Finance, Build and Sell Texas: Worth the Risk and Reward?

[Adam London]

Hello fellow BP Friends. I wanted to run a deal by you and see what your opinions are on the upside as well as one question I have about the taxes. 

Description of the Deal

A friend who just did this same deal introduced me to a builder in San Antonio who is building aprox 2400 Sq/ft 4 bedroom 3 bath houses on the 35 between San Antonio and Austin where a lot of people are moving. 

I buy the lot and get a construction loan. He builds the house in 4 months and at the end we sell the house and split the net profits 50/50

He can build the houses start to finish in 4 months and typically they are sold before they are done being built. Last home sold for $331k before Commissions

Total investment ($50k)

$45k LOT

$5k Origination Fee for $226k Construction Loan (6% construction Loan. Variable after 1 Year)

($2500 interest fees on the loan but this can be covered by the loan)

Risks

Economy takes a $&*#& and I'm stuck with a rental with a variable rate, but could refinance and get a 30 year fixed loan.

Sell the house at cost  - $270k and make $0

Reward

Average Profit between $40-55k

My Profit - $20-27.5K (Minus income tax @35%)

$13k-18k after taxes. 

Questions

What are peoples opinions about this deal?

Is this a good deal?

Any thoughts about tax shelters to protect the tax bill? 

Numbers. (Closing costs are Wrong on the Doc Below. Should be $5,000)

[Betty Cruz]

@Adam London  Is your construction loan supporting the entire project? If so, I'm not following where the builder is at any risk.