With any investment, large or small, you need to consider the upside gain, and the downside risk.
Investing in real estate is no different, whether it’s a long-term buy-and-hold, or a short-term reno-and-flip.
I’ve been monitoring this property in a very sub-par location for the last year, and it’s finally turning over. Let’s look at the risk-reward equation, and you tell me if it’s the basket in which you’d place all your eggs…
Maybe this is a case of the “first horse to the trough, gets to eat.”
This property sold in May of 2015 for $857,500.
Only seven months later, the property sold, with OMB approval for a 3,000 square foot house, and permits, for $1,025,000.
The first “flipper” of this piece of land made money.
Jury’s out on the second.
While I can’t say with 100% certainty that this is a “flip,” I can’t see an end-user purchasing this lot.
Either way, the person who purchased this lot, be it an end-user, or a flipper, is sticking his or her neck out.
$1,025,000 for a 27 x 85 foot lot on Mount Pleasant.
And that’s just land value!
3,000 square feet, at the cost to build of $250/sqft, is $750,000.
The OMB approval and permits have already been included in that $1,025,000 cost, but what about land transfer tax on the purchase, legal fees on the purchase/sale, Realtor fees on the sale if it’s a flipper, and the monthly carrying cost.
This, in my opinion, is the very definition of a “risk-reward equation.”
It’s high-risk, put potentially high-reward. If you can find somebody who wants to buy a $2.5M house on Mount Pleasant, that is.
Call me risk-averse, but I would never consider this, nor would I recommend it to my clients.
To each, his own.
But I have to wonder how many people out there would consider this their “own”…