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Wednesday, September 06, 2006

Builders Are Practically Giving Away Homes!

Well, not really, but I did see an amazing offer last weekend. I have some relatives who are looking to move to Arizona from California and they were out here last weekend to look at houses. They looked at some resales, but also looked at one new build development. The house they liked was the biggest in the development, about 2,300 square feet. It was priced at $395,000, but the builder was offering an $85,000 incentive. With that incentive, the house was actually cheaper than their smallest model. In looking at their community map, it seems pretty clear why they are offering such a big incentive. Very few of this model have been sold. They probably want some diversity in their community, so they are trying to sell this particular model so the neighborhood has some variety. Oh, and another incentive they were offering was free granite countertops.

I also found out an interesting bit of info from the salesperson. This particular model is a two story house and, when discussing the various lots available, she told us that the city of Chandler does not allow two story homes on a corner lot. I've never heard of that and I can't really think of a reason why they would have this restriction. The only thing I can think of would be visibility, but you can instead have required setbacks from the street for the house. Does anyone have any other ideas?

14 comments:

Steve said...

Wow, that is wierd. I was thinking visibility, too, but even then you'd have to be on a ladder on top of your car to see over even a 1-story, I'd think. Almost every city has one or more strange rules on their books from some outdated reason, perhaps this is one of them.

Anonymous said...

Would you care to share what builder you saw with that offer?

Thanks

Shaun said...

Elite was the builder.

FiveMZNYC said...

Maybe it's a fire code or something? I'm purely guessing here. Some building codes are historical, so it may reflect a need in the past that is no longer applicable.

Billy said...

Hello Shawn! First let me thank you for an awesome read. I have learned more here than I ever have from any book. I litterly read your entire blog starting back from 2004 in two days. It was like a soap opera lol. To get started I have two questions for you.

A. Your last house you posted made a profit in the ball park of 6 grand. You say your LLC makes 15% off of each deal and your investors keeps the rest right? I'm just starting out and my first plan of attack is finding a financial backer just like you have. I put a Craigs List add up stating I'm looking for a investor to foot all the bills and once the house is sold we would then split profits 50/50. I didn't think it would work but guess what...it did. I have two very interested investors I'm in talks with now and possibly a third. If I do land one of them I will see if they want to do the same deal with you if your interested. Just let me know.


B. How do you have limited access to the MSL listings and how would we be able to do the same?


I have so many questions but I'll start here and keep my book limited. lol Again it's been a joy reading your saga and I look forward to much more from you.

Billy

Shaun said...

Hi Billy. Thanks for the kind words and congrats on finding investors! Be careful that you set up the LLC correctly so that you are personally protected should things not go well. Make sure your investors know there are risks and know your experience level. FYI, in the future I would charge more than 15%. I just charged that much because, at the time, I had little experience. I am an investor in other LLCs that do basically what I am doing and they keep 25%. I'm not looking for additional investors right now, but thanks for the offer. As for MLS listings, just search the internet and you should be able to find some sites that offer it. Start with the sites for your local newspaper.

Anonymous said...

Thanks for the advice. Have to ask though why no new post. This site is better than Flip that House or Property Ladder. Your readers are eager for you to buy a new house lol :). Seriously this site is a great read. Very educational as well.

I could really use some advice.

Question: My investor is asking since he lives in Cali and our flip would be sold in Oklahoma what tax ramifications is he looking at? I posted this on my club board in Oklahoma City and no one seemed to know. I figured since you deal with private investors like I'm doing you might know.

Also I had one investor tell me your title company can make or break you. My understanding of this is some title companies cost more than others do. Is he meaning something else by this? How did you choose your title company? Was there something in particular you was looking for?

Thanks again for your time.

Billy

Shaun said...

No new posts because I don't have a new deal yet. Finding a property that meets my criteria takes time, especially in this slow market.

As for taxes, consult a qualified tax professional for the best advice. My take is that it doesn't matter that the investor is out of state - mine are as well. He will pay capital gains on the profit from a flip.

I wouldn't say an escrow company could break you, but you do want one that will work with you and is responsive to your needs and timelines. I have not yet run into an escrow company that does not offer investors a discount on fees, so be sure to ask for investor rates. I didn't look for anything in particular in an escrow company. I typically used the ones the seller's were using until I finally found one that I liked and now I try to use them all the time.

realestatemadman said...

The Diversity sounds ethnic. There are millons of DEED RESTICTED commuities "out- there". They all have their own stupid rules. There is no answer.You would have to get an explanation from the all-mighty home owners association for that.
Just ask for their logic "if they have one"

Anonymous said...

Shaun,

Thanks for the advice. I will dabble with a couple at first and see which one is more responsive to my needs.

Update on my partner. He set a requirement on me that I couldn't meet. But low and behold I had two others call me just tonight and one of them is right here in OKC. Hope this guys comes through. Sounds promising I'll let you know.

I know I ask alot of questions but I'm in the absorb stage right now and trying to learn everything I can...

You say a deal has to meet your criteria. Would you mind listing your criteria out for us newbies?

V/R
Billy

Anonymous said...

Shaun,

Not sure if this is up your alley or not but I know a guy looking for 30K in hard money.

Billy

Anonymous said...

Shaun,
Great blog! Really informative and interesting (I am a fan of your blog)........I have just bought a new home in Gilbert. With the market softening, the builder actually offered a 30K reduction in price, 3 months AFTER we signed the contract. Guess they were afraid of people foregoing their earnest deposit sinc ethey could get a similar house for much lesser just down the street. So the base is around 330K for a 2500 sq.ft. home, in a good location. Do you think this is overpriced? We still havent closed, so waiting to see if they will dock of some more from the base price.
Thanks in advance!
Regards,
PKA.

Shaun said...

Wow.. A building giving you back money after having a signed contract? I never heard of such a thing! I can't tell you if this is overpriced or not - there are too many things I don't know about it. Also, if it is going to be your primary residence, it's more important that it's a house you like and in a neighborhood you like. But be happy - you just got a 10% discount for no reason!

dan said...

Hi Shaun, me again...

I had a similar experience with some condos in a downtown area.

Basically, you put down $9k as an 'option to purchase' when the property is completed 2 years from now. The developer is offering a $9k incentive OR $1800/mo guaranteed rent for a year. So my options are 4:

1) Dont close on the property - take my $9000 down plus another $9k as incentive
2) Close, get financing, and get market rent OR the guranteed $1800/mo (not bloody likely)
3) Assign my contract to another investor/occupant prior to closing - if the property has appreciated enough in 2 years.
4) Close on the property, lease-option it to occupant buyer.

Hoping to do #3, will settle for #1, #4 would be ok depending on the market in two years.

Reason builder is doing this is so they can show the bank 50% sales quicker to get more loan funds released - this will allow them to break ground sooner. Plus, the condo market here is a bit saturated currently, so its been harder to move them.

The $9k deposit is escrowed and released pending final inspection, so if it doesnt get built I only risked the loss of what I could have made on my $9k.

Interesting times. Lets hope things improve so I dont have to settle for a measly 40% return (pretax of course) on my money per year for 2 years.

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