I just closed on a mobile home on about 1/3 acre in a medium density residential zoning area. The mobile home and garage are basically no value besides bringing a little rent in while going through entitlements, but this looks like it's going to be an amazing deal.

Details:

Purchase Price: $250,000

Entitlement costs: $75,000

Infrastructure Costs: $350,000

Vertical Costs: $1,500,000

Interest Costs: $440,000 (over up to 42 months)

Sales Costs: $250,000

Total Projected Sales Price on exit: $3,400,000

Total projected profit: $535,000

This is if I take it down completely on my own and leverage 100% of the development using private money and construction loans. There is also the potential to fit another unit, which would actually decrease my construction costs (less total sq feet), but increase sales costs. The downside to that is 2 units would be 1 bedroom, so I need to contemplate and research more how those would sell.

These are also intentionally very conservative numbers. A few factors and assumptions I've made:

1. Infrastructure costs: 50% higher than a recent development I did 2x the size. But, that was before inflation hit, and there is typically a floor to development costs no matter what size lot.

2. Overestimated entitlement costs (hopefully, but have experience that says yes)

3. Vertical costs. Took my vertical costs on upper mid-level single family homes and increased 4% annually for 3 years. Construction should start in about 2, and townhomes will cost less psf generally than SF. I will also dial back the level of finish slightly for this product.

4. Projected sales: This was a little harder(as there were no perfect comps), but based it off of today's data on some townhomes in an area a few blocks away a little more desireable that sells for about 20% higher. Lowered price on those comps by 20%. I didn't account for any increases in sales prices as that's never a good assumption, but I also didn't account for any decrease, as this neighborhood has not been affected very much by price declines over the wider metro area in the past 1.5 years and we have mostly leveled off.

Overall I'm super excited about this as it is the hottest redevelopment neighborhood in the Boise area. There are new construction projects everywhere (including my own 350 ft away) and some really unique products and community features, and its a block from the river and greenbelt. In the end these will be affordable compared to many other new construction products in the area. I'll keep updating my progress on this project and others!

Boise, Idaho

4 Votes