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 Comparable properties in the area are currently valued at an outdated $1.1 million.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.

[Caroline Gerardo]

$600000 will build a 1300 square foot SFR with no pool no ADU. That number is not realistic.

To refinance the property and get cash out it needs to be completed as in everything done and inhabitable, unless you do a short term expensive hard money loan and then refinance later and pay the costs twice. 

If you wanted to refinance the raw land maybe you can get 50% of current as is value not what it will be when completed.

So that's three loans at lets guess $15000 X 3 = $45000 plus interest reserve and carry cost. The hard money loan in the middle might be 4 points so it alone may be $35000

Water is number one problem. Number two is getting fire hazard insurance (get a quote today it will give you chest pains). Curbs, gutters, utilities temporary and permanent, architect plans specs, planning dept asks for changes adding fees, fencing to keep out the stealers, temporary porta potty, and then in a year you get the okay to start. Los Angeles Planning Department not so friendly as we hope. 

Can you qualify full documentation for a construction loan (IRS taxes net for a big loan plus what your housing is today unless you move in with family)?

Get the loan approved and don't lock rate as you have 12 months to get all the pieces lined up and approval from planning.