Simulation: a fictional property for practice.

A $90,000 lot to build and sell a new house

New 2,000 sq ft homes nearby sell for about $520,000. Is there room for profit after building costs?

A fictional lot inside a city, with a construction loan. Building costs, fees and rates are example assumptions.

• Lot price: $90,000
• Plan: Build a 2,000 sq ft house and sell it
• Nearby new homes: About $520,000
• Build cost (example): $150 a square foot, $300,000

Mission 1: Can you build what you plan?

Pick all you’d check before buying.

• Zoning, setbacks and height limits, with the city’s planning department
• HOA rules or recorded restrictions (CC&Rs) on design and size
• Water, sewer and power at the street, and the connection and impact fees
• Soil, slope and drainage
• Nothing: a lot inside a city is always buildable

Confirm what you can build and what it costs to connect before you buy the lot.

Mission 2: Every cost

• Lot and buying costs (2%): $91,800
• Construction: $300,000
• Plans, permits, impact and connection fees (example): $35,000
• Construction loan interest and fees (example): $25,000
• Selling costs (7% of $520,000): $36,400
• Total cost: $488,200
• Profit before taxes: About $31,800, about 6% of the sale price

A 10% rise in construction costs ($30,000) would erase almost all of it.

At $90,000, what do you do?

Buy, investigate or pass? Work through the drill to see what an experienced investor would weigh.