Financing A Pre-construction Flip
I'm new to this form of investing and have purchased a pre-construction phase 1 home with the idea of reselling before moving in. My question regards funding the transaction. The contract does not allow assignment and I will have to close with the builder, so I'd like to close as in-expensively as possible. Would a combination of cash and taking a HELOC on an existing property be a wise way of financing the deal? Are there any other suggestions hat would help?
Thanks in advance,
Pete :-? [ Edited by pholahan on Date 06/27/2004 ]
How strict is the no assignment clause.
One was discussed here last week that allowed a sale on change of job.
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On 2004-06-27 15:06, cjmazur wrote:
How strict is the no assignment clause.
One was discussed here last week that allowed a sale on change of job.
The Transfer and Recording clause states: " You may not assign or transfer this Agreement without Our permission."
I'm a newbie learning about wholesaling. I have a couple basic questions on this post:
1. What's a HELOC?
2. What is assignment?
Thanks for your patience.
Ireally wonder if the strongly prohibation clauses are enforceable.
heloc=home equity line of credit
assignment is "selling" someone else, the rights you have under a contract.
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On 2004-06-29 15:39, cjmazur wrote:
Ireally wonder if the strongly prohibation clauses are enforceable.
Not sure I'd really want to test it with $610,000 hangin in the wind.
curiously, how are u going to make a profit and how big will it be? did u get a nice pre-construction discount to pad a profit onto or do the new homes appreciate rather quickly in your area? iwas considering this myself but do not see how all the new build headaches for a home buyer can possibly be worth the profit unless it's big enough
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On 2004-06-29 23:00, tonydicorpo wrote:
curiously, how are u going to make a profit and how big will it be? did u get a nice pre-construction discount to pad a profit onto or do the new homes appreciate rather quickly in your area? iwas considering this myself but do not see how all the new build headaches for a home buyer can possibly be worth the profit unless it's big enough
This particular property was the last home in phase 1 of what will eventually
be 4 phases. Phase 2 will already be priced $40,000= higher by the builder. There is very rapid home appreciation where I live and a shortage of homes on top of that.
I also invest in pre-construction homes and have been able to assign my contract although it clearly states that you cannot in the sale agreement....the key is to find your buyer then ask (nicely!) if the builder would consider doing this for you....explain your situation....and why he should help you...perhaps you can purchase another home from him in another phase if the development is still a good investment....or you've had a job change or family circumstances don't allow you to go forward with the purchase and you don't want to lose your deposit never mind your good reputation, etc. I find that this is easier to do with the smaller builders....right now in Florida everyone is trying to do the same thing, so it may be impossible to do this for one person and not another. When investing in pre-construction deals you always need to assume that you will not be able to assign the contract and you will need to close...more often than not these costs are significant so add them into your equation.
Florida lender's are very easy to deal with in flipping contracts. I just closed a deal on 07/02/2004 in Florida like this. The first contract holder closed with the developer, then the new buyer closed with the original buyer all on the same day. The deeloper got his check , the first buyer got their check and the end buyer moved in all weekend.
Lori
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I'd like more info on this type of flipping. I don't understand when to get in: at the very beginning, during closeout of any phase, the beginning of any phase in a multi-phase development, or at the very end closeout of a multi-phase development. I understand there are people in my area who are buying spec homes then doing a double closing and making about $30K on this venture. Can someone explain to me what exactly DRIVES this profit? Where does it come from? I'd really appreciate any info anyone can give on this.
beth
Quote:
On 2004-07-04 22:07, tinman1755 wrote:
Florida lender's are very easy to deal with in flipping contracts. I just closed a deal on 07/02/2004 in Florida like this. The first contract holder closed with the developer, then the new buyer closed with the original buyer all on the same day. The deeloper got his check , the first buyer got their check and the end buyer moved in all weekend.
Lori
Lori,
Thanks for your reply. I'd like to try to keep my selling costs as low as I can and I would assume a double close would not help me meet that goal. Again, I'm new to this form of investing and am assuming an assignment of contract would be less expensive than a double close.
beth, its real easy to figure ot "when" to get in. find out what a builder is charging per square foot to build a new home and then figure out how much a piece of land will cost and all the costs to develop it. add all that up plus any other costs that will you will have and then see what a house that size will sell for in your area and if there is a good profit in it then go for it. the key is to educate yourself on the devolopment of land(septic/sewr, water, clearing, permits etc etc) so you can get a accurate number. I have a builder here who will build a very basic but well built home for 40 to 50 dollars a square foot which is very good. I am having one built now and when its all done I will profit at least 40k. A good friend of mine just sold his spec home and made 50k. shortage of homes + overpriced exsisting homes = a good profit for new construction.
Quote:
On 2004-07-05 15:33, dlitedan wrote:
beth, its real easy to figure ot "when" to get in. find out what a builder is charging per square foot to build a new home and then figure out how much a piece of land will cost and all the costs to develop it. add all that up plus any other costs that will you will have and then see what a house that size will sell for in your area and if there is a good profit in it then go for it. the key is to educate yourself on the devolopment of land(septic/sewr, water, clearing, permits etc etc) so you can get a accurate number. I have a builder here who will build a very basic but well built home for 40 to 50 dollars a square foot which is very good.
:-o WOW, $40 to $50 per sq. ft.!!! You obviously are not having this done in So. FL. How much will it cost to permit and develop the land where you live? :-?
When I bought the house in which I'm currently living, the builder paid for all closing costs except the first $500. I would think if you coupled that with a low or no closing cost short-term loan you could do a double closing and still have that built-in profit. I am researching this opportunity in my area and will definitely look into changing that clause forbidding assignment.
Sounds like the answer to my question is to get in as a phase is being completed and you know that more expensive homes are also going up nearby. Thanks for the input.
Beth :-D
Times change, but in Calif. an awful lot of investors, builders and developers begin projects for which they are not financialy qualified to complete. Just why this is I do not know. Perhaps it is the example of the Film Industry in which this type of conduct is almost standard.
An example, a builder began some really nice Condo's just south of the Strip in West Hollywood. Two bedrooms, two baths view of the rooftops and the city. Good facilities and parking for two cars per unit and some guest parking so you could buy another space.
But alas, he did not have enough to carry himself through the period of construction and he was dealing with a bank that ran its own project control and they were tight. No little goodies enroute.
I gave him a check for six www.units.The full 5% down. Paid it into his escrow account and allowed an imediate withdrawal to his account. In exchange I got the units at about 30% off and all I did is sit and watch the lead out of sales and checked to see whence came the financing. His sales crew as they ran short of units then sold my units and everybody was happy. I kept one for kicks, you know like a straw in the wind. It worked well.
Cheers Lucius
[/quote]Lori,
Thanks for your reply. I'd like to try to keep my selling costs as low as I can and I would assume a double close would not help me meet that goal. Again, I'm new to this form of investing and am assuming an assignment of contract would be less expensive than a double close.
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Of course assignment would be less expensive. But what have you got right now. Making money without coming out of pocket with any is a win win situation. I have learned of the last 16 years you have to start somewhere.
You state you are "new" this would be the safest way for anyone that is new to start. You state you have a goal, don't over speculate what you have never done. Slow and Steady has always worked for me. People who try to move too quickly don't learn enough to stay on top.
Lori
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