Wholesale 5 lots with a teardown in one lot - profitable????

6 Replies

I have been presented to wholesale 5 lots, one of which has a rambler on it (that could be torn down or fully renovated). Homes in the area have been selling in the mid to upper 200,000s. The homes that have been selling in the upper 200,000s are atleast two levels and from what I see split foyers.

Public Water and sewage is already connected to each lot. All infrastructure is completed except for road paving, permits were approved and can be re-instated. The site plan is complete and all MD and local transfer/recordation taxes are paid by the seller.

The lots are in Maryland, but I don't want to offer a deal if it's not profitable for the investor. The asking price is $450,000obo. With the number that the homes are selling for (assuming all sold for $275,000) I would assume a gross profit of 925,000. Developers- how much more money would you have to put in to construct the five homes? How long do you estimate it taking? If in the area, or out of the area, would you consider this a good deal?

Thanks in advance for your assistance with this matter. If the response is favorable to this deal, then I will post such in marketplace soon with a google earth photo of the location.

Stephanie

First, tear downs gets a bit out of the average investor's arena since there are so many contingencies of demo, debris removal and remediation of lead and asbestos of old homes. A rehab is easier to manage since you don't disturb hazardous materials as much. Cost of demo could sink you profits.

Lot costs should not exceed 20-25% of the value of a dwelling, go under 20% to begin to realize a profit. 

Other issues with new developments, experience and success of the developer, financial abilities, market conditions, the list is almost endless for due diligence, again, not a place to begin in. You have hit on aspects that the average wholesaler would seem to miss on here, but seems you're still lacking valuations of this type of project. 

You're not seeking fixers here as much as new home construction builders, they will be a much tougher sell IMO. 

Learn real estate and new construction aspects and you can often find developers willing to slash prices on 10 or 20 lots, then flip each lot to smaller builders. Especially in phase one start ups of developments as lot prices increase as the development matures. Good luck :)   

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

More information would be needed to analyze such as what size were the other homes etc. if they were 2000 SF homes at $100/SF (which is bare bones) you are at $200k per home, plus you have land development costs, permits etc and the cost of land which is $90k per lot (assume other is knock down). My first incling is this seems steep - along with first poster I think lot prices would need to be under 20% for you to make any $

Thanks for your response!! I will keep the percentage of 20 - 25% in mind when coming across deals such as this. Also what does IMO mean?

Originally posted by @Stephanie Dobbs :

Thanks for your response!! I will keep the percentage of 20 - 25% in mind when coming across deals such as this. Also what does IMO mean?

IMO = In my opinion 

IMHO = In my humble opinion 

Hope you are able to pin down all the real numbers and, make this deal work!

Thank you, I will certainly try my best!

Stephanie

@Chris Seveney :

Thanks so much for your input Chris! It's always appreciated! BTW, I tried reaching you concerning the DC deal, all offers are being accepted so give me a call if you want to put in for it.

Stephanie

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