When does carry math on a golf course house only work if it sells fast

Rigging beat me to it. Six months to sale at 3.95M in a market that absorbs two non-new-build sales a year is a wish, not an input.

I'd also flag the 5% selling cost. At that price point you're likely paying full buy side, plus you'll get asked for a credit at the inspection because a 1994 stucco house with a pool will hand a good inspector twenty pages. Budget the credit as a line item, 30 to 50k, don't discover it in escrow. I ate one of those on a much cheaper house and it was still the difference between a good month and a bad one.

690k across 6,200 sq ft is 111 a foot. For a full gut kitchen, five baths, all flooring and a new primary layout at luxury standard, that's not a budget, that's an opening bid.

The thing that kills luxury scope is that there's no acceptable cheap version of anything. Buyer at 3.95M walks into a bathroom with a builder-grade shower door and mentally deducts 150k from your whole house. So you end up with slab counters wrapping the walls, custom millwork, real tile setters, and a plumbing rough you didn't plan because the new suite layout moved the stack.

My actual number for that scope would be 140 to 175 a foot on the wet areas and finished spaces, and I'd hold 15% contingency on top, not 10. If you can't get the purchase down to absorb that, the deal's already decided.

Also the nine month reno is optimistic if any of it needs a plan review. Ask me how I know.

Small correction on the carry, and it goes your way slightly. You won't be fully drawn on day one. If the 2.6M is purchase plus draws, you're paying interest on roughly 2.35M at the start and stepping up as you draw the 690k. Blended over a nine month reno that's maybe 2 to 3k a month less than your 28k figure, so call it 20 to 25k of savings over the reno period.

That's noise compared to what harrow just said about the scope, and it's gone the second you extend. Extensions at half a point on 2.6M are 13k each plus the interest, so twelve months of marketing costs you both extension fees and another 340k of carry. I'd write out the fifteen and eighteen month rows before you talk price with the estate, because those are the rows the deal actually lives in.

The number doing all the work in your post is the marketing period, and everything else is secondary to it. You have 28k a month of carry against a submarket that your own data says clears two dated resales a year above 3.5M. Under that absorption, a fifteen to eighteen month total hold is the base case and a twenty four month hold is not remote.

Run the two rows. At eighteen months total hold you are carrying roughly 500k, plus two extension fees, plus harrow's scope correction. If the true renovation cost is 145 a foot rather than 111, that is 900k instead of 690k. Basis then lands near 4.0M against an ARV of 3.95M, and the deal is a loss before you negotiate a single inspection credit.

The price that makes it work is mechanical once you fix the hold. If you require, say, 400k of profit at an eighteen month hold with a 900k scope and 5.5% selling costs, you back into an acquisition in the low 2M range, and that is before contingency. Whether the estate can reach that depends on the debt against the property and what the beneficiaries have already agreed among themselves, which you can partly infer from recorded liens, though what is available to inspect varies by state and roughly a dozen states do not publish sale prices at all.

One more input to verify in writing rather than assume: the extension terms and whether the lender will fund draws on a 12 month clock that is already partly consumed by plan review. Get that from the lender in writing before the offer, not after.

If the answer to the acquisition price is no, the answer to the deal is no. There is no execution good enough to fix an absorption problem.

Question I'd have been embarrassed to ask out loud: what happens if you just don't sell it? Is there a version where the estate carries paper, you finish it, and you rent it at some ugly number while you wait for a buyer? Or does a 3.95M house rent for so little relative to basis that the idea is silly?

Compass, luxury rentals usually rent for a fraction of what the basis needs, so it is a bleed and never a rescue. It buys time. It does not fix anything. Windlass, crew availability is the line item that tends to get left out of the math. The trim carpenters and tile setters who can do work a 4M buyer accepts are booked out months, and they do not move for anyone. Even operators running a smaller book schedule specialty finish trades twelve weeks ahead. If a nine month reno assumes a millwork shop can be called in at week four, that assumption is worth more than the extension fee. Line up the two or three trades that gate the schedule before signing anything, and get their lead times in writing.