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  • Alecia Bolton

Case Study: The Gateway Drug

This is the investment that started my note journey. I've told this story numerous times, but here's the version that includes the numbers.

 

While I was exploring different real estate investment strategies, I bought a piece of vacant land at a tax deed sale in November 2018. The plan was to get plans approved to build a good size house and garage on the lot. It was a 2 acre parcel, about 1 acre buildable. It was land-locked (no recorded easement), but you could access it from the end of a private driveway.


The house with the private driveway was in the process of being flipped when I purchased the land. When it was complete, new owners moved in and started using my lot for storage. I reached out and asked if they were interested in expanding their property by 2 acres. If they weren't, we'd sell to a developer and their rural feel would disappear. They bought the land in January 2000 with owner financing and made their first payment in March 2020. It has been happily performing every since and the balloon is due next March.


Numbers:

  • Total Expenses to purchase land and sell: $23,708.88

  • Sale Price: $40,000 (FMV close to $70k)

  • Financing Terms:

  • $5,000 down payment

  • 5 years with balloon

  • 6% interest

  • Annual Income: $4,668

  • Yield: 17.76%

  • ROI (at balloon): 87%

  • Hold Time: 6 years

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