Author Topic: Ideas to make money off new build  (Read 1797 times)

cj25

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Ideas to make money off new build
« on: January 14, 2022, 09:18:49 AM »
So DH & I have never owned a home. Mid forties. Want to desperately. Weíve never had a down payment. Weíve been trying to buy again since June of 2020 and were outbid for a year. We took a break and came to help with some family stuff in TX. We werenít looking for a home but a new build fell in our laps. In a great suburb of Austin in a great new part of town where everything new is going in. $389k with 5% down, builder paying closing cost. Problem is, we donít want to live in Texas. We hate it here. But Iím wondering if we should buy it and sell it in a year or two just to get us a bigger down payment. Itís already up around $435k.  Some issues thoÖ 1. the quality construction is awful! So many issues. Going to spend the first year filing claims to the builder. 2. Rates have gone up so high our payment is going to be ridiculously higher than we want. Probably at least $2900 if not more. We couldnít rent the house for that if we end up upside down in a market downturn. Rents are around $2100-2200. Is this too risky to try to play in our situation?  Or should we buy it, wait for a bit and get a heloc to put down on something somewhere else? Is there an angle Iím missing? Or just walk and find a house somewhere we want to live?

Watchmaker

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Re: Ideas to make money off new build
« Reply #1 on: January 14, 2022, 09:28:11 AM »
So DH & I have never owned a home. Mid forties. Want to desperately. Weíve never had a down payment. Weíve been trying to buy again since June of 2020 and were outbid for a year. We took a break and came to help with some family stuff in TX. We werenít looking for a home but a new build fell in our laps. In a great suburb of Austin in a great new part of town where everything new is going in. $389k with 5% down, builder paying closing cost. Problem is, we donít want to live in Texas. We hate it here. But Iím wondering if we should buy it and sell it in a year or two just to get us a bigger down payment. Itís already up around $435k.  Some issues thoÖ 1. the quality construction is awful! So many issues. Going to spend the first year filing claims to the builder. 2. Rates have gone up so high our payment is going to be ridiculously higher than we want. Probably at least $2900 if not more. We couldnít rent the house for that if we end up upside down in a market downturn. Rents are around $2100-2200. Is this too risky to try to play in our situation?  Or should we buy it, wait for a bit and get a heloc to put down on something somewhere else? Is there an angle Iím missing? Or just walk and find a house somewhere we want to live?

No part of this, not a single small part, sounds like a good idea.

314159

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Re: Ideas to make money off new build
« Reply #2 on: January 14, 2022, 09:53:05 AM »
...Or just walk and find a house somewhere we want to live?

Well, the last part was a good idea! The rest is a bad idea.

If you're going to buy a house, instead of buying a house you don't want, buy a house you do want.

sonofsven

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Re: Ideas to make money off new build
« Reply #3 on: January 14, 2022, 10:32:31 AM »
You already know it's bad construction, and that is just what you can see! Run!

theoverlook

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Re: Ideas to make money off new build
« Reply #4 on: January 18, 2022, 06:54:29 AM »
Sometimes the answers are easy. That is the case here. NO.

maizefolk

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Re: Ideas to make money off new build
« Reply #5 on: January 18, 2022, 07:28:49 AM »
Sounds like there is consensus here, but just let me add: No. Don't do this thing. It is a bad, very bad idea.

(And good for you/your gut instincts for having enough recognition it might be a bad idea to ask people about it before you were committed.)

cj25

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Re: Ideas to make money off new build
« Reply #6 on: January 21, 2022, 09:29:17 PM »
Sounds like there is consensus here, but just let me add: No. Don't do this thing. It is a bad, very bad idea.

(And good for you/your gut instincts for having enough recognition it might be a bad idea to ask people about it before you were committed.)

Why is it such a bad idea?  I'm really struggling with letting go of it.

maizefolk

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Re: Ideas to make money off new build
« Reply #7 on: January 21, 2022, 10:13:19 PM »
You are considering taking on hundreds of thousands of dollars of debt to buy home so poorly constructed that the builder cannot unload in a city that you don't live in, for which you'd owe a mortgage payment half again as high as what the house might rent for.

It does not make sense as home because the house is not a city that you currently live in nor is it in a city you plan to live in.

It does not make sense as a rental because you will be losing hundreds of dollars every month before you have do a single piece of maintenance (and there will be lots in a poorly built house) nor experienced a single month of vacancy or missed rent from a tenant.

It does not make sense to buy it as a speculative bet on future real estate appreciation because:
1) Your carrying costs will be extremely high because it will cost you money every month as a rental even if everything goes perfectly.
2) As you mentioned, interest rates are trending up, not down, which tends to drag property values down, not push them up.
3) If you've been struggling to put together enough savings for the down payment on a house you wouldn't be gambling with money you could afford to lose if property values go the opposite of the direction you hope.

I'm sorry. I can imagine how seeing house prices increase as fast or faster than you can save up greater amounts of money towards a downpayment it can start to feel like housing prices only ever move up and the solution is to just buy a house, any house.  I know losing out on offer after offer for houses has got to feel bad. I remember how ready I was to not have a landlord. But this is not a shortcut to the end goal you want to achieve.

cj25

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Re: Ideas to make money off new build
« Reply #8 on: January 21, 2022, 11:17:25 PM »
We do temporarily  live here. My family is here. We just donít like it here but I figured well, if we can get a house, everyone else likes Texas, so maybe we should just stay. Sell it as soon as we can/want. Once we back out, the builder will have it sold in minutes even though the quality is crap.

Dicey

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Re: Ideas to make money off new build
« Reply #9 on: January 21, 2022, 11:45:12 PM »
I've owned lots of houses. At present, DH and I own four. We've seriously considered scores more. Every single time, even when I was a single person and buying was a scary proposition, I listened to my gut. I always knew without a doubt that I was making a good "buy" decision.

It doesn't seem to like you're listening to your gut...

Telecaster

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Re: Ideas to make money off new build
« Reply #10 on: January 22, 2022, 02:06:44 PM »
Sounds like there is consensus here, but just let me add: No. Don't do this thing. It is a bad, very bad idea.

(And good for you/your gut instincts for having enough recognition it might be a bad idea to ask people about it before you were committed.)

Why is it such a bad idea?  I'm really struggling with letting go of it.

What part of it is a good idea?  It is cheaper to rent than buy.  Right there, that means buying is probably a bad idea.  The construction quality issues should be an obvious no.     And remember, it costs a lot to sell a house.    If you try to sell in a year or two you very possibly could be underwater.  Which brings up another problem:  You are counting on price appreciation.   And you might get it.  But you might not.   We've been through a long period of prices going nowhere but up, but that will end at some point, guaranteed.     

cj25

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Re: Ideas to make money off new build
« Reply #11 on: January 23, 2022, 02:24:54 PM »
What if we sell immediately? It may sell for $450k-$500 somewhere. House will be done in a month and have a buyer lined up as soon as we close. Demand is huge here with building delays and waitlists. Just hate to lose out on $20-50k after transaction costs.

Paper Chaser

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Re: Ideas to make money off new build
« Reply #12 on: January 23, 2022, 07:16:35 PM »
Selling immediately would require you to pay tax on any profit. Short term capital gains is taxed as income.
So you're hoping for a profit (certainly not guaranteed) then subtract selling costs no matter what (potentially putting you in the negative), then the amount remaining is taxed at whatever income tax bracket you'd end up in (annual income plus house sale profit).

Morning Glory

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Re: Ideas to make money off new build
« Reply #13 on: January 23, 2022, 07:32:10 PM »
What if we sell immediately? It may sell for $450k-$500 somewhere. House will be done in a month and have a buyer lined up as soon as we close. Demand is huge here with building delays and waitlists. Just hate to lose out on $20-50k after transaction costs.

This is an example of the "greater fool" theory that gets mentioned in discussions about crypto, tulip bulbs, etc. Don't buy something you don't want just because you think someone else might pay you more for it later. Even if you make a profit you will lose most of it to taxes, realtor fees, etc. and there's a good possibility that you will get stuck in this house for years. 



Jon Bon

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Re: Ideas to make money off new build
« Reply #14 on: January 23, 2022, 08:13:13 PM »
What if we sell immediately? It may sell for $450k-$500 somewhere. House will be done in a month and have a buyer lined up as soon as we close. Demand is huge here with building delays and waitlists. Just hate to lose out on $20-50k after transaction costs.

So how are you buying it for 389 if market value is 450?

Do you have a signed contract to buy for 389? If not why would the builder sell it to your for that if he can get 450 somewhere else?

The way I am reading this is the market value of this house probably is 389k right? Its only worth what someone will pay for it. Now if you have a purchase contract for 389 and shit is that crazy down there that you can in fact sell it for 450 then maybe talk to a RE agent about selling said contract to someone else for 450k which is basically how wholesaling works.

I feel like your leaving some information out.

 

cj25

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Re: Ideas to make money off new build
« Reply #15 on: January 23, 2022, 09:06:02 PM »
Yes, we have a contract for $389. Itís been being built since August. Now itís gone up a lot. A lot of people are suggesting we do this (wealth strategist & other people with property in the area). Iíd only want to if weíd make a decent chunk of cash. $10k isnít worth the risk and headache. Husband doesnít want to. There are long wait lists for new builds though. Iím just trying to be open minded about taking opportunities. I have no desire to buy and live in it and get stuck. What other details would be helpful?

cj25

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Re: Ideas to make money off new build
« Reply #16 on: January 23, 2022, 09:11:04 PM »
Oh only other issue we currently have no where to live so if weíre not living it and just going to rent, we will need to have our credit run which may affect our credit/ability to get mortgage before close.

Dicey

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Re: Ideas to make money off new build
« Reply #17 on: January 23, 2022, 11:39:23 PM »
One pull on your credit report will only matter if your score is marginal. Should that be the case, you shouldn't even consider doing something this speculative.

cj25

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Re: Ideas to make money off new build
« Reply #18 on: January 24, 2022, 02:49:42 AM »
On weíre both at/above 800. Just wasnít sure if they will see a credit pull and ask why a leasing company is pulling our credit.

SailingOnASmallSailboat

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Re: Ideas to make money off new build
« Reply #19 on: January 24, 2022, 06:19:03 AM »
if you have nowhere to live, where are you living now?

IMO people want new builds because they want to decide all the things. All the colors, all the finishes, all the extras. You selling the house, even immediately, is not a new build any longer.

I can't see how this is a good idea.

I feel like you're here looking for confirmation on a course of action you've already decided on.

cj25

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Re: Ideas to make money off new build
« Reply #20 on: January 24, 2022, 07:01:33 AM »
Hotels/Airbnbís/people from church. We were living with my sister and her family (we were helping them originally and stayed to wait for house) and then her alcoholic husband got pissed NYE and kicked us out. Itís been really special. Now we definitely want out of TX and have no reason to stay.

I havenít made up my mind. Wasnít my idea. I think I want to walk away but I wanted to be open to doing things different than I normally would. We need a bigger down payment and this has the potential to help with that. But if things go bad, we canít afford to lose the down payment we do have. Just donít know why it would go bad exactly.

We didnít get to pick anything or make any choices. In this market a lot of homes that arenít custom builds are just selling as inventory. You get what you get. Which does suck. But everyoneís paying top dollar. Iíve met several of the neighbors and a lot of them their parents just paid cash for the homes for them.

Just for kicks, check out how crappy construction is here in a nice suburb outside Austin. They are fixing all of this with caulking. https://www.icloud.com/sharedalbum/#B0Z532ODWVapoN

Papa bear

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Re: Ideas to make money off new build
« Reply #21 on: January 24, 2022, 07:15:45 AM »
Can you sell the paper? As in, wholesale the property. You have a contract for 389.  Find a buyer who wants it for 450. Be the middle man and trade the note.  Maybe throw the builder some extra. Everyone wins.

You make money, builder makes more, you donít have a shitty house, and you pass it off to some other fool.


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sonofsven

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Re: Ideas to make money off new build
« Reply #22 on: January 24, 2022, 07:33:42 AM »
Hotels/Airbnbís/people from church. We were living with my sister and her family (we were helping them originally and stayed to wait for house) and then her alcoholic husband got pissed NYE and kicked us out. Itís been really special. Now we definitely want out of TX and have no reason to stay.

I havenít made up my mind. Wasnít my idea. I think I want to walk away but I wanted to be open to doing things different than I normally would. We need a bigger down payment and this has the potential to help with that. But if things go bad, we canít afford to lose the down payment we do have. Just donít know why it would go bad exactly.

We didnít get to pick anything or make any choices. In this market a lot of homes that arenít custom builds are just selling as inventory. You get what you get. Which does suck. But everyoneís paying top dollar. Iíve met several of the neighbors and a lot of them their parents just paid cash for the homes for them.

Just for kicks, check out how crappy construction is here in a nice suburb outside Austin. They are fixing all of this with caulking. https://www.icloud.com/sharedalbum/#B0Z532ODWVapoN
Those pictures tell the story. I'd want nothing to do with that garbage.

Morning Glory

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Re: Ideas to make money off new build
« Reply #23 on: January 24, 2022, 08:03:00 AM »
Why not buy a house in a place you do like, then live in it? There are plenty of banks that will lend to you with less than 20% down. You just have to pay pmi which usually goes away after you have 20% equity.



 

cj25

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Re: Ideas to make money off new build
« Reply #24 on: January 24, 2022, 08:15:34 AM »
Donít know where to go? This was easy because my family was here and they donít have mandates. We tried to buy for a year in WA where we loved only to be outbid on everything and the market go so high we canít a decent home anymore. So when this just fell in our lap in a crazy market, we figured why not, we just have to buy someday to get on the train. It was four walls - our wants/needs list in a house has shrunk to 4 walls. But itís just all been disappointing here - I cannot live near my family and stay mentally healthy, we hate Texas- itís like trying to fit a square into a circle for us. But where do we go? Itís a hard time to not have secure housing and make decisions with covid crap, inflation, the housing boomÖ

Morning Glory

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Re: Ideas to make money off new build
« Reply #25 on: January 24, 2022, 08:40:25 AM »
Can you visit a few places you think you might like that also have calmer housing markets? There are tons of places that aren't that expensive or "hot". Pick the one you Iike best then rent for a few months to get a feel for neighborhoods etc.

If you really want to buy a piece of shit house in a place you don't want to live just to tick it off a list, they have some in Peoria IL for $5k ;)

https://www.washingtonpost.com/nation/interactive/2021/peoria-il-real-estate/



SailingOnASmallSailboat

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Re: Ideas to make money off new build
« Reply #26 on: January 24, 2022, 09:12:16 AM »
Why do you "have to buy sometime to get on the train"? There's a lot in threads in this forum about renting and never buying.

If you love WA, then buy there. Yeah, it might be smaller and not exactly what you want, but at least you'd be somewhere you love. Buying a crap  house in a crap place because you think you might possibly make some unknown amount of money on a transaction seems nuts.

sonofsven

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Re: Ideas to make money off new build
« Reply #27 on: January 24, 2022, 09:13:53 AM »
Do you have any diy skills? Buying a fixer is a good way to get equity, as long as the house is loan-able.

uniwelder

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Re: Ideas to make money off new build
« Reply #28 on: January 24, 2022, 09:42:24 AM »
Now if you have a purchase contract for 389 and shit is that crazy down there that you can in fact sell it for 450 then maybe talk to a RE agent about selling said contract to someone else for 450k which is basically how wholesaling works.

Can you sell the paper? As in, wholesale the property. You have a contract for 389.  Find a buyer who wants it for 450. Be the middle man and trade the note.  Maybe throw the builder some extra. Everyone wins.

You make money, builder makes more, you donít have a shitty house, and you pass it off to some other fool.

To pile on to what has been previously mentioned, find someone that wants to buy your contract.

cj25

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Re: Ideas to make money off new build
« Reply #29 on: January 24, 2022, 10:05:33 AM »
Why do you "have to buy sometime to get on the train"? There's a lot in threads in this forum about renting and never buying.


Iím tired of moving every couple years because the owner sells, moves back in, raises the rent too high. Then getting priced out of areas I like.

Jon Bon

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Re: Ideas to make money off new build
« Reply #30 on: January 24, 2022, 02:56:02 PM »
Go find a RE lawyer.

Wholesale this place if you can.

If you cant, I would advise against buying it just to flip it.


Villanelle

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Re: Ideas to make money off new build
« Reply #31 on: January 27, 2022, 05:39:12 PM »
Imagine that the stock market crashes.  Or a horrific strain of Covid emerges. Or the Fed raises interest rates (which is almost certain to happen at least some, though depending on the timing of your sale, it may not matter).  Or there is a lawsuit against the builder for shoddy construction.  You seem to be treating this almost as though you think it is a sure thing--pay $389k and sell some months later for $450k!  But if any of those--or any number of other-- things happen, then you $450k that you were planning on becomes $300k and you've lost money even before all the associated costs of selling.

I'd try to find a way to sell this NOW, preferably either without a realtor or with a flat fee or lower negotiated commission.  If you can do that quickly, and make money (or lose less than you'd lose if you just walk) then sure. But if you can't do that and do it quickly, I'd look at other options that just get you out.  Walk away, lick your wounds, and as this site likes to say--don't try to time the market, whether that market is stock or real estate or farmer's.

« Last Edit: January 27, 2022, 05:43:47 PM by Villanelle »

netloc

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Re: Ideas to make money off new build
« Reply #32 on: January 28, 2022, 07:43:50 AM »
I've come to the forum seeking confirmation for similarly wrongheaded pursuits and I am eternally grateful to those who talked me out of them. Saved me a lot of grief and money. There are a lot of wise people here that offer great advice. Sometimes wise people disagree but in this case the recommendation is essentially unanimous, and I echo it: don't buy that house. The option to sell the contract at a profit seems to be the only viable one if you must make a play on it.

I've read this thread several times as it has popped up with a new reply or two, so perhaps I missed it -- but what do you and your husband do for work? Not specifically, but it seems like you're not location dependent if you jumped from Washington to Texas? If you're not tied to a location by work and you don't have a preference where you live (other than NOT Texas, which makes it particularly baffling that you're considering buying a home there), for the amounts you're considering spending you could easily find something fairly lavish in a rural area that suits your needs.

Most people are tied to a location by work or family and so they might end up stretching themselves or waiting a long time for the right place. In my case, we searched within a 30 mile radius. That doesn't even justify a pin on the map of the United States. But if you can work from wherever (or don't have to work at all), then you have access to the entire map. Is this the case? If so, then your aim should be to determine a place that you actually want to live. From what I can glean, you've only eliminated two options: Washington because it's too expensive, Texas because you hate it. (Although I'd bet there are parts of Washington that are affordable and parts of Texas you wouldn't hate.)

I recommend opening up a new tab, going to your real estate site of choice, plug in your desired ranges for price and square footage and acreage, and drag your search bubble all over the map. You might find something you like in Tennessee or Idaho or Kansas or Montana or maybe even a different region of Texas. And you don't have to move anywhere on a whim. Maybe you narrow it down to three or four areas where home prices are in your range and you like what you can see of the culture and amenities. AirBnB for a couple months in each of these places and then make a selection, or try again with a couple more locations.

Maybe some of that is off base. But to reiterate, under no circumstances should you buy a house in the one single place in the country that you've decided you don't want to live. Doubly so because it will stretch you financially, wouldn't be a good rental, and all those other reasons others have given not to buy it.