Buy Lot, Build House, Sell For Profit?
I am interested in buying a lot, building a nice 3 bed/2 bath house on it, and selling it for a profit as soon as the construction is completed. The homebuilder has offered to build the house for 120k, and its a nice house. My question is, would it be better to buy a cheaper(~15k) lot and build on it, or a lot in a more expensive neighbprhood(say~45K lot)? Which would I be more likely to sell at a higher profit upon construction in 6 or 7 months? The area is a relatively hot area, known as Palm Coast on the eastern coast of Florida. Has anyone had much success doing what I described above? Thanks.
It all depends what's around. You don't want to put a house for $150K in $100K neighborhood. Do your market research first, see if people are building in the area, what are the prices, etc.
I am a realtor and know some agents who are building and selling a lot in Port St. Lucie. Some of them very successfully. With the most builders you will have to pull a construction loan, though.
Good luck
Are you going to hire a builder or be your own general contractor. I have heard of people, at least here in Illinois that do that very profitably.
I built once, and simply identified the lot to the builder, and he got his own construction loan. I only had to get the end loan when I bought the house at completion. However, this was not a business venture, and the builder made his normal profit. It was still a good deal to me as the lot and construction cost about $225,000, and I was able to get an equity loan 6 months later using an appraised value of $280,000. That was 10 years ago. Now same house is worth at least $335,000 today.
Hello Gorilla1,
The above posts gave some good advice as far as checking comps ect. I just wanted to add that if it's going to take 6 - 7 months to build a 3/2, you might want to find another builder as this should be able to be done in 60 - 90 days. This would help increase your profit margin. Just a thought : -)
Quote:
On 2004-07-16 16:44, gorilla1 wrote:
I am interested in buying a lot, building a nice 3 bed/2 bath house on it, and selling it for a profit as soon as the construction is completed. The homebuilder has offered to build the house for 120k, and its a nice house. My question is, would it be better to buy a cheaper(~15k) lot and build on it, or a lot in a more expensive neighbprhood(say~45K lot)? Which would I be more likely to sell at a higher profit upon construction in 6 or 7 months? The area is a relatively hot area, known as Palm Coast on the eastern coast of Florida. Has anyone had much success doing what I described above? Thanks.
I'm doing the same thing in Lake Havasu Arizona. This, like yours, is a single lot deal. I don't know how it will turn out as I am only in the permiting process now. When I was shopping for lots a while back I had the same delema. I ended up with a mid-range lot. I feel really good about it because I believe it will appeal to a broader spectrum of buyer. Unless it's a large, up scale 3/2 it may not belong on a top of the line lot. By the same token, if its a nice 3/2, and not a cramped formica shack, I wouldnt recommend putting in a C neighborhood. In my humble opinion, the answer on this is to take the middle of the road......Look for a 30k lot with little, if any, dirt work required. Good luck!