I bought a land in CALABASAS and I will get my money (+more) back without selling it

[Edgar Karapetian]

Hello everyone,

This is a beautiful deal that I'm doing in this current moment. I've bought a land in Calabasas, and I'm constructing a house. I intend to keep the property and recoup my entire investment + more.

Here's a breakdown of the deal:

Land Purchase: I secured the land for $200,000.
Construction: The construction of this impressive 4-bd, 3-ba property spanning 1800 sq. ft. is estimated to cost around $600,000.
Construction Financing: I've partnered with a lender, leveraging a construction loan disbursed in stages. This method not only ensures efficient funding during construction but also minimizes interest payments, given that construction loans typically extend over 12-18 months with interest-only payments.

After the first year, my expenditures are as follows:

Land: $200,000
Construction: $600,000
Interest: $60,000
Total Investment: $880,000

Here's where it gets interesting. Comparable properties in the area are currently valued at an outdated $1.1 million. However, the estimated value of my new construction, complete with a pool and ADU, is at least $1.35 million.

Capitalizing on this increased property value, I approach the bank for a cash-out refinance. Typically, banks offer 80% of the home's appraised value. With my home now valued at $1.35 million, this could translate to $1 million.

With the $1 million, I:

Cancel the construction loan ($600,000)
Get back initial land investment ($200,000)
Reimburse the interest paid on the loan ($60,000)
Plus,  I'll have an extra $140,000 .In essence, I not only recover my entire investment but I also put some money in my pocket.

But the story doesn't end there. I will rent out this new house, covering my mortgage payments with the rental income and steadily building equity over the years.

Let me know if you are interested in doing something like this in Southern California, I have my team (brokerage, lender, architect, GC) ready to go.