Cash vs. Leverage in Home Building (Simple #'s)

[Devin James]

You’ve got $500K in cash and want to build and sell Single-Family Homes..

You have two paths forward

1️⃣ - Leverage: Build and Sell 5 Homes

- $80K Per Vacant Lot ($400K Total)

- $250K Cost Per Home ($1.25M Total)

- Construction loans at 80% LTC

- $500K Home Value ($2.5M Total)

💰 Profit: $550K (After Closing Costs, Financing, & Contingency)

2️⃣ - All Cash: Build and Sell 1 Home

- Buy 1 lot and build 1 home

- Same costs, no loan, no interest

- Home sells for $500K

💰 Gross Profit: $130K (After Closing Costs & Contingency)

Same $500K. Same market. Same build.

5X the return by using leverage.

Smart leverage puts capital to work efficiently.

Do you sleep well at night using leverage?

[Jonathan Bremner]

I like the sound of 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