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BUILDING VS. BUYING - BLOG SERIES Since so many of our readers ask us about this topic, we decided to write a blog series!  Are current home prices just too high? Does your dream home seem out of reach?  Photos: 1719 Gladys Dr, Glendale, CA 91206 / Listed for: $275,000 Step #1 Buying a Good Lot Let's face it, today's home prices are sky high and if you continue to get outbid when you find a home you love, it can be very discouraging. If buying your dream home seems to be impossible... What about building your dream home from the ground up? If you build a home from the ground up you can build some equity in the process BUT don't think that the process will be walk in the park. Be prepared for a process that is both challenging and stressful but also very rewarding when you make it through to the other side and complete your dream home! It was back 2003 when I was on my personal home search and just to remind everyone, 2003 was a crazy time when the real estate bubble was building and multiple offers and overbidding were the norm. As I looked at the rising home prices, I really didn't think that I could afford any of the homes that I felt would be good for me. Then I got the brilliant idea that I would build a home from the ground up instead. At the time, I had never built a home before but why let the lack of any home-building experience get in the way of a great adventure? But I successfully made it through the process! Today, as I write this blog, I am sitting in the home that I built from the ground up. And after living in this home for over ten years, I still absolutely LOVE it and I learned so much by going through the process. I'd like to share my experiences so that anyone considering to build their own home from the ground up has a better understanding of what all is involved. What is involved, you ask? Let's break the process down into some main steps: Step #1 Buying a Good Lot! Step #2 Getting Your Permits Step #3 Contractors & Financing Step #4 Let the Building Begin! Step #5 Permanent Financing and Moving into your Dream Home!! PLUS... ALL YOUR TIME, ALL YOUR PATIENCE, ALL YOUR GRIT, AND ALL YOUR MONEY!! LOL:)  Today, let's dig into STEP#1 BUYING A GOOD LOT! During my search, my focus was on buying a lot in greater NELA community. I spent endless hours driving through the hillsides of Glassell Park, Mount Washington, and other surrounding neighborhoods like El Sereno, Montecito Heights and Lincoln Heights. I sure did get to know the neighborhoods through that process! I probably looked at 100 lots or more before I finally stumbled upon my dream lots. Yes, "lots"! At the time, I didn't realize when I placed my offer (and neither did the listing agent nor the seller) the property that I purchased was actually TWO lots side-by-side. What I also didn't know, and in retrospect I got pretty lucky, it turns out that the lots that I purchased were considered "very good" in terms of having lots that met some critical criteria that I would like to share. There is a general rule of thumb that I use when considering if a lot is a "good deal" and a "good option" to purchase when looking to build a home. EXAMPLE: Let's use a working number of $1,000,000 as the value of the completed home, the rule of thumb. BUDGET 25% of the value of the completed home = cost of the lot BUDGET 50% of the value of the completed home = cost of construction BUDGET 25% of the value of the completed home = builder's profit So in the case of a completed home that would be worth $1,000,000 the budget for the land would be up to $250k, the budget for the cost of construction would be up to $500k and the final $250k would be reserved for the builder's profit. Trust me, this is going to be a challenging project and it's only appropriate that at the end of the process you are compensated 25% for your "education". You might be tempted to purchase a lot that you find that might be listed for only $25k or $35k or $50k. In today's market, most likely a vacant lot that is priced below $150k or $100k will have some issues and those issues might cost you much more than you could ever imagine.  Here are questions to ask and features to look for when considering a vacant lot:
If your answer to one or more of the above questions is "no" then there could be significant expenditures that need to factored into your budget. If the answer to above question #1"no" then it might be a budget buster and make a construction project economically unfeasible. Hopefully this gives you a better idea of what "Buyer A Good Lot" is all about and what to look for.  Photos: 1719 Gladys Dr, Glendale, CA 91206 / Listed for: $275,000   Buying or Selling Real Estate? Contact Us Today! Brian Fitzburgh Real Estate Broker / Animal Lover 818-571-9712 [email protected] www.brokerstrust.com  Homes Fur All is a 501(c)3 non-profit charity organization dedicated to helping the people and pets of NELA.
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AuthorThe Fitzburgh Realty Team Archives
March 2024
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