All Forum Posts by: Donald Capwell

Thanks, @Darlena Jones, but rehabbing in this case is not the issue... it's not possible. The question, then, is what margin / profit / ROI do you need to realize before it becomes a deal for you? Obviously, nobody would do this for $150.00 - but what is YOUR required profit to build a house?

Thanks

Howdy, all!  I searched for an answer to this, but didn't find it... Please just give me a link if there's already a discussion about this that I missed!  This question is for anyone that is currently doing this sort of deal, or regularly considers this and has done this sort of deal... 

BACKGROUND - 

I worked for a man that once helped build a homeless shelter some years back (10-ish).  During the process, he questioned whether someone could build a new home (3/2), and make it available to people that are in need for around $50K ("affordable" was his goal).  So, to settle the matter, he actually set out to do it.  He bought some land and then built 3 identical houses, side by side, fully stocked with all appliances, weed wackers, rakes, brooms and lawn mowers, "turn key" homes, and then sold them for $50K each.  Net profit per house was $150.00.  In the end, he was satisfied that his logic was sound - it could be done (this is "yesterdays" money, and not to imply it could be done in today's economy) - but he also realized that you certainly can't make a business case to do this!  

With this story in mind, what is the business case YOU use to pull the trigger on building a home verses walking away, with the assumption that a house is beyond rehab. (NOTE: I do NOT mean that you will make MORE money to build new versus rehab - assume a rehab is not an option, and you have to buy on the basis of discounted land value, area's desirability and comps, or you it's not a deal). I have a property that I'm evaluating, and the existing house needs to be torn down and a new house built. No, I will not be doing this work myself, but if it makes sense, I'd like to work with the investor that does this so I can learn. Houses going up in the area are upper mid-range to luxury finish. Without getting caught in the weeds, at what point and using which method to evaluate (ie: Net Profit, ROI, Cash on Cash return, etc) does it make sense for YOU to level a property and start over? Would you do it for $50K? Not less than $100K? 150K? More? What makes sense for you to pull the trigger, and what questions SHOULD I be asking that I'm not?

Next, as a sidebar to anyone that may be doing this in Norther Virginia, what is your cost to build per square foot for a upper-mid grade (new construction)? I've been quoted several rates locally, from as low as $95/sf and up to $135/sf for upper mid-range to luxury grade builds. Let's hear from you VA home builders!

Thanks for taking the time to answer.

@Brian Burke wins!  (Although I did enjoy the tunnel giving the critters access from the house to the cage, should they need a break from the filth!  

Brian, wonderful job with that house!  I have an offer on a place that looks like it might have been owned by a relative of your house's owner, without the mountains of filth to climb through.  Amazing what people can live in... Truly a disease, and sad... I'm sure the neighbors appreciated your work, too!

@Sean Dawson what is your strategy? Will you be flipping? Buy/hold? Other? Have you built your team? Did you speak with other investors I your area, attend REI meetings, and get a mentor?

The miney is not the first or even major concern if you get the right deal.  Give us some more info, please...

Just a thought... If you know you will only hold this for 5 years, then a 3 year used unit is probably fine.  Don't count on 17 years, though, if it's based on your old unit.  You'll probably get as many say new as old, so spend my two cents carefully!  ;)

If you have an existing home warranty, you can get a repair or replace for almost nothing.  If not, you might want to consider one to cover your major systems.  For only $450 or so annually, it will probably pay for itself in the next 5 years.  

Good luck

hi, @Alan L. Weeks.  If you want to tag someone, just use the @ symbol, then type the first 3 letters (case sensitive, no space).  Below the text field will be a drop down so you can click the name...  This works if you are connected to the person, or if he/she has commented on the forum..

Brandon is tagged, above, and should be able to get you where you need to go... Cheers

@Brandon Turner

@Sean Dawson,my ou are in the right place, and asking the right questions.  Jump up to the education tab and get yourself a free education.  Start with the Ultimate Guide to RE Investing... While going through this, click on the links in each chapter to listen to podcasts and read forums / blog posts for each topic.   Eventually, you'll decide on the strategy, and will have a plan for moving forward.

Education first... Then ACTION!  Don't sit on the fence once you know what you want to do and have built up a team and enough knowledge to do something.  You'll learn as you go, but learn from other people's successes and failures, first.  

Welcome aboard, and good luck!

sounds like they are looking for cash buyer (and probably statue as much???), or want you to make sure you have financing in place.  It means they won't let you back out of the contract for not being able to secure financing (you'll lose your earnest money deposit).  Make sure you have financing in place!

I used craigslist exclusively, and I'll just say you need to screen really well.  Lots of info here to help with that.  My first Tennant trashed the home in only 6 months, was evicted and I was able to rehab twice.  I learned to take time with checking references, and I raised the rent price to get a better clientele (I went less at first for fear of not getting a Tennant).  I don't hold properties currently, as I'm getting back into RE as a flipper, but I'll hold again in the near future (and likely use a property manager, now that I better understand passive income).

Trust, but verify... If you get that nervous feeling in the pit of your stomach, or if anything doesn't check out, punt!  Make sure you know market rents for your area and offer great value... One this helps...

Cheers