HELP! PLEASE!...i Have A Few Questions...
A while back the man the remodeled my mother's home approached my husband and I about investing because i had expressed interest in it before. Basically he has workers and they build houses and he said is this- that i could buy plots of land here in Alabama for around 1000-1500 dollars a peice and he would build a house or houses for around 45 grand and turn around and his friend that is a real estate agent will turn around and sell the property for 95grand. Also he said if i didnt want to do this i could buy the land, and the government will pay him to build and then it will be section 8 property. Now a little background about me...My husband is in the army and just got back from Iraq and we have around 5000 in the bank. I will be 20 in Dec and he is only 22. We should have around 10 grand in December and i was wondering if what he (the builder) is talking about is even feasible with how young we are and with the amount we have saved up I was wondering if it would work? We are trying to save 20 grand by july and more than that when he gets deployed again. Are there anyother suggestions? I kind of wanted to stay away from rental properties since we are military but what can we do with that amount of cash? How much is usually needed to start out and will the bank finance a couple as young as us for something like this? Any suggestions or answers are greatly appreciated!
I would proceed slowly and cautiously. Buy one parcel of land for the 1000 to 1500 bucks and see if he comes through. As long as you are the only name on the land then your monies are secured. The risk would be being stuck with the property for longer than you would like. Also I see everyone making money except the land owner (you). You never stated what you would make out of the deal. Dont forget that rome wasnt built in a day, and neither will your house. We are heading into the winter season, and the work will be slower if at all during the winter months. Make sure you have a contract written up by a lawyer that specifies the house being built by a certain date. Also if he doesnt meet that date then a certain percentage is knocked off every week until the job is complete. This way if he stops work, you will own the house free and clear after a certain amount of time (like a year).
Get a lawyer, secure your money with the land, expect this process to take 6 months.
Good Luck,
Kyle
I would also place this question in the builders forum, to ge an even better response then what I have given. There are more experienced people there that are currently doing what you are describing and may be able to give you a better insight.
Kyle
Thank you so much for your reply! Basically he said that the house would be sold for about 95 grand (which is decent for that size house in this area) and my profit would be that minus the 45grand it cost to build. But I am just wary becuase I did not know if this was to good to be true (thats if we get a loan to build the house) and if we do the subsidized housing he said the government pays us money per month (like rent) but not sure how much, we havent really gone over all that yet. But thank you very much and I will check out the builders forum.
Please see an attorney and protect your interests Before you sign anything!
I may not be an expert at real estate but I wonder why would he need you for buying land that cheap? Can't he just get it himself?
This is a true and feasible way to make money with a builder. But there are many many steps to take with working with this kind of a deal.
First, in many areas there are building restrictions, development building guidelines and many many possible regulations enforced by the city, county, government etc... So one must be very versed in possible how to's, what to and what not to dos', when to's, where to's etc... of where these developments go in.
Having the lot and making an agreement with a builder for the "use" of the lot for building can be a good money making experience but it can also be a bust. You need to have an attorney experienced in these types of transactions look at or draw up anytype of contract. The contract needs to state the risks involved for each party and an exit plan for possible problems like: zoning changes, development requirements that happen during the process of building etc...... and who is responsible for what.
This is not necessarily a good thing to get into if you have no experience or trusted guide to assist you. This can be a very tricky form of real estate investing.
I like to name a price for my lot, and whether the house sells or not I get paid at the completion of the project within X time after completion. If the house is not pre-sold or sold I still get my money because of the clause. My money is only tied up for a specific amount of time and if the builder don't have a buyer or it does not get sold he must then take possession of the house and lot.
I have a wonderful attorney, my father built homes for 25 years so I had a back ground to start with.
Builders don't like to own houses; they make their money in the construction. You would be amazed at the actual cost of building most $200,000 homes you would cry for sure. The best builders presale the houses before construction, they get their construction money from a lender this way. Their profit is in the final closing. It is also the safest way to work with one. He does not want the added burden of being on title and many other reasons that I just can not go into.
Don't reject the idea but proceed with caution and gain knowledge & legal advise/direction first.
I am definitly putting serious thought into this and would like to proceed only when we get to where we have a lot more money saved. Since we are military I think this may be alot for us to get into and all your responses have helped me a GREAT deal in trying to think of another way to invest what we currently have saved thank you so much!