Having just finished a two day one-on-one training in Vero Beach, Florida, I discovered some great investment opportunities. These opportunities will present themselves in many areas across the United States and throughout the world. The common factor being an explosive market in a high-end neighborhood. Vero Beach is unique in that it is located near the Atlantic Ocean and sits between the ocean and inlet bays and canals which create the ability to have docks in one’s backyard with water access to the ocean. There are many smaller older homes in the neighbor with exceptional potential to be torn down and rebuilt into new larger estate homes. Many retail buyers with the necessary means are looking for a location on the water but do not want a tiny old home, nor do they want to be involved in a major remodel. What they want is a brand new modernly built home of reasonable size with all the updated amenities on a property in the right location. The opportunity for an investor is that the difference in price of a small outdated home and a new undated home is staggering; as much as $500,000 to a million more in price, making it very profitable to add a new roof or second story and upgrade all the finishes or even to demolish the existing home and build a new structure from the ground up.
The typical older home in the Vero Beach area costs between $400,000 to $800,000 depending on whether it is located on the water and a newly built home goes from $800,000 to 2 or 4 million depending on its size, location and view. The building costs in the area are between 200 and 240 per square foot and the resale price can be as high as 650 per square foot, leaving plenty of room for buying the property, demolishing the house and building a new structure. Here is an example of a typical project:
Purchase an existing older small home on a Bayfront property with dock for $650,000 to $800,000. Demolish the home for $25,000 and rebuild a new 4500 square foot structure at $220 per square foot for $990,000. Then resale the home for $2.9 million.
Price of home: $2,900,000.00
Land cost: – $800,000.00
Cost to build home: -$990,000.00
Demolition cost: – $25,000.00
Realtor fee (5%): – $145,000.00
Closing and holding cost (5%) – $145,000.00
Financing for construction loan: – $60,000.00
The initial investment with be to buy the house with cash and pay buyers closing cost. The building can be financed with a construction loan, including the demolition cost. Everything else with be paid from the proceeds of the sale of the property.
Return on Investment is the profit of: $735,000.00
Divided by the initial investment of: $840,000.00
NOI equals: 88%
Not a bad return for a 10-12 month project.