New Investor Would Like Some Advise

5 Replies

Hi I we are in the process of completely renovating a 850 sq ft house in Grays Ferry which is starting to become the next hot neighborhood in Philly. We have owned the house outright. Initially got a loan for $25k as a start but we are going to need more obviously. Probably another $30k. We are planning to rent this property at around $1200 / month which seems to be the market rate currently.

We also own outright an empty lot about a block away. We have been offered high 30’s low 40’s. I would love to develop this empty lot like other people are doing in the area and I’ve gotten some rough quotes of $125 - $200 / sq ft to build a house from the ground up  $125 being builder grade and $200 being high end    . So we are looking at between $115k - $180k to build a house on the lot.

We don’t have the funds to build on the lot. Taxes on the lot of minimal so I don’t mind sitting on it but since it’s an empty lot prices won’t go up not even close to if there was a house on the lot. Maybe we could get $50k down the road a little bit I doubt not much more. 

If you were in our situation would you sell the lot and use the funds to fully pay the the renovation for the house and rent it out with no mortgage @ $1200 / month? Or what are ways that I can find the funds to develop the empty lot?

Thanks!


@Marc Possoff Are you able to take some equity from your primary to get the house built and then get a mortgage on it once it's complete?  Talk to some lenders you can probably get a construction loan too.  Other people have houses built all the time.  I am looking in to buying in that area too, so I am interested in how it works out for you.  I would try to keep the lot unless it is absolutely last resort. 

Originally posted by @Jay Sechowicz :

@Marc Possoff Are you able to take some equity from your primary to get the house built and then get a mortgage on it once it's complete?  Talk to some lenders you can probably get a construction loan too.  Other people have houses built all the time.  I am looking in to buying in that area too, so I am interested in how it works out for you.  I would try to keep the lot unless it is absolutely last resort. 

Hey Jay yea Grays Ferry is the next spot next to Point Breeze. It’s not even a guess it’s happening. The housing prices have obvious gone up for ones that need a complete gut.

Couple houses on the street we own the house have recently sold for $225k’ish. My prediction is that in 3 years they’ll be worth $325k+. With that being said even at $225k I probably would have enough equity to build a house on the lot but it would have to be a flip maybe cause the rent might not cover the mortgage taxes and insurance. Not sure though. Like I said the lot doesn’t really cost anything significant just taxes on the land. 

 

Marc, I think you should hold the lot for a future build.  Complete the house you are working on now and get it rented.  This will help you get your next loan.  Check the numbers to make sure it would work as a rental if you build it.  If the area is as hot as you say, then the price of the lot will increase over time, so you could always sell it for more later, if you decide not to build.

If you were able to have a house built for $150k you should be able to get a mortgage around $900 especially with today's mortgage rates.  If you are getting $1200 for your other unit you should be able to get at least that much for new construction.  Also, there should be minimal repairs/maintenance issues.  Just my 2 cents but at the very least I would avoid selling the lot if at all possible.