Case Study of the Five Point System

 

 

PROSPECTIVE PROPERTY 1 A 4+ acre property was listed on the web for $40,000. How high does it rank on the rating chart?
CRITERIA 1: ACCESS I asked these questions: What’s the access? Can we reach the property? Is the access path well traveled? Is the access lawful? Do we need a tank to mow down trees for the property? In this example, the property was just one road removed from the primary highway, access was quite great. Th e road was quite flat. Th e smallest vehicle would have the ability to access the property from the highway, in fact there was a driveway. Th e road from the highway to the land was gravel, so the traction was great. Out of a possible score of 20 for accessibility, I’d rate this a 19.
In this instance, the land was a rectangle. There were many big pine trees, and the lot was straight across from state land to the south. This meant no neighbors to the south, and the views were nice and quite secluded. I would rate this design another strong 19.
CRITERIA 3: LOCATION The property was less than an hour away from a major city, 7 miles from a small town, 10 miles from a medium sized city, and less than 2 miles from a public boat launch for fishing and great boating. I’d rate the place a score of 15 out of a possible 20.
CRITERIA 4: DEVELOPMENT POTENTIAL In this particular property, all improvements (water, power, septic) was made. The well produced 5+ gallons per minute and a three bedroom gravity septic system was installed. Power and telephone were installed, with power to the well. A three bedroom mobile home was on the property. With all these improvements to the property and a mobile home, the standards score is a company 20.
CRITERIA 5: PRICE For this property, the cost was $40,000. A 12 percent return return means I’d double my investment in six decades. I ended up making $470/month, for a 14 percent annual cash on cash return. I would rate this score on cost as a 17.
The whole score for Property 1 was 90/100. This property was a very good buy and a good bet for secure cash flow.

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