Hey all, so I received my first call as a result of driving for dollars. I returned his call and have plans to speak tomorrow. He did give me his address so I've been researching options. I probably getting overly excited but I figure this could be a good exercise for practice.
It's a SFH, one story 2BR/1Bath, build in the 50s on one acre of land in the DC metro area. Bought in the 80s for about $175K. Given its VERY small size, it seems there's not much one can do with the current house. Between Homesnap and Zillow, the current value comes in at about $365K. Land is assessed at $247K. Some comps of newer luxury home construction in the area are:
5/4, 2700 sq ft., $829K
5/4, 4800 sq ft., $935K
5/3.5, 3700 sq ft., $790K
So, my question is, would I look to get a buyer/builder interested in the property to build a new luxury home? Is that a special group of buyers? Should I shoot for as close to JUST the land value as possible? 70% rule puts it at about $255K.
Any insight would be greatly appreciated. Thanks!
This is a big deal. Big numbers. Possible big exposure.
How much experience have you had? If you have not had much experience, I would sell the lead and find something very small, to start with.
If you think it will be a teardown you need comps on what the builders are paying for properties/lots. I would research what builders are currently building in the area. Zillow and property assessments will not give you the actual property value.
I'll echo what another poster said, please do NOT use Zillow to establish the value of a property. Do what real estate agents do to establish a property's value and check to see what similar properties have sold for recently within a few blocks of the home.
How close are the newer "luxury" homes to the property you're considering? Are they a few blocks away? I don't know exactly where your property is located, but new construction tends to happen in new developments so all the surrounding houses have the same nice appeal. You may not realize the same sales price if you do a "luxury" build for the home your considering if it's surrounded by other older, less appealing homes.
The numbers sound promising, but make sure you have a solid process to establish the numbers. When setting the value for a home based on comparables, they need to be close.
If the property is in VA then you should talk to my mentor/partner @Account Closed He has experience with major builds in good neighborhoods out there.
Thanks all for the responses! @Shayne Brescia I appreciate the tip. I'll contact Steve.
did you get the lead as a result of sending a letter of some sort ,, or form driving for dollars as you state in your post.
Do you have the ability to close or just looking to tie it up and flip?
rule of thumb on the development build side is builders look to buy land at 1/4 to 1/3 of the eventual retail selling price. The number goes down as the value of the resale home goes up.
So like for me when I am buying lots to build 250k starter homes in want to be in those 30 to 50k... If its 500k 125k ish to 150k will work... 750 to 1 mil you can pay 250 to 300k
Now take the major metro markets like SF bay area.. and one may pay 1.5 mil for a lot 7K SQ feet and spend 600k building and sell for 2.7 that kind of thing.. so land is almost three times building cost and inverse to the rule of thumb
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