There are various methods to invest in real estate. Your method influences what happens in the long term. This guide walks you through using a real estate broker with licensed contractors versus being an owner-builder, all while clarifying your path to profits.
A 6% commission fee is payable. (10% on raw land)
The price encompasses a profit for the developer.
Licensed contractors tack on a 20–30% mark-up to cover their long-term liability.
The original buyer adds their profits and the amount you pay determines your property taxes.
In California, contractors must follow strict warranty rules:
1-Year Warranty: Applies to small problems such as those with paint or trim.
4-Year Warranty: Applies to obvious defects such as those with floors.
10-Year Warranty: Applies to hidden problems such as those with the structure.
As a proprietor builder, you perform the responsibilities of the contractor. This means:
You are liable for defects. You avoid paying a 6% commission and a 20-30% contractor fee. You also steer clear of bank fees, such as those for escrow, title, and inspection. While these savings can be considerable, you still have to do the work. Here is a list of the things you must do to work without these common fees. All of the following are the President's responsibility who is not the average homeowner and has the necessary time and energy and in the case of Rocky Ledge Estates, this is his legacy wealth transfer to all heirs. Most also require skills that can be honed with practice. Our strategy is to hire Kieth Keltch Construction as our consultant. He has 25 years of experience as a licensed contractor and is an amazing coach for his clients when he teaches how to be an “owner builder”. We will leverage his leadership with our employees that we recruit to Burney to become part of Rocky Ledge Development & Hospitality, Inc.
Property taxes are typically higher with traditional home purchases because they are based on the total price you paid. But if you go the owner builder route, the prices are set after your final inspection and can be much lower, meaning your property taxes can be much lower, too. And over a period of several years, the amount saved on property taxes can really add up—potentially benefiting your heirs.
Extra instructions or adjustments during construction are called change orders.
They frequently hike up expenses and push back the schedule. Change orders are a common headache for constructors and owner builders. For instance, relocating a window to where a door should be or placing a sink where it ought to be can push costs and fees higher. In our case there will be none as are experienced employees work for us directly.
Rocky Ledge Estates lies in Northern California, a locale celebrated for its untainted atmosphere, plentiful water, and opportunities for outdoor adventure.
The region features affordable real estate and a tight-knit community housing. A 3/2 residence can be purchased for under $299K!
By using hired teams to construct a resort, the venture keeps costs low and taxes even lower.
For a pittance, you can buy your way into a huge stake in the operation, with the prospect of earning some easy-to-take cash as a K-1 to your family business.
Lower Initial Costs: No need to pay brokers or contractors when buying into the investment. You pay a reasonable fee to Corporate Services of Nevada to form the legal entities and manage our annual compliance. NOTE: The two partners craft the management agreements for the entitles and all our heirs will ask our CPA, and the answer is always yes if our rules allow it. No need for boardroom brawls ever!
Tax Benefits and Incentives: Use SDIRAs and grow your property investment without paying taxes on the gains.
Legacy and Long-Term Ownership: Investment isn’t in a single property but rather a kind of ownership stake in the whole resort with rights guaranteed in a Limited Partnership, a California Corporation, an LLC holding company for the land, and your independent family business that owns your legacy. In our case we own the construction company too!
Other Stuff: Risk management; growth potential of investment; enjoying life as a luxury hotel "guest" in property for a fraction of its value.
As an owner builder, when you invest, you could save a ton of money on fees and taxes every year. I say could because many owner builders don't think they can do it until they see my examples. Lower costs today can mean big savings for your family over the long term. Lower costs = lower breakeven and higher profits.
Opting to be an owner builder means a significant drop in comparatively high fees, taxes, and operating costs. That's basic economics. And it allows 10 times the long-term gains and increased value for my family that even the best stock market investments can offer. In simple terms, what other investment can you make that yields profits at a half profit rate, return your cash in tax-free fashion, and give you the security of a future that your great grandkids can inhabit?
Commissions, contractor fees, and property taxes can take a huge chunk out of your real estate investment returns. If you invest in real estate not just as an owner but as a builder too, you can save all those costs—with minus signs in them—while you create your investments. And when we work as a team and build the same Private Resort Home eight times, there is a significant economy of scale. Our team does what we ask and since they live near buy, we save all the costs with no travel and hotels. And we build it faster and better, these are “purpose built” for shared vacations. The Private Resort Home is a new asset class and our brand. We can easily expand to serve the demand. That's where the real estate owner-builder investment strategy shines.
Text can sometimes seem deceptively simple. For instance, I once wrote an essay with the following three sentences:
1. The cat on the mat is fat.
2. The kitten in the mitten is not fat.
3. The cat on the mat is not the same as the kitten in the mitten.
Its meaning seemed quite clear, almost obvious, to everyone except my writing instructor, who thought it was an example of unclear writing. I was baffled by his bafflement. I still am. Connect with me and with a Mutual Non-Disclosure Agreement, I will open the kimono…Zoom call?
