Do you see anything potentially wrong with this plan for residential new construction?
Investor · Orlando, FL · Member since 2015 · 121 posts · 3 votes
I am building a house...
https://www.dropbox.com/s/2ta56u5d2esz6h9/house.JP...
... that will cost about $73,000 to build, mostly because I'm doing a lot of the labor myself.
Based on current market data, I think I can sell it for $140,000.
Then, I will build the same house again, but in the area around San Jose, CA because I researched home prices and saw that houses go for 5.5x more. I can build the same house for the same $73,000 and profit around $540,000 after the sale and taxes.
Do you see anything potentially wrong with this plan?
@Account Closed The listing you included in San Jose for $700k makes the point. It is nothing special. It's a 7000 sq. ft. lot. and it's listed for $700,000.
There's no way, even doing all the work yourself (which would take an incredible amount of time) and using all cash, that you're going to be able to buy the land, have plans and engineering done, pay all permits and fees, plus all materials and be into it as cheap as you think even if it's bare bones.
Anywhere in the bay area, land is expensive. It's much like here in Orange County.
Here's the reality of costs there. San Jose New Construction - Built by BP member Granted your house is much simpler, but that only accounts for a small portion.
BTW, we are licensed general and electrical contractors, do our own preliminary design, and are licensed real estate brokers. We wouldn't consider trying to build a house completely on our own just using our own labor, as it would be a huge waste of time. Time that is better spent finding the next deals while the actual construction is being done by subs. Though we do handle the excavation as it's more cost efficient.
John,
At this point, I'm convinced you are clueless about new construction process in the Bay Area. What I have learned through out the years is that "it's not what you say, it's how you say it" makes a huge difference on how people will judge and respond to you.
Your way of responding to the veteran investors on BP reminded me of something I recently read: "Do not correct a fool, or he will hate you. Correct a wise man, and he will appreciate you." I will let you have the final say.
@Karen Margrave, thanks for asking me to chime in. That was fun........I think. :0)
John,
At this point, I'm convinced you are clueless about new construction process in the Bay Area. What I have learned through out the years is that "it's not what you say, it's how you say it" makes a huge difference on how people will judge and respond to you.
Your way of responding to the veteran investors on BP reminded me of something I recently read: "Do not correct a fool, or he will hate you. Correct a wise man, and he will appreciate you." I will let you have the final say.
@Karen Margrave, thanks for asking me to chime in. That was fun........I think. :0)
Well "San Jose" was just a place I picked because it was the top on the list of home values other than Key West and I know I'm not going to find some rural property on the outskirts of Key West. I would not plan to build IN San Jose... I would plan to build on the outskirts of it.
Ok @Account Closed it's been fun, but I think it's obvious this was all just a game, and you are not, nor will you be building a house. But, thanks for the entertainment.
John,
At this point, I'm convinced you are clueless about new construction process in the Bay Area. What I have learned through out the years is that "it's not what you say, it's how you say it" makes a huge difference on how people will judge and respond to you.
Your way of responding to the veteran investors on BP reminded me of something I recently read: "Do not correct a fool, or he will hate you. Correct a wise man, and he will appreciate you." I will let you have the final say.
@Karen Margrave, thanks for asking me to chime in. That was fun........I think. :0)
Do you hear me asking everyone to point out the omissions on my Excel sheet? Did I not just look at the Santa Clara Counties Building permit cost a few hours ago? Are you really telling me that it's going to cost $30,000 to install an electrical pole? I will bet you $1,000,000 that it will not and I DO NOT GAMBLE. That is how sure I am that it does not cost $30,000 to install an electrical pole.
How about my post "How does a condominium owner make money?"... that is a pretty novice question and if I thought I knew it all.... I wouldn't be asking a question like that, would I?
just so you know it can cost more 30k to bring electric to the property. I did a house a couple of years back that it was 150k to get Pge to bring power to the property. So please do your research. You will lose your *** here in CA if your not careful.
Let me add my two cents here as well, as an interior designer from the San Francisco area who has had reason to thoroughly research the laws regarding who can build what where for legislative purposes, and who is a bit of a code geek.
In addition to this being simply impossible on the budget you are thinking about because of truly massive costs in California (Minh Le is absolutely accurate, if not underestimating the case; I've heard of permitting alone taking 2-5 years in some cases, especially in SF), the bottom line is that you cannot build-it-yourself anywhere in the state with plans to sell the property within at least a year because it is flat out illegal. The architects' section of the Business & Professions code absolutely prohibits construction of anything that is intended to be sold by anyone but a licensed general contractor.
I know this has been mentioned by others, but let me spell it out in crystal clear, super simple language. Illegal, as in against the law.
Lie on that declaration and get caught? You'll be paying a big fine and very likely spending some time behind bars, at minimum for violating the construction laws. Not to mention sued to kingdom come by anyone that buys the place if anything goes wrong, or they even just become aware that you were not appropriately licensed to build it. California's reputation for litigiousness is very well-deserved.
Building inspectors and the Contractors' State Licensing Board are not very forgiving, nor are people who end up in financial or physical damage because of something like this. And good attorneys in the Bay Area are running $350/hour and up. You are also required to have a full set of drawings stamped by a licensed architect or engineer - and it is far beyond unlikely that you will find anyone willing to do that for you if they have not drawn up the plans themselves, especially if they don't know you. Among other things, it is also illegal to stamp someone else's plans, never mind the fact that no sane architect or engineer would want his name associated with a set of plans drawn up by a total amateur.
And yes, building codes both can and do differ wildly all over the place. For starters, California uses an entirely different set of codes from the rest of the country. Then each county and even each town and city within those counties have their own variants and additions and they do change constantly. California also has very stringent earthquake codes; I'd bet you haven't figured on or designed in seismic protections in your house, have you? Oops, that will be at least another couple thousand dollars.
What do you know about Title 24? Nothing, I'd bet, but believe me, complying with it is going to increase your costs, not only directly, but because you are pretty much guaranteed to have to hire someone who does understand it to at least advise you, and most likely to submit their own drawings and reports. You will not get a permit, or get signed off anywhere in the course of construction if you have not complied. The state takes energy conservation beyond seriously, and I'm sure all the more so now with the dire state of drought.
And what do you know about sustainable design or BIM? In addition to the California Building Code and whatever local codes may exist, you will have to comply with the California Green Building Code. That alone may well influence the very plan of the home and its systems and require redesign.
Several years ago, some municipalities around San Jose also started requiring submittals to be done in BIM, and I'm pretty sure that has spread. If you hit one, now you are definitely going to have to have the drawings done by an architect or engineer, because I doubt you're going to want to pay $5,000 to buy the software that does that, or invest in the time and cost of learning how to use it, certainly not with the sort of overall budget you are talking about.
Do you even know what a full set of construction drawings comprises? It's definitely not just a floor plan. You will have to have every detail shown, down to where the wiring and plumbing will run, structural and waterproofing details, along with sections, elevations, site and roof plans, and a lot more, and in a standardized format they can read.
More and more municipalities are now requiring sprinkler systems in all new residential construction as well. Do you know if that's the case where you are planning to build? Have you included the cost of having that system designed and installed in your budget?
And let me give you a little clue about understanding codes. There is a reason they are taught to architects in semester-long courses, because they are not easy to understand, and you have to know how to read them, and what else to reference and when. They are less onerous for residential construction, but still complex, and a complete understanding of much of it requires referring to several sections, often in multiple physical codebooks, and not infrequently requiring mathematical calculations. Your building department and inspector know them better than you ever will - and if they find you lacking, they will be all over your case throughout the whole project like bees on honey, and quite likely nitpick you to death. At some point, they will also catch you in the lie you told on your declaration about your role in the project, because you will let *something* slip.
If you've found a $20,000 lot anywhere in the state of California, particularly in the most expensive parts of it, the first question you should really be asking is what is wrong with it, and why it is so bloody cheap. If someone offered to sell you a car for $500, you would (hopefully) rightly wonder just what kind of ancient and horrible junk it was; the same is true of land costs that sound far, far, far too good to be true in a place where one would expect it to cost at least 10 times that.
Also, have you included earthquake insurance in your estimates? Or flood insurance? The former is pretty essential in California, and much of the Bay Area is in a flood plain. With the drought, you'd think you'd have nothing to worry about, but if it does start to rain much, the flooding danger will be much more severe than normal.
If you're determined to still try to do this, and to do it your way, completely ignoring the professional advice of multiple people from the area in question who have vastly more experience in these matters there than you, despite your having actually asked for said advice, then good luck to you, but don't say you weren't warned.
Wendy Hoechstetter
Hoechstetter Interiors
Pittsburgh and Mill Valley
just so you know it can cost more 30k to bring electric to the property. I did a house a couple of years back that it was 150k to get Pge to bring power to the property. So please do your research. You will lose your *** here in CA if your not careful.
Well I would definitely price everything before I build. That's as simple as a phone call or two.
How can something that costs $361 in Florida cost over $30,000 in California? I will need to hear this for myself and I will probably make a phone call tomorrow. I mean... the building permits are more expensive in California, but only by about 2x, not 83x!!!! I will have to verify that for myself because you can certainly see how that seems ridiculous, right? How would a utility make any money by operating like that? Why would it cost so much just to put a pole in the ground? Who could afford to pay such a thing?
Please don't feed the trolls ...
All I can say is come try it. I think you will run out of money right after you pay your building permits but what do I know. hehehehehehehhehehehe
All I can say is come try it. I think you will run out of money right after you pay your building permits but what do I know. hehehehehehehhehehehe
I wouldn't run out if I plan ahead. And if CA isn't the place, I'll go elsewhere. I would never enter a venture where the numbers didn't work.
Perhaps, but from the reading of this thread, it's pretty clear that your perception of the numbers is VERY skewed from reality.
I realize that you can't fathom the numbers being so much higher in CA (and other areas), but the fact that you can't fathom it doesn't make it true. You seem to think that those who are doing this for a living in that area either don't know what they're talking about or are lying to you...when the logical answer is that YOU are the one who doesn't understand.
Perhaps, but from the reading of this thread, it's pretty clear that your perception of the numbers is VERY skewed from reality.
I realize that you can't fathom the numbers being so much higher in CA (and other areas), but the fact that you can't fathom it doesn't make it true. You seem to think that those who are doing this for a living in that area either don't know what they're talking about or are lying to you...when the logical answer is that YOU are the one who doesn't understand.
All it takes is a phone call to verify. I will call the electric utility in Santa Claea County and let you know what they say.
All it takes is a phone call to verify. I will call the electric utility in Santa Claea County and let you know what they say.
The fact that you think they can give you a general answer to this question over the phone is just another indication that you are in over your head. In fact, the utility company is only one piece of the puzzle. If underground lines need to be run, you may need to provide the conduit. If under street lines need to be run, you may need to pay for city traffic control measures and repairs. There may be impact fees, hook-up fees, third-party contractor fees, etc.
My most recent new construction project, it took 4 months before the power company finished the design of the utility implementation for the project and could give me a price. And my fee to them was less than 25% of the total cost of getting the lines run.
Did I have a general idea of the cost upfront? Yup, because I talked to other builders in the area who were familiar with the process and the cost.
We've all been in your position -- having no idea what we're doing, thinking that it's simple and it's mostly commonsense and then being unpleasantly surprised when we realize that everything costs much more than we expected, requires more red-tape than we could imagine and takes much longer than we had planned. Those of us who have become successful have accepted these limitations and learned from those who have come before us. Ignoring the realities of the business doesn't change the realities.
Regardless, I'll go back to your very first point about doing it all yourself. In most of this country, that's not an option, unless you plan to live the property for at least a year after construction is complete. Is that your plan? If not, the rest of your strategy is out the window...
All it takes is a phone call to verify. I will call the electric utility in Santa Claea County and let you know what they say.
The fact that you think they can give you a general answer to this question over the phone is just another indication that you are in over your head. In fact, the utility company is only one piece of the puzzle. If underground lines need to be run, you may need to provide the conduit. If under street lines need to be run, you may need to pay for city traffic control measures and repairs. There may be impact fees, hook-up fees, third-party contractor fees, etc.
My most recent new construction project, it took 4 months before the power company finished the design of the utility implementation for the project and could give me a price. And my fee to them was less than 25% of the total cost of getting the lines run.
Did I have a general idea of the cost upfront? Yup, because I talked to other builders in the area who were familiar with the process and the cost.
We've all been in your position -- having no idea what we're doing, thinking that it's simple and it's mostly commonsense and then being unpleasantly surprised when we realize that everything costs much more than we expected, requires more red-tape than we could imagine and takes much longer than we had planned. Those of us who have become successful have accepted these limitations and learned from those who have come before us. Ignoring the realities of the business doesn't change the realities.
Regardless, I'll go back to your very first point about doing it all yourself. In most of this country, that's not an option, unless you plan to live the property for at least a year after construction is complete. Is that your plan? If not, the rest of your strategy is out the window...
You think I don't know because you don't know what I know. I bet you hire lawyers, don't you. Not me. I bet you hire accountants, don't you. Not me. Why? BECAUSE I AM SMARTER THAN YOU!!!! THAT'S WHY!!!!
How do I know I'm smarter than you? Because of your business model. If you were smart, you would stop building and start investing. But you would probably overcomplicate it, listen to 1,000,000 "professionals" and not know how to do it anyway....
For the 1000th time... I am not signing an owner builder..... I have to hire a contractor to do some things, so he an sign the permit....
For the 1000th time once again..... I am not building in a municipality, so anything you say that has the word "city" in it... might as well throw it out....
Why would you talk to other builders rather than just talk to the utility? You must not have very good social skills with the utility. Try this.... "How much will it cost?".... that's all it has ever taken me....
I'm not going to claim that they're might not be a few thousand in expenses that I didn't account for, although I have no idea where they may come from.... because I have talked to all the relevant government departments and got everything down to the penny, and that includes your precious little "hookup" fee.... and even if there is an extra $3,000, that does not break my bank on the deal. It is still a hefty profit.
And the building department said THREE WEEKS to get the permit. Just called them today.
Nope... I think you don't know because you continue to say things you wouldn't say if you did know.
If you ever do try to build a house and gain a bit of experience, I hope you'll come back here and reread this thread...you'll give yourself a good laugh... 😉
I'll be honest... My first thought was, "There is no way this guy is smarter than I am."
But, then I noticed that you used all capital letters and four exclamation points. Three exclamation points I could argue with, but four of them makes your point pretty much irrefutable.
Well played...you're clearly a force to be reckoned with...
@J Scott you might remember Anthony Lewis. This is my favorite thread from him:
http://www.biggerpockets.com/forums/49/topics/6341...
Team up Anthony Lewis with John Farmer and this song came to mind:
http://www.lyricsfreak.com/b/bill+withers/just+the...
:)
I'll be honest... My first thought was, "There is no way this guy is smarter than I am."
But, then I noticed that you used all capital letters and four exclamation points. Three exclamation points I could argue with, but four of them makes your point pretty much irrefutable.
Well played...you're clearly a force to be reckoned with...
Okay, I'll let you know how much profit I make from this house.
I'll even keep you up to date step-by-step. Tomorrow, I go back to the architect with the final revisions, which will include bitching at them to include the electrical diagram they promised me in the quote, which they might want to include if they want the rest of their money. Then, send it to my contractors. I already basically know who I am going to hire, but I will send to a few just to be sure.
I would say "I'll post pictures," but by the time I am actually building the thing.... I would probably be too tired to care.
Nope... I think you don't know because you continue to say things you wouldn't say if you did know.
If you ever do try to build a house and gain a bit of experience, I hope you'll come back here and reread this thread...you'll give yourself a good laugh... 😉
Yea well of course the first time is the learning experience. I didn't claim to know EVERYTHING.... but I bet I will streamline the process and do it a hell of a lot more efficiently the second time around... and just imagine the THIRD time!!! And by the 7th time, I should have enough to put down on a hotel and my "building" days should be about over. Unless I can run it as a side business if it is still profitable to hire other people to do the labor.
If this is a real discussion from this gentleman, I'm truly amazed. He asks what's wrong, he's told what's wrong and then refutes EVERY...SINGLE...REPLY for 4 pages! So NO ONE has a point @Account Closed?
Oh, WOW! I can hardly catch my breath from laughing so hard. Whew. This is an epic post. An Instant Classic, if you will.
I agree with @Steve Babiakabout not feeding the trolls, though it's resulted in high comedy in this case. And in all seriousness, I wanted to mention that, while the OP clearly had no intention of learning anything, I've gained quite a bit of knowledge on this topic from masterminds like @J Scott, @Karen Margrave and others. So guys, your advice did make its way to *someone.* But I imagine that's why you answered in the first place - not to engage a troll, but to put some info out there for others of us who are reading, absorbing, and listening (that old thing). Thanks for some spectacular information ... and entertainment.
You clearly don't know what you're talking about. How are you going to use one set of plans in every location when every location has different building codes and plan requirements? In some areas, you need grading plans, stormwater management plans, etc.
How can you say that nothing requires a license? In every area I've built houses, you need a licensed engineer to stamp the plans, a licensed electrician/plumber/HVAC company to pull mechanical permits and a licensed GC (unless you plan to live in the house yourself).
You've clearly never done this before, but think you have all the answers. My best suggestion is to give it a try. Keep us updated along the way, and once you sell your first house for a profit, come back and give us a big "I told you so!"
We'll be here waiting...
Do you really think the building codes differ that substantially from one area to the other? Do you think the Georgia Building Code is that different from the Florida Building Code?
And I do have a licensed GC that I will be using to do the foundation, masonry, (even though this stuff doesn't actually require a license), and the HVAC. All that other stuff, I can draw myself. In Florida, you don't need to be a licensed architect to submit your own plans.
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I have done modular homes in Florida and the codes can differ COUNTY BY COUNTY... And in Florida, a modular home is viewed the same as a site built home for the most part. As for plans... every county I have worked with requires ENGINEERED plans, stamped and signed! Not sure you have done all of your Florida homework (know you haven't done your Cali homework).
okay I'll let you know how much profit I make.
I'm fairly certain every single one of us already knows the answer to that question...