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Real Estate buying from da builder

Discussion in 'Real Estate Investing' started by venom, Nov 11, 2007.

  1. venom
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    venom New Contributor

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    The was an article in todays paper about builders offering 60-100k off the selling price. Or a combination of throwing in upgrades and price lowering.
    Wonder if anyone is looking at this angle ?
    One of the things I subscribe to is a group that looks at partnering with the builder then cash out at the sale.
    Something I may do when I decide to sell the property I 1031'd into.
    Rob
     
  2. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    hmmm. Interesting thought. I would only consider this strategy if it cashflows - and if SFR are in my plan.

    If SFR are in my plan.... I still don't think I'd be looking at new construction - as there are places in the country right now where you can pick up SFR's for less than cost of replacement.
     
  3. randallg99
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    randallg99 Bronze Contributor

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    not sure where you are speculating, but there is a very remote possibility that it will positively cash flow in the NE region of USA

    I also think, and this is my opinion, that we will see further declines in the new home building markets...

    the 1st two home builders to announce bankruptcy did so this past week and my gut hunch says this is just the beginning.

    Good luck.
     
  4. ChrisS417
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    ChrisS417 New Contributor

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    My girlfriend's dad is a builder here in St. Louis, and he is having a hard time selling some of his stuff. Thankfully this market isn't so volatile with it's swings and it's doubtful they'll go bankrupt. He's been finishing basements at no extra charge just to move the suckers. He even just had someone back out of a deal and give up 10k in earnest money on a 900k house.

    He is however trying to get out of a partnership he has with a different building project that deals with smaller houses. He told me he'd sell 5 of their brand new houses for 1,000,000 total. They go for 225,000 to 230,000. All anyone would have to do is buy em and resell em. Probably wouldn't take more than a couple months to unload em. It would be a 12.5-15% return. Buy em sell em make 125k-150k if anyone is interested.

    The real trick would be to figure out how to use OPM. Only problem would be holding costs while selling I suppose.

    Any Ideas?
     
  5. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    Why are there so many people around here still wanting to flip????

    There may still be pockets where that is the order of the day, but I'll bet it is rare.

    Now is not the time for the flip folks.
     
  6. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    Rob, we did this very thing...without really meaning to. I've always liked the strategy of buying into first phase of a development and then as the developer continues to add phases, your SFR have a built-in appreciation. It's pretty brainless....unless, of course, the market crashes. (So we never do too many of those kind of deals.)

    We had two properties with non-refundable deposits of $15K on each one. People were cancelling right and left on the development. We weighed the cost of walking away from the $15K*2 or buying and being prepared to hold until we could get a tenant. Well, the crashing real estate and, more importantly, sub prime crash, meant people went back from being buyers into renters. So, we could get them rented right away.

    Even better, though, is what happened at closing. We had intended to hold for short term and flip and we knew a lot of other people were doing the same thing. So my husband put a lot of extras into the property that he felt would make a distinct advantage when it was time to sell. Of course, the market fell apart and our competition largely walked on their deposits. At closing, we got a call from the home builder, they said they weren't ready to close. "Fine," we thought.

    Then they called and said they wanted to comp us the cost of the upgrades because they were afraid of what the appraisal would show. "Cool," we thought.

    We were ready to close a second time and got another call - they needed to delay again. About a week later, they called and told us they wanted to discount the bigger house by $75K and the smaller one by $50K (after they had already comp'd us about $75K in upgrades). "Awesome," we thought.

    So, by the time we bought them, we ended up renting them out quickly for slight cash flow. Meanwhile, we are under cost on these homes...just waiting for the extension of the freeway which should jump the value, whether or not the market recovers.
     
  7. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Lemme preface this with, I agree with you 100% it is harder to flip right now. I still think its very doable. Yes your profit is not as great as 3-4 years ago, but its still very profitable. You just have to price the property right. We have already had 8 showings and 1 offer on the property I mentioned in another thread. There will always be buyers and sellers, the sellers just have to work harder right now.

    Holding is probably the best strategy, unfortunately that does not fit into our plan at the moment. That is why we are flipping properties.
     
  8. phlgirl
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    phlgirl Bronze Contributor Read Millionaire Fastlane

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    Great news on the showings/offer Bilgefisher!! Keep us posted.
     
  9. Shawn
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    Im not keen on the terminology, but it seems like buying now (very low prices) is a good idea and then hang on to it until the market rebounds. Is that still considered flipping?
     
  10. jta00r1
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    jta00r1 PARKED

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    That would sound good but some do not want to pay holding costs.
     
  11. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    That's why you buy properties that cash flow, thus minimizing the risk.
     

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