Where do you want to be on the food chain?

[Karen Margrave]

In reading @Manuel Acunas blog post about the tight market where he lives, and inability to get offers accepted at the price point he needs them to be, I got to thinking. Many investors are 'wholesalers' buying houses that have been built, sold, financed, lived in etc., and are for some reason back on the market. Many are back on the market as REOs, Short sales, probate sales, etc. However; the 'true' property that is actually 'wholesale' is new construction. The closer you get in on a property to its original construction, the more potential for profit, as it hasn't gone through the various mark ups. (I am speaking about areas that have stabilized and beginning to appreciate, not in areas where properties can still be purchased for less than building).

Therefore; why aren't more of you working with builders, or developing projects yourselves in those areas? Also, another opportunity may be in looking at builders hit hard by the real estate collapse, that can use a financial infusion. It seems like a great opportunity for partnerships, etc. , and could be a win/win for both parties.

[Karen Margrave]

Brandon Turner We have built spec for over 25 years. Our first was a 10,000 sq. ft. medical office building. At the time we made the offer we had no money to speak of, but we were licensed in real estate and construction and used that experience along with our commission for 'skin in the game". We knew our local market, and the hospital had just done a huge expansion. Most the doctors in the area worked out of older homes that had been converted to office space, and we knew they'd prefer new space closer to the hospital. There happened to be a parcel of land across from the hospital and made an offer on it. We had a basic rendering of a building, along with the income and expense projections. We then found a HML that could see the potential.

While the building was under construction we started advertising for tenants and filled the building, while at the same time advertising for an investor/buyer. By the time the building was finished, we had it sold, and another piece of property down the street tied up, and in escrow. We then built a 15,360 sq. ft. bldg. and leased it to the State of California, and sold to investors. Next up was a medical/dental clinic sold to an Indian Tribe, a few small office parks, and office/retail condos, etc.

However; we ended up getting into a subdivision that was finishing up final approvals and the developer needed someone to come in. The residential market was HOT. We agreed. Unfortunately, the City and Army Corp of Engineers had a disagreement over whether or not a gate should be put in a fence, it ended up pushing the project out another full year. That year was the difference between having a marketable project and the market crashing.

After the market crashed we sold all our stuff, paid off our investors, leased out our house and relocated to Orange County where employment and the real estate market are much more stable. We spent a few years doing small jobs, and getting to know the various towns here, getting to know all the different building and planning depts and which were good to work with and which to stay away from. Now we're getting established here, and excited about the prospects. Sorry for the long... answer!