All Forum Posts by: Ryan H

Thanks for the response Bill,

This is certainly not the most bang for the buck for the use. The end goal is to have a nice, affordable homestead in the end. The parking lot I mentioned is for the neighboring community building and not for retail. The current easement uses the parking lot for access but the owners are securing a private drive entrance from the residential street across and exiting multi-unit tenant building lot. The surroundings are all residential for a few blocks then either multimillion dollar homes or the main retail strip.

I know that we can do the project but I am also not pipe dreaming that it is going to be handed out on a silver platter. There are a bunch of deal breakers on the lot that have to be overcome first.

I have put in an offer on a one acre lot in Northern California that's walking distance to the main square/wine tourism spots. It is about half of the total lot, the rest is going to be held or sold off by the development owners. The lot needs an access easement, one exists but it is through a parking lot and not ideal. The lot also needs access driveways and utility stub outs to the lot. It also will need to be subdivided and re-zoned. So why would anyone be interested in this? Because it is going for below market by about 30% and the owners are in the process of securing the access easement, re-zoning, and doing the civil work to prep the lot with driveways and utilities. We are the ground floor buyers on the deal. They are willing to do a carry back for financing, let us divide and pick our choice of lots, participate in the CC&Rs, and allow us to begin early construction prior to the final lot split.

Our idea is to build a guest house quickly using prefab construction, live in it while building a larger main house. Then use the remaining 1/3 acre for possible future construction of a third home to sell later. The end result being a 2/3 acre plot with a main and guest house plus an storage building and shipping container converted to a work studio.

The numbers are rough but look something like this:
1 acre = $360k
Guest house = $75k (2BR/1BA - 840 s.f. Max. Per zoning code)
Can be done as a carry back for the land purchase and all cash for the guest house construction.
Market value once complete = $600k (similar home lots are going for $700k+ so this is a conservative estimate)

Apply for a cash out conventional bank loan.
Use the cash out to build the main house.
Main House = $200k (3+BR/2.5BA - approx. 1,800 s.f.)
Live in the main house and rent out the guest house for cash flow to help out with the mortgage payments)

Build some equity, savings, and give some time for possible appreciation.
Build a second main house = $150k (3BR/2BA) 1,500 s.f.
Sell off 1/3 acre with second main house on it = $550k

Original investment = $360k + $75 k + $200k + $150 k = $785k
Selling of second main house = $550k
Results in 2/3 acre with a 3+BR/2.5BA main house plus a income property for only $235k

I know this is all big picture stuff and is not including loan fees, RE fees, and other soft costs.
The reason the construction prices are low is that I am a architect/builder who will self GC the projects.

I am looking for any feedback on this deal and possible problems that I am missing.
I have not done a deal this big before and am looking for some experienced advice.

Thank you for your time.
Locus