New Construction - French Hill

[Ralph Stowe]

Investment Info:

Single-family residence other investment.

Purchase price: $329,000
Cash invested: $10,000
Sale price: $389,000

I bought a lot for $51,000. I sat on it for a year. By the time I got my $281,000 construction loan, the lots next to me were selling for $106,000. If I was smart, I would have taken my $55,000 profits and ran. I was not smart. I built a 3300 sq ft house on the property, doing a lot of the work myself (and friends). I ended up going a bit over budget and sold the property around April 2004 for $389,000 and walked away with about $40,000 I put down on my current home.

What made you interested in investing in this type of deal?

I was 28 and still living with mom and dad. How pathetic was that? So I decided to get off my duff and invest in my future and bought a property. By taking out a loan, I was building my credit, so much that I qualified for a $281,000 construction loan.

How did you find this deal and how did you negotiate it?

I drove around where I wanted to live. This neighborhood was like that moment in Christmas Vacation where the beam of light was shining down on that one glorious tree. I felt, "This is it!! I want to live here!"  As far as negotiating, The developer said the lot is $51,000. He needed $1,000 down. So I paid him $1,000.  (I'm a hell of a negotiator aren't I ?)

How did you finance this deal?

I got a traditional loan from the big bank. For $51,000 for some land, the risk for them was minimal. The payments were easy as well.

How did you add value to the deal?

I did a lot of the work myself (Big no no!!) and took out a $281,000 construction loan with a bank that specialized in owner/builder loans. They were very nice.

What was the outcome?

I ended up going over budget, and sacrificed a lot of week-ends doing tile work, wood flooring installs, and hanging kitchen cabinets at 3 a.m. I ended up listing the property for sale and got $389,000 for it and walked away with $40,000.

Lessons learned? Challenges?

1. Don't do the work yourself! 2. Get it done FAST!! 3. If you have doubled your money on the initial investment without doing anything, take your profits and run!! 4. don't bite off more than you can chew. 5. Even if you make some dumb mistakes, you can still come out ahead in some situations.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Konvicka Construction who acted as general contractor for licenses, permits, and all the work I didn't do.