I have a question regarding tear down flips. I grew up in a neighborhood just outside Washington D.C. in VA. There seems to be a theme in the area. Especially in my neighborhood, houses that are sold are being snatched up very quickly to be torn down. They build these huge 2+ million dollar monstrosities. Houses that sell are not selling for anything under 750k or so. The advantage I feel I could have is that I am still connected with many of the neighbors. I usually hear about a neighbor wanting to sell before the house even hits the market. Assuming I have a team lined up but no funding, what could my creative options be here? I see opportunity but don't see any way to get my hands on it.
Thanks so much!
Nick, As you will see I am also in Vienna VA and know exactly what you are talking about. I have lived in the town for over 25 years and man is it changing!
It sounds like what you want to become is a wholesaler. You would get a home under contract with a small deposit and then shop it among the dozen plus builders working in town.
Now the disclaimer. I am a Realtor but I do not represent any builders. That just isn't my area of concentration. I have worked with sellers trying to decide if they should sell to a builder or put it on the open market. Those experiences, plus my observations wondering around town, led me to write a blog on my site entitled, "Is your home worth more Dead or Alive."
I looked at the what builders paid for the tear down homes sold privately and what the prices were for those that went on the open market. The numbers showed (and this was some months ago) was that sellers netted more - even after commission - with open market exposure.
More recently I am noticing a real bump in the entry level price points for liveable homes in town. With new homes commonly in the 1.3 range, folks wanting to live in the area but not in that price range are causing many basic homes to jump from the high 500s to the mid 600s.
Anyway, if you do have a connection thinking of selling and the house is need of lots of work, you may try to get it under contract and flip it to a builder.
I have grown up watching how the area has changed. Change is almost an understatement. Thanks so much for your input!
Is there a way to take over the entire process potentially? In a creative manner?
Possibly depending upon who is on the team you mentioned but this is project that from purchase of the tear down to settlement of the new home can take 1 to 2 years. It needs to be well capitalized with inexpensive money. It is not a fix and flip that can absorb typical high interest short term funding. I am not sure I know of any creative way to do it in this competitive market but others may chime in. It is more dependent upon having the right partners.
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