Building new homes? - I Need Advice - May take the leap

11 Replies

I have flipped a few homes now, more than I will admit, and I have come to the conclusion, that using my contractors that it may be less expensive to build new, rather than flip in some cases.

There are many lots, not only here, but across the nation, mainly in low income neighborhoods, but many in decent neighborhoods that are 25 foot wide. I am thinking about contacting an architect to design some homes for me that I can take advantage of these properties. These homes would be from studio's with one bath to 3 or maybe even 4 bedroom homes with 1 1/2 to two baths.

My figuring on construction cost I am seeing about $30,000 to $60,000 on building these homes, plus the cost of the dirt. I should be able to sell them from $60,000 to $120,000 easily. What kind of advice can someone offer?  Would you take the leap?

Do you have any background in build "new" homes?  Doing rehab, of any size, isn't the same thing.  You won't be using the same contractors either.

 Actually my contractors are the ones that want me to do it.  Do I have any experience in building new homes?  No I cannot say that I do, but I have a very good friend that does, and he is also leading me in that direction.  Also, two of my contractors build custom homes. (Roofer and foundation contractors).  Also, the local building inspectors suggest that I may want to do that, rather than flipping.  All of my contractors are class B or better, plus it is not that far of a leap for me to get a Class A license.   I am not a flipper that does shoddy work, and I don't cut corners.   My average flip is now costing $30,000 or more, plus the cost of the home and by crunching the numbers, I can see how I could build a home for that kind or money, that would sell a whole lot faster than a flip.   

I see many that take a similar course...and get burnt.  You may have a leg up with the friend that does have experience.  What exactly is the friend's "experience"?

Personally, I went from Design/Build of new homes and developement into REI. I don't use the same contractors for both...even though they may have experience in both, or say they do both. One big reason is scheduling. If a contractor works their schedule on a rehab basis, they are not setup to schedule on a whole house construction basis. They may know how, but building a "new" home is more about managing, than knowing what the difference between a Gold Ardox Spiral Cut Deck Nail, and a Drywall Screw.

Built 11 homes from $150,000 to over a million. 

$30k-60k for construction costs seems crazy low.  most builders i see on bp quote around $100-120 SF.  

Your area may be different, but permits and impact fees on my last new build were almost 20k.  Most of these fees were fixed regardless of the size of the home.  On a small home, these fees would kill any kind of profit.

Originally posted by @Colin L. :

$30k-60k for construction costs seems crazy low.  most builders i see on bp quote around $100-120 SF.  

 Low end of having a home built is $100 SF.  Secret is that if you build it yourself, even using various contractors, it is not that expensive, and you will do a lot of the work yourself.  Don't get me wrong, building it yourself means a whole lot more responsibility than having a contractor to do the job. Just like was advised above you have to manage the build correctly.  If you are the builder yourself, you are the one that has to eat the cost in things not completed correctly etc..., not to mention materials on the site when they are needed etc...  Many things can and will go wrong I know. 

Saving money to build your own home is not the answer for most, even flippers.  I am not even sure about doing it myself, my only advantage is having a support group of contractors that have built, and do build entire houses.  I will also tell you that I will be surprised if I make money on the first build, we will see. 

Originally posted by @Colin L. :

$30k-60k for construction costs seems crazy low.  most builders i see on bp quote around $100-120 SF.  

 This is correct.  Prices vary across the country, but not as low as $60k/sf

@Edward Briley  I used to teach homeowners how to be their own general contractor on their own home.  Three most important things to know:

1 - It is nothing like remodeling or doing rehab
2 - It demands an incredible amount of time and patience
3 - It is all about management...managing:  time, people, & money
4 - OK 4 things.  It is NOTHING like remodelling or doing rehab (I mentioned that already.  It's worth repeating).

Originally posted by @Tyler Clark :

Your area may be different, but permits and impact fees on my last new build were almost 20k.  Most of these fees were fixed regardless of the size of the home.  On a small home, these fees would kill any kind of profit.

 Not that bad here, but at the same time I don't know the amount, because in different areas, the cost is different, because a lot of the land here is very close to water, not only that - the Chesapeake Bay to be exact.  With this being said, I expect about half of what you are quoting.  I have a phone number that I can get exact amounts, however, I am not ready to make that call yet. 

Originally posted by @Joe Villeneuve :

@Edward Briley I used to teach homeowners how to be their own general contractor on their own home.  Three most important things to know:

1 - It is nothing like remodeling or doing rehab
2 - It demands an incredible amount of time and patience
3 - It is all about management...managing:  time, people, & money
4 - OK 4 things.  It is NOTHING like remodelling or doing rehab (I mentioned that already.  It's worth repeating).

 I gave your advice to a friend of mine about 10 years ago.  I wonder how many homes he has built since? And he works a full time job, and I am now retired. 

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