Update on Building home instead of rehabbing for profit.

[Rich Weese]

This is just an update to a previous thread. Here are the results on the first home completed and sold. The property referred to on the Golf Course has closed. Lot was actually bought for $39,145. The sales price was $319,000 and we had to do some additional itemsfor buyer. Fireplace, some additional granite in laundry room, pet door etc.

I used a private lender who charged 9% and 2 points. I could've paid cash, but wanted to show ANYONE could've done the same deal with under $40,000. The net after ALL costs, including interest, and commission was $84,000. The "net" was just under $45,000 in 6 months on a total investment of 39K. This is an annualized return of 200% on total investment of 39K. (if I calculated correctly) I still think there are other areas where this is possible.

The Parade home referred to is NOT sold yet and return will be less, due to holding time. March 1, I started a 3rd home in St George to be priced at $299,000 for 2300 sq ft- very nice home on a 50K lot. It is also financed with same lender.

As the rehab or wholesale margins are shrinking, you might consider this option in your area. Rich

[Steve K]

@ Rich - Good numbers on these. I've always wondered how feasible it was to build spec in different areas and still regret not setting up a second base in New Orleans post Katrina. Sounds like it's completely feasible if you have the right contractor relationship.

@ Tod - 10% is way too high. What I do is go to an online site like eplans.com and find a few options that I generally like. From there you can either buy the plans online and have them tailored or once you have a pretty good idea of what you want you can hire your own draftsman as Rich mentioned. 1% is about right. Ideally you want to pick a house that you can have a few different exterior elevation options yet the interior remains basically the same. This will allow you to easily forecast your future build costs.

It's probably worth doing an entirely separate post but how you spend your money completing a spec can have significant financial impact on your end result. I used to hang around my houses as a customer throughout the parade of homes every year just to hear the unvarnished comments of potential buyers. The items that jumped out at them were usually a lot different than what I thought were the important items. I'd recommend going on any parade of homes that you can and just listen to what features people really comment on - usually it's the cheap and easy stuff.