Real Estate 101: A simple guide to becoming (very) rich!

Here is an interesting little story that comes to me from my readers down in the Heart of Virginia: Prince Edward County, Virginia.

It seems that there are some fabulous opportunities to make a lot of money fast if you know your way round those dusty Courthouses in the Heart of Virginia. The story is about making money the old fashioned way and it goes something like this.

Once upon a time (actually a few years back), the Prince Edward County Board of Supervisors found itself in possession of some real estate that it had no immediate practical use for.

The piece of land in question was 74 acres in area and was covered with mature hardwood trees. The property was adjacent to the Town of Farmville and had access public water and sewer utilities subject to the normal hook-up fees. Town streets were immediately available and stubbed into the site. For those who may be unfamiliar with the area, Farmville is a vibrant and growing community in the Heart of Virginia and the home of Longwood University.

From local accounts, the 74 acre site was a pretty piece of land with a little stream and majestic hardwood trees over a hundred years old. Neighbors in the area reported seeing all sorts of wildlife on the land including deer, turkey, and everything in between. For years, children from the surrounding neighborhood played in the woods on the edge of town like children of yesteryear.

Apparently, sometime around early 2003, the Prince Edward County Board of Supervisors decided that there was no further use for the land and elected to unload it by public sale. The exact circumstances of why are not known and it is possible that this decision was made in a closed meeting for some good reason. We just don’t know what that reason was. It really doesn’t matter (unless someone wants to offer a reason).

In any event, the County published a public notice in The Farmville Herald, a local newspaper, on April 30, 2003 to announce the “Sale of Surplus County Property” and indicated that the Board of Supervisors “will consider offers” not later than 4:30 p.m. on May 12, 2003. A check of the calendar will reveal that the County provided a full twelve days from the first notice to the public to the deadline for bids on the land.

The public notice indicated that there was a timber appraisal available. That appraisal reported that the timber on the land had an estimated value of $166,000. There was no other appraisal for the land in general. Perhaps there was no need for a current land appraisal, but I will leave that for you to decide.

According to a report in The Farmville Herald on May 16, 2003, citizens appealed to the Board of Supervisors and asked many questions concerning the status of the land and its possible uses for the public interest. Citizens also asked for a public hearing on the sale of the land so that current citizen ideas and suggestions could be considered more carefully.

Citizen concerns were acknowledged by the Board of Supervisors Chairman William “Buckie” Fore. However, the request for a public hearing prior to the sale of the land was rejected when the County Attorney Jill Dickerson explained that the County already held the required public hearing to declare the land surplus back in August of 1996. The Board seemed satisfied that the seven year old public hearing was sufficient to fairly weigh citizen ideas and decided that no new public hearing to receive public input would be necessary.

To be fair, it should be noted that the same news report revealed that there was some doubt on the Board about the appropriateness of the hasty sale of the land. In that report, Chairman Fore asked one of his fellow Supervisors who had expressed qualms regarding the sale “…how much of the County’s money he would be willing to spend to answer the [citizen] enumerated issues?” While it appears from this report that there was some honest hesitancy on the part of some Board members, the overriding view of the Board, and Chairman Fore, was to accept the two bids and get on with business.

The low bid was in the amount of $150,000, an amount less than the appraised value of the timber ($166,000). This bidder apparently wanted the County to pay him or her to take the land. You can’t really blame someone for trying…especially under these circumstances.

The high and winning bid was $225,000. This bid was submitted by a well known local land speculator (name withheld). Subtracting out the appraised timber value of $166,000, this winning bidder walked away with the raw land for an estimated investment of $59,000 (remember this number).

A recent report in another local paper, The Crewe-Burkeville Journal, points out that this effective price for the raw land is equivalent to about $800 an acre. Considering that the site is located with immediate access to public water and sewer from the Town of Farmville, this is starting to sound like a pretty sweet deal.

Shortly after acquiring the land from the County, the land speculator harvested the timber. Presuming that the appraised value of the timber at $166,000 was approximately on target, what was left was the raw land that the land speculator obtained from the County for an effective price of $59,000. Consider…74 acres with public utilities available for $59,000 or $800 per acre…indeed, a pretty sweet deal.

Since then, the original land speculator was reported to have sold the land to another party. Most recently the second private owner was reported to have sold the land again. Courthouse records indicate that on May 25, 2005, only two years after the original land speculator acquired from the County the raw land for the effective price of $59,000, the same raw land sold to a new party for $725,000! This deal is getting sweeter by the minute.

Please let me repeat this for clarity: Effectively, the County sold the raw land in May of 2003 for $59,000 ($225,000 total sale price minus $166,000 timber value equals effective price for raw land of $59,000). Two years later the same raw land (with timber harvested) sells for $725,000!

Just looking at these basic numbers (all available in local news reports), this seems like the value of the raw land went from $59,000 to $725,000 in just two years. This seems to be over a 1200 percent increase in two years in basic value (correct me if my math is wrong).

Even allowing for incidental costs for attorneys, engineers, and various other middle men/women, et al, etc, whatever, it would appear that someone made a fairly good return on their initial investment.

I really do not want to speculate on exactly how much money specific individuals made on this deal. Probably there were a number of people in the chain of transactions who took a piece of the action on this little “economic development” venture. It is fair to say that significant money was made in a very short time.

Perhaps there were a number of players who did pretty well on this deal. But, as for the taxpayers who used to own this land, they may not have come out on this deal so well. The big profits by the private investors in such a short time suggest that the County may have given important County assets away way too cheap… way too cheap. (That's what some people might call an "orange jumpsuit" type of deal - you firgure it out!)

Interestingly, this same 74 acre site is now the subject of a highly controversial zoning application in Prince Edward County where the most recent owner is proposing 270 townhouses ( $40 to $50 million in potential value) If approved, the new zoning proposal would permit the largest residential development in the history of Prince Edward County (this matter probably has nothing to do with making a lot of money really fast). I am sure that the Board of Supervisors (the same people who sold the 74 acre site two years ago at a fairly modest price) will look out for the interests of the citizens and resolve this controversial zoning matter satisfactorily.

But back to the main story: I am probably making the idea of easy money too simple. The key to making a lot of money really fast is not as simple as the above basic facts may suggest. If you want to make similarly impressive returns on investments you have to know what to look for. Here are some basic tips.

Look for opportunities in counties where the Board of Supervisors does not bother to appraise surplus real estate before they sell it.

Look for opportunities in counties where the Board of Supervisors will accept seven year old public hearings a satisfactory way to evaluate current decisions.

Look for opportunities where the Board of Supervisors does not want to “waste” tax dollars answering silly questions from citizens.

Look for opportunities where the Board of Supervisors is willing to liquidate hundreds of thousands of dollars in County assets on the basis of a twelve day notice.

Look for opportunities where the Board of Supervisors really doesn’t care all that much about citizen concerns about management of valuable public resources.

One final tip: Where you find the above conditions, you might want to get to know your county officials… get to know them very well… and let them know that you too are interested in getting rich as quickly as possible.

Good luck.

PS: Many thanks go to those who contributed to this piece including The Farmville Herald, The Crewe-Burkeville Journal, my good friends the citizens of Prince Edward County, and those officials who have kindly provided the public documents cited in this article. As always, I want your feedback. If readers have further insight on this story, I welcome further comment and information. Keep those confidential comments coming. I appreciate the material.