Clever Creative Real Estate Strategies

There are pieces of land in every town and city that are basically leftovers after the area was subdivided for building. These leftover lots are either landlocked, or too small to build on, or on steep hills that are not build-able.
These lots may have private owners, but generally they get tired of paying taxes on something that they really cannot use. And so they allow the property to revert to the county for unpaid taxes. These lots generate no revenue, but most counties have some of these lots that they would happily sell for a very low price to someone who would be interested in owning the property and paying the property taxes.
Not all of these properties are worthless. I know someone in Florida who researches these lots in several different states looking for lots that could generate revenue as a parking area for events, or as additional backyard space for a neighboring property, or a place to park an RV, etc. He purchases the properties for a few hundred dollars with a clear idea in mind as to how this property could be valuable to someone who would want to create revenue from it.
Then, as he puts together various buy and sell transactions on other properties, he uses these properties as bonuses to induce the other party to enter into the transaction. It has worked very well for him, most people are intrigued at owning a free bonus piece of real estate that can actually generate revenue or have some other valuable usage. And property taxes are very small on properties that are considered to have extremely low value.

Please read the post above first.
I discussed the above strategy with a real estate student, he thought it sounded like an interesting technique, and was able to find a list of properties in his area that were available for purchase from the county, some of which were very inexpensive. He researched these properties and found one, in particular, that looked interesting. The property was about 20 feet wide, and about 800 feet long, kind of like a big bowling lane. The interesting thing was the placement of the property--it formed kind of a green belt area directly behind 6 adjoining houses on a street.
When we discussed the property, he asked if he could sell the property to the people who owned those houses. My response was that if he did, he would have to make the price pretty low, and that there would have to be subdivision, which may not even be possible, or economically sound for that property. But still, we recognized that the owners of those properties would pay SOMETHING in order to have the rights to the land that backed up their properties. What would you pay if someone was to offer you an extra 20 foot extension to your back yard?
We concluded that an alternative would be to lease them the property for a small yearly fee, or monthly fee, with a little larger payment up front. He got all 6 homeowners to agree to pay $100 up front, and (if I remember correctly), $96 per year ($8 per month for life on a transferrable lease in case they sell the property). So the result is not really a huge amount of money, he made $1176 up front by collecting the $100 payment plus the first year, and $576 per year for life coming in off the property. The kicker, though, I think is that he paid $380 TOTAL for the property. Not a bad return on investment! The last I spoke with him, he was structuring another deal like this with another property. It seems you could build a lot of passive income doing little deals like this.

I have worked with someone who buys inexpensive lots in various states, has a big map created of the property, and "subdivides" the map into one square foot parcels. He then sells these square foot parcels of land as a novelty, and conveys his own "deed" that was made up in a printing office for him. He uses local flavor, started out in Tennessee, and began marketing in Souvenir shops. I'm not sure what he charges, but I think he ends up with about $15 each. He believes that there is a market for people who want to "own property" in every state. And in case you want to think about what the possible return on investment would be, let's say that he nets $5 out of each property sold. There are 43,560 square feet in an acre, and five times that number is $217,800 profit from a property that he pays $3k or less to own.
Real estate can be fun if you just think a little outside the box.

Farm to Horse Boarding
I have an associate in Las Vegas who acquired a property that had operated as a farm, and most of the farmland had been sold. The remaining property included a well constructed barn, good sized farm house, and some remaining acreage that was fenced as a pasture.
The buyer, my associate, purchased the property and converted the barn into a horse boarding barn with brand new stalls and some cemented areas, converted a portion of the roughly fenced pasture into white board fenced horse training areas. Total cost, all in, including purchase price of property and modifications to barn and pasture was approximately $500k. The property was then put back on the market and sold for $800k. The property now operates as a successful horse boarding and training facility.

Rental House to Assisted Living Facility
Another associate purchased a property with 5 bedrooms. The house would ordinarily rent for around $1600/mo. in the area it is located. She went through the licensing process to convert the property into an assisted living facility. These facilities serve as residences for seniors and others who are unable to fulfill certain daily living functions like making meals, housecleaning, laundry, bathing or other bathroom functions. Unlike nursing homes, the residents must be fairly capable and of sound mind. 24 hour supervision is required on premises.
Minimal modification of the home was required, it was a ranch style facility with everything at ground level. Railings were required for the entry steps, and bathroom assists were required for the bathing and toilet areas. The property was furnished in common areas, but residents would furnish their own rooms.
My associate was interested in owning such a facility, but not in running it day to day. She hired a person to run and staff the facility during daytime hours, and some part timers to staff the evenings and nights. Rooms for this type of facility go for about $3000/mo. for a private room and around $1800/mo. for a shared room. With four rooms rented, and the fifth as an office/lounge for staff, the property generates a minimum of $12,000/month gross, which is more than 7 times the revenue it would produce as a single family rental.

I have been reading all the pearl of wisdom here and some of them interest me a lot!!! I am a nurse and have been looking for a way to own a "money making" business that continues to help people. I have had nursing colleagues that struggled to open an assisted living facility only to end up working it themselves and becoming very exhausted.

To everyone who shared, I thank you. Gosh, what wonderful seeds you're planting.

Thank you for your response and comments. In regard to the situation that you mentioned, it is always challenging to find the right employees to help you operate a business, and it takes as much dedication initially to finding and training them, and making sure they feel well compensated for their time. Those people are out there. I also know of a person who developed 10 of these facilities, hired employees, and arranged so that he only spent 4 hours per week in each facility. Once they were all operating smoothly, he sold them all to a company that operates large facilities in the area, and retired as a multi-millionaire. It is well worth the energy to systematize these facilities and staff them with good people.

Gold Office Suite Condominiums
An associate in the northwest part of the U.S. acquired an historic property on Main Street in their town. He was an avid collector of old typewriters and associated printing machines and devices, and wanted to establish a profitable investment property that would also provide him with a sort of museum location to display some of his typewriters.
the property needed a little modification to suit the intended purposes, but was set up as a sort of partnership arrangement that professionals could buy into, securing an office for themselves and leasing some of the common services in the building, such as receptionist, copying services, break room, etc.
People were drawn to the building to see the typewriters, the partners in the property enjoyed the status of owning part of a historical building on Main Street, and having their offices in a prime location in the downtown area, and the original owner had his original investment plus a profit repaid by the partners in purchasing shares of the building, while retaining some space for his own office and a place to display his typewriters.

Simple Subdivision

Some properties are large enough and configured properly to be subdivided. It is not our intent here to teach you the processes in subdivision, but rather to invite you to look for these opportunities to create a bonus income from a property.
Subdivision does take time and has associated costs and variables, but often it can produce a good additional return on the property, or a patch of land that you will want to hold onto until the optimum time to sell.

Dividing the Bundle of rights

In order to further discuss subdivision, we need to change perceptions as to the definition of a real estate property. Most people identify a property as a thing, which includes land and potentially one or more buildings to be used either as a residence, or storage, or for some business purpose. This is actually NOT an accurate definition of a property.
A property is a bundle of rights associated with real estate that can be transferred individually or collectively to someone else.
I'm going to let that settle for now, as it is late in the day, and I will address the topic further in my next post in this string.

Thanks for sharing.. Such a great lots of information I can make use of. I love the usage #2 and would like to crush on a deal like that and think a little different out of the box.

__________________
TC
Miami, FL

Thanks TC, for your comments, and you have identified one of the great gems in this series, Assisted Living needs are expected to increase for another 8 to 9 years before gradually decreasing, so the opportunity to create a small facility, or maybe several of them, is still several years from the peak. Another interesting point I don't think I mentioned about these facilities is that they can be created in any neighborhood--otherwise it would be classified as discrimination against the elderly or handicapped. So as long as you find a good single level property with more than the average number of bedrooms, and decent sized bathrooms, you have the foundation for a great Assisted Living facility. My suggestion to everyone interested in this idea is to identify the department of government that regulates these facilities, contact them, and request the free packet of information that they offer regarding state regulations, licensing, etc.

It occurred to me that I may be able to provide a little more assistance to you on researching Assisted Living Facilities by State. Here is a link that should be beneficial as a starting point to research your intended state. Nice survey with data on each state.

http://aspe.hhs.gov/daltcp/reports/stasvyes.htm#sectionIV

Here is another website that will provide links to the state departments that deal with Assisted Living Facilities.

http://www.assistedlivingfacilities.org/about/resources.php

Dividing the Bundle of Rights (Continued)

The next few items in this series will be cover some examples of ways that the bundle of rights has been separated or subdivided to lease or sell those rights to another party or entity.

Air Rights--I apologize for not remembering or being able to find quickly, an example of Air Rights leasing in New York City, but I recall reading an article describing a property where one building is built over the top of another, with an open foundation that is somewhat like having the building on stilts. The air rights are leased on a long term lease at a rate of $500k per year, if I remember correctly.

Within 1 mile of the office I'm in right now is a building that straddles a public road like a bridge. The effect is stunning, and I know that there was a negotiated arrangement that allowed for this strategic placement of the building.

Dallin,
You just so consistently post great stuff. Thank you sharing these stories for us to create opportunities for ourselves.
Jim

Yesterday I actually called the customer service number from this website you shared http://www.assistedlivingfacilities.org/about/resources.php They told me to call my state branch to get more info. I will follow up with them today
Thanks
_____________________________
TC
Miami, FL

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This is very good information I will go to the website you mention, and see what are the requirement here.

Thanks again, and I will continue to looking forward for more of Clever Creative Real Estate Strategies.

Dallin - Thank you - again, for taking the time to put these postings together. I never miss one of yours because I get something from every one of them that I can use!

While it's obvious that you have a gift for real estate investing; your true gift may be that you can teach. True teachers are not as common as people think, but they are the ones leading the way to the solutions for our future.

Roxie

TC: It sounds like you are serious on the Assisted Living Facilities. I may need to keep feeding some additional information on that topic, and will use this string to do so. I have some information that was compiled by the gentleman who set up 10 of these facilities and then sold them, I'll track that down at home and make sure I have it available in the office as reference material for additional posts.

Ada10_2009, thank you for your comments I hope you find the information that you are looking for on those sites. If not, then, as I mentioned above, contact the state department that regulates these facilities, each state offers a free packet of information that is extensive, and helpful. I have acquired these packets from two different states, and was surprised at how much they sent me.

Roxie: Thank you so much for your comments. I do love real estate investing, but have had a lot of experience with training and coaching, and producing educational content, books, articles, etc. Real Estate, Natural Health, Business Development/Marketing, and Writing/Publishing are the four areas that I am active in advising people. From reading your posts, it appears to me that this may be an area of expertise for you also. Thank you for sharing your talents.

Jim: Thank you for your positive comments. It's always a pleasure to connect with you on these forums.

Water Rights

Las Vegas is definitely situated in the middle of a desert. So it should come as no surprise that water is valuable. An associate acquired a property with water rights, and was able to lease those water rights on a five year lease agreement with rights to extend for an amount that was equal to about 70% of the price of the property. With one extension, he should have recouped the cost of the property in about 7 years even if he cannot think of any other way to make money on the property.

I just walked out of a meeting where one of the topics was Highest and Best use of properties. A great suggestion was made to find properties where zoning offers opportunities to market the property for more, or where a buyer could increase a properties value by making some modifications to the property.
As an example of the first, if you were to find a property with some acreage that was zoned to allow horses, and horse property is a rarity in your community, simply buying the property, or putting it under contract, and then marketing it as horse property at a higher price can be a quick way to make a profit.
An example of the second would be buying a property that has an R2 zoning that would allow for a duplex, and converting the basement into a legal second unit, and then rent the property as a duplex, or live in one and rent the other.
I've recommended before that you want to get to know a few subdivisions, and claim them as your domain. Then get to know these areas and look for opportunities like this.

Dallin you opened the mind, which we call creativity thinking, love all these ideas.I remember from A.D.K. our friend and fellow investor who over came so much to be truely successful and was very caring who talked about air rights, when we open our minds there are endless ways to do things and in this business they are truely endless, many thanks my friend your a true joy, Jim

While I realize that this may not be the site to discuss a fellow investor who has passed on, I do want to acknowledge that we are all a product of our experience, and there are many things that I have learned that have benefited my life that have come from A.D.K. I hope, Jim, that each of us is contributing things that can benefit others. I believe that the principles of how to be an effective investor are actually the same principles of how to live the better life. Creativity is certainly a part of that. Being able to do things that benefit many others is absolutely a part of it. And for me, being able to communicate with other people like you on this forum is supremely a part of it. Thank you to you, Jim, for all you share, and all you do, and the same message to others whose hearts and minds are aligned in this way too who give of their time to share what they know on this forum for the benefit of others. Yes, each of you is a great friend although we may never have met face to face, and each of you is a brother or sister because we have a common familial type objective to build our real estate family with true principles and knowledge that make the world a better place, and real estate investing a true joy to be a part of.