Building on a lot owned by...

3 Replies

I am not sure if this is the correct forum.  Please forgive me if it is. 

There is a home builder who has 5 or 6 great lots for sale but he has to be the builder for these lots.  We were thinking about building a home to sell on one of these lots.  He is a pretty good contractor as I've noticed over the past few years his houses sell fast.  Even before they are finished being built.  The area is in a prime location as well.  This would be my first venture into building a new home and I don't care if I don't make a lot of money on the first one as I think the experience is worth a lot.  Has anyone had experience with this?  Is there a forum on here or a thread someone can direct me to for info?  Does it sound like a decent investment?  Any problems you see with doing this sort of transaction?

Thanks for your time!!

It all comes down to the cost to build and the cost of the land. This in particular doesn't sound like an ideal way to start. You are looking more into "developing". However the builder is eating up your profits on the cost of the land and the markup on the build. Chances are he is selling the houses to retail buyers. 

You would have to be able to sell "your" house for more than all of the other ones the builder has sold in order to turn a profit. 

That's my opinion. Now if you were getting the land dirt cheap and bringing in a builder that is different. This just sounds like a great setup for the builder and there's not much left for you.

You were fine with the forum category. Welcome to the site!

It's usually more cost-effective to purchase a home on a lot that's ready to go.

One of the biggest problems with doing a build from the ground-up is the time it takes.  And if you have to go with this guy, you can't fire him and find somebody better/faster.  However your longest time frame you have imagined to get it ready to move into, multiply that by 3.

And you'll have driveways and sidewalks and landscaping to put in, which is enormously expensive, too.

And in the meantime, you're paying rent somewhere else.  

The closest I've come to doing this, is I improved a lot by putting in a driveway, fence, septic and well.  Took forever.  Waiting on them to get to your job can take so much longer than expected, even with their best intentions.  They get delayed at the jobs they are working on ahead of you.  And in your case, you're at the mercy of this one guy.

I would find a different way.  Personally, I'd only ever buy ready-to-go homes again.  But, if you want to build, don't be at the mercy of one particular builder, is my advice.

Thank you all!!  You answered my questions with great responses. 

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