Any experienced input would be helpful for these 2 new construction projects I'm looking at. $200k each lot, side by side. Builder who builds new homes that sell over 1m, also knows my lender and they have a great relationship. They both work with the same realtor who sells high end homes as his specialty. We have two lots side by side so that should help our cost per build since each contractor will get two big projects next to each other. Lender works well with the builder = Trust. Number look like this.
$200k each lot = $400k
$550-650 each home build = $1.1-1.3m home total
Total acquisition and build = 1.5-1.7m
Hard money costs ~ $200k roughly
Realtor, staging, closing, misc fees, costs, insurance, taxes = $100k estimated
Target ARV = $1.1-1.3m each
Neighboring houses built in early 2000's selling for mid $900's & some over $1m. Properties built modern selling for closer to $1.1-1.6 from our comps. Neighborhood is very hight end. Both homes would be ~ 4000 sq feet with great views of the city and sunset from front of house. Both are 10,000 sq foot lots but have green space in back (Oregonians!) that requires about 3500 sq ft to be undisturbed = nothing can be done. So we have about 6500 sq ft to work with on each home. Back of each home is against wooded area = not much backyard areas.
Seller bought them back in 2014/15ish for $250k each, had all plans drafted and approved by HOA ($1500 each review!), GeoTech report done (2015 so needs refresh), but realized that he didn't have enough money to build both at the same time. Spoke with him directly today and he tried to get other builders to go in with him and each do one so cost is lower.
Agreed to either $350k up front cash for both now or $400k for both with $300k now and carry $50k on each property until the homes are built and closed on at the end. That allows for my hard money lender (his idea to lower my interest) to require $50k down payment vs $150k. Then monthly payments for interest. Negotiating with lender to write one loan to acquire lots for $300k and then write a new loan after permits are issued and work starts approx 3 months later and wrap the old loan into new loan. (Lowers interest) Also saves $500-1000/mo on interest carrying the $100k.
Would pre-list houses for sale mid project to attempt to line up buyers for each by the time houses are built.
Would attempt to build modern or modern/craftsman and that is the specialty of the builder. We went to church together years ago, know a lot of the same people, have same eye for detail and care for quality work. He knows good friends of mine.
One other part may go in with me at $100k with a guarantee $50k return after homes close.
Lining costs up this way:
$200k hard money
$50k interest 3rd part investor
$150k selling, marketing & closing costs
ARV: $1.1-1.3 each = $2.2-2.6m
$2.2-2.05 = $150k Profit potential
$2.6-2.05 = $550k Profit potential
Assuming it doesn't dip to $1m each or less, we would make money over the course of 12-14 months.
$550k profit potential is good buffer
$150k profit potential scares me on this size of a project that would take over a year to start and exit. I could do 3-5 smaller flips and make more than that with less risk.
We would have to really try hard for the $1.3m price ranges.
***Any other factors that I'm not thinking about? We have the money for it, we have the skill for building and selling it, it's a great location. If I can lower either, 1 - hard money costs, 2 - build costs (closer to $550k each), 3 - find an alternative to save the $50k from the 2nd investor AND the $50k to get the lots secured now would free up $100k right there. Not super feasible though since that would require $150k down payment plus monthly interest payments. I have just enough to do the $50k down payment plus interest payments.
Again, any experienced input would help for new construction.
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