Real Estate

Advice on purchasing vacant building lot to build on (turn key or be my own general contractor), and best way to fund it

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  • Feb 13th, 2020 11:28 am
[OP]
Deal Addict
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Aug 28, 2012
1828 posts
993 upvotes
Kanata, ON

Advice on purchasing vacant building lot to build on (turn key or be my own general contractor), and best way to fund it

Hi All, need some advice regarding purchasing a vacant lot and building, and how to possible fund this using a HELOC...

Background:
- currently own a house valued at about $400,000. Located in Ottawa. Mortgage balance of $125,000 owing. Currently no HELOC.
- Wish to purchase a lot for $125,000+HST to build a new house (either us as general contractor, or hire someone... still deciding). If we build, will need Builders Mortgage. If we get a general contractor it will be turn key and we'll need a mortgage at closing.
- Closing on the lot can be pushed to April; however we would need to fund the purchase now. (General contractor could also purchase it for us, but we're not anywhere near figuring out a floor plan yet and don't want to lose the lot to someone else).
- We would ideally like to stay in our current house until the new one is ready (this would likely only work if we hire a general contractor and do a turn-key build), but we also have a place lined up for renting at a very reasonable price (family member) if we do sell our current home.
- We have a couple general fix-ups we were hoping to do on the exterior of the home (I ripped off our front steps in the fall and have the new Trex/composite railing system in my garage waiting for warmer weather), so a spring sale would be preferable.

Just wondering what everyone thinks is the best way to proceed:
1. Get a HELOC now to cover the cost of the lot, but if we sell within a few months anyways, are there penalties or is this even a worthwhile option?
2. Try to get personal loan (at higher interest rate) to fund the purchase and repay it once we sell in a few months?
3. Sell our current house now and set the closing date of the lot in April in hopes that our current house has a closing date around the same time (if it doesn't, we'd have to do option 2 anyways to buy the lot).
4. Just figure things out now and do turn-key. (we take a long time to make up our minds though). Would still likely need HELOC or personal loan to fund the 10% down of the build/property (approx. $70,000)
5. ???
3 replies
Deal Fanatic
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Feb 2, 2014
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Toronto
I no longer broker construction loans, but when I did, Scotia had the best. They will lend you about 50% of the purchase price for the vacant lot and help fund the building costs. They release the funds for building in stages (ie when foundation is done, when house is enclosed...), so there will be a delay between receiving the funds and when the GC wants the cash...you will need some cash on hand to bridge this.

I would visit a Scotia branch with the property you want to buy and get a loan schedule from them for their constriction loan program.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Aug 30, 2011
3445 posts
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Ottawa
I live in Ottawa and I'm curious where you can get a lot for $125,000. Do you have one in mind, or you are hoping for this price? Or are you looking in rural Ottawa?
[OP]
Deal Addict
User avatar
Aug 28, 2012
1828 posts
993 upvotes
Kanata, ON
OttawaGardener wrote: I live in Ottawa and I'm curious where you can get a lot for $125,000. Do you have one in mind, or you are hoping for this price? Or are you looking in rural Ottawa?
Rural Ottawa is where we're looking. Have a few in mind, but that's about the average of where we're looking.

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