Welcome to part 3 of 3 of my vacant land series posts. I do hope you enjoyed them so far. In case you missed them, I will put a link to the previous 2 at the bottom of this post.
While building a home may seem like an economic alternative to buying a home in the greater Los Angeles area, one need be aware that there are many factors and costs involved with that alternative.
Often, I'm asked about the price range potential builders may face when it comes to building a home on vacant land. Depending on the steepness or grading of the land itself, costs could vary from $250/square foot to $1300/square foot. While this may seem hard to fathom, the finished product will be a lot less expensive than buying an already ready built home, not to mention you would be building something to your own tastes and ideas. Keep in mind, there are many challenges for which one has to be both mentally and financially prepared.
Step One: buy the land! There are very few lenders that are willing to lend on raw land. (On the other hand, if you need lender contacts for this, please reach out to me directly.) There are hard money lenders, however, that might be willing to loan on the land for a hefty cost. Of course, one could always pay cash for the land. And finally, if a Seller chooses to offer seller financing, that will increase the buying pool for their vacant land. Note that some professional builders and architects classify buying the land as “Soft Costs”.
If you've gotten this far, congratulations! You have become the new owner of the land! Now comes the quest to get approvals. Your first expense as a landowner will likely be acquiring the services of a good hillside architect with a proven track record. Some work by the hour, while others might have different business models. Hence the initial contract negotiations should be handled correctly to determine their costs.
You will also need to find a reputable Geotechnical Report (a "Geo") as well as a Survey. While these can be costly items, they are a requirement for the proper designing of the home as well for the approval process. The good news is that these costs are spread out over time.
As you get closer to approvals, there are permit costs. Once you are at the point called Ready to Issue permits - best known as "RTI" - then you need to plan for the “hard costs”, because once you've paid for and obtained the permits, you are finally ready to begin building your home. At this point, Banks are typically open to finance the construction costs because now there will be a tangible asset once the house is built. This of course is good news for the potential home builder!
What exactly is meant by Hard Costs? When it comes to preparing the land for building, there are ‘grading costs’ which is the removal of the land to make room for the foundation of the home. Next comes retaining walls, what most people call the cement part of the home. Here in Los Angeles, you need to have caissons to go to bedrock to anchor the foundation to bedrock, so the house does not slide down the hill. The building of the house truly begins with the framing of the house and the actual walls being built. Naturally, these costs will vary based on taste, material, what type of kitchen, bathroom and flooring one chooses just to name a few.
As I said earlier, one of the benefits and beauty of this process is that once the home is finished, you can truly say this home was built to your wants, needs and taste.
I hope you enjoyed the land series, and please visit the links here if you've missed the first two.
https://activerain.com/droplet/HFqX
https://activerain.com/droplet/HFwM
Wishing you a safe and healthy life and I look forward to your comments. If you are looking for a knowledgeable, focused and goal-oriented Realtor in the Beverly Hills area who will help you achieve your Real Estate goals, please reach out to me directly! If you are looking for a pet friendly Beverly Hills Realtor who can handle and sell the most difficult properties that no one else could, please reach out to me directly!! If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at 310.486.1002 ( m) homes@endrebarath.com or visit one of my websites at https://www.endrebarath.com I contribute a portion of my commission to local animal rescue organizations. Endre Barath, Jr. Realtor at Berkshire Hathaway HomeServices California Properties DRE#01238708
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