Developing on land -- could it really be this easy for profit?

2 Replies

Previously, my method has been to purchase homes and hold/rent with healthy cash flow. But now I'm thinking of venturing out.

I had always run under the assumption that buying plots of land and developing couldn't really be profitable in my area, as land prices immediately around me can be a bit insane. However, recently I've started looking around and noticed in my (semi-close) area, there are plots of land for ~70K in semi-rural areas. Separately, I've noticed that you could build (nearly) turn-key log cabin home kits to put on these plots of lands in the 1000-1250 sq ft range for  ~100K (I say nearly as I'd be doing the roofing, some electrical/some plumbing/minor details-- I have experience with these). I'd hire someone to do pretty much everything else (erecting the logs, foundation, draw up the plans, etc..).  I'd act as the general contractor and work out some final details. So this puts the total at ~170K -- however I've seen multiple home sales in 2017 in this area that are in the range of 275 - 350K, and these weren't even brand new.

So in other words, it seems like with a couple of months of part-time personal weekend effort, I'd  be able to make a sale profit between 105K and 180K. While the math seems to work out, I feel like I've got to be missing something -- could it really be that easy? Buy the land, buy the kit, pay someone else to do the majority of the construction work, and reap huge profits??

I know one of the difficulties is in getting a home construction loan (high interest rates, strict time tables etc). However, we do have some of our rental properties completely paid off, and could sell one to finance this to make a larger profit than currently possible on the rental, or take out a personal loan. If it worked out, I could rinse/repeat.

For the crowd that wants to warn me about the difficulty of being my own general contractor/doing some of the home improvement projects, duly noted. Lots of experience with it, long time engineer, I have in the past made my own drawings/permits and gotten them approved by reading through city regs/docs. Experience with nearly every type construction project long and short, always see it through to the end. 

However, I know there are always unexpected pitfalls, and there are people on here far more experienced than myself in the realm of investing. What am I missing here? Should I go for it, sell a rental or get a personal loan? Other information: smaller town, but as of the past two years, home sales have seemed to be pretty steady.

Thanks so much in advance for any information/guidance.

@Benjamin Fishler , the question is: why does any Developer, develop?

ie. Don't they just do their sums, check the logistics, and then decide?

Q. Which developers make a packet, every time? [A. The ones who get it right!]

You seem to have the requisite skills. Go get 'em, tiger! Welcome to BP...

just want to get a handle on your soft costs.. UTLS  etc .. permits many CA locations permits can be 50 to 75k per home.. but I like building these days as a preferable to heavy duty rehab..

last comment is log home in your area unless your way up in the moutains above SD  its too hot and sunny those log homes will get weathered pretty badly and they usually don't fit in the scheme of what is going on in the area like say a desert style home with stucco etc.. that can handle the heat and sun

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