ForumsAccounting and Budgeting

So this is like an investment club type venture?

It sounds like you could use initial input from three sources: a bank or mortgage company appraiser, a realtor, and a general contractor. An appraiser can examine the two existing houses and the house plans for the two vacant lots to estimate how much your future buyer(s) could borrow to purchase the homes from you. A realtor can provide market information for the area, and with the appraisal, establish an reasonable estimated selling price for the property, and tell you how long it will take to sell once you have completed your improvements and listed it. The general contractor will be able to tell you how much it will cost to repair/upgrade the existing houses and to build two new houses on the vacant lots based on the plans.

Next, you might want to estimate how much time this deal will take on the part of all the investors -- to set up an effective way to administer the money, decide how and when it will be spent, facilitate the various discussions and disagreement that may arise (and there will be many), directly oversee work on the project, etc. For at least one person, this will probably involve a considerable amount of time.

Once you know all that, you could ask: 1) How much would the investors make if they just left the same amount of money where it is now for that same length of time (instead of using it to buy and improve this property)? 2) What much money would all the investors make if they took the collective amount of personal time it will take to manage this deal and used it to work at something else instead?

The return is obviously unacceptable if the sum of those two amounts is more than you could sell the property for when improvements are complete. A few years ago, I'd have expected 6 to 8 percent above that as an investor, and once did as well as a 17 percent return on one project -- but I would not expect that kind of return today on most residential properties. But then, I don't know your neighborhood, and you do.

Good luck!