<p>"</p>
<p>You could say whatever you want, but in common parlance developers take raw land and turn it into to approved, improved lots. Builders build houses on improved lots. Builder/developers do both.</p>
<p>Honestly you are asking questions that have no place in what I did. I improved the lots yes, but they did not need to be approved by anybody.</p>
<p>Did you buy the land approved or raw?</p>
<p>Raw of course.</p>
<p>If approved, why was it being sold? (A Developer selling land subdivisions after approvals and prior to improvements is not typically a bullish sign.)</p>
<p>Thats not really true. Many developers simply buy land, improve it slightly and sell it. You don't necessarily have to do anything physical to the property to improve it, and there are all kinds of developers who specialize in all kinds of improvements. Sure, some do at all from acquisition to retail, but there are about a million ways to skin that cat. A developer can do or specialize in an number of fields,</p>
<p>If not, how long did approvals take, what where your engineering costs and legal fees? How were they funded?</p>
<p>None.</p>
<p>Was the road you put in public or private? If public, how much of a bond did you have to put up and how was that funded? How were the improvements themselves funded? If private, how does the ownership work, who is responsible for maintaining and repairing the road and other improvements?</p>
<p>Private road. Yes, the road is shared between the owners and a agreement is in place for them to share maintenance.</p>
<p>** What is the legal form of this arrangement? If it was some sort of HOA, did it have to be reviewed by the state attorney general? If so, what were the related attorney's fees?**</p>
<p>lol state attorney general? Where are you getting this information? Answer is no.</p>
<p>I could go on and on and on (what type of water and sanitary systems and whose responsibility, etc.), but in sum - what was the cost of the land, the total cost of the improvements, and the total of the carrying costs - how was it all funded and how long did it take from land purchase to completion of improvements?</p>
<p>Each lot has its own well. That well is typically drilled when the house is being built. Each lot has its own septic system which is also installed when the house is being built. Your other questions are too personal. Do you think I'm going to go through the trouble of divulging my entire P&L on the internet? I think I'm being more than obliging, considering that is this pretty much pointless to me.</p>
<p>Then how long did it take to sell?</p>
<p>Not very long. Put it this way, most people buy something and then hope to sell it. I don't really like doing it that way. I would much rather have a buyer before I ever start working on something. </p>
<p>No, its not rocket science. Its magical thinking. You didnt buy a house for $500,000 on 100% financing and then flip it a month later for $1 million. (My company generated hundreds of thousands of dollars in revenue in the the year or so before the real estate crash. By your own description, your total sales of houses and building lots was less than $1million) But even if you had, you didnt make $500,000. Figure 75k in brokerage costs, mortgage and transaction fees and/or taxes. That takes you down to $425,000. So
when you lose that $450,000 on the next deal you arent ahead, but in the hole 25k plus 3-5k per month in interest costs, plus RE taxes, plus insurance, plus utilities, plus, plus, plus any monies you took out to cover your own living expenses.</p>
<p>This is what bothers me about my peers. I just threw out a an arbitrary example that illustrated the power of leverage. Rather than attempting to understand the concept of leverage and how I could have taken on large projects with very little money, you attempt to pick apart the example. I asked you to use your head. This isn't HS, I'm not going to tell you exactly how things work that took me years of thinking. Think for yourself. When you start working outside of school your success will depend on whether you can formulate and of course understand complex concepts and put them into action before every other Tom, Dick, or Harry. Otherwise you will just be that guy that is only worth how much it costs to replace you. You asked me how I could be a net success despite the fact that I took huge losses. I said: leverage. I realize thats not explaining it to you fully, but if you stopped and used your head you should be able to extrapolate a little bit of my strategy. You will also be able to figure out why I failed, and if you keep thinking about it you will come across the very reason why our financial industry is a mess right now. </p>
<p>Oh and about that example, $75k in brokerage costs? Thats 7.5%. First of all I don't use realtors, and if I did and I sure as HELL wouldn't be paying 7.5% on a million dollar sale, what do I look like?.You are right, there would be other expenses. A couple thousand AT MOST. Why? Because If it were me I wouldn't go into the deal unless all those costs were accounted for. The biggest cost is one you didn't mention and that's closing costs. At its worst I would say I might lose $10,000, that's it. Once again though, this wasn't the point. I was trying to lead you to a concept so that you may figure it out. Trust me, when you leave school no one is going to spell it out for you. The biggest asset you have is resting on your shoulders.</p>
<p>Please try.
The stock I chose was Toll Bros. National presence. Publicly listed. Top ten builder. Upscale homes. Toll Bros. IS a rough proxy for the housing market. Picture is no different if you look at the top ten builders as a whole (<a href="http://www.nytimes.com/2005/10/04/bu...4builders.html%5B/url%5D">http://www.nytimes.com/2005/10/04/bu...4builders.html</a>) or if you look at earnings instead of stock price.</p>
<p>I know what Toll bros is, and yes I do realize its public company lol. I'm going to give you some more advice. I don't know why. The ONLY thing that moves the price of a stock is the supply and demand of its shares. Period. For example, if Toll Bros ceo died you can bet that their stock would drop a bit. Does that mean the housing industry has slowed down? Toll bros could announce a large share buy back which would likely cause its share price to spike, does that mean housing prices just spiked? Not really. They may or may not have been a rough proxy for the housing market before '07. I really don't know, and don't care to look. As I will show below, housing peaked in '07 and if Toll Bros did not, obviously its not a very reliable proxy. Even if it has tracked well with the housing market you never look at one stock to judge an entire sector. I can't emphasize that enough.</p>
<p>Ever hear of the term McMansion? It was a rare builder who wasnt building to the top (most expensive portion) of the market. (Where did your $700,000 house fit in?) Median and average prices per houses are of no use here.
What information in times series could be of use?
Sales Price per square foot (better yet, profit per square foot)
Number of permits pulled
Number of units sold
Average number of days on market
Average number of times asking prices were reduced
The percentages of houses that sold at, below and above asking prices
The average percentage drop from orig asking to final sales prices
The number of houses never sold (taken off the market)
The number of houses foreclosed upon</p>
<p>Those are all factors, sure. But they are only small parts. It would be wrong to look at one single part and judge the entire housing market. The housing market, like any other market, is controlled by one rule: supply and demand. If demand outpaces supply then you have rising prices, which is of course what we consider a "good" market. Look at the last statistic I quoted you "Finally you will see that the average US real estate price (everything) hit an all time high in 2007. Thats the only one you need. That takes into account houses built, permits pulled, units sold, houses foreclosed, EVERYTHING. The average PRICE of ALL real estate hit an all time high in 2007. </p>
<p>Ok I'm done now. I'm not your teacher unless you want to pay me...if so maybe we can work something out. I've answered god knows how many of your questions, and a lot of your questions weren't even applicable to my situation to begin with. I encourage you to think critically for yourself. Your mind is your greatest weapon. A lot of the time, and some times quite literally (as in trading) the money you make in the world is money someone else could be making, or is coming directly out of someone else's pocket. You have to work harder and be smarter if you expect to keep any for yourself. </p>
<p>Lesson over.</p>