Would you invest in a waterfront and land lot....

ottawaman · Sep 26, 2011

Friends of mine, which have little to no knowledge of how the real estate investing works in Canada (other than buying their home) are planning to buy a a huge lot (say 60 acres least) with waterfront in Ontario.

The objective is to develop the land and make it into something like a camping site. (Sounds like a lot of work and money and etc. etc. of course all of this would have to be approved by the goverment). They wanted me to join as an investor and as someone who will help them develop this...

Now after reading the complete REIN books, Robert Kiyosaki books, and all the REIN recommended real estate books, my gut tells me that this waterfront investment is a waste of money.

Am I right? would you invest in these type of properties? Any comments would be appreciated.

RedlineBrett · Sep 26, 2011

All depends on the numbers and the capital behind the developer.

If your friends have money (like lots of it or connections to lots of it) AND they have an 'in' to get a great price on the land then this could be a good opportunity for a real estate expert (you) to come in and help them exit.

BUT... without that... unless they have answers to all the obvious questions (how long, how much and how to pay for it) deals like this can be very risky.

All kinds of investors have gone bankrupt trying to play real estate developer in the last 5 years. Lots of REIN members have too. It is neither easy nor cheap to do it right.

Thomas Beyer · Sep 26, 2011

Many real estate projects are a good idea at the right price .. and even more are a waste of time in the wrong location or for the wrong price or teh wrong zoning.

Land development can be very lucrative in the right area and for the right price, especially in an in-migration / high demand part of the world. Land development with the proper zoning, or re-zoning, can be hugely profitable .. or it can be a waste of time.

Land development costs money for roads, sewer, water, electricity, internet, telephone lines etc. .. plus marketing costs plus realtor fees.

So, research those costs .. and then work backwards from the ultimate sale price per lot. It may makes sense .. it may not.

Some properties are overpriced at $1.

We just bought some land in Yorkton, SK at $35,000/acre zoned medium density and a second parcel in Cold Lake, AB zoned country residential at $28,000/acre .. with ultimate sale prices in the 125-200K per acre range. It can be very profitable.

Do more due diligence .. then decide !

ottawaman · Sep 26, 2011

Thank you for the insights Brett and Thomas.

housingrental · Sep 27, 2011

You've received good advice above

To add

From what you've wrote this seems like something that the owners have no expertise on - and you should run away from this

invst4profit · Sep 28, 2011

From my limited experience with the business of establishing a new campground (friends of my son) this is the type of business that is build up by one generation with deep pockets, hard work and endless hours simply to be passed on the the next generation to benefit from.

There is plenty of profit to be made once fully established by very little along the way.

bizaro86 · Sep 28, 2011

[quote user=invst4profit]From my limited experience with the business of establishing a new campground (friends of my son) this is the type of business that is build up by one generation with deep pockets, hard work and endless hours simply to be passed on the the next generation to benefit from.

There is plenty of profit to be made once fully established by very little along the way.

This is a very astute comment. I'm aware of one couple that ran a campground they owned in BC's Okanogan area. They ran it for decades, and I suspect had very low cash flow for the amount of work involved. When they passed away, their children sold the land for redevelopment and made a medium sized fortune. Nothing wrong with that necessarily, but something to be aware of.

Regards,

Michael

ottawaman · Sep 30, 2011

Thank you all for making my decision easier.

I have decided to let go of this opportunity and maybe pursue a new one.

I decided not to invest simply because:

1. I didnt see any present/future plans for this lot, no timeline of the end result, no cash-flow analysis goal for year x to year 5-x.

2. Im sorrounded by investors who know little to no knowledge of real estate investing but do have goals

3. Im sorrounded by friends (friends and business dont mix together)

4. I have received advices from REIN experts which all makes sense! (kinda knew it somehow but wanted to hear it from somebody)

Therefore, a big thanks again to all.

Thomas Beyer · Sep 30, 2011

Partner with people who offer something that you do not have to offer, and offer complementary skills/resources !

Otherwise it is not win/win !