What is a land entitlement group investment?
Land entitlement is generally defined as the process of getting city approvals & permits to develop raw land or to change the use of an existing structure (ie: from residential to commercial or vice versa). A land entitlement syndication is a structure in which the developer raises capital from investors in order to fund the project. Land entitlement is highly complicated because the approvals are given by city council members and subsequently, residents who may or may not want the project to succeed. This is one of the riskiest types of real estate investments, which is also why it can be the most rewarding as well. It is incredibly important to only partner with a highly experienced real estate developer.
Here are several examples of past land entitlement projects:
Cannon Ranch 1b – Commercial Land
# of RealWealth Investors: 33
Property Location: Pasco County, FL
We purchased 26 acres of commercial land, adjacent to our residential development, the Mirada, for $380,000 (it had previously sold for $6.5M in 2004). We held this land until construction on Mirada began. We then sold half the land to a large grocery chain. Investors received all of their capital back and half of their preferred return in 2020. As we sell the rest of the land, investors will receive the remainder of their preferred return plus profit. Learn more about Cannon Ranch here.
Total Raise Amount: $1,600,000
# of RealWealth Investors: 29
Investor Return: 30%+ IRR
Property Location: Dublin, CA
We optioned a commercial property in the city of Dublin, California for $1.2M and partnered with a developer who got the land entitled for residential use. We then tore down the commercial building and finished residential lots which were sold to builders. The original plan was to sell the finished lots to builders for $14M. We received multiple offers for $20M and finally accepted an offer from Pulte Homes. Investors received over 35% annualized.
Pleasant Hill Project
Total Raise Amount: $2,500,000
# of RealWealth Investors: 47
Investor Return: 13%+ IRR
Property Location: Pleasant Hill, CA
We bought a commercial building in Pleasant Hill, California sitting on 3.2 acres of land. We re-entitled the land for residential use, tore down the existing building, finished the lots and then sold the subdivision to a national builder. Investors earned 13%+ IRR over an 18 month period.
PEI Mountain View
# of RealWealth Investors: 92
Property Location: Mountain View, CA
We bought a fully leased 208 unit apartment building in Mountain View California, blocks away from Google’s main campus. The business plan was to re-entitle to 716 units and then resell the plans and approvals to another developer. Unfortunately, the city council asked for 3 revisions to the architectural plans (even though the first one was great!) And residents pushed for more affordable units, of which we were able to provide 30%. Those delays negatively affected our timing. When we took the building to market, San Francisco Bay Area rents had softened, bringing down the future value of the property, which cut into the profits. Had we sold just 6 months earlier, investors would have made a very large return. This is why entitlement projects can be highly profitable, but also highly risky.
Are you interested in investing in a land entitlement project?
We don’t have these specific types of projects available all the time, but when we do they usually sell out quickly.
The SEC has a lot of rules about who we can and can’t discuss group investments with when they are available. Most of the time you need to be an accredited or sophisticated investor. To see if you meet those qualifications and to view any available projects that you qualify for, login to the investor portal or join here. If you haven’t already filled out our investor intake form you will be prompted to do so.