How Buying Land Has Changed (Before/After Covid-19)

acquiring deals acquisition & development buying land land Oct 07, 2021

In a lot of ways, buying land for build-to-rent projects has become a lot more difficult over the last couple of years. This video dives into the topic of new construction investing and what/why buying land is different than it was pre-pandemic.  

Watch the full episode here:

There are four areas right now, where we're seeing delays, and headaches, and snags. And some of this is attributable to COVID. Some of it's just attributable to things that have been unfolding for a while, that COVID kind of accelerated. So Sherida, let's start with you.

Talk to us about land.

So you want to buy land and it's not like what it was a couple of years ago, is it?

Sherida Zenger

Totally different. Right now a lot of land sellers are not allowing for a long enough period of due diligence. Some of them your earnest money is going hard, you know, 714 days, and so you're not able to go in and figure out Hey, what can I do with this land? Can I make this multifamily? Does this have to stay single family, you know, doing rezoning stuff like that? They're not giving you a lot of time they're saying Nope, buy it or I'll go to the next highest bidder and move on. Yeah,

Chase Leavitt

Yeah, it's because land is in high demand. Yeah, that's why there's not a lot of land out there, especially good land for multifamily apartments or townhomes or whatever the case is. So land is hard to find right now.

Sherida Zenger

Yeah, cuz again, it comes down to the location that we've spoken about before, right? You want to be in a good location. There's land out there, but it's not like chasing that for multifamily.

Chase Leavitt

Yeah. And land sellers know this. There's a lot of competition for land. So if you're looking for land, you're most likely not going to find it on the MLS or loop net, and maybe, but it's most likely going to be off-market and start to find right now.

Steve Olson

Off the market through a good network broker. The land that is available, or that's readily available, I would say, and a lot of people have used a saying has some hair on it, right? There's no there are problems with that land that you're going to have to be, you know, tricky, you have to figure out how to navigate around it.

We weren't quite a market maker in Magna, Utah. As Sherida pointed out there was that other apartment complex that had been built, I think it was like five years old, maybe three years old. And the data that we saw from that was compelling.

But what would have been like to be those guys that did that deal? they had to go, they had to make that market happen. And in a market where land is just so scarce? That's really what we're seeing more and more of, is somebody having the courage to say, look, I think this is where it's going. I'm willing to take the risk.

The capital, certainly there to do it. But as you pointed out, farmer Bob doesn't care. Farmer Bob has 100 acres for sale in Boise. Right or, or in Goodyear, Arizona, I don't know somewhere. And he's not going to give you the time that you need, or the flexibility on your deposits that you need to make this thing be a slam dunk. You know, the phrase is entitlements, you can't get the entitlements are the approval from the city council that says yes, you can go build that type of product there at that density, and so on and so forth.

Farmer Bob is saying I have land, it's valuable, whether the city allows you to build exactly what you want or not is not my problem. Right? Close on the land. It's valuable. I'm sure you'll figure it out.

Sherida Zenger

The truth is I think from some of that, you can then flip it right? So if maybe if it didn't fit your model, hopefully, you're not buried too deep in it. And if you make it through the entitlements process, maybe you can flip it to a single-family home builder, or a multi-family home builder, whatever it is, whatever you're not in. However, you can get it zoned.

Chase Leavitt

And the other truth is, is you're taking on more risk too. So maybe it doesn't work out that way. But we're seeing a lot more competition--other buyers/builders looking to purchase the same land that is willing to take on that risk.

Steve Olson

They're willing to do it. Yeah.

Sherida Zenger

And I wonder, you know, we were just at a conference this last weekend, and they spoke about the years 2000 to 2010 and said that in that time period, they built 20 million homes, or 20 million homes brought to the market in from 2010 to 2020. We were at 6 million so there were 14 million homes behind. And I know a lot of that is because, you know, Gen X and their renters, they want to be renters for life and they're okay with that.

But I thought that was kind of interesting. I thought you know, not only did COVID propel some of this, but I also think building had slowed down and I think people are just starting to ramp up. They were also speaking about how a bunch of people is just buying land to hold on to it.

They're fine holding on to the land and just waiting to see what they can or can't do with it down the road. I know we talked about that, you know we did in a location here in Utah. Hey, what if we just bought a couple of 100 acres and sat for a while? Yeah, eventually it's just gonna move there.

Steve Olson

We went to one of our favorite places Din Tai Fung in Las Vegas and ate so many dumplings. And at the time talked about where some places we could just land bank, buy land, right. It's crazy.

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