1) Its more than 5 times the work. Never consider this anything but a job. You could be doing other things, so lost opportunity cost. Are you qualified to oversee the builders?
2) What if your numbers change for the worse? Lets say you lose money per sale? Disaster For example, Trump places a 50% tariff on steel and lumber and/or deports all the illegals, a real possibility.
3) What if your builders let you down. Can you sit on those properties for two years?
I have known several investors that took the grow like a virus approach. All of them did well for a period.
None of them are in the business now. A significant event could hurt you. Can you afford to take that risk?
If you can shrug off a 2 sigma event go for it, imho.
If this is your first transaction of this exact nature, maybe a test run of one house would be wise.
Considering leveraging to build a few modular homes on a larger tract of land, but probably would have to build one at a time due to capital restraints. Each sale would help fund the next build, in theory. Looking at a semi-rural piece of land in NC for $170k, I could be all in on a modular home for roughly $200k. I have $80k liquid.
I understand there are a lot of variables but would appreciate any thoughts or feedback you may have on a micro-development like that
Considering leveraging to build a few modular homes on a larger tract of land, but probably would have to build one at a time due to capital restraints. Each sale would help fund the next build, in theory. Looking at a semi-rural piece of land in NC for $170k, I could be all in on a modular home for roughly $200k. I have $80k liquid.
I understand there are a lot of variables but would appreciate any thoughts or feedback you may have on a micro-development like that
Hey Jonathan how many units are you looking to build?
Theres A&D lenders out there who will fund 80% LTC.
So in your case $170K+$200K = $370K
$370K X 80% = $296K Loan Amount ($74K equity needed)
But they will need to see that you have avaliability to carry the loan, in other words, that you are able to pay the interest payments on the loan throughout the build.
There's tons of variables, but I would start by contacting lenders. Specifically A&D Lenders. Most people are happy to help.
1) Its more than 5 times the work. Never consider this anything but a job. You could be doing other things, so lost opportunity cost. Are you qualified to oversee the builders?
2) What if your numbers change for the worse? Lets say you lose money per sale? Disaster For example, Trump places a 50% tariff on steel and lumber and/or deports all the illegals, a real possibility.
3) What if your builders let you down. Can you sit on those properties for two years?
I have known several investors that took the grow like a virus approach. All of them did well for a period.
None of them are in the business now. A significant event could hurt you. Can you afford to take that risk?
If you can shrug off a 2 sigma event go for it, imho.
If this is your first transaction of this exact nature, maybe a test run of one house would be wise.
1) Its more than 5 times the work. Never consider this anything but a job. You could be doing other things, so lost opportunity cost. Are you qualified to oversee the builders?
2) What if your numbers change for the worse? Lets say you lose money per sale? Disaster For example, Trump places a 50% tariff on steel and lumber and/or deports all the illegals, a real possibility.
3) What if your builders let you down. Can you sit on those properties for two years?
I have known several investors that took the grow like a virus approach. All of them did well for a period.
None of them are in the business now. A significant event could hurt you. Can you afford to take that risk?
If you can shrug off a 2 sigma event go for it, imho.
If this is your first transaction of this exact nature, maybe a test run of one house would be wise.
Yes, all things to consider, but I would disagree in some aspects.
I would not consider it more than 5 times the work. If you have a GC you trust, then it shouldnt be much of anymore work on your end. Im not the one calling the trades and making sure they show up to the job-site. But I can see your argument if you take a more hands on approach.
Yes, market risk is always a factor. With leverage, you have less room for failure, but that same principle also works if the market increases significantly.
No doubt leveraging can help scale. I always want to be able to pay for what I borrow. If the market goes bad and I'm left with houses to sell. Can I pay those bills? If I can't I don't engage.
Hard lessons learned from building pre 2008. Until you've sold your plasma to get gas money. You can't really get it.