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jw01

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Jul 3, 2005
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Hey guys

been here a couple years now and looking to build a house and potentially sell it down the road. ive been particularly interested up north (i.e. north of maple, vaughn on the 400 etc b/c of land), in the city of King, Aurora. I've seen they have quiet a few spots for land that is vacant. Some in King in prime locations where houses are worth $2.1M+. Thus I was wondering if it would be worth getting a mortgage for purchasing that lot (approx. 2acres) and constructing something worth while on it 5000sqft and sell it a couple years down? Any input? Thxs

Cheers,
 
of course it is.
 
a great thing to do but you should be the general contrator and hire the trades yourself. EG: someto dig the basement, then hire a cement man then a framer ect you'll save 1000's
 
The only problem that I can see is if you do this, and build a 4 or 5 million dollar home on a "building lot", what happens if a developer buys all the surrounding land and puts in tract homes? Who would want to spend $4 million on a house surrounded by cookie cutter homes worth 1/8th the price?

The only time I'd do something like this is in areas where there are already existing homes in the size range that you want to build. I seem to remember up hwy 27 towards Orangeville some people were doing this. There were 3 or 4 houses under construction all around the size you're talking about.

Just a rule of thumb: an average house costs around $150.00 to $200.00 psf to construct. This does not include the land or the cost of running utilities, sewer, lot developement, etc. This also is based on using reasonable materials, not the best, but not the worst. ie: ceramic tiles instead of granite or stone. MDF trim instead of oak or other hardwoods. Basic trim instead of high end. Hollow core doors instead of solid.

So, a 2000 sf home will cost you about $400,000.00 to build (plus lot, utilites etc). Depending on the area you could probably sell it for $550,000.00 maybe $600,000.00. Your profit would be somewhere around $50K. Divide that by the 2 yrs it would probably take to complete and that's not a lot of profit.

But more accurately, if you're looking at 5000 sf. and go higher end materials, you're looking at $1.5 M for just the house. Now you would have to buy a reasonably sized lot to put that on, 1/4 acre or 1/2 acre and you will probably pay $3 - 400,000.00 for a lot and then you still have to develope the lot. (I am just guessing at the cost of a 1/2 acre in those areas because I've heard of builder's lots 100 x 30 going for 150 - 200 k in those areas).

Don't forget: you will also need all the right permits and or rezoning etc etc etc. Which is another good reason to build where others are already starting because the land has already been rezoned thanks to the other guys.

I'm no expert but I'd certainly talk to someone who has done this before, before getting yourself into it too deeply.
 
There's a great example of what I mean about building in an area that may be overrun (for lack of a better term lol) by tract houses:

If you ever are up around Mavis and 401, drive to the first lights N of the 401 up Mavis. Turn left. Go straight through the development.

It is obvious that the guy who owns the property to the west of the first development didn't want to sell to the builder. His 2000 sq ft ranch is sitting in a nice copse of trees on probably an acre +/-. But now he's surrounded on all sides by MOR houses. His lot isn't big enough for another developer to buy and put any number of houses on, but it's too big to put 1 or 2 houses on.

The only way for him to get any good money for his property now, is if the developer who built all the other houses, buys it, and puts similar houses on it. But then, he's not going to get as much as he probably thinks he will by holding out.

It's a great chunk of land and would be perfect for a 5K sf house but talk about looking like a fish out of water. You'd have a manor home stuck in amongst the peasants lol.....
 
Should also consider that with the way the credit market is these days you may have a hard time getting a loan on vacant land that you plan to develop yourself. Add to this that you are new to the development game and your chances really lower. Of course money is always available from higher priced ( non conventional ) sources but thats not too clever either.

.
 
LOL aren't we all just a bevy of support!!!

I guess it is better to get realistic advice than crap......
 
tboy said:
LOL aren't we all just a bevy of support!!!

I guess it is better to get realistic advice than crap......
Click to expand...




My point was simply that, just like in any other business CASH is KING.

You can have the greatest idea since sliced bread but without the implementation money you are going nowhere. A home under construction does not throw off any cash , therefore since it sucks up huge amounts of it you need to know that you have a secure patient source or else the project is partially complete then stops. not good.


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Hey Lanc, you're right, I was just being a smartass.

In fact, on a project like this, one better have a really large contingency fund because cost overruns WILL happen and any delays WILL cost huge sums of money.

For eg: You schedule the foundation guys to be complete by day 20, the framers to come in on day 21.

The foundation guys can't finish due to weather and aren't done until the 26th. The framing guys want more money because they can't just move on to another project for the 4 days so they just sit around on the builder's clock until the site is ready for them. And of course the GC wants THEM to finish on time so they have to put more men on the project and work overtime which means the GC will pay more.

Also, word of caution: if one trade quotes you a price? Count on 20 - 30 % over and above that price for the final total. This is due to many factors (as stated above) plus the varying cost of materials, fuel, etc.

For example: last week a sheet of 4 x 8 veneer core flat cut oak was $68.00. This week it is $75.00. That's over 10% in one week!!!
 
tboy said:
LOL aren`t we all just a bevy of support!!!

I guess it is better to get realistic advice than crap......
Click to expand...
I was waiting for the tide to turn a bit. Consider too that the price of real-estate will likely drop, and the first kind of property to drop will be exactly the type of home you are building. Watch the market, find comparables, see how much they were going for a year ago, and at least time your purchase carefully. Remember that most of the value of real-estate is the land, not the actual structure on it.

Also, consider as tboy has said, what will be there in the future (you can never know for sure, but see). Not only being a fish out of water, if what he says happens, your property value would drop. Finally, I have no idea whether this is relevant or not, but always consider your "exit strategy", and that would include buying a lot size that would be attractive to future developers of that area. Do you know for a fact that you will be able to sell this house? This is a high-end product, and the market is very small and finicky for it.

Let me ask you a serious question - to do this you would have to have be able to obtain credit in the high six figures, or even low sevens, and you`ll also have to have a lot of cash on hand. Do you really have access to this? If you have accumulated this much wealth or credit it strikes me as odd that you would not have taken tboy`s good, solid advice already in terms of consulting insiders who have already done this. I`m starting to do real-estate investing in amounts that are like half of what you`re talking about, and those are risky enough. This, especially at this time, is very risky.

Actually - just looked up your posting history, and found this - https://terb.cc/vbulletin/showthread.php?t=186160&page=2 I`m going to go out on a limb and assume that you know very little about basic finance, since you are asking for help with bankruptcy issues, and then asking if you get to keep stuff you have bought once you declare bankruptcy. Again, maybe I`m wrong, and you do have lots of cash (so much so that you`ve never had to even worry about bankruptcy or money in general, like Paris Hilton, I guess), but my sense is this is a case of a fool and his money are easily parted.
 
maybe i can shed some light here...I am one of those guys who did this...I was trained in the design build trade and I went out and bought a lot. I did not get a loan for it. I saved and bought it. Spent eight years sitting on the land and finally built a house on the land. It took nearly a year full time out of my life..almost lost everything due to fights etc with so. I knew exactly what i wanted and watched every cent I had. I ended up with a overrun of approx. 150 grand from extras, but I count myself lucky as others that built on my street ended up with divorces and financial woes well beyond what they had imagined. Of the six houses that were built the year I built, 3 of the six are now up for sale due to overruns etc..I myself count my lucky stars everyday..only good preparation and allot of luck and advice got me through it.
 
Hey TF: how much did you end up making in profit at the end?

10% ROI ??? (I bet it was less than that but I'm curious)
 
tboy...well the ROI would be less than 10 percent if you calculated the time
that I actually spent on the project. One of the builders down the street estimated that he would make 50 grand off a house that sold for 1.45. I am still finishing mine almost 2 years after i started. I had my temp move in permit 8.5 months after I started. I am now working on finishing the lower walkout floor of my bungalow, but I am still spending 2 years on.
 
Hey tightfit - has your estimated selling price from two years ago been revised given the current state of the market, and what is the high-end market like now in your opinion?
 
Yeah, that's what I thought.

Kudos to you for keeping on keeping on.

Everyone thinks builders make shitloads of money on houses but that's not true. The only reason they make any amount of money is because of volume. it is rare to see a solo builder making a lot on one project.
 
well i can tell you that my house is not up for sale, however, if it was, and I thought I could sell a house that is listed for more than 1.5 mil in a few weeks then I'd be seriously dilluted. Having been through the process years ago, i can tell you that if you intend on selling a custom home then you ought to be prepared to sit on it for 2 years before it sells...if you don't believe what i am saying then feel free to ask anyone selling a custom house north of the city. The fact is..if you want to purchase a home at these prices, then you have to be making a steady income in the high 6 figures. Not only do you have to be able to afford the mortgage, but just think about the money these houses require in upkeep..imagine if you will how much soil I will be putting in my flower beds just to keep them up this year. How much money will I spend on fertilizer and window cleaners etc..i can tell you the figures are staggering...
 
tightfit said:
well i can tell you that my house is not up for sale, however, if it was, and I thought I could sell a house that is listed for more than 1.5 mil in a few weeks then I'd be seriously dilluted. Having been through the process years ago, i can tell you that if you intend on selling a custom home then you ought to be prepared to sit on it for 2 years before it sells...if you don't believe what i am saying then feel free to ask anyone selling a custom house north of the city. The fact is..if you want to purchase a home at these prices, then you have to be making a steady income in the high 6 figures. Not only do you have to be able to afford the mortgage, but just think about the money these houses require in upkeep..imagine if you will how much soil I will be putting in my flower beds just to keep them up this year. How much money will I spend on fertilizer and window cleaners etc..i can tell you the figures are staggering...
Click to expand...

This is exactly my point where I posted in that thread about the people who scrap nice 7 - 10 K sf houses and put up castles.

Someone who disagreed with me about just how wasteful it was said: you telling me you wouldn't do the same if you could afford it? I said HELL no.....just on the upkeep alone would drive me nuts.

Frankly if I had unlimited funds (or a pretty decent cash flow) anything over 3000 sq ft is just a waste for me. I'd much rather have a 10 car garage with all my dream vehicles than a humongous house. Hell, I shared a 6 x 5 bedroom with my brother growing up so anything over 500 st ft is a stadium in my eyes lol....
 
tboy,,i see your point here..i on the other hand grew up in a 10,000+ and then lost it all..so i have learned from the best...never over extend yourself..never put yourself in a position where the bank ownes you..if you can't afford to pay cash for it ...then save your money until you can. For me, I have built a 6500 sq ft bungalow..open concept 12ft ceilings..that feels big..but then i wanted something I could throw a party in and invite 100 people where they would not feel cramped...Now you ask why did i build in the first place..well the answer is..I had bought the land as an investment that i intended to sell and fell in love with it..hated my next door neighbour..he was an arrogant shit in a little house...and decided i wanted to
risk it all, as i had nothing better to do..crazy ..hell yeh...but what is life really about...
 
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