I have a contractor friend that thinks it would be beneficial to just purchase land, build a home and then sell the home. What are your thoughts on that as opposed to buying existing properties??
I love new builds. Easy to sell, relatively easy to estimate costs.
But here in the Columbus area, it’s tough to do this as a single home investor. In the growing areas, the big builders own most of the land. In the developed areas, it’s almost impossible to buy the land and build at a price that will turn a profit. It can be done, but it’s tough.
Here’s an example: if you can buy a lot for $50k, and then build a 2,000sf home for $100/sf, you’re already up to $250k in cost. Add in some carrying cost, and selling expenses, and your cost basis is closer to $300k. You’d probably want to sell for around $350k to make this worthwhile. The challenge is finding a $50k lot in a neighborhood that has homes selling in the 300-400k range.
You can find 20-30k lots easy, but homes usually only sell for 100-200k in these areas.
The best approach is wait for a recession, buy the land at a discount, and then wait for the market to rebound before building.
Good thoughts. Thank you 🙂
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