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REAL ESTATE Profiting from natural disaster using real estate

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ArtRyumin

Contributor
FASTLANE INSIDER
Jan 12, 2017
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New Zealand
This is a real estate strategy that i got exposed and am taking advatage of in a city that experienced an earthquake, this strategy can also work in other natural disaster areas and perhaps outside of disaster zones also.

Quick background about myself and how it came to be. I'm a construction project manager/quantity surveyor (slow lane life) and now am running a app start up/consulting and carrying out own development. I worked in New Zealand for the Christchurch earthquake recovery project and was involved in the demolition project. We project managed circa 5000 residential homes being demolished over a period of about 4 years.

I'll try to keep the story telling to a minimum and concentrate on the juice of the strategy with some explanations on what makes it possible also.

Before all these homes started being demolished, they first went through assessment phases to determine the repair cost vs the rebuild cost of that property. Land damange was also considered and in some areas where land was too bandly damanged and had a classification of "red zone" meaning cannot be rebuilt on. The house was an automatic write of resulting it needing to be cleared of the land to repurpose the land into forests, parks etc.

There was a urgency to complete these assessments; we had about 4 hours to assess a house and another 4 to price up the repair strategy. If the repair was 80% of the cost the rebuilt it's a rebuild.

The houses that interested me where the ones that were less than 80%, sometimes significantly less 10-25% cosmetic damage and especially on the "red zone" there was houses that were no also no older than a few years prior to the year quake that were still in great condition and spec.

What i have done is found a bareland section (this one is a lifestyle section 4.1hecters) with no water but has power + data to the gate of the property.
Because of my network i was able to get a house that was ultimately going to be demolished and taken to the dump esentially and paid $10k for it to be deconstructed (flat packed meaning taken apart section by section, placed inside containers and shipped to this new land i've purchased. The house came with all the fittings, joinery and appliances.

Got the plans redrawn and a new consent = $5,000
Got a builder to build a new floorslab and construct the buulding to lock up stage (exterior completed and roof completed) which cost about $180k

So far the costs are:
Land aquisition $430,000
i had to put about 100k upfront the downpayment (there are 2 mortgages here)
Cost of building mortgage $200k

Total at that stage = $630,000 Loan from the bank
Cash in deal = $100k

Which brings us to $730,000

To date we've paid close to $60,000k for interest (i'll share my lessons learnt on why this was so much and how to reduce it next time, put shorly, i was doing about 10 other things at the same time and was in a relationship that crashed basically i screwed around hard)

So back to strategy, bought bareland, changed the use of the land by placing a 6 bedroom house on there, we've having the well bored for the water supply and a septic system for the waste discharges. Once that's done the house can receive it's competion certificate changing the use of the land from bareland to residential lifestyle block with water and services and this gave us a valuation of $1,200,000

Hoping to have it sold in the next 3-6 months which will add another 5-15k of holding and maintance costs.

Profit from project will be around 300-500k and it's taken less than a year for the whole project.

What else could be done for a much cheaper construction cost is relocating the building on a trailer all together. The costs of the reconstruction could go down quite significatnly as the house isn't being taken apart into smaller peices resulting in a faster reconstruction.

I also though if houses from cheaper regions can be purchased, picking them up and moving them to a place that has a higher demand for housing and reaching the demand for housing quicker and building a new house in the cheaper region from the proceeds of rent or sale of the relocated property. The cost of building in a cheaper area will be cheaper also but now you have a new house in a cheaper area and a house in an area that has higher demand.

Would love to hear what you guys have to comment if anyone has done anything similar and i will be editing the post at a more reasonable house with the accurate figures and a better layout i just wanted to get the idea out there as i've wanted to share this for a while and decided to do it during a hot night suffering from insomnia and reading the rest of the forum. If you want to expore if this strategy can work in your area hit me up i'm interested to see where else it could work.
 

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