How do you buy land and sell blueprint prior to construction?

Question

Good evening everyone, I am new to the forum. I am currently a university student who is studying finance and working part-time as an accounting clerk making slightly above minimum wage. As of right now I have about $2.5k in my bank account but by the end of the summer I could probably get it up to $5k.

It seems that through my quick browsing there hasn't been too much written about this... How would I go about finding land, getting a contract on a single-family house blueprint (usually these go for a lower price than a ready home), and then construct the home based on what you sell this blueprint for and keep the difference?

Ex:

Buy land (or mortgage for land) for $15k

Design or buy a ready blueprint for a single-family home

Interested buyer decides that he/she wants the home constructed that you designed and pays you $500k to do so

You hire builders to build you the home for $400k

You the difference ($500k-$400k=$100k)

(the numbers I used are purely hypothetical to show what I mean).

Also, is it possible to do a sort of 'wholesale' on land so that you can seek out interested buyers for your blueprints prior to actually putting money down for the land?

Sorry if this was too long or I wasn't very clear with what I meant. I live in Illinois - if that makes any difference. I really look forward to your input!

Manny Cirino · Answer

@Tom Sutherland Your strategy can be done, but there are a few things you need to keep in mind. Know that not all land is buildable, land has restrictions as to what can be built on it, which is determined by the zoning, every zoning and has max density(number of dwellings than can be built on an acre). You can buy 1 acre, and that acre could be zoned to hold 2 dwelling per acre or 4 per acre, your lack education may lead one to believe you can only build 1 large house on that acre, when in reality you could get away with build 4 houses/duplex/triplex/etc... Also the land may be cheap but what is it going to take to get it shovel read?

Google the words I placed below, they may help you get a better understands of the process.

• stock plans
• cost-to-build
•  builders
• setbacks(front, rear & sides)
• density profile
• wetlands
•  drainage
•  surveyor
•  civil engineers
•  geo tech
•  perc. test 
• impact fees
• feasibility

The list is to long but this should help you a bit more.

Mike Salisbury · Answer

Respect to you for thinking of a different approach. As a Builder, I know we miss wildly on predicting what people will buy. This cost us money as days on market (DOM) grow and eventually a price reduction becomes necessary to sell the house.

My recommendation is to have a local Real Estate agent on your team to guide you on your plan purchase. They have feedback from what current buyers are seeking. There is substantial risk in what you are proposing but I wish you luck.

Tom Sutherland · Answer

Welcome to BP Richard. Basically you are describing being a general contractor.

I live in Illinois and I have built a few houses and done several remodels.

My last house that I built for myself I bought a 1 acre lot and shopped home plans online. Found 1 I liked and had the online company make some custom changes I wanted. All in the plans cost me about 2500.00.

Most bigger towns and villages require a architecturally stamped set of blueprints that conform with current building codes that have been put in place.

The area I built didn't require an architect stamp which saved me money. An architect will charge you anywhere from 1-3 dollars a sq ft to review and stamp your plans.

As far as building a spec home (which is a home with no owner in mind at the time building starts) you would need very good credit,decent income, and usually have the land/lot payed for upfront.

Does that answer your question?

Good luck!

Tom

Account Closed · Answer

Also, would it be safe to outsource the blueprint architectural drafting to save money?

Account Closed · Answer

No, I would make the investment into the architectural blueprints. What I asked was whether or not I could get title to a land under contingency (if that's what it's called) prior to making investments into the land until I find an interested home buyer - then I would pay for the land and begin the project. Is something like that possible?

Account Closed · Answer

I have a builder in mind that creates very good quality houses (the one my family and I live in included). As a source of personal reputation and guarantee of good quality, would I be able to share photos of the builder's past projects without disclosing the builder's name or something like that? Also, won't the potential homeowner be insured?

Account Closed · Answer

Yes, for the most part this answered most of my questions! Thank you so much for your response! Do you by any chance have the answer to my last question? I'm not sure if I worded it correctly...

Basically wholesaling is finding an interested cash buyer prior to having the seller sell you his home, right? Whereas flipping is more risky since you have to first buy the home before you sell it (probably rehab it first).

Could I do that with land? Like, would I be able to have an architect design a blueprint for me, find an interested buyer, and only THEN put cash down for the land and start development? This would be more safe since I wouldn't have to commit to a piece of land prior to having a deal in place.

Manolo D. · Answer

Richard B. There is no discussions about it because it is so hard to pull or put together. No architect will work for you under a contingency, no plans will be drawn unless you have a few hundred if not a few thousand. No builder will quote you without any plans. Without any experience in building, almost noone will treat you seriously. You can try, but from what your plan and experience, it looks like a long and dark route, you need more research.

Tom Sutherland · Answer

there ar 60-70 1acre single family zoned lots available in my area was what I was telling Richard . They used to sell for 80-100k now they are on the MLS for 17-39k.

Tom Sutherland · Answer

Manny I'm not doing the building. Richard is. I am well aware of building and zoning.

How do you buy land and sell blueprint prior to construction?

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