What a week!
We closed on a property in Philly on Tuesday, and I got another offer all but accepted on Thursday.
I'm so grateful to be ending the year this way.
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Livin' La Vida Luna y Luca
He can hold it himself, but she insists on helping. #BigSis
Did you know Zillow suppresses non-MLS listings?
For example, you have to toggle to "other listings" to see properties that are For Sale By Owner (FSBO).
Here's what that looks like on a desktop:
To achieve the same on mobile, you have to click Filters and then scroll down to "Listing Type" and select "By Owner & other).
Why am I sharing this?
Because there are some hidden gems behind the "Other Listings" door, and I imagine not many people are looking back there.
It's also how I found my latest deal.
This past Thursday, I was browsing through the "Other Listings" in my farm area and came across an opportunity in Florham Park, NJ.
Research
I immediately hopped in the car and drove around the area to scope it out.
I really liked what I saw. I was having Deja Vu. The feeling I got was similar to the feeling I had last year before buying the new construction project I'm working on now.
The immediate neighborhood had a healthy mix of new construction homes, well-maintained homes, and a few homes that needed major TLC.
I wrote down the addresses of homes that looked like they were recently built and homes that were in the process of being built.
After I had a list of ~8 properties, I drove back home and opened Propstream. I don't have MLS access so this is the next best thing.
Here's what I found:
1) Dirt trades for roughly $540,000.
2) A 4,000-square-foot new construction home sells for roughly $1.45M.
These numbers work. And they're eerily similar to the new construction project I'm doing now.
Stacking Up
But how does the subject property's lot stack up to the comps?
Here's what we have to work with:
The lot is .4394 acres, which is larger than all of the comps.
The dimensions are 116x165, which is wider than all and longer than all but one.
So we have a size advantage.
Some Math:
Let's do buildable square footage first.
Based on averages, the new construction homes were 4,160 sf on a lot size of .361 acres.
It doesn't actually work this way, but here's some quick math to calculate how big we can build on the subject property lot:
- Take Average Comp Square Footage (4,160)
- Divided by
- Average Comp Lot Acreage (.361)
- and Multiply that by
- Subject Property Lot Acreage (.4394)
- To equal
- 5,063 Buildable Square Feet
To be safe, let's take 90% of that number and assume we can build a home that's ~4,500sf.
Now let's look at value.
The average Price ($) per square foot (PSF) of the recently sold comps is $347.
I feel good about that number because the comp on the same street sold a few months ago for $371 per square foot. Using $347 is almost a 10% discount.
4,500sf x $347psf = $1,561,500.
Now let's run a quick pro-forma.
(+) $1,561,700 - Sales Price
(-) $95,000 - Cost of Sale (6%)
(-) $95,000 - Carrying Costs
(-) $600,000 - Build Cost
(-) $200,000 - Net Profit (Goal)
(=) 571,700 - Offer Price
Making An Offer:
Once I felt comfortable with the numbers, I wrote up two offers:
- $500,000 cash
- $550,000 with 90% seller financing
For option 2: I'd put $50K down and pay them the remaining $500K in 12 months when the project was complete. I made no mention of interest on the loan.
Making Progress:
To my surprise, the owner is interested in offering seller finance. But they countered with 80% seller-financed and want me to pay a "fair" interest rate.
I agreed to the 20% down ($100K) and offered to pay 4% interest only on $450,000 ($1,500 per month) for up to 24 months with no prepayment penalty.
This was the final communication on Friday evening. I'm now waiting to hear back.
Assuming The Sale:
At this point, I'm assuming the sale. Something really hairy will have to come up in my due diligence process for this to not go through.
Once we're under contract, my next steps will be:
- Performing an oil tank sweep
- Scheduling an inspection
- Requesting a Survey
- Engaging an Architect
What To Build?
I subscribe to the R&D method: Ripoff & Duplicate.
A house down the street sold for damn near $1.6M before it was even complete.
I'll plan on building a similar home and call it a day.
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P.S. - I'm looking to take on 1 or 2 new private money lenders for this project.
If you're looking to passively invest in real estate and earn up to 10% on your money, call or text me at +1-201-618-7918.
