An Interesting Idea

by Dual Income No Kids on September 25, 2006 · 0 comments

Last week, we blogged about inexpensive land in West Texas. Even though the land is basically economically worthless, an interesting business idea did occur to me.

The main idea would be to purchase a block of desert land, subdivide it into small blocks (say 1/4 acre) and market the small plots as a novelty or specialty gift. Just for fun, I did some back of the envelope calculations to see how a likely return would pan out.

Assume you could locate 100 acres for $20,000. (This can be done, according to a couple of the websites I visited). Next, I assume that you could subdivide each of the acres into quarter acres (100*4=400). Provided that each 1/4 acre could be sold for $300, this could yield approximately $120,000 before taxes, expenses, marketing, etc. Assuming costs for expenses (40k), taxes (30k) and the cost basis of the land (20k), you’d walk away with $30,000 post everything.

That’s a 50% return on your initial investment of 20k.

Of course, this is just back of the envelope. To make the idea work, you’d need to convince people that economically worthless land is actually worth buying, as well as set up the necessary marketing and legal infrastructure. It could be fun, but being a full time grad student, I think I’ll explore options that are perhaps more local or less time consuming.

Best,

James

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