Large property consisting of several parcels

Good evening,

The plot of land I want to buy belongs to a community of heirs. They only want to sell the plot as a single piece, even though it consists of four surveyed plots. I would also like to comply with this wish, but the financing did not work out immediately. The plots are approximately 4000m2 in total, of which I want to build on 2 and probably sell the other two.
Equity capital is about 60,000 and the purchase price 147,000 + property transfer tax and notary fees.
Do you have any idea how and if I can arrange financing? The equity ratio is actually sufficient.
Thank you very much.

Counter question – why do you believe you will get rid of the two surplus plots when the community of heirs does not even assume that they can sell them profitably (including any speculation tax, etc.)?

Well, in the end I will probably get beaten up for this, but €37/m² ... that is nothing. Zero demand. There are plenty of comparable plots in the area, and you can confidently make this claim without even knowing the region. The price alone says it all.

So. Now let's take out a beer coaster (everything that follows necessarily under the assumption that €37 is even a realistic market price):

1. Plot price €147,000
2. Incidental costs 10% => €14,700 (50% = €7,350)
3. Value of unused plots: €73,500 (dead capital)

If you now only want to get back the €7,350 you paid for the acquisition of the two unused parcels without your own added value, then the plot price must – from the outset – increase by 10%. A risk interest rate is not even included here, i.e., for your invested capital of €73,500 you only receive an interest above 10%.

It becomes even worse if you want to allocate the entire incidental costs to the remaining plots – then the plot value would suddenly have to increase by 20%. Sounds like a lot? No. Your investment in the two unused plots carries considerable risk, because the demand in the area is obviously extremely weak, which means that you may have to wait a long time until one or two interested parties are willing to pay at least €40. If you want to achieve €45 to earn a decent return, you will probably have to wait several years and invest a lot of time, which ultimately reduces the return again.

Viewed differently – if the selling price of €36-37 were a good price, a developer would have long since snapped it up and developed it themselves.

Therefore: if you want to build yourself, buy the two plots you actually need. I would value the other two plots with a 50% discount, which would come to a total purchase price of about €100-110K so that with the sale of the two plots at the current market price of €36-37 the additional costs for your acquisition would also be capped.

The bank – if you have presented your idea correctly – will consider similar things because you will (have to?) design the loan for the remaining plots so that it can be redeemed shortly after a sale and is basically structured without repayment. Which means nothing other than that you recoup the costs of interim financing upon sale. If you don’t manage that, you lose money.

The key question is whether that is even clear to you in this form.

Best regards
Dirk Grafe

Hello Dirk,
thank you very much for your detailed answer. You are right if you assume that the plots would not be in demand. However, the current price for plots in the immediate vicinity already amounts to 40€ and more, moreover the plot is very well connected. The trend rather points to rising prices than the opposite. Of course, it is always a bit speculative, but in my opinion, it is worth the risk.
There is interest from developers, but at that time I already had the seller's commitment (apparently he stands by his word). The information about the developer I got from a different source than the seller ;)

However, developers are usually good at pushing down the price or demanding a quantity discount. They are also usually interested in larger, contiguous areas in order to achieve as dense a development as possible; basically to maximize profit.

You say there are 4 pieces; are the other two, which you do not want to build on yourselves, connected, or are they "to the left and right" of your 2 plots?

Yes, it is a contiguous plot consisting of four parcels.

Maybe I expressed myself incorrectly. Of the 4 plots, you want to build on 2. Then 2 remain. How are these positioned relative to each other and to your 2 built-on ones? Are they still contiguous?

Hello Dirk,
thank you very much for your detailed response. You are right if you assume that the plots would not be in demand. However, the current price for plots in the immediate vicinity is already 40€ and more, moreover the plot is very well connected. The trend is rather towards rising prices than the other way around. Of course, it is always a bit speculative but in my opinion, it is worth the risk.

You say that although you obviously have never conducted such a transaction.

Just ask yourself whether you cannot acquire the same area in a similar location in the same area for 38€ without having to finance an additional 2000m². After all, the connection/location cannot be that sought after, otherwise the price would be at least €100.

Or is it raw land and still needs to be developed first?

There is interest from developers but at that time I already had the seller's commitment (apparently he stands by his word). I got the information about the developer from a source other than the seller ;)

Of course there is interest from developers – the question is whether they will pay your price. Presumably, they would also prefer to buy the entire 4000m² and divide it according to their own ideas.