Investor Seeks Advice
Hi, I currently reside in South Florida, and have available a substantial amount of capital to invest. I have a long time friend who's worked in the building industry most of his adult life ( primarily laying concrete foundations on new structures)
He has suggested that if I invest a total of 150k, 100k for the building of a single family home and 50k for the land, a profit of 150k would be a realistic expectation.
The scenario goes like this: spend the 150 in the manner suggested above, sell the finished product after completion (6months to a year to be completed) for 300,000k at a taxable profit of 150k.
I would like to know if my friend's scenario is a realistic one, not that I don't trust him, is just that neither one of us has much experience in the process.
I reside in Miami Fl. Thanks in advance for any and all advice you are willing to share.
That is a high profit margin, and not seen very often. Don't get your hopes up.
But, if you know you will at least get your money back, go for it. On your first deal, anything over your original investment is gravy.
It's realistic, if that kind of house on that size lot in that neighborhood sells for $300k, and can be built for $150k inclusive. If the numbers work talk to a bank about a construction loan. With leverage (using other people's money) you can do more houses in the same amount of time and make more moey.
Try to get your buyers' signatures on the contract before you start building, although that might be difficult with no track record. But run a few ads - who can tell?
BTW, if you have to build roadway, that's VERY expensive.
Selling a new home for 300k in the miami area should be no problem, what Iam worried about is the 50k to cover a land parcel and 100k to cover the cost of a home construction( aprox 1200 to 2000 sq f) If anyone with knowledge of prices in the greater miami area reads this plese give me a heads up.
Also construction time: is 6 months unrealistic? how about 6 to 12 months??
Thanks abunch for the info.
6 months for a 1200 to 2000 foot house should be no problem. Bear in mind though you have permitting to go through as well plan check and other obsticals. It all depends on how busy an area is as well.
Your profit margin is to high. 20-30% would be typical being a new developer and all. Don't forget about things like selling costs, holding costs and depending on your tax situation any gains you may have to claim, and the biggest expense of all is you have a partner. All I'm saying is make sure your numbers are tight and leave some wiggle room. Good luck!
I to am in SFL but on th ewest side. Blank Waterfront canal lot is min. $250k lot Build Out $200K. Off water lot $50K + $150 sells for $225-$250. 9-12m for permits 6-9Mos finish out depending on season ( wet or dry?)
It will work if you have the burning desire and persistance.
Bank of America has a 5% dn plus, closing costs loan for lots. Interest only for 5 years. Thats
a lotta time to put a deal together but, who needs that much time with this web site.
WOW, what a great web site. Did I die & go to Heaven??
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A good estimate for construction is 100 per sq. ft. on average, and it might be more there in Miami. Considering that, you'll probably spend at least 120-200k on the construciton given your suggested sq. ft.
Depending on the housing and you not outpricing yourself...
Yes do it!
webd71,
Yes it can be done, depending on where these properties will be located. We build 2 family homes here in Jersey in about 4 months from the date of breaking ground. What will set you back the most are inspections. Will you be building or hiring a GC?
Repoman
I suggest investing instead in pre construction condos - esp. waterfront. You can oput as little as 10% of the cost of the condo, with a title company, and in 18 to 24 months you will have to close. Watrewrfront condos have gone up 15%+ a year. You can either sell at a simultaneous closing or close and flip once you have furnished it.
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