Building a custom home?

Question

Hello everyone,

So this is just kind of a fun discussion piece that was spawn out of curiosity. I’m currently waiting on a deal to finish up so I can invest in a flip in Florida . In the meanwhile I’ve come across what I think to be a great deal. It’s a 300k property estimated 50k rehab sitting on 4.7 acres in an area that houses just don’t sit on an acre much less 4+. There’s not a lot of comparable because of this but the house is a decent size 4 bed 1 bath (rehab estimate includes adding another bathroom). Unfortunately I’m not able to do this deal myself right now but I do know two great investors so if they wanted to jump on board I know they would allow me a piece of the action. So I pitched it to them, but I also told them that I believe we should have the land surveyed splitting it into 4 parcels. The property is allowed 1 unit per acre. Also there’s a lot of new house development popping up in the very close vicinity. I suggested we rehab the house split the land up and sell the 3 remaining parcels of land and then of course the house on the 4th parcel. I’m currently going back and forth with them right now to see if we can do this deal. I would play the role as project manager basically doing everything considering they’re out of town. However ￼my entrepreneurial investor mind is reeling now, I’m wondering what if we built on the 3 parcels brand new homes. Just one street away there are brand new communities popping up selling new homes (with no yard space typical neighborhood) for the mid to upper 200s. I’ve never studied new construction. I’m just wondering in Florida what is the average cost to build a new home via contractor? Obviously I know these numbers vary immensely on a lot of variables but I am curious into this side of investing.

Thank you

Edgar Rodriguez · Answer

Your best bet on a new build is $110-120 a foot. However, those prices vary a lot especially since the price of lumber has jumped up recently. I actually know a gentleman who finances a lot of new builds who would probably be a great help.

If you have an agent, you can also ask them what the new build would sell for before splitting them just to make sure it is within your profit range.

Daniel B. · Answer

@Naresh Maragh

What is the square footage of the homes selling for the mid 200’s?  Need to make sure they could be split into 4 lots...does the house sit in the middle of what would normally be lot 2 and 3 as an example?  In addition to minimum lot size, typically each individual lot has to be a minimum width and depth, check with planning and zoning in the local city on this.

Don’t know what the typical cost per ft is there, might be hard to make a profit.

Another option: can you flip the house and sell it where you could own the other 3 lots free and clear?  That would give you the option to joint venture with a builder, essentially they use the lot as their equity/down payment.  You don’t get paid until the actual house sells, and get a split of the profits, good option to partner with small builder, but there has to be profit in houses after lot costs, engineering, site utility costs, etc.

Daniel Haberkost · Answer

Hi Naresh, I don't know anything about your market so my first questions is what is the situation with utilities? Is the house on a well or does it have city water? I'd assume it's likely septic as far as sewer?

To your second point, if the area is as hot as it sounds I'd subdivide and sell off the parcels individually to local builders. I build new houses in Pueblo West, Colorado and if you have no experience with it I'd recommend not trying to do so unless you're going to bring someone with experience in development into the deal.

Nate Bell · Answer

@Naresh Maragh

It’s often difficult to sell bare lots, and there’s something to be said for controlling what gets built there. I wouldn’t expect to make a lot more money by going through with the builds, but it will likely mean you’ll sell them all much faster.

Naresh Maragh · Answer

@Daniel Haberkost

Hello daniel,

Thank you for your response, it is on city water. I would definitely bring in someone whose done this before. It just sparked my interest. I would like to know more about the subject of new constitution. I would love to pick your brain

Thank you

Joe Villeneuve · Answer

If you haven't built any yet, don't start now.  Building a home isn't like anything you've done before.  You'd be better off selling the property to someone that has, or partnering with them where you are the supplier of the lot(s).

Go rent the movie, "Money Pit", then get back with me.

Joe Villeneuve · Answer

Do you have any experience in building new homes?

Naresh Maragh · Answer

@Daniel B.

Daniel,

Thanks for joining the discussion. The homes priced in the mid 200s are around 1400square feet. The house is actually placed in an area that’s on the corner of the lot so it would be easy to split the lot. However we would have to confirm with the city. ￼ zoning allows for 1 unit per acre.

As for your second option. Yes we would make a profit off the first lot with the house rehabbed. Where we would own the other three lots free and clear. I will be looking into that option, right now we are weighing the options to see how we maximize profits.

I really appreciate the input

Naresh Maragh · Answer

@Steve Smith

Steven,

Thanks for entering the discussion. A lot of great information here especially from someone who’s done this and done it in the same area. I don’t think selling a new home in this area would be hard at all. It’s a super residential area with a lot of new developments surrounding it. Also this is only a short 10 minute drive to downtown Tampa or ybor. It’s tucked away not in a high crime area at all.

Will be looking into Florida’s 1031. Thanks I didn’t even consider it.

Building a custom home?

Most Popular Reply