Ever thought about building your own house? Here is the first video on vacant-lot sales:
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
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Encinitas, CA 92024 - (858) 997-3801 call or text
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CA DRE #01527365, CA DRE #00873197
FAKE lawn? Fake lawn? No, no, no.
Ecosensitive building practices.
Come on Jim.
driving slow… got both hands on the wheel
LOL!!!
Can you even get reasonable financing on vacant land these days?Anyone know of a reputable lender that is still lending on land?
Born, you’ve never been able to get reasonable financing on land.
Cost of land is where the cost of housing is. The difference between 2500 sq ft of “sticks and stucco” in La Jolla vs the same 2500 sq ft of sticks and stucco in Temecula is location of the parcel of land it sits on.
Raw land costs are a big part of why our housing costs are so high. Sticks and stucco cost about the same, no matter where you are building.
Where does one research county zoning (unincorporated 92084) and lot splitting possibilities? Is it published somewhere. For instance, folks on our street “say” we are 1 acre min. But some of the homes are not on an acre. If you have septic you need ample space for perc test and leech lines as well.
Raw land costs are a big part of why our housing costs are so high. Sticks and stucco cost about the same, no matter where you are building.
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Very true. And we can see in Jim’s video how delusional the land buyers are, even in this market. Everyone wants to be a spec builder and throw up their grand monstrosity in once-modest neighborhoods so they can pocket their first million and “live the good life.”
It’s frustrating for those of us who just want a nice, relatively modest house in a decent neighborhood when these specuvestors destroy these neighborhoods.
Dirt buying 101: we’re buying dirt/finished lots in Phx, Vegas, riverside, Etc in failed subdivisions (150 lot project with 50 built homes/100 finished lots). So long as you buy the lots below the cost to physically improve the lots (street, sewer, power, grading, etc) you get the improvements at a discount and the dirt for free. Just bought 100 finished lots for $9k/lot…developer spent over $50k/lot to buy/entitle/finish…I say thank you mr. developer.
Very easy to wait the market till builders go crazy (and they will) and begin overpaying. thus we look for dirt anywhere at less than it costs to put the improvements in…the only starting point that every makes sense….and it is out there.
PS: don’t leverage it until ready to build…carry dirt all cash, or not at all!!!
clearfund, how would one go about coming up with a cost to physically improve (street, sewer, power, etc.) Is there a general assumption on cost? Expect grading & paving to be xxx per yard or something like that.
I suppose for a spec builder, they already have a pretty good idea on the cost from experience – but for a would-be dream house shopper looking for dirt, how could they do a back-of-the-napkin cost to know if they are getting a worthy deal on the dirt?
Art – Wish it were that easy. It also varies from area to area as you need to bake in all the water fees, sewer fees, impact fees, kangaroo rat fees, school fees, extortion fees, f the developer fees, etc. these vary wildly from city to city, etc.
my suggestion is to talk to any good civil engineer and they could hone you in for the type of site you are talking about. single lot, lot split, subdivision.
In the riverside areas our cost to improve (and drag sewer 1/4 mile), grade, etc was $95k/lot (for 65 lots with fees) PLUS DIRT!!! Sold the site in Dec 05 to a builder (map in place but not physical work done) for $150/lot. Profit of $50k/lot.
that site is still not built, is in foreclosure, and we’re trying to buy the development loan from the bank for $35k/finished lot.
Dirt is good, and easy, but never build as they value of the spec home is in a builder ready lot. That is where you take all of his profits away from him before he even pours the foundation.
Art – last one, take market value of a decent home in the neighborhood, subtract a 20% profit from the JTR value, then back out everything to get it done (and I mean everything) including all permits, carry, const, arch, eng,etc and what is left is your lot value.
Then compare that number to what the seller is asking and you’ll laugh at how high his number is.
Likely, the value of the land most markets discussed on this blog today, carries a residual value of ZERO (or negative).
its a beautiful time to be a picky dirt buyer.
its a beautiful time to be a picky dirt buyer.
Provided you have cash and can sit on it for at least a decade. That’s what you call “long-term investing”!
tj…it may well be a decade if you pay retail prices for anything. However, it won’t be a decade until a wide-eyed builder comes along thinking he can build his way to a fortune and overpays for the dirt.
But we’ll never lose our dirt to the bank!
Builders are out of lot inventory and their business is the manufacturing of homes, not real estate investing. They are already looking to refill the pipeline. if they don’t build, they get real hungry, real fast. Thus they can convince themselves of their proforma with very little convincing.
Interesting, thanks Clearfund!
My guess is that a buyer on a larger scale is in a better position to get dirt at a good cost than your person looking for a single lot to build on. I haven’t seen much drop in prices on good, buildable lots yet.
Which kind of surprises me but it may be more of the seller derangement syndrome the Jim mentions all the time. I’d have thought the spec builders were mostly hiding in bear caves right now as their is a huge oversupply of housing. With spec builders hiding out, the market for single lots in established areas should be pretty good for would be dream home buyers…but I’m not seeing it.
A good spot to note Rob Dawg’s assertion years ago that all previous assumptions don’t apply.
It used to be that spec builders who bought the dirt at 1/3 of the value of the finished house, you’d do fine. All you had to do is be able to calculate what the house would sell for, and pay about a third of that for the lot.
I’ll do more dirt surveys to see if I can find a lot that would fit this bill, but don’t have my hopes up. Like clearfund said, between the permit-and-fees costs eating you alive and the parts and labor, most lots are now worth zero or less.
Like clearfund said, between the permit-and-fees costs eating you alive and the parts and labor, most lots are now worth zero or less.
Totally agree with this (as Jim knows).
…so much for that idea.
“most lots are now worth zero or less.”
Somebody please pass that on to the sellers, they seem to have missed the memo 🙂
And another thing….
I’d imagine that a person looking for dirt is likely not planning to build a McMansion and max out the lot, which is probably the only way for a spec builder to make a profit (which would lead back to why the current trend in building has been to max out the house size on a postage stamp lot.)
See if you can make this one pencil:
http://www.signonsandiego.com/news/2009/oct/31/copley-press-puts-la-jolla-land-market/
All I know is Encinitas, but assume they are all similar.
Water meter $19K
School fees $14K
Flood fee $2K
Traffic “mitigation” fee $3500
Parks and Rec $11K
Grading permit/check $10K
Building permit/check $10K
I’m sure I forgot some.
Then the actual work begins, starting with remedial grading of an already flat and engineered graded lot. About $40-50K when you add in the soil tests and observation fees.
Good times.
Art – I pass along the ‘worthless dirt’ memo daily and get laughed at, but patience is a virtue…much better than overpaying.
I offered a bank in AZ NEGATIVE $300K for a small subdivision…yep, told them to write me a check for $300k and I’d take the land…obviously no deal got done, but they are still holding the site and are about $150k deeper than they were 9 months ago…
Disciplined math doesn’t lie…
As for 1/3 of finished value as lot value that was a good starting point for a 100% finished lot with no grading needed. I’ve always operated in the 1/4 starting point as I’ve never seen a const project finish on time/budget.
Speaking with most of the major national builders they have drasically lowered their formulas for lot purchases from 35% for a finished lot to 10% during this crisis…telling…we should all be doing the same and lot values will follow in due course.
The subdivision is worth negative $300,000. Hilarious.