Welcome to the #cultivatebuilds page where I will chronicle my journey to purchasing and building on an upcoming recent land purchase. My goal is to highlight the steps I am taking and what I am learning in real-time. I will add pictures and relevant resources along the way. If there are bigger lessons I am learning, I will link to blog posts I have written on the subject. This will certainly be an adventure and I plan to make this page the central place for all the details of the project.
You can find more of my journey by following me on Instagram @cultivate_re, follow my #cultivatebuilds hashtag, and subscribe to my #cultivatebuilds Pinterest board to see what is inspiring me.
What to build. What to build.
I officially closed on the land purchase this week! I have been going back and forth on what to build on these three lots. I know I will build single family homes, but the question is whether to build rental properties or to build homes to sell. The decision is important because it will inform the budget, finishes, and overall approach for planning the build. I like the idea of building rentals as a way to continue building my real estate portfolio. And as of about 12 hours ago, that is what I would have told you I would do. However, I believe the neighborhood I am building in will appreciate quickly, so the idea of building and selling is very attractive. I believe we can build one at a time and use the proceeds from the first sale to roll into the funding of the next, then when the last one is complete, I will have a sizable amount of money to use for a new project. This approach will also keep my financial liability lower than having mortgages on all three.
I met with two builders this week to learn about their experience, process, team, and overall approach. I have meetings with architects and engineers coming up, so settling on rentals vs. spec homes is important for me to lock down. I don’t want to appear indecisive in these meetings. So as I sit here today writing this journal entry, I am building 3 single family homes to sell. I’m going to let that marinate in my brain for a couple of days and see if that direction sticks!
Land Use Update
Remember that plan I had to rezone the 2 other single-family lots to multi-family? That was a great plan wasn’t it? Super plan, actually. Well, that plan won’t work. After doing additional digging, my realtor found information on the city clerk’s website with the notes and results from the city council’s decision to rezone all of these lots (and many more in the area) to all be single-family. The decision was reached in April 2018, yet the city’s GIS information still shows one of my lots as multi-family more than a year later. We reached out to the city planner assigned to the case and he confirmed that R-6 is the current zoning for all the lots and the GIS map was incorrect and out of date. Once we found that our original assumptions were wrong (well, mis-informed really), we did a lot of contemplating on what to do next. Do we move forward and build single family homes on each of these lots? Was I prepared for this? Did it make sense to try and build rentals? Would the numbers work? Would it be wise to build spec homes and hope the upside on the sale would cover our building costs and provided some profit? We didn’t know, and still don’t, but decided that this life is too short to not find out. So we gave the “green light” to move forward with closing on the lots…let the fun begin!
I have spent the last few days getting my mind around the zoning and land use requirements for the lots. I have found a lot of useful information on the city’s parcel viewer website. This allowed me to type in the address of each lot and find all the details for each parcel (roughly 20 data points). This is the information I need to plan the redevelopment of the lots and you won’t find these details on the seller’s disclosure. Each of my three lots is roughly 6800 square feet. Two are zoned R-6 (single family or cottages) and one is zoned R-1.5 (multi-family). This is significant because I will want to get them all zoned as multi-family to get the most use out of each lot. I also found the city’s “Development Tracker” map which shows me all proposed zoning changes. The map attached to the proposed rezoning was a little hard to read, so I have reached out the city planner assigned to the case to find out more.
How it began
I had sketched a diagram in my journal a few months ago that envisioned a different approach to multi-family construction. One that created an integrated approach to blending multi-family and single-family units. I decided to act on this idea and look for empty lots after feeling frustrated and uninspired by the existing structures for sale. Through conversations with my realtor, we found 3 contiguous lots that were not yet on the market, but were going to be for sale soon. I acted quickly and after some initial research (i.e. zoning, water meter, historic designation) put in an offer.
I wrote a letter to the seller to complement the offer highlighting my investment philosophy and plans with the lots. My offer was accepted on 4/11/19 without the lots even hitting the market! To this point, I have delivered the earnest money deposit to the title company and the bank is ordering the appraisal.