We buy low and sell low. The only benefit is low property tax than comparable near by homes, but hard to sell even in good school district areas.
Gee! I agree with terri. Location and only location. Screw the rest.
Remember, he who blinks, will lose track of the ball. If you have the $ and willing to be fearful, buy now, or keep talking forever how you missed that opportunity.
Somebody, somewhere, maybe at this minute is thinking on buying that thing. Buy it, or just keep going.
Well, it is not like this is deciding on chinese or italian food for tonight. It is a major purchase and one should look at it from all perspectives and ask for some opinions from folks who donāt have any skin in the game yet who are addicted enough to real estate porn to want to weigh in on it.
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Just an example, see this home, really good one, but T junction, buyers are not there, High DOM and seller is reducing price !
I somehow missed whether OP wants to build this house to live there personally, or if it shall be sold for a profit.
I would not pay $1.4M for a lot that can sell for $2.1M. Has nothing to do with the street.
We actually did one transaction with nearly exactly these numbers. Bought an existing house for $1415k, tore down, built new (2000 sqft) and sold for $2000k. (Actually had an early offer of $2100k but negotiated too hard, 4 months later, sold for $2000k.) My exuberant business partner had liked the lot for $1415kā¦ sheās Chinese and possibly too optimistic about values sometimes. In the end, we made a small profit- around $120k. We achieved that by not hiring a general contractorā¦ we hired all subs ourselves. There is risk associated with this. Donāt ask further.
Banks will not lend on such a project as a spec-home. If itās for yourself, that may be different. I never did that.
The traditional formula for spec homes is 1/3 - 1/3 - 1/3
1/3 lot price
1/3 cost to build incl all soft cost and carrying cost
1/3 profit
Pay $700k for the lot, build a house for $700k, sell for $2.1M
You probably say thatās not possible, but ā¦ it is. Even in Sunnyvale. Even today.
We bought a lot for $340k in Sunnyvale, built a house $350k, sold for $985k. That was 2012.
More recently. Bought a lot for $1750k, so far spent $700k, cost of future construction $2.3M, resale value $7.5M. This is a small subdivision with 6 townhomes.
1750/7500 = 23% for land
3000/7500 = 40% for building and carrying cost
2750/7500 = 37% profit
Another purchase, 2 years agoā¦ Sunnyvaleā¦
Lot price $1451k
Could build 3 or 4 homes thereā¦ city tries to steer us to 3 only
Cost to build $2M
Resale value $6M?
You see what Iām getting at?
The lot is not worth $1.4M unless you insist that you have to live in exactly that spot. (Personal emotions.)
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I think thereās a benefit for buying on a major street to rent because people may not mind the busy street if it means a slight discount to them. So if it meant a larger discount to you, theyāre not emotionally tied to the fact that the location sucks because they can leave. Youāll probably end up with a higher turnover, but it might be worth it.
But for flipping, youāre looking at a family to own, not a landlord most likely, as presumably a landlord could flip their own rental cheaper, and probably doesnāt mind doing it.
IMO, He wants to build a home for himself - primary home.
Itās ok to overpay then.
Although, I think there should still be at least a small reward for the hassles. Why pay $1400k for the land and $600k+ for construction, if the finished result is worth $2M - $2.1M?
Oh, I get it. Lack of inventory.
Maybe a portion of the existing house can be salvaged (add-on remodel). We kept some of the foundation when we paid $1415k for a SFR tear down.Saved us maybe $30k 
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Nice sarcasm. Round about way to say should buy a $2.1 mil house on the market.
From memory, my neighborhood seems be 60% lot, 20% construction, 20% profit Guess is why not many rebuild to flip. A lot more remodel to flip.
Is it correct that $600K to build a 2800 sq ft house is too low though? I thought the numbers that were thrown around were $400/sq ft. Or was that renovation only?
Not sarcasm. I see only one SFH, one TH and One Condo available in Lynbrook area.
I feel the same, it is too low unless experienced arch/builder team.
I am still not convinced why he needs to go such expensive home rather go for this duplex. He can either keep it as duplex or turn it as SFH.
https://www.redfin.com/CA/Sunnyvale/562-Puccini-Dr-94087/home/1414518
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Very easy to spend over 100K to just break ground. Consultants and fees.
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For $2.1 mil, you can buy a nice 3/2 SFH in Saratoga, Stay in Saratoga goes to Lynbrook
or buy a nice 4/3.5 SFH in Cupertino, Stay in Cupertino goes to Monta Vista
or buy in the fast appreciating Homestead High area (good potential as many houses have big lot and fast improving schools), Stay in Sunnyvale goes to Homestead High
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Building is best left to professionals. People should have a least half dozen major remodels under their belts before taking on spec building. Itās a very complicated process, both emotionally and physically draining if not managed right. Itās one thing to play with this or that scenario on a spreadsheet. Itās quite another to wrestle with planning departments and contractors.
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Boo. I disagree! Itās never too early to try something like this.
But Iād want to plan for a larger price per sq ft.
I read people, and sometimes I wonder, I just wonderā¦
Sometimes, you need to listen to people with experience in the game.
Terri, you should do it. You seem like you really want to. The problem is if you budget high 99% of the time it will not pencil out. Your margin is someone elseās job opportunity.
The goal is to get some real world experience without losing your behind. On a spec build its easier to get your lunch money taken from you. Time is one large risk component add in the fact that you will be taking the property down to land value. You donāt want to get squeezed at the wrong time. You will note in PT examples those are all subdivision/development projects.
Suggestion - Jil opens threads for what she considers worthwhile projects. You should do the same and get some feedback on it.
Check this out for costs https://newavenuehomes.com/kb/Cost%20of%20a%20660%20square%20foot%20guest%20house%20in%20Menlo%20Park. It looks like real world examples.
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Jil becomes a lady.
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To answer few questions raised: It will be primary residence with intention of holding it long term. Just to reiterate my previous post - i am fully aware of the negatives of busy street ( both economically and convenience wise ) .Jil and few others answered main part of my original question. Thanks to them ! I am amazed so many passionate folks are in this forum.
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Now I know Jil is a manā¦ explains why we both insisted that we were correct.