80,000,000" is out: order it on Amazon or as an e-book for Kindle, iTunes or kobo format <<

                                
  • JordanCartwright

    Status: Forum Member

    Posts: 10
    Joined: 9 Jun 2008
    From: Calgary AB

    Thank you Thomas, that's given me food for thought. Some of the information I have had in mind, though not as in-depth as you've suggested.. Most of it I'd not factored in at all.. I really appreciate your feedback!

    Jordan
  • NorthernAlex

    Status: Forum Member

    Posts: 244
    Joined: 3 Nov 2008
    From: NB ON

    Hello everybody.

    It is my first post here and I would like to thank all for this forum, which I cant stop reading now for a couple weeks. I will became soon a REIN member to meet some of you in person and learn from your experience. I really cant thank you enough for all threads and postings in this forum.

    I am a new PR (permanent resident) in Canada but invested since 2004 in Condos here in the GTA area. Meanwhile I am managing four own and two friends rental properties.

    Now arrived here in Canada I noticed that my daily work is getting a "time filler" to get my real estate journey further. Meeting nice contacts and generating interesting opportunities I just run into a very interesting opportunity- and thats why I reopened this threat again as my first posting to ask for help.

    I would like to learn more land development. Are there any books out there, which someone would recommend? I checked, if there is a residential hold (is none), hydro and city services are next to the land and I had an architect prepare a layout, how to optimize the land to get roundabout 120 lots. The cost of getting one lot serviced is about 25.000 CAD. NaturalGas, Bell/Rogers are ready to proceed in 2009, aso.

    Now I would be interested to learn a bit more about the "HowTo".

    Maybe I should wait until I became a member of REIN and visited the first meeting and meet maybe a tutor/experienced person, but what do you want to do, if you hear the opportunity knocking.... smile.gif

    Anyhow, Merry Christmas and I am happy to be here in Canada.

    BR,
    NorthernAlex.
    With kind regards,

    Alex

    "Be liberal in what you accept, and conservative in what you send." by Jon Postel.
    My info provided is only my opinion or best knowledge.
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