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I live in a place that city folk are moving to because it is not ruined yet. I have capital for one 500k construction loan or something like it, a cheap Genetal Contractor, cheap electrician, cheap excavation.
What would you do?

This is not my wheelhouse, but I would like to get into developing something.

Yes I left that spelling mistake for your amusement.

I live in a place that city folk are moving to because it is not ruined yet. I have capital for one 500k construction loan or something like it, a cheap Genetal Contractor, cheap electrician, cheap excavation. What would you do? This is not my wheelhouse, but I would like to get into developing something. Yes I left that spelling mistake for your amusement.

(post is archived)

[+] [deleted] • 4 pts
[–] • 3 pts

Entering real estate at the peak of the current bubble in a speculative fashion with zero experience.

What could go wrong.

If you're gonna gamble, gamble big?

[–] • 2 pts

What size are you talking? A couple lots and houses or a bigger subdivision?

I jumped into RE in 2004 after quitting my engineering career. Interest rates were near 0% (translated to 4% for commercial loans at the time). I bought land, hired a surveyor, engineer and other pros as needed, succeeded in getting my subdivision through final town and state DEP approvals in 8 months on my own dime. I secured financing and proceeded with building out the infrastructure that fall. My first sale (always the hardest) occurred 6 months later.

I sold 8 lots in 2005. The subdivision was very special, big elevated westerly views of the lakes, mountains and sunsets. Top quality road and infrastructure. The lots were of rare quality and expensive. These 8 lot sales paid off the infrastructure loan and taxes on the income. Sales slowed over the next few years (especially the Obama years), averaging a couple of lots per year. Meanwhile I had to pay property taxes and association fees on the remaining lots. I sold everything I intended to sell in about 15 'years. I have a couple of lots left - that I always intended to keep.

Today's commercial Interest rates could cause you pain over time. Property taxes/assn fees can cause pain. The survey, engineering, permit fees, etc weren't too bad. Infrastructure is expensive. If you take on a partner, be careful who you trust and make sure to have a solid written agreement. I did my project alone, no partners, no employees; I hired professionals for the things I couldn't do. My realtor was an ex-coworker who left engineering to become a realtor a few years before I started my project - we worked really well together.

It was the wildest ride I ever had. It was the most lucrative "job" I ever had, it was the most excitement I ever had. You have to go into it prepared to lose everything if you don't have deep pockets to withstand some adversity. You want to get the loans paid off as soon as possible so no one can ever take it away from you. Many developers go bankrupt, some commit suicide ... It is not for the faint of heart.

Smaller projects are much easier to manage.

[–] • 1 pt

Thanks for the input!

I’m looking at either fixing something up and renting it out or building something and selling.
Definitely don’t want to deal with a subdivision. What’s the most risk averse strategy here? Building for others? I’m just in a unique spot where I have a great infrastructure of workers.

[–] • 0 pt

I tried the rental process with my old house, it didn't work out well. I'm no expert at the rental biz. Building and selling would be my choice. I helped a friend do his small 7 lot subdivision around 2007. He already owned the land, got it through approvals cheaply, built a dirt road for little money. He had a selection of low priced contractors to build the entry level houses. Started a new house after each spec house sold so he kept his max loan amount low at any given time.

If you have a few acres to work with, I wouldn't ignore the subdivision option. If you invest the price of a lot you could have a half dozen or more lots to work with. You can sell lots to buyers who want to build later, sell home packages, sell spec homes, sell lots to builders who need inventory.

Tax wise, it is beneficial to buy and hold the land in one land holding company for a year or more to get long term gains treatment on the land profit. Your home construction operation should be a separate company because selling lots/homes classifies the business as a dealer and dealers don't get long-term gains treatment, taxes are treated like regular income. Your land holding company can sell and finance the whole subdivision to your home construction business in order to get long term gains treatment on the land portion (worthwhile if the value of your lots greatly appreciates as a result of subdivision). I did this and saved about 15%-20% of the taxes I would have owed had I done it all in one company.

[–] • 0 pt

If you do decide to rent... don't rent to niggers. Had a neighbor and she used to rent to niggers and it was endless headaches and not worth it.

[–] [deleted] • 2 pts

Consider taking that 500k, investing in a turn key multifamily commercial (5 units or more) apartment building. Multi family is great because you can force appreciation by raising the rents and/or lowering the Net Operating Income. There is a lot of due diligence, research, understanding the numbers presented.

Using the right title company with a commercial side to do the appraisal, due diligence the first time can be very helpful. Stewart Title is in all 50 States, has a commercial division, may be able to help.

The Youtube channel "Commercial Property Advisors" is full of easy to understand practical knowledge as well.

Writing all this because it may be safer for you to buy an income producing asset, then lever that to develop.

Good luck!

[–] • 1 pt
[–] • 1 pt

every situation is different, but I think I can help at least give you some ideas, but I'm going to make some assumptions.

if you plan on staying in this area I'd suggest building a 2-3-4 unit rental property. I say up to 4 because anything over is considered commercial. I'd make the one you live in a little nicer or a little bigger depending on your situation. The other ones I'd make them 2 bedroom 1 bath, 800-1000sf each. Do it all on slab, no foundation. Give yourself a garage bay or two and the other units gravel or macadam parking pads.

you can make it either townhome style, meaning 2 floors, or top and bottom units. reason being, older ppl who want to rent don't want stairs, but they typically keep the place in good order and pay.

now you have a nice place to live and a couple other units that will pay you back. If you have the newest places in your area and ppl are moving from the city you can charge the highest rent, and they will pay for it.

in about 10 years or so, with proper budgeting and spending this thing should pay itself off and you now have a cash cow of an income producing property.

[–] • 0 pt

Thank you!

[–] • 0 pt

very welcome. best of luck bro

[–] • 1 pt

Buy a couple of laundromats or buy a laundromat. Or build a brand new laundromat. People always got to wash their clothes. You got to get good commercial washers because people will throw in extremely dirty blankets which will end up breaking machines that are not up to the task.

[–] • 0 pt

Real Estate trends are highly local; I know my market won't crash because there's a housing shortage that will persist through any recession. Plus the prices are reasonable compared to anywhere else.

[–] • 0 pt

Instead odlf going balls deep into real estate, have you thought about finding a real estate group, or a realtor and learning about the local market first? I'm sure if you spent a year working part time or shadowing a real estate agent, you'd learn a lot and save yourself from making some newbie mistakes.

[–] • 1 pt

Smart. We have one of these in the family.