WWII 077: My First Real Estate Development Project, Buying Foreign Companies on U.S. Exchanges, Private Sales of Public Stock
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Main Topic: My First Real Estate Development
There is a gated community in northern California. I have family that live in that community and have been doing real estate flips with my operating partner.
The year is 2015. I find our that the four last lots owned by the Association, all with lake frontage were going to be sold.
My partner and I walked the lots and determined that they were easy to build on and were decently located right inside the north gate to the community.
That area of the lake is quiet and the lot we were interested in was three lots in from the main road. The location had its pluses and minus, but this particular lot had more pluses.
The first step is to put together some numbers, so we did a financial analysis of the project. We built up a cost to buy, prepare, and build the final single family dwelling. We eyeballed comps and determined how much we would need to sell the house for to receive a six figure net profit after all costs were considered.
Based on this analysis, we determined that we could buy the house for full price and we presented the first full price offer the instant the lot went onto the market.
After a bunch of due diligence, review of utilities, grading needs, and after the inspection period had expired, and after waiting for the sale of another property to close simultaneously, we rolled our profits from the last flip into purchase of the lot.
Now we owned it, and the hard work started. We designed a 3,010 square foot single floor dwelling with a two car garage, two golf cart garage, custom cement dock and custom sea wall. The interior had 3 bedrooms and 3 and a half baths, beautiful open concept, and lots of windows to take advantage of the fantastic lake view, a kitchen that an chef would love, and several outdoor living spaces.
In short, we designed a dream lakeside house. Once we had the plans in hand, we went to get financing from a lender. The one that we succeeded with viewed the spec house as a project and ultimately funded a loan of about 70% of cost, which is typically. We broke ground in July 2016 and completed the house in January of 2017, about seven months.
In March of this year, we put it on the market and it sold two weeks later after some intense negotiations. Escrow closed recently and the profit is in the bank.
The keys to success as I view them were the following:
· Picked the right partner. My operating partner is a world-class dynamo who ferrets out any issues and hustles like no other. The construction company we used is the premier builder in the area with the best reputation of all. The quality of the house is apparent all the way through.
· The product was right. We designed the house to take advantage of the views and modern living. This made the house very attractive to potential buyers.
· The timing was right. We finished the house in time for the spring selling season. Given that we started with a flat lot of weeds and dirt, the seven month build time was astonishing given the quality of the result and is a testament to my partners.
· The financial analysis was right. We ended up with a selling price that was in our sweet spot from day one, and our costs were exactly the budget we put together. The profit, predicted almost a year ago, was in the sweet spot.
So far, with this set of partners, we have completed three projects and all three have been profitable with each profit larger than the previous.
Real estate is another kind of snowball and I intend to continue pushing the boundaries of my knowledge and experience in this area.
Ask JB: Can I buy foreign companies on U.S. stock exchanges?
submitted 15 hours ago by jran16
JB SAYS: Very good question. In the financial crisis, everything worldwide became correlated. Europe and Asia experienced market declines just like we did here in the U.S. That suggests that globalization has continued to infect financial markets and there is no reason to think this will revert. The stocks that you mentioned are Chinese stocks and it’s fair to say that Chinese companies do not have to live up to the same reporting standards that U.S. companies do. Many companies listed on Chinese stock exchanges are actually frauds. If you are going to look for quality companies outside the United States keep this in mind.
submitted 18 hours ago by BeautifulLadies
JB Says: Yes, you can negotiate a private sale as a block off-exchange. This is useful if you do not want to signal that you are unloading your position. If you have control stock, you may run afoul of regulations associated with this kind of trade without informing the public and will need to file with the SEC to do so. You should consult with a securities lawyer to determine what exactly you will need to do.
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