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Old 07-16-2003, 11:37 PM   #1
Impreza2.5RSTi
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Default House selling/reselling. Please help with my idea...

Most of the area I live in is filled with very plain looking houses. When driving down the street you will see about 1 house in 20 that will actually catch your eye and make you think "Wow, that's a nice looking house." Flashier, and more outstanding houses are starting to become sought after. Houses that are 'cute' sell very quickly. The average price for a house around here is about $150,000, and the size is approx. 1,200 sq/ft. I know quite a bit about the market around here along with the good/bad areas.

An overwhelming amount of homes look like this:
(Not that it's bad or anything...)


Here is the idea I have....
Could I have a 'cute' house built and resell it for more than it was built for?
Something like this would sell quite well:

OR


Is there a loan that I could take out from a bank that I wouldn't have to start paying off for a certain period of time? If there were, this would work perfect. I'm guessing that if there was this type of loan, there would be some sort of fees, but the selling of the house could cover that.

Anyway - Would this work?
Real estate has always interested me, and I would love to get started in it.
Unfortunately I donít have any worthwhile amount of money I could put down on the house.

Thanks in advance!
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Last edited by Impreza2.5RSTi; 07-17-2003 at 12:20 AM.
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Old 07-16-2003, 11:52 PM   #2
Mike Wevrick
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Interesting idea, but I think a bank would consider that a pretty speculative loan. Building a house is not a simple matter. Maybe if you were an experienced builder/developer, but I assume you aren't. It can't hurt to ask, though; why not go into a few banks and see what they say?
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Old 07-16-2003, 11:56 PM   #3
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Thanks for the response, that's a great idea.

If I walk into the bank with the reports, and potential prospective returns, they might think twice about it.

Also, mortgage rates are incredibly low, so I think that quite a few people would jump at the chance at purchasing a cute new house.
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Old 07-17-2003, 12:19 AM   #4
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Do you have any building experience at all? I've worked in home construction and can tell you that having a house built is a very complex process, not a fun money-making project (unless you are experienced and know exactly what you are doing, and sometimes not even then). Not trying to be a wet blanket, but ...
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Old 07-17-2003, 12:27 AM   #5
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Mike: PM'ed you.
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Old 07-17-2003, 12:40 AM   #6
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Think about what you are doing though. Why would someone buy the custom house you just built, when they could build it themselves for the same price but get exactly the features they want?
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Old 07-17-2003, 12:45 AM   #7
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The average person probably would not want the headache of dealing with a construction crew. Notice I didn't say anything about building a $1 million dollar home. I'm going after the average buyer who dosen't have have the time or ambition to have a house built for them.
As I said, 'cute' houses' sell around here.

With mortgage rates being so low, why wouldn't it sell? If you haven't refinanced yet, and are a bit tired of your home why keep it? Buy a new one for about the price of your current home...
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Old 07-17-2003, 12:51 AM   #8
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I think you will be lucky to sell a custom home for more that what it cost to build, unless you are doing some of the work yourself.

If that's the case, then you could get a construction loan which is usually at a lower interest rate then a standard mortgage loan and lasts for one year (usually).
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Old 07-17-2003, 12:52 AM   #9
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Also, it would be quite feasible to cut a deal with the builder. They could take their time building the house at a reduced cost. Possibly a side project for them...


---
I would most definitely do some work on my own. Painting/roofing would not be a problem. I used to remodel houses with my father before he passed away, so I have quite a bit of experience.
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Old 07-17-2003, 12:58 AM   #10
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Old 07-17-2003, 01:22 AM   #11
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I just received some great advice!

I could purchase some land, and post a large poster showing the house that will be built there. I could then collaborate with potential buyers (showing them the layout, blah, blah) and have them place a down payment on the home.

Make money by using others' money.
Genius...

Last edited by Impreza2.5RSTi; 07-17-2003 at 01:35 AM.
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Old 07-17-2003, 01:24 AM   #12
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Investment properties appreciate mainly from the land they are built on, not the structure itself. Cuteness might sell a property, but it's not going to necessarily make it appreciate better than the dump next door. There are many factors that drive a home's appreciation rate.

My study of flipping properties (and I have not actually done this) indicates that ideally, you want to find a VA forclosure (getting quite difficult to find now, because the govt is getting out of that line if business) at 60-70% below market. After fixup costs and taxes, you'll get a nice tidy profit (not huge, but well worth the time and effort).

I would be surprised if you can actually find a builder willing to take the time to build you a single home at such a low cost that you could immediately profit from it. Typically builders do this (through phases).

I've got about 5-6 investment property deals in the works (3 homes being built, and 2 university condos going into escrow in the next week or so). My plan is to hold them and leverage them to acquire more property down the road. Buying and selling has significant tax implications that can really trash your profit. I'll be incurring about a 300$ negative monthly cashflow for the first year, and breaking even after some rent raises in the next 2-3 years. But after the tax benefits, it's really closer to only $150 negative a month. Soon my assets will be cash flowing, getting me closer to financial independence.

Read "Buy and Hold" by David Schumacher before you commit to building and selling homes. It's a cheap way to get some good schooling on investment properties.

Disclaimer: I'm a newbie property investor, so be sure to do your own dilligence!
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Old 07-17-2003, 01:33 AM   #13
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I agree with you on the location aspect. Location is key. A great school district, roads and nearby houses are all things to keep a tab on. I would definitely look into the appreciation of nearby properties.

I would do the whole 'fixer-upper' thing, but I think this might be a better route. I've looked into all of the 'fixer-upper's and most are in horrid locations... so that idea is worthless. I wouldn't be able to sell for much more (if anything) than what I put into the house.
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Old 07-17-2003, 02:28 AM   #14
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--

Last edited by Impreza2.5RSTi; 07-17-2003 at 02:47 AM.
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Old 07-17-2003, 07:35 AM   #15
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If you have the money to buy the land, couldn't you buy the land, and then borrow against it and use those funds to build the house? The bank will be happy enough as the loan is secured against an asset.
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Old 07-17-2003, 08:40 AM   #16
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Just something to cosider..... you mihgt want to begin by getting a real estate license. You could then start out as an agent (and you'd be making damn good money that way), build up some capital, and refine your sense of what's goign to sell well and what isn't (nothing like experience...) and you might at that point consider remodels to existing fixer-uppers instead of starting from scratch. Starting from scratch means a lot of permits, probable delays waiting for them, possibly waiting for infrastructure (such as connections to sewer lines, electricity, water, etc....).

I think you could do a lot in terms of taking a fugly house and making it cute. If you want to go even further in terms of adding value, you can take an older clunky kind of home, buy it cheap, and just by moving interior walls you could give it a more modern floorplan and amenities, which will add a lot more value to the home than the cost of these items. And of course the outside can be made "cute" as well pretty easily (you can take a pretty nondescript place and make it look, mediterranean for example, with an eye for style, color, some stucco, and perhaps the right kind of roofing as an accent).

Also, if you don't have a RE license, when the time comes to sell this thing you're going to have to pay an agent and that will eat into your profits which may be a little thin in the first place for the first couple times as you're learning the biz.

Good Luck.

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Old 07-17-2003, 01:28 PM   #17
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Thanks the feeback!

Question: If I built my own home to KEEP for myself, would I still need a RE agent?
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Old 07-17-2003, 01:34 PM   #18
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Quote:
Originally posted by Impreza2.5RSTi
Thanks the feeback!

Question: If I built my own home to KEEP for myself, would I still need a RE agent?
Need? No.
Is it nice to have one? Yes. I
s it a waste of money? IMO, yes. Unless you have no idea what you are doing.

A good RE Lawyer > RE Agent.
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Old 07-17-2003, 02:38 PM   #19
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To be honest, it's not a bad idea but I don't know what the returns would be for undertaking such a project and whether it would be worth it for you.

If,however, you decided to buy a house in an up-and-coming area, you could rent it out as well as earn the capital appreciation on the real estate (although it will take at least 5 years or so).

Of course, this is mostly in the "fancy" areas of the world, where real estate prices are extremely high, but its a suggestion.

Good luck,

Mark
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