Any Creative Strategies

Hello all. . .I am a new poster here.

I recently was approved for a 500K construction loan.

There is a 7 acre waterfront lot of land in an exclusive gated community (where average price of home is 2 million) for sale for 900K.

Obviously, I can't afford that. . . but constructing a house on that lot would raise the value of both the land and the house. . .

Just wondering if there were any creative strategies whereby I could construct on that lot. . .

Has anyone had an experience like that before??

Comments(71)

  • NancyChadwick6th March, 2004

    Do you know if the 7 AC can be subdivided or is this just one building lot? If just one lot, $900K is really a retail price, meaning a price that only an end user would pay--not a price that a builder would pay (assuming new home value at $2 mil). If the 7AC could be further subdivided, then that's a different story altogether.

    If it's one building lot, my only suggestion is put it under purchase contract or option--some mechanism that gives you time to line up a builder and market the lot as a total package--that is, with X new home to be built on the lot for Y$. However, I don't know what the builder's construction price would be and thus if there would be enough in it for you, taking in account acq. cost of $900K + builder's cost (fee, construction cost, site prep costs).

    The builder would not start construction of the home until Mr. & Mrs. Jones had signed a purchase contract with you to buy the house on the lot.[ Edited by NancyChadwick on Date 03/06/2004 ]

  • 3rdChimpanZ6th March, 2004

    Thanks for replying nancy. . .

    I am not sure if the lot can be subdivided. .

    The average acreage of a home in this community is 5.5 acres.

    Do you (or anyone) know anything about subordination?? The owner of the property just wants to get rid of it from what I hear. . . so to me, that means she might be open to some creative arrangement.

  • NancyChadwick6th March, 2004

    If the owner has no mortgage and she's willing to take back paper and subordinate to a construction lender, that is helpful. However, you're still "stuck" with a price tag of $900K for one building lot. What I was saying is that if a new home would sell for only $2 mil and lot cost is $900K, that doesn't leave much for you after backing out the builder's cost + fee.

  • JeffAdams6th March, 2004

    ChimpanZ:
    Why dont you approach the lady. Take her to lunch, be really nice to her. Maybe you can talk her into doing a joint venture with you. She puts up her lot, you go and get a construction loan and build a nice house on it. If the lot is inside a gated
    community with homes around it, that means the utilities are in place.

    You should have no problem finding a
    contractor to build you a house as a developer for $75.00 to $80.00 a square foot.

    I would approach her and see if you can get her to come down in price and do the
    joint venture with you. You need to run the numbers and see what the actual projected cost are.

    Best Riches,
    Jeffrey Adam
    [addsig]

  • JeffAdams6th March, 2004

    Nancy:
    Could you give a cost breakdown if you purchased the lot for $900k, built a house on it and sold for 2mil? Lets say for example we are going to build a 3000 sq.ft. house. You could base this on the
    "average" cost for permits, plans, builder
    fees, acquisition cost, etc....

    I am assuming the utilities are already there since the lot is inside a gated community where houses have already been developed.


    Best Riches,
    Jeffrey Adam


    _________________
    "The only place success comes before work
    is in the dictionary." [ Edited by JeffreyAdam on Date 03/06/2004 ]

  • NancyChadwick6th March, 2004

    Jeff,

    As I put in my reply PM to your PM to me, a 3,000 SF home in my area would not command $2mil. House size would be closer to 4,500-5,000 SF. Builders in my area would not build high-end housing for $100/SF (and certainly not $75-80/SF)nor would they build at $100/SF with their profit included. In my area, $60-80/SF gets you production type housing with not many bells & whistles. If a builder in my area were to buy a $900K lot, the value of the end product (house on lot) would have to sell for closer to $3.5mil.

    land acq cost = $900K
    house const = $700K-1mil
    ??? = site prep, permits, util hookups
    $120K = marketing (advertising, RE commissions/MLS)

    I would also suggest checking to see what, if any, restrictive covenants may be in place on this lot--restrictions as to min. house size, building materials on exterior, etc.
    [ Edited by NancyChadwick on Date 03/06/2004 ]

  • JeffAdams6th March, 2004

    Nancy:
    From a retail standpoint you are probaby right in your pricing. That is if you got out the yellow pages and started calling up contractors for bids.

    From a developers standpoint, I could fly there and build a nice 4000 sq.ft. house
    and sub everything out myself for $70.00 a square foot very comfortably. This does not include plans, permits, architectural fees, lot grading, etc... Or I could find a contractor to build it for me for around $100.00 a square foot, not including plans, permits, architectural
    fees, lot grading, etc... I will throw in
    $100k to cover these expenses.
    Due to the fact this is in a gated community, it sounds like the utilities are
    probably there. I think there is some money to be made there. I did a similiar
    deal like this in Newport Beach a few years back and the numbers were around the same. The contractor built two two 3000 sq.ft. duplexes on a lot that I split. It cost me $300,000 per building.

    What was the last house you built Nancy,
    and what did you pay to have it built?
    Just curious?


    P.S.- I would like to know what the famous "Lucius" would have to say.

    Best Riches,
    Jeffrey Adam
    [addsig]

  • 3rdChimpanZ6th March, 2004

    Actually guys. . .there is a bit more to this story.

    I want to buy, hold, and live the property for a few years. . .

    My wife happens to be an architect, and with her network of builders, we have a 4560 home, that can be built with for 300,000.

    Since I qualified for 510K. . . and we can build the house for 300K, that means we have 210K "extra". A bit simplistic, I realize. . .

    But I was hoping I could draft up an agreement whereby, I give the seller perhaps a 100K downpayment. . .and enter into some sort of agreement.

    But I am just not sure. . .

    We do intend to sell it in 3-5 years for a profit; therby recouping the lot and house costs. . .

    Any ideas guys??

  • JeffAdams6th March, 2004

    ChimpanZ:
    Great Job! Your numbers were right in line with mine! I new you could build a
    4650 sq.ft. house for $300,000 if you were connected. I would recommend you figure in 10% overrides as it always happens.

    One other piece of advice I would like to give you is when you hire your contractors, you need to give them a separate contract that they sign stating:
    "No Change Orders"

    Contractors are famous for giving you the
    bait and switch to get their foot in the door! You also want to stay ahead of them always in terms of the draws you give them.

    My last piece of advice is to see if the lady
    will carry paper. I know a guy who was in a similiar situation. He bought the lot,
    parked his RV on the lot for 2 years until he could come up with the funding to build his dream house. Just some food for thought!

    One last thought, maybe you could have Lucius negotiate a 99 year land lease
    and you guys could do a joint venture whereby he puts a couple of his containers on the property.

    Best Riches,
    Jeffrey Adam

    _________________
    "The only place success comes before work
    is in the dictionary."[ Edited by JeffreyAdam on Date 03/06/2004 ]

  • NancyChadwick6th March, 2004

    3rdChimpanZ,

    So you are buying this property, not as a developer or builder, but as an end user. Thus, you are willing to pay retail prices for the land. That was the point I had tried to make to Jeff (apparently without success). That end users will pay much more for a lot than a builder will.

    You see, in my area, builders wouldn't buy this lot for $900K unless they could sell the total package for close to $3.5mil. So there's a big difference between the type of home you would like to have built for your personal residence and the type of new home that would sell on the open market for $2mil.

  • JeffAdams6th March, 2004

    ChimpanZ:
    At 900k for the land, you are close to wholesale pricing. If you could get the
    house built for $300k and have an end product worth $2mil. you are doing outstanding. If I could find those deals, I would be all over them! It would not take too many of those deals before you were sitting on your own private island sipping your pina colada! Could you imagine if
    you sold it for 3.5 million?

    If you could negotiate with the lady and go direct and get it for an even lower price, you will do even better.

    So what type of style are you going with?
    Mediterranean, Spanish Style, Tudor,
    Cape Cod? I bet it is going to be a beautiful house.

    Best Riches,
    Jeffrey Adam






    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/06/2004 ][ Edited by JeffreyAdam on Date 03/06/2004 ]

  • MikeWood6th March, 2004

    Forget the 900k lot and find something more price appropriate ( 100 - 200k )

  • Lufos6th March, 2004

    A Gated Estate.and water front. I can see it all now. The lovely lady gives you a 99 year lease for $200 a month. I arrive at the gate with four big trucks on the back of which are four lovely Brick Red 40 foot long boxes. they still have their shipping numbers and lot stickers. Oh they are prim.

    The man at the gate asks me whom I have come to visit. I explain that we have a date with a lot and we are going to combine these lovely steel ribbed boxes into a house that will be truly stand alone.

    The guard will not let me in. Ever...


    Come on guys, please do not mix a desire to live in the grand manner for a few years with a development project to make a few bucks. Who do you think you are? The Donald da Trumper? You have to get to his level to play that game. You know so highly stretched that if you went down half the banks in Wall Street would have to declare a moritorium

    My suggestions coming down to reality.
    Offer her a reduced price for the lot after exposing to her the truths of construction. Then obtain a subordination clause for the balance with a payment plan to begin some six months after completion of construction. Then build in conformance with the strange taste of those who live in and around the lot. Complete, have the big party, invite all the neighbors. Pour a really good champaign and serve long dead funny fish on crackers. Perhaps a stylish Ice Sculpture parked in the punch bowl. You will sell it by offering to make a contribution to one of the neighbors strange charities in exchange for a Buyer.

    If your wife desires to be the architect of record and she is not inclined toward Modernisim. I am sure you will do well. Besides there is enough in the construction loan to make it all happen and then some.

    Now this was fun. Jeff and Nancy the two opposite sides of the coin. Heads I win, Tails you loose. Luv you all.

    Lucius cutting steel today.

  • JeffAdams6th March, 2004

    Great Post Lucius!

    I will have to throw that into my bag of tricks! 6 months with no payments until after construction. I knew you would agree they could build the house for the
    price I quoted!

    Maybe we could sneak the containers in when the guards are sleeping at 2:00am.

    Best Riches,
    Jeffrey Adam

    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/06/2004 ][ Edited by JeffreyAdam on Date 03/06/2004 ]

  • NancyChadwick6th March, 2004

    Jeff,

    Builders make more money by never sticking the shovel in the ground. I'm surpised you don't know that.

    For instance, I sold a builder land for $700K; he got approvals and then he flipped. He collected an assignment fee of $112K. He retained an outparcel (existing house) which he sold for $242K. So he made $354K on a $700K deal. He doesn't drive a Ferrari but certainly could afford one on that deal alone.

    Builder sells new construction, 3,753 SF house on 1 AC lot for base price of $515,950. Retail sale price/SF for the total package = $137. Comparable bldg lots in that area (Lower Gwynedd) retail for $225-250K. The builder didn't pay $225K per lot because he bought the land wholesale and subdivided. It's production housing with some bells & whistles and his bldg cost is $85-90/SF.

  • JeffAdams6th March, 2004

    [quote]
    On 2004-03-06 21:32, NancyChadwick wrote:
    3rdChimpanZ,

    So you are buying this property, not as a developer or builder, but as an end user. Thus, you are willing to pay retail prices for the land.
    -------------------------------------------------------
    Nancy:
    Just because you are buying the land as an end user does not mean you are willing to pay retail prices.

    Have you ever heard of the term:
    "Owner-Builder"

    We all know that builders usually pay a lot less than end-users or retail buyers.

    The point here is if you are a large builder that builds large tracks vs. a small developer who does single projects you are going to have to use a different
    cost analysis of the project. They did a survey one time in California on what a builder actually made on a track of 100+ houses after it was all said and done.
    Guess what the average profit was?
    In the single digits. Go figure.

    You are absolutely right. Hire a big-time builder and pay $150.00 - $300.00 a sq.ft. or hire a General Contractor as a developer or "owner-builder" and pay
    $80.00 - $100.00 a sq.ft. I know what I would do. I know what "ChimpanZ is going to do. The bottom line is he is going to have a 2 million dollar house for a projected cost of less than $1.5 million,
    maybe even less if he gets an even bigger discount on the lot.

    I still think he should partner up with Lucius and put 3 or 4 containers on the
    property.

    Best Riches,
    Jeffrey Adam

    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/06/2004 ]

    [ Edited by JeffreyAdam on Date 03/06/2004 ][ Edited by JeffreyAdam on Date 03/06/2004 ]

  • NancyChadwick6th March, 2004

    Jeff,

    It's not a question of "large tract" v. small tract. The methodology is the same. That $700K parcel produced only 8 building lots. Price per lot after flip was $101,000. Value of end product: $400-500K. It wasn't bought by a big builder. It was bought by a small builder.

    On 2004-03-06 22:09, Lufos wrote:
    ....

    "My suggestions coming down to reality.
    Offer her a reduced price for the lot after exposing to her the truths of construction. "

  • JeffAdams6th March, 2004

    [quote]
    On 2004-03-06 22:09, Lufos wrote:

    If your wife desires to be the architect of record and she is not inclined toward Modernisim. I am sure you will do well. Besides there is enough in the construction loan to make it all happen and then some.
    --------------------------------------------
    Nancy, you should read my original post to ChimpanZ. You have stated in your post it would cost too much to build a house based on what he is paying for the lot. ChimpanZ came back and told you he could get it done for less than half of what your projected costs were.

    I rest my case.

    Best Riches,
    Jeffrey Adam


    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/06/2004 ]

    [ Edited by JeffreyAdam on Date 03/07/2004 ]

    [ Edited by JeffreyAdam on Date 03/07/2004 ][ Edited by JeffreyAdam on Date 03/07/2004 ]

  • NancyChadwick7th March, 2004

    [quote]
    On 2004-03-06 23:52, JeffreyAdam wrote:

    Nancy, you should read my original post to ChimpanZ. You have stated in your post it would cost too much to build a house based on what he is paying for the lot. ChimpanZ came back and told you he could get it done for less than half of what your projected cost were.

    I rest my case.



    Jeff,

    Now please don't misrepresent any more facts here. That's not appropriate.

    You know that initially 3rdChimpanZ did NOT say that he wanted to buy this property to live in it.

    You know that my initial posts reflected the assumption that he was buying the property as an investor in order to flip or assign or resell it.

    If 3rdChimpanZ were buying the property in order to flip it, the numbers wouldn't work here at a lot price of $900K. How do I know that? Because I've been selling land here for over 20 years to builders and developers.

    Now if a contractor is willing to build a house for 3rdChimpanZ for $60/SF and that includes the contractor's profit, that's real cheap. I've seen houses built here for $60/SF by small builders. I hope 3rdChimpanZ's contractor does a better job.[ Edited by NancyChadwick on Date 03/07/2004 ]

  • JeffAdams7th March, 2004

    [quote]
    On 2004-03-07 00:19, NancyChadwick wrote:

    Jeff,

    Now please don't misrepresent any more facts here. That's not appropriate.
    If 3rdChimpanZ were buying the property in order to flip it, the numbers wouldn't work here at a lot price of $900K. How do I know that? Because I've been selling land here for over 20 years to builders and developers.

    ------------------------------------------------------

    Nancy:
    I am not misrepresenting any facts here,
    just the truth! I am speaking from experience having done over 300 deals
    in the past 10 years, including new construction projects. This is based on my "experience" not what somebody
    told me.

    I realize that the builders/developers tell you what their construction cost are and you are basing your analysis on this.
    Did it ever occur to you that they are telling you this so that you can go back and tell your seller of the land a pumped up price for construction in order for them to get a better deal? Look at your example you posted earlier. Sounds like your seller got the bad end of the deal.
    Again, I am speaking strictly from experience. Nancy, you stated: "What I was saying is that if a new home would sell for only $2mil and the lot cost is $900k, that doesn't leave much for you after backing out the builders cost and fees." Again I have to reitterate that if you are talking from a "retail" standpoint, you are correct. However, from a developer's standpoint, it is a good deal. That's all. It sounds like ChimpanZ is going to make out like a bandit.

    Here are my padded numbers:
    Lot- $900k
    Construction cost- $400k
    Plans, permits, fees -$50k
    Lot grading and prep- $60k
    Carrying Cost- $40k
    Sales Cost- $150k

    Projected cost of project-$1,600,000
    Selling price-$2,000,000

    Total Profit- $400,00

    Best Riches,
    Jeffrey Adam


    _________________
    "The only place success comes before work
    is in the dictionary."[ Edited by JeffreyAdam on Date 03/07/2004 ]

  • concrete7th March, 2004

    Hi 3rdChimpanZ (interesting),

    I had posted a more indepth post, but it was deleted. So I'll attempt to leave out what I think might have been offensive.

    I have experience...$250,000 price range...homes built on an owners land for $70 per sq.' depending on the complexity of the house design. A $2 mil. home w/nicer features would probably be easily done for $80 per sq.', again, subject to design. Since you already know your cost of about $66 per sq.', you've got a great price and opportunity here. Especially for your area.

    I'd get a very specific contract with your builder, perhaps show the make and model of appliances and fixtures used (or at least specific price costs), flooring and cabinetry specifics, etc. Mainly showing the cost allowances so you'll be guaranteed those associated with a $2 mil. property. I like the idea of No Change Orders (or agreed upon change orders)...they protect you and the builder. Clarity in the contract is paramount for not losing money and knowing what to expect.

    I would not wait 3 - 5 years to develop this property if your market anaylsis shows the time is right now. I'd offer full price. Either get the deed and a note, or put the deed in the name of an LLP or LLC if the owner wants to remain on title. Balloon note to be paid at time of sale of home. They might want a completion bond. I'm sure you know, never build on someone else's land.

    I'd make sure I was building something that would sell easily, throughly checking comps in the area, length of time on the market, as well as design, leaving creative urges for your dream home you build from the profits.

    So you've got:

    land cost: $900,000 (deferred)
    preconstruction cost: 100,000
    house cost: 300,000
    sales cost: 200,000 (from closing)

    Total: $1,500,000 with a $500,000 profit. My prices may be padded a bit, but I'd rather be surprised the other way.

    I think you've got a potential winner. Much luck with your project.

    Terry

  • DealerJo7th March, 2004

    ChimpanZ:,

    You don't even need the money. Be creative. You see, I tend to agree with Jeff. Being nice is the key in all RE transactions. After adopting Nancy's initial view, Jeff appears to know what he talks about. The lunch(es) and being real nice solves most of the problems for many creative investors. Alas, knowing that, I can see where he is coming from. First you have a lunch with land owner. She sings deed to you and then you have a lunch with builder who puts his money to build you the castle and then you have one super lunch with realtor who accepts $2,500 under table in exchange for selling the estate for you. Why not, you are being really nice to her too.

    Thereafter, you show one day in The Big Bank and after a nice smile to everyone, you had out for a lunch with Mr. Banker himself. This time around, he pays for the nice lunch because all the moneys are in your hand and he wants them too.

    Some students of this technique (I heard) reported properties being even given to them for a few nice smiles, just for being "real nice". Real nice rules guys! It is called "Nice lunch" no money technique that now gains tremendous popularity among rapidly growing rank of real estate investors with no dime to invest but a good will and intent to be nice.

    Hello guys, I am creative investor my self and I believe in Jeff's nice lunch technique. I also believe that container houses are future of The American Dream. If the export of the jobs continue within current rates, where we going to live after 89% of the population declare bankruptcy then in the RV's or safe and sound container homes.

  • NancyChadwick7th March, 2004

    Jeff,

    First of all, I was NOT representing the seller of the $700K parcel and never said I was representing the seller. The seller was a FSBO. I was representing the builder. I brought the builder the property that earned him $354,000 on a $700K deal.

    Secondly, buying a $900K lot to sell a finished product worth $2mil may be a "good deal" by your standards, but not in my area. As I have said several times before, builders here would buy a $900K lot only if they could sell the finished product (total package) for around $3.5mil. The MLS here is littered with "expired listings" of development properties that haven't sold because they aren't priced right, including one-lot properties.

    Thirdly, as I have said several times before (including in my replies to the barrage of PM's you have been sending me since last night), 3rdChimpanZ did not explain that he was buying the lot for his personal residence until we were several posts into the topic. Thus, my initial posts were based on the reasonable assumption that he was buying the lot as an investor, not as an end user. Hence my statement: "...if a new home would sell for only $2mil and the lot cost is $900K, that doesn't leave much for you after backing out the builder's cost and fees."

    When I have represented land sellers, I understood how builders and developers in the market here analyze economic feasibility (because I have done it for them when I was an employee in several building organizations) and I priced the property accordingly. This is not to say that the buyer's first offer was accepted, because there always is negotiation and often it is rigorous and carried out over long periods of time. (From time to time as the seller's agent, I have even been subjected to verbal abuse from builders whose idea of aggressive negotiating includes such acts of unprofessionalism.) However, what I am saying is whether the property consisted of 10 lots or 900 units of housing, I got the properties sold for my seller clients and we got to settlement.

  • concrete7th March, 2004

    Hi,
    Just a couple of observations here, not meant to be offensive. It seemed to me that 3rd ChimpanZ was looking for ideas of how to make this project happen, and he got some great examples of building and developing cost from different areas of the country that will help him throughly apply a little extra knowledge to his project.

    The amount of acceptable profit in a project varies greatly from person to person as shown in every type of REI. One might just be happy with living on the property at a reasonable cost for a few years.

    Also, I apologize to 3rd ChimpanZ . I just re-read and caught where you want to live in the property for a few years. Makes a difference. Perhaps the property owner will give you a five year or more 2nd balloon on the property. True, it's a lot of cash, but you never know. Perhaps, again, as a partner in the property for a profit split when sold. Her investment would basically be earning interested if the market appreciates comparably. She'd just have to look at the numbers.

    Quote:
    On 2004-03-06 22:15, NancyChadwick wrote:
    Jeff, Builders make more money by never sticking the shovel in the ground. I'm surpised you don't know that. ...
    (snip)


    Yes, but maybe they're wearing their developer's hat? We all know there are many different types of builders with different achievement goals for their business. A lot depends on that plus the opportunities for each builder in their area. Some smaller builders are forced to pay retail prices for lots in subdivisions if they can even get in at all, and they feel lucky just to get a lot.

    Also each builder, even in the same area, is not able to make/profit/or build for the same price per square foot. Different amounts of overhead, cash in company, availability of credit, and differing materials cost greatly affect his business. Not to mention what the market will stand, and even who his network of buyers is...what circle of people he moves in. I've just developed a way to buy true wholesale materials. It will affect my pricing.

    I'm enjoying the exchange of perspectives!

    Let us know if you work a deal for your lot 3rd .

    Terry

  • DealerJo7th March, 2004

    ChimpanZ:,

    You don't even need the money. Be creative. You see, I tend to agree with Jeff. Being nice is the key in all RE transactions. After adopting Nancy's initial view, Jeff appears to know what he talks about. The lunch(es) and being real nice solves most of the problems for many creative investors. Alas, knowing that, I can see where he is coming from. First you have a lunch with land owner. She sings deed to you and then you have a lunch with builder who puts his money to build you the castle and then you have one super lunch with realtor who accepts $2,500 under table in exchange for selling the estate for you. Why not, you are being really nice to her too.

    Thereafter, you show one day in The Big Bank and after a nice smile to everyone, you had out for a lunch with Mr. Banker himself. This time around, he pays for the nice lunch because all the moneys are in your hand and he wants them too.

    Some students of this technique (I heard) reported properties being even given to them for a few nice smiles, just for being "real nice". Real nice rules guys! It is called "Nice lunch" no money technique that now gains tremendous popularity among rapidly growing rank of real estate investors with no dime to invest but a good will and intent to be nice.

    Hello guys, I am creative investor my self and I believe in Jeff's nice lunch technique. I also believe that container houses are future of The American Dream. If the export of the jobs continue within current rates, where we going to live after 89% of the population declare bankruptcy then in the RV's or safe and sound container homes.

  • JeffAdams7th March, 2004

    [quote]
    On 2004-03-07 13:42, NancyChadwick wrote:
    Jeff,
    Hence my statement: "...if a new home would sell for only $2mil and the lot cost is $900K, that doesn't leave much for you after backing out the builder's cost and fees."
    --------------------------------------------------------
    Nancy:
    I guess if $400k - $500k profit is not a good deal. I think I am going to consider packing my bags and moving to PA so I can make the real money! When I move there could you please show me the lots for $900k that I can build a 4625sq.ft. house on and sell for $3.5million?

    I figure I will do 9-10 of those deals and then buy my own island and kick back on the beach on my laptop while visiting TCI while I am sipping my Pina Colada.

    Best Riches,
    Jeffrey Adam



    _________________
    "The only place success comes before work
    is in the dictionary."[ Edited by JeffreyAdam on Date 03/07/2004 ]

  • NancyChadwick7th March, 2004

    [quote]
    On 2004-03-07 14:42, JeffreyAdam wrote:

    "Nancy:
    I guess if $400k - $500k profit is not a good deal. I think I am going to consider packing my bags and moving to PA so I can make the real money! When I move there could you please show me the lots for $900k that I can build a 4625sq.ft. house on and sell for $3.5million?"

    Jeff,
    $400K-500K profit is your number, not mine.
    If you come to PA, I'll be happy to show you the $700K property my builder client made $354,000 on. Also, I'll be happy to show you the MLS list of overpriced "development properties" that haven't sold.

  • WheelerDealer7th March, 2004

    Okay,

    "ding" every one to there corners!!


    lets settle this by everyone giving an opinion as to what a realistic expectation of profit should be on a deal like this.

    Jeff seems to think that this deal will net 400k at a min.

    Nancy, Do you think this deal would net 400k as it is described?

    Who would spend 1.6mm to make 400k?

    If you were going to do a deal that sells for 2mm how much should you make?

    How much negociating room should you leave or the "opps I priced it to high" factor?

    Is a 2mm deal the high or low end of a new construction deal?

    If you have 1.6mm invested in a deal how do you descide how much to price it for in the first place? What do you compare it to?

    As a side note. can you build a house with tile roof, marble entry way, granite tops, sub-zero appliances, pool, tennis court, stone fence, 11 foot ceilings, detatched garage, cherry cabinents, wet bar, etc. like a 2-3mm house is s'posed to have for $70 dollars a square ft?

    [ Edited by WheelerDealer on Date 03/07/2004 ]

  • NancyChadwick7th March, 2004

    Quote:
    On 2004-03-07 18:01, WheelerDealer wrote:
    Okay,

    "ding" every one to there corners!!


    lets settle this by everyone giving an opinion as to what a realistic expectation of profit should be on a deal like this.

    Jeff seems to think that this deal will net 400k at a min.

    Nancy, Do you think this deal would net 400k as it is described?

    Who would spend 1.5mm to make 400k?

    If you were going to do a deal that sells for 2.5mm how much should you make?

    How much negociating room should you leave or the "opps I priced it to high" factor?

    Is a 2.5mm deal the high or low end of a new construction deal?

    If you have 1.6mm invested in a deal how do you descide how much to price it for in the first place? What do you compare it to?

    As a side note. can you build a house with tile roof, marble entry way, granite tops, sub-zero appliances, pool, tennis court, stone fence, 11 foot ceilings, detatched garage, cherry cabinents, wet bar, etc. like a 2-3mm house is s'posed to have for $70 dollars a square ft?

    <font size=-1>[ Edited by WheelerDealer on Date 03/07/2004 ]</font>


    WheelerDealer,
    As I've said, in my area a builder would buy a $900K lot if the value of the end product were closer to $3.5mil. For $2mil end product, lot would need to be priced around $500K, give or take, depending on site prep & other costs. In my area, this deal would not net either a builder or developer $400-500K. Gross margin would probably be less than 10%. I generally use no more than 5% as the "oops" factor--in other words, what it should sell for + 5% = list price.

    If the amenities you list were to be included in a property, here that would make it a true custom home--not production home and not even a semi-custom home. Production housing here (builder's cost and not including profit) starts at around $60/SF. It goes to about $85-90/SF as you get into more bells & whistles, but not the package of amenities that you've listed.

  • WheelerDealer7th March, 2004

    I guess we are spoiled here in texas. the amenities i described are in ALL houses over 500k A 2mm house is equipped like the Taj Mahal!!

  • DealerJo7th March, 2004

    Yes, WhealerDealer speaks the truth. For $790K I even got a marble jacuzzy with Egiptian criptpgrapy engravings all over the place. In the tub, out of the tub , everywhere. Just like the real Egyptian thing. Since the builder was so creative in putting them there, I have to bring now almost every week a new decrypted to explain to me kindly what all those little pictures mean. Ah, who sad is easy to be reach.

  • woodsong7th March, 2004

    I have to say that unless you are doing something "radically" different like Lucos is doing that I am very much with Nancy on this one. Jeff, please clarify the amenity package you propose to put in the $2mill home for $80 sq. ft. Obviously we are not talking a vinyl sided home with 356 casing! A home in that price range is going to require some serious amenities and typically speaking, $80 sq. ft. isn't going to cut it. I say this as an agent (no home resales..only raw land brokerage), a builder for the last 7 years, and a subdivision developer for the last 3-4 years. Owner builders can do stuff for around $40 sq. ft., tract or production in around $60-$70, semi-custom up around $100, and the upper end houses can be all over the map, but not on the low side.
    So as to avoid future confusion, please describe the fixtures/amenities you propose for the house.
    And even if the original starter of this thread thinks they can build a $2mill house of quality (quality being the key word) for only $80 sq. ft., that does not mean he can or has done it.

  • WheelerDealer8th March, 2004

    woodsong,

    Speaks a builder AND a developer.
    You are dead on man.

    40 to 200 a sqft. it is ALL about the amenity's and construction. Hell, we could put a double wide in beverly Hills on Rodeo Drive and sell it for 10million.

    But here in Texas 10 million will buy you the House Micheal Dell built and it is 30 thousand square feet!!

    There is no way to guage construction costs untill you have a plan and you are building according to the deed restrictions of a particular area.

    You could but a 66 dollar sqft house on a 900k lot and you could put a 400 dollar sqft house on a 100k lot!!!

    WD

  • AllCash4Homes8th March, 2004

    despite the bickering ... no, probably BECAUSE of the bickering ... this has become quite an interesting and educational read!!!

    please, do go on!

    jeff, how do you respond? these folks seem to have a point!

    allcash

  • econrad8th March, 2004

    Lots of good dialogue here! Now that we've heard from experts (I'm not being snide), I'm going to pose my thoughts so someone can correct me.

    If one has a 900K FMV lot, and builds a 500K house, wouldn't that house be 'underbuilt' for the lot and the area? Someone mentioned the custom amenities that go into a high-dollar home. I wouldn't think that you could even do it for $100 sq ft - at least not here in Southern California. It just seems to me if you're building something that you expect to sell in the 2-3M range, that it's not just the house with the driveway.

    BTW WheelerDealer - If I can get what you described for 500K in Texas, That's probably where I should be. Today 500K gets you 1600 sq ft 30 miles from downtown!

    -e-

  • JeffAdams8th March, 2004

    Mr. Woodsong:
    First of all, ChimpanZ did not specify what type of home he was going to build on the water. I am sure it is not going
    to be the Taj Mahal!

    Due to the fact his wife is an architect and they plan on spending $300k, I highly doubt he is going to build the ultra-custom 4500 sq.ft. house with an elevator, marble floors flown in from Italy, gold plated fixtures, etc.. From what he is stating, it is obvious he is going to build something a couple steps above track level, something comparable to the other houses in the waterfront community.
    Just because the houses in the area are worth 2 million dollars does not mean they are Custom Homes! Haven't you
    ever seen condo's on a golf course
    in a gated community that are basically track quality with bullnose and upgraded
    moldings and doors that sell for $2mil+
    I can drive you around all day to
    houses in California that are basically track houses that sell for $3-$4 million and the builders sell them with simple landscaping in the front yard and no
    landscaping in the back yard. The fixtures are "kwikset" with tile counters
    and FHA grade carpet unless you pay extra to upgrade. And guess what, they
    dont install any appliances, those are extra. They offer a standard appliance
    package that you could purchase or you can pay even more and upgrade to a
    stainless steel package.

    My intentions would be to build a semi-custom home with granite countertops,
    travertine floors, upgraded fixtures, upgraded carpet, etc..
    I feel very comfortable that I could get this done for $400,000. Am I going to build the Presidential Palace? No.
    Would I allow 10% for overage as typically does happen. Of course.
    This is based on my experience.
    I would not be taking out a construction
    loan to build this house either as I would
    be using my own cash.
    Mr. Woodsong, why dont you give us your numbers based on building a semi-
    custom house based on what it would cost you as an owner/builder.

    If you look at Nancy's numbers on the high end of the spectrum:

    Land: $900k
    House: $1,000,000
    Site prep: $200k
    Sell: $200k
    Total: $2,300,000 projected cost

    I will even give her an extra $100k to sell it and $100k for carrying cost.
    Total Cost: $2,500,000

    She claims that builders in her area
    would pay $900k for for a lot with a finished product worth $3.5 million?
    She does not make any sense? I don't
    know any builders that are making
    $1,000,000 a house! That is why I am packing my bags tommorrow morning and moving to PA so that I can buy some of those $900k lots in PA and build houses on them that sell for $3.5 million.
    I am going to keep one for myself so that I can bring Lucius with me and put one of his containers on the lot!

    P.S.- I am still waiting for Nancy to tell us
    what the last house she built cost her, not based off what a builder told her.

    Best Riches,
    Jeffrey Adam










    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/08/2004 ]

    [ Edited by JeffreyAdam on Date 03/08/2004 ]

    [ Edited by JeffreyAdam on Date 03/08/2004 ]

    [ Edited by JeffreyAdam on Date 03/08/2004 ][ Edited by JeffreyAdam on Date 03/08/2004 ]

  • WheelerDealer8th March, 2004

    Econrad,


    This is is the very reason we moved here. This place is NOT the sand, cactus filled 200 degree hell hole some might think it is. Heck the people even know who Gucci is. I grew up in beverly hills area, so I ought to know. Just look up http://www.austin360.com better yet check this out http://www.homecity.com/featured_listings_ext.asp

    http://www.autorevolution.com/homeview/results.cfm

    These are the cheap ones play around on the site and see what you get for 1.5mm!!

    If you look real close you can see me here this is where i keep my boat this is 2 mins from down town
    http://www.homeview.net/

    [ Edited by WheelerDealer on Date 03/08/2004 ]

  • JeffAdams8th March, 2004

    Great Example Wheeler Dealer!

    I welcome everyone to click on the link that Wheeler Dealer has provided and take a tour with me.

    Ok are you there yet? Take a look at the
    nice 3623 sq.ft. custom house with granite countertops, oak bannisters, nice landscaping with a view that was built in 2002. Do you see the price?
    How about $339,500. What do you think the builder paid to build this house?
    Don't forget, the builder also had to purchase the lot.

    What do you think it would cost the builder to add on an extra 1000sq.ft?

    This definitely does not look like a track house to me!

    Come on Nancy, take a good look!



    I Rest My Case!

    Best Riches,
    Jeffrey Adam


    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/08/2004 ]

    [ Edited by JeffreyAdam on Date 03/08/2004 ][ Edited by JeffreyAdam on Date 03/08/2004 ]

  • woodsong8th March, 2004

    Jeffrey,
    The house for $359,000, to me, is a tract home/semi-custom home. It still has 653 basebaords, 356 casing, no crown or details on the columns, basic upgraded master bath, etc. Those homes sell like that here in the same price range and can indeed be done for around $100 to $125 sq. ft. A house like that here would typically be on a lot worth around $70,000. If he is trying to build that house on a $900,000 lot then yes I would possibly agree with your numbers if he does it as owner/builder and he actually does some of the installation himself and does not hire subs for some of the work. To me though, at least in our area, you would not build that type of house on a $900,000 lot. Best way to conclude this debate is to have some pictures of the neighboring homes and to know if he is going to build to the same level of finish.
    It really boils down to what you are going to build and what amenities you are going to put in it. [ Edited by woodsong on Date 03/08/2004 ]

  • NancyChadwick8th March, 2004

    woodsong,

    Here are some examples of new and nearly new homes for sale in my area.
    New home: price is $1,975,000. Interior SF = 7,700. Check out the features and take the virtual tour:

    http://houseandhome.aol.realtor.com/Prop/1030931756?gate=aolhouseandhome


    Here's a 2 yr old home. Price is $1.8mil, SF = 6,791. Take the virtual tour:
    http://houseandhome.aol.realtor.com/Prop/1033343018?gate=aolhouseandhome

  • WheelerDealer8th March, 2004

    Woodsong,

    What does it cost to build those two homes nancy posted? Wholesale-true cost estimate?

  • NancyChadwick8th March, 2004

    WheelerDealer,

    As woodsong said, if semi-custom is $100-125/SF, custom isn't going to be on the low side. The two homes I posted links to sure aren't semi-custom. Even if you use say $150-175/SF, sticks and bricks cost is easily over $1mil.

  • NancyChadwick8th March, 2004

    [quote]
    On 2004-03-08 01:32, econrad wrote:

    "If one has a 900K FMV lot, and builds a 500K house, wouldn't that house be 'underbuilt' for the lot and the area? Someone mentioned the custom amenities that go into a high-dollar home. I wouldn't think that you could even do it for $100 sq ft - at least not here in Southern California. It just seems to me if you're building something that you expect to sell in the 2-3M range, that it's not just the house with the driveway."


    econrad,

    Yes, putting a $500K house on a $900K lot would be "underbuilding". Many "prestigious" planned communities have deed restrictions which can include min. house SF and types of materials used on the exterior (like % of natural v. man-made). As y ou said, a $2mil house is not just a house with the driveway. That's production housing and even into some semi-custom. That's no a $2mil house. If you go to the links I provided, you'll get some idea of the amenities and type of finish.

  • JeffAdams8th March, 2004

    Quote:
    On 2004-03-08 11:31, NancyChadwick wrote:
    Yes, putting a $500K house on a $900K lot would be "underbuilding". Many "prestigious" planned communities have deed restrictions which can include min. house SF and types of materials used on the exterior (like % of natural v. man-made). As y ou said, a $2mil house is not just a house with the driveway. That's production housing and even into some semi-custom. That's no a $2mil house. If you go to the links I provided, you'll get some idea of the amenities and type of finish.


    Nancy:
    Sorry, incorrect. It boils down to 3 things:

    -Location
    -Location
    -Location

    I can show you lots all day long that sell
    for $1,000,000 that you can build a beautiful house for $500,000 which would include all the amenities. Are you telling me you have never seen a gated golf course community with 2000sq.ft.
    condos with lake view that sell for $2 million? What do you think the lot
    was priced at vs. the cost to build a 2000sq.ft. condo? Try lot price
    $1.5 million. Buiding Cost $200,000!

    You never got back to me about your numbers you posted on the $3.5 million dollar house built on the $900k lot?
    With the builder making $1,000,000.

    I find it very discouraging and non-productive trying to get thru to a "Realtor"
    with no formal building experience.
    Just information based on what others have been telling you for 20 years.
    Therefore, I feel it is not necessary for me to waste my time and keep posting back and forth with you.


    Best Riches,
    Jeffrey Adam

    _________________
    "The only place success comes before work
    is in the dictionary."

    [ Edited by JeffreyAdam on Date 03/08/2004 ]

    [ Edited by JeffreyAdam on Date 03/08/2004 ][ Edited by JeffreyAdam on Date 03/08/2004 ]

  • Lufos8th March, 2004

    Dear Nancy and Jeff,

    Now I am a Realtor (please pronounce that correctly). I have also built a great many wonderous and strange houses, apartment houses, condo's a even some commercials which also defy description.

    I paid a fortune for a lot on Bel Air Road, up at the top where the five picture deal people hang out. I spent $600,000 for the lot and then erected a $100,000 slightly less house upon those enriched soils. It was very modern and very sparse. We covered nothing. If you are into factory buildings and fancy gas stations you would have loved the house. All the connections were there but you had to fill in the kitchen, most of the baths. and everything else. We followed a plan they use in Europe, you know when you move there you take everything, room dividers, cabinets, sinks the works. It was single level modernistic 1400 sq. ft. 3 br, 2.5 ba and a great room. Big on decks.

    We sold this little darb for $1.200,000 prior to completion. Location, Location, Location.

    A rising (I am polite) young agent from one of the bigger agencies bought it. He wanted to live love, watch sunset blow, among his wanna be clients.

    He gave us half down, which he stole or borrowed depending who tells the story. I think he furnished it with Ikea stuff. I know he called, needed assistance operating a screw driver.

    We held a lease back on the land for over four years until he finaly scored big with some cluck client that turned her prior employment into a fund of experiences on which to play the part of a call girl. So how could she miss.

    Sammy has now glitzed the place, put a Mansard Roof on, all French Doors, Red fuzzy wallpaper and gilt chairs, sort of a Trump wanna be.

    Jeff is right, you can play the game if you are prepared to get out on site and ride the costs down and dirty.

    Nancy is right, play the game with builders and developers (they are the ones that do not wear bib and suspender type overgarments.)

    Dear Nancy, stay in the middle play the game of push and pull. But do not go out on the sites. Much too common. You are where you belong playing that wonderful center position.

    Dear Jeff, I know of what you speak. Yes you can do what you say. Depends with whom you are dealing. Stay close, this state of Calif. needs all the help it can get.

    So make up, kiss and be friends and Alex you devil, this is not a Greek Tradgedy do not come down from heaven and settle all the problems. Let them stew, this has been a fun series of postings.

    Luv to all. Lucius

  • Samw8th March, 2004

    You are a wise man luciussmile Treading the middle path..

  • InActive_Account9th March, 2004

    The most exclusive subdivision in Las Vegas is located on the southeast side of town, called," Lake Las Vegas". It's a 325 acre private lake with golf course community and gated. The home prices keep climbing. There are homes priced at multimillion dollars.

    Then there's ,on the southeast, : Southern Highlands. and Rhodes Ranch.

    The nationally best designed community for several years is a Howard Hughes 5000 acre development known as, Summerlin.

    All these subdivision have homes which were/are built for $500K-$700K. They are custom homes, but they lack the main subdivision attraction/amenity such asf being on the water/golf course/panoramic mountain view/scenic vista/etc.etc.

    Here's some data for your inspection:
    . Lake Las Vegas

    20 Avenida Fiori
    Listed : $685,,000
    Pool ,Spa,Fountain, Built in 2001,1story ,2478 sf, gated community

    21 Caminito Amore
    Listed: $699,000
    Sold : $600,000 (10/27/03)
    Pool,Spa,Casita off master,interior courtyard
    1 story ,2846 sf.

    Rhodes Ranch
    65 Chateau Whistler Ct
    Listed : $620,000
    Sold : $620,000 (3/4//04)
    Pool, spa, 2 story, 3751 st

    Southern Highlands
    5640 S Morning Snow
    Listed : $719,900 (3/5/04)
    Pool,spa,2story, 4043 sf
    built in 2002

    10524 Torre De Nolte St
    List: $695,000
    Sold: $685,000
    Pool, spa, 2story, 4027 sf
    built 2002

    Summerlin
    8829 Cortile Dr
    Listed: $650,000 (3/2/04)
    Pool , spa , built 1995, 2 story,4060 sf

    2004 Winter Wind
    Listed : $675,000
    Sold : $650,000 (8/03)
    Pool,spa,,2 story, 3835 sf

    8808 Bonita Ct
    Listed : $699,000 (2/27/04)
    Pool ,spa,, 2 story, 4148 sf, built 1995
    This property also sold 6/30/03 for
    $650,000.

    jThere are a number of homes here in Las Vegas which can be bought /built for under $700,000 . It would be virtually impossible to discern whether they were semi-custom or custom built homes. They certainly aren't prduction/tract built.

  • TomC_MI9th March, 2004

    After reading all the bs here I can say I am glad I don't live around anyone that would build a $400 or $500k home, or whatever the rediculous number was, on a $900k lot. At $70 a sq. ft for a custom home, if your works good come on out here, as I'm sure you could get a ton of work. It doesn't make sense but I guess if you can do it and make a profit, go for it. It's not happening in my area [ Edited by TomC_MI on Date 03/09/2004 ]

  • Zach9th March, 2004

    Tom, as another Mi. resident, I can only agree with you. Z

  • JeffAdams9th March, 2004

    Quote:
    On 2004-03-09 20:46, TomC_MI wrote:
    After reading all the bs here I can say I am glad I don't live around anyone that would build a $400 or $500k home, or whatever the rediculous number was, on a $900k lot. At $70 a sq. ft for a custom home, if your works good come on out here, as I'm sure you could get a ton of work. It doesn't make sense but I guess if you can do it and make a profit, go for it. It's not happening in my area <IMG SRC="images/forum/smilies/icon_rolleyes.gif">

    <font size=-1>[ Edited by TomC_MI on Date 03/09/2004 ]</font>
    Tom:
    I don't believe anybody ever said they could build a "custom" house for $70.00
    a sq.ft? My figure was around $400k for
    a custom 4650sq.ft. house with 10% in
    overrides. This is using my own funding also. Not loans. The price of the lot does not dictate the price of the house.
    Let me give you an example. Where I live in Newport Beach, Ca, people buy
    waterfront teardowns for $1.7 million
    dollars and build custom houses for
    $500k.- $700k. These are not "retail"
    end-users that call up a builder out of
    the yellow pages to build a house for
    them either. These are "developers."
    I have a good friend of mine who does
    8-10 of these a year and his average
    profit is around $200k. He just recently bought a bayfront lot for $975k and built
    a "custom" 3500sq.ft. house on the lot
    for under $400k. The house even had a slate roof with granite countertops, travertine, the whole works. He only had to spend around $10k on the backyard as it was on the bay and had a smaller yard.

    There is also a big difference between
    "custom" and "luxury". You could spend
    $300.00+ when building a "luxury" house.
    You could even spend $250k in the
    backyard alone!

    If you read what ChimpanZ put in his post. He stated he could build a 4650
    sq.ft. house on his lot due to the fact that his wife was an architect and connected.
    Will he go over $300k, probably. Is he
    putting in an extravagant backyard with
    rock swimming pool? I doubt it. Was he
    building a house comparable to the other houses in the area? Probably.

    The whole point of my post here was that
    if I could find a lot for $900k that could
    build a 4650 sq.ft. house on the lot and have an end product that would be worth
    $3.5million as stated by Nancy, I would
    be all over it. Even if it cost me $900k to build the house. Do the math. I am sure you would be in also.

    If you look at the example I posted on the house that Wheeler Dealer showed, that by my standard and California standards is not a "track house" but rather a custom
    house. Most "track houses" are stucco boxes. If you do the math on what it cost the builder to build the house that wheeler dealer has given example of,
    you will see how much it cost to build.
    Look at the examples posted above regarding the "custom" houses in Las
    Vegas that are 4000sq.ft.+ that sold
    for $650k. This proves my point.

    I think where the controversy here is in peoples definitions:
    "Custom" vs. "Luxury"

    Also, people are assuming that a $900k
    lot has a fabulous "luxury" house on it.
    In California, they build track homes on
    6000sq.ft. lots that sell for over 1 million.

    It all boils down to Location-Location-Location.


    Best Riches,
    Jeffrey Adam











    [addsig]

  • TomC_MI9th March, 2004

    Perhaps I should pack up and move west then

  • JeffAdams9th March, 2004

    Everybody else does, you might as well
    join the club!



    Best Riches,
    Jeffrey Adam
    [addsig]

  • richardw9th March, 2004

    Getting a seller of land to carry the paper and to subordinate to a construction loan is fairly common. The seller probably bought the land with the dream of building on it herself. She may appreciate your plan and ability to pull all the pieces together. You may also want to explore the tax consequenses of the sale for the seller. Sometimes it is better for a seller to carry the paper with a minimal down thereby deferring the majority of the capital gains taxes for the duration of the note. Finally, once you have expalined the tax deferal benefits of an installment sale to the seller, you may also want t point out that whatever interest she gets on the note will be higher than whatever she can get at the bank.

    If you can really build the house for 300k (or even 400k) and can afford two years of the combined land and construction loan payments, I say it looks like a winner. Put it together and two years later you will be pocketing $500,000 of the profit tax-free by using your primary reidence exemption. Wouldn't it be wonderful if your could pull that off every two years!

  • TomC_MI10th March, 2004

    Quote:
    On 2004-03-09 23:19, JeffreyAdam wrote:
    Everybody else does, you might as well
    join the club!



    Best Riches,
    Jeffrey Adam




    Well we were thinking of Colorado at one point but if I could move a little more west and get hooked up with these kind of deals then it would be worth it

  • CREIPAP10th March, 2004

    You comments sound quiet certain/confident, what is your background that allows that certainty? Home Building or ...please tell?
    [ Edited by CREIPAP on Date 03/10/2004 ]

  • NancyChadwick10th March, 2004

    [quote]
    On 2004-03-10 09:03, TomC_MI wrote:

    "Well we were thinking of Colorado at one point but if I could move a little more west and get hooked up with these kind of deals then it would be worth it."

    Tom,
    How about a deal in PA for $700K, subdivide, assign, and walk away with $354K without having to put a shovel in the ground? As a builder and developer, you would appreciate that kind of deal.
    Nancy

  • concrete11th March, 2004

    I wrote this up before seeing that some wise posters had added balance to the topic. But since I wrote it up, here it is anyway

    "A Picture is Worth a Thousand Words"
    Correct me if I'm wrong (I'm sure someone will ), but the issue seems to be, "Can you build a $300,000 home on a 900K 7 acre waterfront lot that will sell for $2 million and make a profit. The issue is not what a $2 million home is. Obviously a home on a 7 acres waterfront is not the same overall purchase as a home on a lot in a subdivision. The amenities will differ because the buyer for a property like this is looking for something different than a house in a subdivision. Like Jeff said, location.

    I am not trying to advertise here, and I sincerely hope that my post will not be deleted for that reason because I truly think this information will help others here look at this as an area of real estate diversity. Not using tunnel vision and thinking only in terms of the amenities of homes construction alone defining a successful formula for making money.

    If necessary, let me know and I will take the time to delete the name of my company too to allow this post. I merely wanted to add some validity to my figures. It has taken me a little bit of time to compile this.

    I am currently building a 4,600 sq.' Tuscany house for $296,000, my builder's cost. My costs are higher on this house because I'm actually putting a crew up in a motel during construction as it is located three hours away from home base, so I've padded my estimates to cover that. The appraised value of this home will depend on the location it will be built in. Thus it may appraise for $600,000 on an oversized lot in LA (Lower Alabama ), but even that is subject to the lot and area built upon. The same house could easily appraise for $2 mil (or more) on a 7 acre waterfront lot on Lake Martin, near me. Could I afford the lot or find an owner financed or venture partnership, I'd build something very similar in size and cost, but my design, and make a nice profit. I'd be putting my cost for the motel and extra expenses in this example back into the house, so my lake house would be a little nicer than this one. This house is also a concrete house which cost me more to build. I do not use many subs, so my profit margin is pretty good. As with anything, prices subject to change with materials in the market.

    Yes, there are more deals that will make more money. Yes, there are more ways to make more money than building, especially this scenario. But as in anything, being creative is you do what you have to do or want to do at the time.

    This owner also had a budget, and we have tried to maximize the house footprint, using less expensive features now that will allow him to upgrade later. Here is a classic example where he wanted the location first, and a great home too. He is very pleased he is getting what he asked for that other builders told him he couldn't have.

    I've uploaded my contract agreement and specs for anyone's viewing to a web site, and since I'm not to that status, it probably won't show up here: www.theconcretehouse.com/TCI case sensitive If it is permitted, can I say that anyone who wants to take a look can pm me for the link?

    I have deleted the name of my client and personal information for privacy's sake. And I've put in a password section on my web site as I do not wish this to be stumbled on by the general public. Probably seems silly .
    enter the username: tci
    and password: b19dp7
    all case sensitive

    I'm not saying that every contractor or individual can make this work, however, the impression was given that it couldn't be done. And I know it can be done, agreeing with a couple of other folks with experience doing it. So I thought I'd offer a little evidence.
    There are links to:
    Work Agreement and Contract
    Specifications
    Views of the house:
    First Floor
    Second Floor
    Left View
    Right View
    Front View
    Rear View

    I will not leave this information on my site indefinitely, so my apologies if someone goes there later and it's gone.

    Hope I've helped someone achieve their goals and dreams.

    Terry

  • davesgirl31711th March, 2004

    thanks concrete for the links your house looks grand. however the specs you gave seemed to give pretty low numbers for flooring, fixtures, lighting and appliances for the scale of house you showed. I suppose you get builders prices for the items but if the owners are on the budget for the items doesn't it seem on a 4,000+ sf house your cost allowance for flooring should be more than $2.18/sf? And for the number and size of rooms you have it seem that $3,000 is extremely low for lighting. Just some things that caught my eye.

  • NancyChadwick11th March, 2004

    concrete,

    Thanks for supplying your specs and other info. If you went to the links I provided and took the virtual tours, you will readily see that new houses for $1.8-2mil in primo locations in my area cater to a buyer market that has vastly different expectations in terms of amenities in that high-end price range.

  • TomC_MI11th March, 2004

    [quote]
    On 2004-03-10 18:08, NancyChadwick wrote:
    Quote:
    On 2004-03-10 09:03, TomC_MI wrote:

    "Well we were thinking of Colorado at one point but if I could move a little more west and get hooked up with these kind of deals then it would be worth it."

    Tom,
    How about a deal in PA for $700K, subdivide, assign, and walk away with $354K without having to put a shovel in the ground? As a builder and developer, you would appreciate that kind of deal.
    Nancy



    Well Nancy for that kind of money I'd move anywhere

  • DealerJo12th March, 2004

    Hay NancyChadwick,


    "Tom,
    How about a deal in PA for $700K, subdivide, assign, and walk away with $354K without having to put a shovel in the ground? As a builder and developer, you would appreciate that kind of deal.
    Nancy "

    So you and Tom know each other? Good god, this looks more and more as Tinman show... You already bragged in this post about $375K deal. That was fantastic job but is that the only/lonely deal you did recently? What are you not posting more about actual deals instead of theory. You made some deals. Right? Your profile says you are the Realtor/Broker. Realtor usually make deals. Right?

    I am apologizing if my questions are exposing you to some wanna hide reality but I cant believe that's true. You and your PA neighbor Tinman now share the 3rd place in the number of posts and I hope to see you soon catch up the top.

    The bottom line in this meter is: STOP measuring your extremities and agree not to agree on what makes sense for you it does not make sense to me or my grandmother. She likes waterfalls, samba, fresh air and lots of animals that you cant keep on the small lot. You need to have it big and even then it might not be enough. The size meters when it comes to land and hose can be an RV trailer for as much as my cousin Bob is concerned.

    Hey Jeff, would you put an 45 foot RV trailer if I lend you a $900K land? Waterfront of course.

  • NancyChadwick12th March, 2004

    [quote]
    On 2004-03-12 03:22, DealerJo wrote:
    "Hay NancyChadwick,
    So you and Tom know each other? Good god, this looks more and more as Tinman show... You already bragged in this post about $375K deal. That was fantastic job but is that the only/lonely deal you did recently? What are you not posting more about actual deals instead of theory. You made some deals. Right? Your profile says you are the Realtor/Broker. Realtor usually make deals. Right?

    I am apologizing if my questions are exposing you to some wanna hide reality but I cant believe that's true. You and your PA neighbor Tinman now share the 3rd place in the number of posts and I hope to see you soon catch up the top. "

    DealerJo,
    I don't know Tom any more than I know you or just about anybody else at TCI.

    The $700K deal is certainly not the extent of my 20 yrs worth of land brokerage experience. I mentioned it because there was a fat gross profit for the developer on that one, and also because the guy he flipped to paid over $100K per lot (exclusive of site improvement costs) to build new homes starting around $450K.

    But since you ask about my other deals...there was the property I represented that was zoned for 900 units of housing, or the one contiguous with a prison, or the one backing up to elevated state expressway, or the one sold as is where is to a builder for assemblage, or the horse farm downzoned for 15,000 SF lots....

    You keep mentioning the number of posts to me--both here and in PM's you've sent me. I'm really not focusing on the "post count" and don't understand why you are.

  • DealerJo13th March, 2004

    Thank you for quoting me NancyChadwick,


    Sorry I forgot; you sad in your PM message to me that you didn't know what the most active list is for. LOL, I believed you then and I believe you now.

    Your posts are great Nancy and you started posting strong on multiple subjects this month leading me to believe that you are after forum's most active member "crown". Furthermore, based on intensity of your replies to Jeff and other members in this and other forums, I am also lead to believe that you are an extremely competitive participant, whose word has to be last. That's all Nancy. Would this be a satisfactory answer for you? I hope it will. [ Edited by DealerJo on Date 03/13/2004 ]

  • Stockpro9913th March, 2004

    HI,
    I am a buidler that does everthing from school gyms to libraries and the smallest bathroom remodels you have ever seen!
    IF the homes are in a gated community and are selling for 2 million I don't think that I would plan on less than 100-110$ a square foot.
    In Oregon a real basic would be $55 with something nicer in the $70-$80 range.
    I just looked at some plans for a 7000 sf house and it would be $130 a foot, marble, italian tile etc.
    HOw big of a house are we talking here? if it is just a run of the mill house 4,000 sf then Jeffrey's figures would be a great place to start. IF it is a palace then we need to bump up the figures a notch

  • Stockpro9913th March, 2004

    Here is a copy of my bidding software that gives me prices across the nation etc.
    ""
    " Single Family Home Costs"
    ""
    "Use the costs below to check your estimates and to verify bids submitted by subcontractors. These costs are based on a 1,600 square foot home (as described on page 314) built during the third quarter of 2003 at a cost of $75.71 per square foot. Figures in the column % of Total are the same as those listed in the Residential Rule of Thumb Construction Costs on page 314. These are averages and will vary widely with the type and quality of construction. "
    "Unit","Mat.","Lab.","Equip.","Total/SF","Total/1600SF"

    ""
    $ $ $ Total $ Total $
    Item, Manpower required, % of Total Unit Mat. Lab. Equip. per SF 1600 SF

    ""
    Excavation, 3 men 2 days, 1.2% SF -- $.68 $.23 $.91 $1,456
    Foundation, slab, piers,
    3 men 4 days, 3.7% SF $1.12 1.40 .27 2.79 4,464
    Flatwork, drive & walk,
    3 men 3 days, 2.4% SF .73 .91 .18 1.82 2,912
    Brick hearth & veneer,
    2 men 1 day, 0.7% SF .21 .27 .05 .53 848
    Rough hardware, with carpentry, 0.6% SF .18 .23 .05 .46 736
    Finish hardware, with carpentry, 0.2% SF .09 .06 -- .15 240
    Rough lumber, with carpentry, 8.4% SF 6.36 -- -- 6.36 10,176
    Finish lumber, with carpentry, 0.5% SF .38 -- -- .38 608
    Rough carpentry labor,
    2 men, 20 days, 8.9% SF -- 6.74 -- 6.74 10,784
    Finish carpentry labor,
    1 man, 7 days, 1.7% SF -- 1.29 -- 1.29 2,064
    Countertops, 1 man, 2 days, 1.5% SF .68 .45 -- 1.13 1,808
    Cabinets, 2 men, 2 days, 3.7% SF 2.24 .56 -- 2.80 4,480
    Insulation (R19 ceiling) ,
    1 man 3 days, 2.3% SF 1.13 .62 -- 1.75 2,800
    Roofing, soffit, fascia,
    4 men, 3 days, 5.5% SF 2.50 1.66 -- 4.16 6,565
    Painting, 2 men, 3 days, 3.6% SF .95 1.77 -- 2.72 4,352
    Shower and tub encl. ,
    1 man, 1 day, 0.5% SF .23 .15 -- .38 608
    Prefabricated fireplace,
    1 man, 1 day, 0.9% SF .51 .14 .03 .68 1,088
    Bath accessories, 1 man, 1 day, 0.7% SF .35 .18 -- .53 848
    Built-in appliances, 1 man, 1 day, 1.6% SF 1.09 .12 -- 1.21 1,936
    Heating and ducting,
    2 men, 5 days, 2.9% SF .88 1.32 -- 2.20 3,520
    Plumb. & sewer connect,
    3 men, 5 days, 7.3% SF 2.19 2.76 .57 5.52 8,832
    Doors, 2 men, 2 days, 1.9% SF .94 .50 -- 1.44 2,304
    Garage door, 1 man, 1 day, 0.4% SF .23 .08 -- .31 496
    Alum wind./slide doors,
    1 man, 2 days, 1.2% SF .55 .36 -- .91 1,456
    Exterior stucco, 3 men, 3 days, 6.4% SF 3.13 1.48 .24 4.85 7,760
    Gypsum wallboard,
    2 men, 6 days, 4.7% SF 1.59 1.96 -- 3.55 5,680
    Resilient flooring, 1 man, 1 day, 2.0% SF .71 .80 -- 1.51 2,416
    Carpeting, 2 men, 1 day, 2.4% SF 1.42 .39 -- 1.81 2,896
    Wiring (Romex), 1 man, 10 days, 3.2% SF .97 1.45 -- 2.42 3,872
    Lighting fixtures, with wiring, 1.2% SF .73 .19 -- .92 1,472
    __________________________________________________________________________

    Subtotal, Direct Job Costs, 82.2% SF $32.09 $28.52 $1.62 $62.23 $99,568
    Amounts above, as a percent
    of total direct costs -- 52% 46% 3% 100% --
    ""
    ""
    $ $ $ Total $ Total $
    Indirect Costs, % of Total Unit Mat. Lab. Equip. /SF 1600 SF
    __________________________________________________________________________

    ""
    Insurance, 2.8% SF $2.12 -- -- $2.12 $3,392
    Plans & specs, 0.4% SF .30 -- -- .30 480
    Permits & utilities, 1.7% SF 1.29 -- -- 1.29 2,064
    Final cleanup, 0.4% SF -- .30 -- .30 480
    ""
    Subtotal, Indirect Job Costs, 5.3% SF $3.71 $.30 -- $4.01 $6,416
    ""
    Overhead & profit, 12.5% SF $9.47 -- -- $9.47 $15,152
    ""
    __________________________________________________________________________

    Total all costs, rounded, 100.0% SF $45.27 $28.82 $1.62 $75.71 $121,136
    Amounts above, as a percent of total costs 59.8% 38.0% 2.2% 100.0% --

  • Stockpro9913th March, 2004

    Here are some average costs for average homes.

    Construction Index
    "Construction Cost Index for New Single Family Homes"
    __________________________________________________________________________

    " % of Cost $ SF/Floor"
    __________________________________________________________________________

    "2002"
    1st quarter 530.11 74.16
    2nd quarter 530.29 74.18
    3rd quarter 532.80 74.52
    4th quarter 535.31 74.89
    "2003"
    1st quarter 539.22 75.45
    2nd quarter 540.58 75.63
    3rd quarter 541.11 75.71

    This is probably overkill and the spreadsheet doesn't seem to transfer very well. But maybe you would find it useful.

  • NancyChadwick13th March, 2004

    Stockpro99,

    Throughout my posts on this topic, I have said that in my area, builders are not going to buy (and in fact, do not buy) a $900K lot if the projected sale value of the end product (house + lot) is only $2mil because the numbers just don't work for them. Rightly or wrongly, high-end new home buyers in my area don't buy a 4,000 SF home with semi-custom finishes for $2mil. They buy 4,000 SF houses for $450-500K.

    If you didn't check these out before, go to these links and take the virtual tours and you will see what I mean.
    New home: price is $1,975,000. Interior SF = 7,700:
    http://houseandhome.aol.realtor.com/Prop/1030931756?gate=aolhouseandhome

    2 yr old home. Price is $1.8mil, SF = 6,791:
    http://houseandhome.aol.realtor.com/Prop/1033343018?gate=aolhouseandhome

    I think you will easily see that the amenities provided in the above are not of the $80-100/SF variety. If building cost alone is $850K-1.mil and lot cost is $900K and end product only sells for $2mil, after taking into account other costs (site prep, permits, EDU's & tap-ins, marketing/advertising, etc.), the margin is very small for the investor-builder.

    3rdChimpanZ is an end user, and is not planning to have a house built with anywhere near the types of finish and amenities as the 2 examples above from my area. As I recall, he's planning to have a 4,560 SF house built for $66/SF. In my area, that's the cost of production housing.

  • NancyChadwick13th March, 2004

    Quote:
    On 2004-03-13 12:11, DealerJo wrote:

    '...you started posting strong on multiple subjects this month leading me to believe that you are after forum's most active member "crown". Furthermore, based on intensity of your replies to Jeff and other members in this and other forums, I am also lead to believe that you are an extremely competitive participant, whose word has to be last. That's all Nancy. Would this be a satisfactory answer for you? I hope it will.


    DealerJo,
    You seem to be obsessed with the issue of who posts the most during the month. This is odd because a few weeks ago, Omega1 sent me a PM that was very similar to your remarks concerning the number of my posts.
    I am not interested in the "crown" as you call it. Since apparently it's important to you, then go for it. It's all yours.

  • TomC_MI13th March, 2004

    Not trying to take sides here or anything, but why are some obsessed with the number of posts that others make. Let's get back to what this board is about and that is learnig. There seems to be a few people on this board that are worried about looking as if they are the best. If you can't contribute anything useful then why bother at all?

  • DealerJo14th March, 2004

    Tom speaks important truth. Few people seems to be FAR to obsessed with how they look and if their words are the last on almost every post. Their posts are more about self advertising and almost always about them. Instead of caring if they help someone else on this board, they care how they look. Posts found in their member section clearly speaks to that effect. They are always right. Go check. You'll be surprised. Double posts. Split posts, you name it...

    I am newbie here but overall, I am doing great and can care less if someone wins or not. However, it's a bit irritating to read all those empty debates and to watch all the same people push to close every post. Why? They probably have something to prove. Topic after topic. I guess, they must be lonely and have to much time on hand. That's obsessive Tom.

    And oh, the land. Here in Texas we like it BIG! The bigger the better and a 10 acres ranch can certainly have a 2000sf, non castle looking home. If someone needs to read 40 repetitive posts just to realize that we all think different about size and quality of our homes in different parts of our big country, have Nancy or anyone else continue to post. And post. And post. And post on this topic one and same thought just to prove that they are right and no one else. I wont!

  • WheelerDealer15th March, 2004

    Looks like we have wolves in sheeps clothing also.

    The sheep seem to have fangs starting to grow.

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