Is a tear down/rebuild a good investment opportunity in St Louis?

[Kristie Hurst]

I'll try to summarize as much as I can: we are investors in training and also new neighbors to a builder who is doing tear down/rebuilds in St Louis. This is pretty common in our area as there is very little open land available. We are considering going in on a deal with him to purchase a property at 500k, rebuild cost roughly 700-800k then will retail around 2.1 M. We would front the property purchase, he would front construction cost and we haven't discussed profit split yet. Seems like an opportunity but want to be well informed before making a decision.   Any feedback is much appreciated. 

[Tim Johnson]

Wow, nothing like jumping in with both feet! :)  

My biggest concern would be, is the property really going to sell for $2.1 million?  There aren't a large group of buyers at that price (although there are some).  Maybe a few things to check...

- It would need to be on a premium lot or in a premium neighborhood.

- Really check the comparable homes sales.  Use several comps so you are not tempted to compare it to one house that sold for big dollars but was extra special in some way that your home will not be.

- Make sure you are comfortable with this builder.  Check his other work and keep up to date on the progress of this home.

The best of luck to you!