New Construction - Posted by Tim

Posted by JT - IN on July 01, 2001 at 12:26:54:


I applaud your desire to get involved into such a venture, but it appears to me that you are undercapitalized for such a deal. Undercapitalization, is the single largest reason for business failure.

Your best option would be to find a partner, who could provide cash to this effort, at least for the first one, two or three homes, that you intend on building.

The last thing that you would want to experience would be to have to scramble for additional funds, 1/2 way through a construction project. Next to impossible, unless a RE investor has deep pockets, elsewhere.

Good luck on your project.


New Construction - Posted by Tim

Posted by Tim on June 27, 2001 at 21:48:09:

I have an opportunity to build invest property in an up and coming inter-city neighborhood. There are tons of vacant lots due to the city condeming and demolishing the older homes. I am planning to build duplexes that I estimate will cost between $90K and $100K including the cost of the lot’s. It is estimated that these properties will be worth close to $200K within a year due to the neighborhood developement (strip mall w/ major grocery chain and tax abaitments for home buyers).

The problem: Although my construction loan has been approved, I do not have money for a down payment. If possible, provide ideas on how to start this project with no money down. BTW, if you can’t already tell, this would be my first investment.

Re: New Construction - Posted by sueC

Posted by sueC on June 28, 2001 at 12:23:57:

Tim, please do not overlook the things Kevin posted about. “common knowledge” is not something to base your investments on, and it is this character of your post, that yoiu are taking a lot for granted that may not come true, that gives away that this is your first investment, not your lack of knowing where to find a down payment.

You probably won’t find a lender or even a hard money lender to give you the additional $$ you need (can you tell why? Because of the RISK - something to think about!) Your best and probably only bet would be to find a partner who is interested in this deal to put the money down while you do the work.

Good luck.

Re: New Construction - Posted by Kevin Subbert

Posted by Kevin Subbert on June 27, 2001 at 22:20:23:


There are easier ways to make money than to develop inner cities. You’re planning to make money based on speculation. Even though you may be sure the properties will double in value in a year, the possibility that they may not is something to consider. What is your plan if crime returns to the inner city and property values falls? Are you prepared to compete with other investors that are also building in that area? These may be large corporations that do this type of thing as a trade. Needless to say, this being your 1st investment, you will be buried.

Have you verified all of your information about the neighborhood development? Or is this just some things you heard? You might want to check with the city planners or the zoning board. Dont take the word of an agent or your buddies, its not their money.

How did you come about estimating the construction costs? What if your wrong? Have you spoke with a contractor? Have you ever dealt with a contractor before?

Are you sure you can build duplexes in the location your looking at? You may have to get the lot re-zoned. This can take a long time if the city allows you to do it at all. Does the lot have water, sewer, electric, gas for a duplex? If it had a SFH on it you will have to make accomidations for a duplex.

How long will the construction take? Are you prepared to pay the loan for 6 months or more while the duplex is being built and then longer while it sits vacant?

Just a few things to take into consideration before you go spending money. Try looking into buying houses that are already built in neighborhoods that are already are established. Lots of people make money doing this. There’s always room for 1 more.

Kevin Subbert

Re: New Construction - Posted by Tim

Posted by Tim on June 28, 2001 at 08:55:13:


I appreciate your input. However, the estimates are more than just speculation. I failed to mention that the I live in Atlanta where there is currently an influx of people back into the inter city. This is public knowledge. The lots are currently zoned for duplexes and water and sewage are available. Within less than one mile away in a different but same community, $200K new homes are being built and have been sold. There’s a risk as always…but it’s calculated. I watched a crack/crime infested area turn in a prime area for real estate through this same program and I missed out on that opportunity. I don’t want to miss this one.

I still need advise on financing without the down payment.