Land for sale (maybe)

3 Replies

Hi, 

I have an in-law that bought a single home lot in a not so desirable area. He has tried to get rid of it for several years now and only received a real low-ball offer. (50% of appraised value) 

He now wants to deed it over to me and have me build a home on it and pay for the lot him once the home sells. I think he is fed up with the taxes and dealing with the maintenance. 

I think its a great deal an while it may take me 6-9 months to sell (worst case scenario) I think I can make some money down the road.

I am looking for advice, Tax complications? not a good idea to tie my money? Interim financing? have I overlooked anything obvious?

Thanks.

Originally posted by @Victor Rejino :

Hi, 

I have an in-law that bought a single home lot in a not so desirable area. He has tried to get rid of it for several years now and only received a real low-ball offer. (50% of appraised value) 

He now wants to deed it over to me and have me build a home on it and pay for the lot him once the home sells. I think he is fed up with the taxes and dealing with the maintenance. 

I think its a great deal an while it may take me 6-9 months to sell (worst case scenario) I think I can make some money down the road.

I am looking for advice, Tax complications? not a good idea to tie my money? Interim financing? have I overlooked anything obvious?

Thanks.

 You have control and zero carrying cost for the land (although your father in law has some). If I were in your shoes I would put together a business plan to sell a custom built home to a home buyer. 

There a many buyers in the market who are looking for a semi custom home. In selling the home this way you would get the buyer to pick up the financing on the home being built while also getting them contractually obligated to buy the land. 

In order to get this done you would need to gather up the property team to get this accomplished. I would start with a lender. Start interviewing lenders that can offer buyers you bring into buy the property the type of financing they would need to have a home built for them.

Next I would interview several architects to establish who best could help you accomplish your semi custom build. Try to find an architect who can offer you pre-drawn plans that are modified to your site. That will save you some on the architecture fees. Then get the architect to produce a set of plans you can use to get bids from general contractors.  

Here's where you'e going to want to spend a good deal of time. Start interviewing several, perhaps as many as a half dozen GC's and reduce it down to three. Then have them submit to you a bid to build the home build. 

Work closely with your architect to ensure the bid is appropriate for the construction job. And whatever you do check every reference you get for each general contractor. Get prior clients, sub contractor referrals, and even personal referrals from people they do business with such as their bank or insurance company. Vet them carefully.

Once you're waiting for the general contractors to get you the bid numbers start interviewing real estate agents. You want to find an agent who has marketed custom/semi-custom homes. You'll also want to have them show you what they're company is willing to do/spend to market the property. You should be prepared to hire them as soon as you've signed a contract or committed to work with a general contractor.

Approaching the project as a built to suit (custom build) removes a lot of the financial strains that come with the building of a home on spec. You father in-law should be happy that you are bright enough to assemble all of the moving parts for this project, and also in the end will get his land sold. You will obviously make some money for "sweat equity" and will not have to take on unforeseen liability for the debt to build and then carry the home. 

I would talk to a realtor that knows the area and get their take on building a custom home in a "not so desirable area".  If your in-law can't sell the lot, that should be an indicator on the interest level of the area. Best of luck. 

Thanks for all the information and suggestions.

I am meeting with a realtor tomorrow to do a market analysis for the area.

Will post back if I follow through with the construction

Regards,

VR

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