Hello,
I’m in need of some input. There are some vacant lots that are for sale that have already been zoned off for building, actually there have already been homes built in the neighborhood. So my question is would it be profitable to buy the lot and build a house on it to sell it. Please somebody give me a little bit of advice.
Thank You
find out if u can make profits from the land, get contractors to bid, find out comp sales.
It all depends on the following:
Essentially if you pay too much for the land (developed lots with utilities are expensive) and the cost to build the house (especially if there are strict requirements for the development) are too high in relation to the final value of the home, your profit margin could be very very slim.
If you are going to make less than 30% to 40% after paying listing agent fees & other costs related to selling a home in your area after factoring your costs … you could encouter a rude suprise. Most people fail to factor in the fact that you are going to encounter cost over runs … and if they are not controlled well or anticipated early on … you could end up with a project that you are upside down on (losing money).
Had a client who encountered this situation because they had to change builders midway (first builder walk away with some of their money). In the end their profit margin of $100k turned into a $15k loss once the property was sold!!