To build or not to build-new home content.

[JMPRO]

To build , or not to build.

I have some property in a beach community in south orange county that has been a rental for many years. My original renter that had been there for 40 some years died and now we are trying to decide what to do with the property. My wife thinks she wants a new house so we checked into building a new house on the property. Very expensive, with all the city fees, plans and building cost adding up to about $257.00 a square foot. The lot has a blue water view and to not build a second floor to take advantage of that view doesn’t make sense. Now you have almost doubled the square footage and are in the 3000 square foot range, you do the math. Don’t forget to add in all the moving cost and new furniture because the old stuff will look tacky in the new house. The good part is I get a 4 car garage.
Here is the question

1. Sell the property as is and pay the capital gains of about $75k and walk away with about $650k in cash. The good part about this plan is , no moving, no moving costs, no decisions to make about flooring, tile, or any other such woman stuff, just sell it and walk away and not have to deal with renters anymore.

2. Spend the $800k, build the house, live there at least 2 years and then sell it{2 years to avoid the cap gains} and walk away with about $900k. Homes like the one we are thinking about building are listed in the $1.9 to$ 2.0 m range in that community. We will be keeping our present home so we can always move back here or we might even decide to stay in the new house.

3. Stay where we are, continue to rent out the property . The property is paid for so any rent we get is nearly 100% positive cash flow.

There doesn’t seem to be a right or wrong answer, just different scenarios with some different out comes and I don’t really expect anyone to come up with the “right” answer. Even if the bottom falls completely out of the R.E. market in the next 2 years I will only have my original investment of $60k in the property plus the cost to build the new house so the R.E. market would have to really, really go bad for me to loose any money.
There are certainly other factors to consider including a partnership with the builder to build a spec house on my lot and participate in the profits from the sale.
My head hurts from all the thinking about what to do.
JMPRO

[legion]

I have never met anyone who has built a new house that hasn't exceeded their budget by at least 100%.

[id10t]

Instead of 2 livable stories, why not build up on stilts with garage under the house? Or is this stupid because its California? Anyway, stilt homes are really popular on the W coast of Florida (big bend, cedar key, etc) due to storm surge, etc....

[kach22i]

Housing is down all over the country, you should have builders and architects falling over each other to serve you.

Crazy idea, can you build a duplex, or does it have to be single family?

Can you build an in-laws apartment over the garage for extra income?

Maybe you should spend a little money on an architect to do some schemes and get them priced out.

Fly me down there, I'm dying for some work.

[JMPRO]

We have already seen a very comprehensive budget plan and are satisfied that we can stay within the budget. {The best layed plans of mice and men} We have also seen a prelimanery floor plan and exterior drawings of what we propose to build . The builder we have selected is the architect, designer and builder with many homes like this to his credit in this area so we are fairly confident in that respect.
The property is on the bluffs at about 300 foot or so above high tide so unless there is a real problem we won't need stilts.
JMPRO

[911Rob]

Most land developers that I know build the properties out to their full and maximum capacities; there is more money in developed land than undeveloped.

Keep in mind that the property should appreciate in the two to three year time frame too.

As for budgets, well there's alot of idiots in the construction industry?
I've been doing it for over 20 years without one instance of being over budget.

Sounds like you're in a great position either way? Good Luck.

[JMPRO]

Most of the people I have talked to say the same thing, build out the lot to its maxium especially in the beach communities and especially with a blue water view. The house as its planned now is too big for my tastes but the experts tell me its not. As one wise person once told me " To do nothing is also a choice"
JMPRO

[the]

Geddy Lee?

[id10t]

JMPRO - only reason I asked about the stilts/garage under is that way you'll only be building a single floor worth of living area, but have a 2nd storey view out of it... I'll admit that i'm an id10t, so feel free to ignore...

[Dan in Pasadena]

1. Make $650,000
2. Make $900,000
3. Own an ATM machine that prints out ever taller stacks of $100 bills each month.

Uh, gee..TOUGH decision. We should all have such tough ones.

[KFC911]

Originally Posted by the

Geddy Lee?

Give Neil some credit too :

If you choose not to decide
You still have made a choice.

[Nostril Cheese]

I say sell. Enjoy the income. Buy some toys.

[Porsche-O-Phile]

At the end of the day, what's better? Something that puts money INTO your pocket every month or something that takes it out?

I say either fix up & re-rent or build anew, then rent out.

That's what I would likely do.

[JMPRO]

I could also move into the rental house, live there 2 years and then sell and avoid the cap gains taxes. I could also change my legal address to that of the rental property, don't live there and in 2 years sell to avid the taxes. Of coarse when I move out it may to a federal penn for tax evasion.
JMPRO

[legion]

Originally Posted by JMPRO

We have already seen a very comprehensive budget plan and are satisfied that we can stay within the budget. {The best layed plans of mice and men} We have also seen a prelimanery floor plan and exterior drawings of what we propose to build . The builder we have selected is the architect, designer and builder with many homes like this to his credit in this area so we are fairly confident in that respect.
The property is on the bluffs at about 300 foot or so above high tide so unless there is a real problem we won't need stilts.
JMPRO

The things I've seen (and you may experience none of these):

"The quartz countertops you ordered aren't going to come in until next year. We can go with formica or granite."

"Yes, I know the plans were approved, but the electrical box is too close and below the level of the water main. We're going to have to reroute the plumbling and electrical, and pay for another inspection."

"The price of [insert anything here] just went up because of [a hurricane/a trade dispute/a strike/high fuel prices]."

"All of my [carpenters/concrete guys/plumbers/electricians/drywall guys] just walked off the job because [they are striking/a sympathetic strike/they felt like it].

Of course, the most expensive problems are when the homeowner decides to move a closet or buy a different furnace or changes their mind on materials during construction...

[tabs]

Are you happy in the house you live in now? If you sell that property you will never be able to go back and find one like it again for a reasonable amount. Do you have the time and energy to build.

Build the biggest you can afford. High utilization of property in that price bracket...it comes down to $ per sq ft. Sm house on expensive lot means high $ per sq ft. Big house drops the $ per sq ft.

I have a friend up in Upland thats a retired Electrical Contractor who builds houses for people to keep himself busy. Over the past several years he has built 4 or 5 multimillion $$ homes for people. He can get all the quotes for the subs or he can use yours and act as a super. Believe me he is CHEAP for what he does for homeowners. He currently has started a home in Clarmont, CA that is going to cost 1.2 M in construction costs, it is a home for a guy that is on a home remodeling show. 5000 Sq.

IMO by hiring a General your giving away 100K on this project. Thats gona be his cut. You should also get a 2nd opinion on costs. All houses have basically the same construction standards and costs where the $$$ rack up is on the fru fru...the tile, the fixtures, the carpet, doors, appliances, cabinets, marble, granite etc. There the sky is the limit.

It is a challenge to build your own home. To think it is womans stuff is naive. Marriages break up over building homes. However the results in my opinion are worth it, you get a home that is custom to your needs and wants. It is a sense of accomplishment. You have an ideal location that you can't replace with an ocean view. My vote is to build, if it would materialy improve your lifestyle more comfort, relaxing etc. It is a once in a lifetime opportunity.

[frogger]

JMPRO, what do YOU want to do?

[JMPRO]

I want to take the easy way out, however throughout my life I have had to resist this temptation otherwise I would still be playing guitar in some bar band for 50 bucks a night and tips.
I will still be able to keep the house I live in now so I can always move back into it should we change our minds. My wife and I made the decision long ago that I would make all the big decisions and she would make the day to day decisions. I haven't made a decision in 40 years.
JMPRO

[frogger]

It sounds like you just made a decision.

[JMPRO]

I wonder if I brought back the "Cool Collar" I could get the money to pay for this .
JMPRO