Hi all, I'm new to RE investing and would love to discuss a scenario and get your thoughts.
There is plot of land in San Carlos that I am looking at ($300k+ for 7000sq ft.) Assuming this plot of land is zoned appropriately and the site is ready for excavation, would putting down $500k+ to build a model 3bd/2ba home on the site for flipping a good situation? (or 2bd/1ba home if my risk appetite is lower)
I'd appreciate hearing reasons why could be a bad idea. I've been looking at all possible costs and I'm trying to figure out why this could be a bad deal. Thanks!
I have not see a flat build-able lot in SFBA under 500K for sometime. Your first order of business is go to City Planning.
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What do you mean by excavation @Erik Chan ? that's the part that scares me. If it's hill side development it could be costly.
$300k for 7,0000 sf lot is a good deal, $500k for build out is a pretty small house, bay area it's prob $275/sf to build if you manage your own subs and that cost is always going up. Plus you have your soft costs--architectural, engineering, permit fees, developer fees, school fees. If there's trees or old house on the lot you'd have to demo that, that's if the trees are not protected. If it's hill side and you need cut and fill... not seeing the property in person that's prob easily a $200k job.
That should be enough to do a back of the napkin math. If you need more help give me a holler.
@Erik Chan I agree with @Sam Shueh . The last time I saw a lot in the 300K range that was sold in San Carlos was more than a decade ago and a flat one even longer. That being said if you do have the ability to buy one at that price and you can build on it, and it is not steep, you are very fortunate. I would not be afraid of building a small house as there are plenty of buyers out there for smaller homes, especially if they are in a walkable area. If the lot is in Devonshire or in the San Carlos Hills, it could be a very expensive proposition as the lots are so sloped there. As @Jason Hsiao said, 500K won't get you a very big house in the Bay Area as construction costs are very high. There is a severe labor shortage in the construction industry so having contractors lined up with good estimates will be very helpful.
Hi Eric I am a general contractor/landlord and similar to what Jason said, the fact that you said excavation makes it seem like you are on a hillside. It would be more expensive to build because you would most likely need big piers and a stronger foundation.
Sorry for the double reply but why are you considering it as a flip? Have you considered “BRRR”?
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