The Property
Two adjacent parcels of land located at 26399 & 26405 Girard Street, Hemet, California. The larger parcel is 2.22 acres of very high-density residential land (fourteen to twenty units per acre). The smaller parcel is 0.47 acres of medium-density residential and has an old 3-bedroom house. The current land use/zoning will allow 32 to 46 units.

The Find
Tim Huyck, an MWI student from Orange County, was using his automated MLS searches and came across 2.22 acres of vacant multi-family land located one block outside of the city limits of Hemet. It had been on the market for ten days.

Current Use
Vacant Land. The 0.47 acre parcel has an old small home on it.

The Technique
The asking price was $900,000. Initially, Tim offered $800,000 with seller financing. The seller finally agreed on a cash price of $825,000, Tim began his due diligence, and submitted the deal to the Mike Watson Institute as a partnership deal. It was accepted and the partnership was started.

The listing agent later told Tim that the seller also owned 0.47 acres of adjacent property with an old house on it and that he might consider selling it. It was not on the market at the time and the seller settled on a price of $315,000. 

Highest and Best Use
The highest and best use would be the construction of affordable 3-bedroom 2-bathroom townhomes of about 1,200 square feet in size. Total Townhomes=38.

Acquisition Price
Short-term would be $1,144,000, then sell paper lots at $50k, making a $756,000 profit. Long-term would be $8,984,611.12, then sell thirty-eight townhomes at $299k, making a $2,631,398.88 profit.

The Contract
A standard purchase contract was used for each of the two parcels. Addenda were later added to provide for due diligence extensions and to obtain a price concession from the seller for defects in the house that were revealed by a home inspection. At one point we went out of contract for a period of about ten days. Fortunately, we were able to put it together, and after five months we closed escrow.

The Result
We have submitted an application to change the land use of the smaller parcel so that it conforms to the larger parcel. We are working on getting the entitlements to build forty-eight townhomes. If approved, we will scrap the old house. If we don’t get the land-use change, we will do a lot line adjustment and sell the old house with a 7,200 square foot lot, then create and sell an additional SFR lot and build thirty-eight townhomes on the balance of the land.

The property is on the market at this time. Several agents have indicated that their builder clients may be interested in buying it when the entitlement work is done. If we sell it at the end of the entitlement process, we should make a profit of about $900,000 to $1.2 million. If we build out the development, the net profit will be around $3 million. The property is currently listed at $2,400,000.