For HaHa, Diamonds From Dirt

[hellbender]

Here are some pictures roughly representing the before and after conditions on the riverfront lots that I improved. The first photo shows an eroded bank after clearing operations had already commenced. the bank was covered by brush,trees and debris. Here the trees have already been removed and the brush and debris are next.

Later the embankment was regraded, seeded and mulched. The mulch placement was underway at the time this photo was taken.

Sale price one year ago: $67.5K for each of two lots.
March 2007 appraisal: $110K each.
Net gain in equity: ($110K - $67.5K) X 2 = $85K (less minor transaction costs)

Cost of clearing, debris removal, grading, seeding and mulching: $0 I got the owner to do it as part of the initial sales transaction.

Now for the fun part: I have broken ground on a riverfront cottage to be built on one of the lots. I am really looking forward to drinking that first cold one on the back porch while listening to the rapids.

 

[wabmester]

Cost of clearing, debris removal, grading, seeding and mulching: $0 I got the owner to do it as part of the initial sales transaction.

Cool! Where do I find somebody to sell me land below market value, make free improvements for me, and let me take the value of those improvements instead of him?

Was the seller nuts? In any case, nice score.

 

[hellbender]

Cool! Where do I find somebody to sell me land below market value, make free improvements for me, and let me take the value of those improvements instead of him?

Was the seller nuts? In any case, nice score.

The seller was a nice old guy wanting to liquidate his holdings. Not nuts . . . just didn't care that much about getting top dollar. He knew it was a good deal. He doesn't let me forget it either. Real estate markets are much less efficient than equity markets. As a result, opportunities abound if you have a sharp eye and local market knowledge. I have stumbled onto deals like this over and over in my investing career.

 

[Non sequitur]

Better have flood insurance if you are buliding there.

 

[smileydog]

Or a house on stilts

Looks like a wonderful place... enjoy!

 

[hellbender]

Better have flood insurance if you are buliding there.

The building pads are well above the 500 year flood zone. Finished floor levels are another 4' above that. The lender didn't require flood insurance because the construction is not in a flood hazard area. When I applied for my building permit, the County said I needed a flood elevation certificate. This is sometimes a show stopper, or at the very least a source of delay since the property owner would normally have to hire an engineer or surveyor to prepare the required FEMA documentation.

Since I am a licensed civil engineer, I prepared my own flood elevation certificate and had it back to the building official the same day. This land is adjacent to the headwaters of a large lake so detailed flood studies have already been conducted. I am well above the elevation at which there is less than a .2% chance of a flood in any given year.

 

[haha]

Very nice Hellbender, both financially astute and lifestyle enhancing.

Way to go!

Ha

 

[hellbender]

Very nice Hellbender, both financially astute and lifestyle enhancing.

Way to go!

Ha

Thank you. The plan is to utilize the cottage as a second/vacation home for the next two years until I retire. Then I will reside there while I build my retirement place on a mountaintop about a mile away. At that time, the riverfront cottage will be converted into a vacation rental. If it performs as well as I think it will, I will develop the second riverfront lot in similar fashion. Otherwise, I will liquidate both properties and go on to the next deal. There is always another deal!

 

[califdreamer]

Nice job, hellbender!

Real estate markets are much less efficient than equity markets.

Yup. I'd rather index with stocks and do my value hunting in the real estate market.

 

[brewer12345]

Looks very nice, but also like a lot of work.

 

[hellbender]

Looks very nice, but also like a lot of work.

The most valuable things in my life are the ones that I have earned. And the fact that I earned them makes them all that much more valuable.

"Don't compete. Create. Find out what everyone else is doing and then don't do it."
Joel Weldon

 

[wabmester]

The most valuable things in my life are the ones that I have earned. And the fact that I earned them makes them all that much more valuable.

Lots to like about real estate. Potentially nice returns. Relatively low volatility. Satisfaction of working with real stuff. Warm and fuzzy feelings from owning hard assets.

Downsides: carrying costs, transaction costs, personal liability, evil renters, illiquidity, hard w*rk.

 

[hellbender]

Cottage Construction is Underway

I visited the property a couple of weeks ago. So far-so good. Temporary power has been installed. Had to relocate the cottage a few feet to miss an old buried cistern. Luckily it was discovered early in the process of excavating the footings, so no extra cost. The well driller called a couple of days ago with good news. Got 15 gallons per minute of water at a depth of about 100 ft. We pumped about 100 gallons into a couple of plastic drums for the contractor's use. The water is already fairly clear, soap lathers easily and no odors. Good chance that no water treatment will be required.

The masonry work was just about complete. I expect the framing has begun by now. Will get another look-see on May 10th when I visit the area to attend my daughter's commencement at Virginia Tech. Hope to get some photos at that time. Later . . . .

 

[CybrMike]

can you give me some details of the cottage? Is it stick-frame or log cabin or ?? How much per sq ft?

Sorry I just got some land and am looking to build a cabin on it. Just curious.

 

[Arif]

Sale price one year ago: $67.5K for each of two lots.
March 2007 appraisal: $110K each.
Net gain in equity: ($110K - $67.5K) X 2 = $85K (less minor transaction costs)

Yep, that's pretty similar to the returns I get from my real estate. The goal is always to make money when you buy. The RE market is very inefficient and you can always find someone willing to give there property away. The key is solving the problem they had when they owned the property. For instance, my partner and I found a large multifamily property that is close to 50% BELOW appraisal and it's running a 30% vacancy. Assuming we can solve the "probem" we stand to make a tidy profit. Still doing our due diligence though....

 

[hellbender]

can you give me some details of the cottage? Is it stick-frame or log cabin or ?? How much per sq ft?

Sorry I just got some land and am looking to build a cabin on it. Just curious.

Sure . . . We are aking the cottage to be a lot of different things. It will start out being a vacation home for the next couple of years until I retire. Upon retirement, it will become our residence while we build our ideal retirement place on a close-by mountain top. Later it will become a vacation rental. If the rental performs as I anticipate, I will develop the adjoining lot in similar fashion. If the rental business does not meet my expectations I wanted the cottage to be big enough to market as a single-family dwelling.

The cottage is of frame construction. The design is what I call a "country-cape". It is a story and a half with front and rear porches. Two gable dormers in front and a nearly full-width shed dormer in the rear. A large full bedroom and bath are on each floor. The living room has a cathedral ceiling leading to a large loft on the second floor. The house can sleep 6-8 easily. The exterior is largely maintenance-free. It has about 1000 sf on the ground floor and 600 sf above. The front and rear covered porches comprise another 450 sf. We contracted turnkey for its construction. The construction is good quality. It has hardwood floors throughout except bath/kitchen/laundry which is vinyl. All trim, windows and doors are stained wood. Cabinets are custom. Windows are Andersen. The cottage and all site improvements including the drainfield, driveway, grading, etc cost about $175K. I contracted separately for the well.

 

[hellbender]

Will look something like this:

 

[CybrMike]

So about $110 per sq ft. Sounds about right these days.

 

[hellbender]

Re: Cottage Construction is Underway

The masonry work was just about complete. I expect the framing has begun by now. Will get another look-see on May 10th when I visit the area to attend my daughter's commencement at Virginia Tech. Hope to get some photos at that time. Later . . . .

Trip went well. Got my daughter graduated. The riverfront construction project is advancing nicely without issues. The first floor is framed.

The exterior:

The Interior:

View from the Riverbank:

 

[hellbender]

Framed and Under Roof

 

[Dawg52]

Very nice. I hope to find a couple of acres in the country one day and build 1000-1200 sq ft cabin. A lake view would be nice, but very hard to find around here.

 

[GatorBuzz]

That. Is. Awesome. Great story and love the updates. Just out of curiosity, how far from a decent size town (25- 50k population) are you?

 

[hellbender]

That. Is. Awesome. Great story and love the updates. Just out of curiosity, how far from a decent size town (25- 50k population) are you?

Blacksburg, 40 Minutes, 40,000
Salem, 60 Minutes, 25,000
Roanoke, 70 Minutes, 100,000

Property is about a 15 minute drive from I-81

 

[GatorBuzz]

Sweet. I grew up half of my life in Virginia (Tidewater), so I'm somewhat familiar with that part of Virginia. That is a beautiful part of the state.

Keep the updates coming...

 

[hellbender]

Sweet. I grew up half of my life in Virginia (Tidewater), so I'm somewhat familiar with that part of Virginia. That is a beautiful part of the state.

Keep the updates coming...

Will do. I'll prbably try to arrange a trip around the Fourth of July. I have been very happy with my builder. Little talk and lots of action. I am always amazed at how much progress he makes between my visits.