New Construction? I don’t get it…

So House #33 is a rental house in a B- (well, maybe I am biased… probably a C+ neighborhood), we bought it in February.  Via the MLS, I saw a lot for sale in the area, it’s a triangle shaped corner lot in between brand new houses and some real bad ones.

The lot was listed at $17,900 and I thought about putting in a “stink bid” of maybe $5,000 and sitting on it for a couple years.  The MLS did advertise that it comes with pre-approved plans and everything.  I never ended up putting a bid in and it went pending after being listed about a month and a half.

Someone ended up paying $14,000 for the lot, and every time I drive past it I see they are building a brand new 2,000 sq foot pretty aggressively.  I would guess it’s about two months from being complete…

I am stunned as to what this owner is planning on doing with the property.  Best case, his construction costs are $100/sq ft.  That puts his cost at $200,000 + $14,000 + other fees, etc.  I did some comps… House #33 was worth about $120,000 maybe $130,000 after we bought it.

The highest sales within the mile area is $117,000.  Including a 2009 house that sold for $100,000.  Does this investor know something I don’t? I will let you know what happens.  Maybe he is planning on renting it?

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3 Responses to “ New Construction? I don’t get it… ”

  1. Mike Z says:

    Wow, you have to want to live in a brand new house pretty bad to spend 50% more money. We need people to buy, repair and rent existing houses not build new ones. This person could have bought 4 houses with all that capital and had 50% LTV’s.

    Oh Well. I can’t think of any reason this makes business since. Let us know if you ever talk to the owner or the builder as I would love to know what they are thinking

    Z

  2. Steve says:

    I think I saw the owner and I thought of pulling owner and talking to him. But I don’t know how to start the conversation. “Are you insane?” “What are you planning to get for this place?”

    Maybe I should act like an interested Buyer and see what he wants to sell it for.

  3. Mike Z says:

    Just tell him you’re an investor in the area and curious what his/her plans are for the new house. Then we they tell you the plan try not to laugh over fall over. Should be fun

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