S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the March 1972 issue of the Real Estate News Observer.

Did you ever roam around a new subdivision and see all of the homeowners putting in their lawns, and right in the middle of the subdivision are two vacant lots? The developer knows the value of “finders keepers.”

Did you ever inspect a recreational development and note that the developer did not offer all of the lots for sale? The developer withheld some lots for his own account. It is because this sub-divider knows the value of “finders keepers.”

Did you ever see a Real Estate Broker divide a 40-acre tract into either four 10-acre parcels or one 20-acre parcel and two 10-acre parcels? However, the Broker does not sell or exchange all of the parcels. He retains one or two parcels because the Broker understands “finders keepers.”

The simple concept for basic Broker Estate Building is the value of KEEPING some of those vehicles he divided for future profit.

By dividing a 40-acre parcel, you normally have created an increase in value. This fact normally can be substantiated by the developer that “cuts” up a parcel into lots. The developer expects to make a profit for his work; he is placing the smaller parcels within financial reach of the marketplace, and hopefully, creating a lasting development. Each smaller parcel will cost a retail price. If you add this retail price, plus improvement costs, carrying cost, sales cost, and then subtract the original purchase cost, you’ll quickly see the developer’s profit. This profit will be weighed carefully against the total risk involved. So, division of land normally increases value.

With full knowledge that land division increases value, the Estate Building Broker will not exchange or sell all of his parcels. This “no sale” concept is sometimes hard to restrain with “quick profit” tempting the Estate Building Broker – and who doesn’t like quick profit?

The Estate Building Broker will take one or more parcels and file them away for future benefit. He has, in fact, “found” a good investment, and now is “keeping” it for future benefit. Why?

1. The other owners will increase value by reselling (hopefully) for greater amounts.
2. Every time someone builds or otherwise improves his land around your land, an increase in value normally will take place.
3. Your tax counsel probably will tell you that long-term capital gains are better than short-term capital gains.
4. You have warehoused an equity for future appreciation (consider the cost of holding).
5. You have a valuable equity to use or “toss” into a transaction at a later date when you need it: a property with a history and comparables.
6. Future zoning changes may increase your value (many of our subdividers have been retaining service station sites and small shopping center sites for years with this formula).
7. The activity of sales and changes in the subdivision normally will call for increases in your value by maintaining a price compatible with the sellers.

All too often, Real Estate Brokers pass by healthy future profit by taking a quick, short-term profit. The Brokers who are building larger and worthwhile estates are those who understand many estate building formulas and, certainly, “finders keepers” is an important concept leading toward a larger estate goal.