Anyone Else Here Building New Construction?

Investor · Portland, OR · Member since 2009 · 42 posts · 18 votes

Hey there folks.....I just wanted to reach out and see if anyone else on this site is doing any in-fill new construction these days? We have been doing quite a bit of in-fill new construction ourselves and its been a great niche for us financially, but I am curious what others experience is with it.

We generally focus on the higher end A+ neighborhoods in my market of Portland for this strategy, but I would like to hear how others are using the strategy in their market.......I look forward to hearing what people have to say.

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Grant P.

Denver, CO · Member since 2012 · 218 posts · 48 votes

13y

All I am focusing on currently. Only infill in A+ neighborhoods as well here in Denver. One of the main reasons I like it is because I actually enjoy it. The Design is the most exciting part for me. Working through challenges that the site/budget may present, and attempting to maximize returns with the real focus on building A great house. Even if we make a little less, but don't build garbage I'm ok with that.

You will never catch me building a house out of a magazine at a supermarket, only one off high design modern homes.

Here was the project I worked on with my dad in 2002 when I was 18 that got me hooked. Winner of an AIA merit award.
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Justin PiercePro Member
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Tucker,

Yes, I think now is the time. It was my main focus back in 2006-2008 but I went away from it after the crash. I'm ramping up to do it again now that inventories are shrinking in my area.

I'm working on purchasing a 5 unit subdivision that a builder has left. I wanted to build some small more affordable homes but with impact fees and utility hook up costs being so high we had to scrap those plans and we're working on bigger designs to spread out the fixed costs.

Finally the banks are open to this kind of business again. I have a local bank who seems pretty willing to fund. I'm excited to get back into it and let everyone else scramble for the few remaining distressed sales.
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Tucker Merrihew Welcome to the jungle! Glad to see you jumping right in.

We are builder/developers in Orange County, CA, having relocated here from Shasta County, CA. It took a while to find a lot on which to build here, but we finally found one in Lake Forest, CA that was an REO (house had burned down) We built a new 2350 sq. ft. house, and actually had a buyer before the land escrow had even closed. Sold for $675,000.

We now have a parcel in escrow for a medical office project (not sure if we're going to do it or not ... financing or finding partners for a spec commercial building isn't easy! (Cost to build will be $3,200,000 Value upon completion $5,000,000 or more)

We are looking at a couple of "off market" lots in San Clemente, that will be infill development. The house will probably be a 2 story, 2700 sq. ft. 4/3 bath, with view of the ocean. Meet with appraiser tomorrow to find out what the value should be. (Though we have a good idea, we like confirmation since we are relatively new to the area, and each city in Orange County is different)

Oregon is such a BEAUTIFUL state. So many trees! My grandson will be a firefighter up there this year.

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Grant P.
Denver, CO · Member since 2012 · 218 posts · 48 votes
13y
All I am focusing on currently. Only infill in A+ neighborhoods as well here in Denver. One of the main reasons I like it is because I actually enjoy it. The Design is the most exciting part for me. Working through challenges that the site/budget may present, and attempting to maximize returns with the real focus on building A great house. Even if we make a little less, but don't build garbage I'm ok with that.

You will never catch me building a house out of a magazine at a supermarket, only one off high design modern homes.

Here was the project I worked on with my dad in 2002 when I was 18 that got me hooked. Winner of an AIA merit award.
[/URL]
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Zachary Sexton
Sandy, UT · Member since 2011 · 64 posts · 10 votes
13y
Gorgeous Grant P. Mind sharing the address? I'd love to do a drive-by.
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Dennis Romano
Laguna Niguel, CA · Member since 2012 · 12 posts · 3 votes
13y
Ours are not really in fill but we buy developed lots and build sfh on them. Doing 3 right now up in elko county nv (gold country). Simple homes on about 2 acres that go for approx 260k for about 2,000 sq ft.
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Tucker Merrihew
OP
Investor · Portland, OR · Member since 2009 · 42 posts · 18 votes
13y
Thanks for the reply everyone......I'm glad to see there are others in here doing the same thing. I actually just finished recording the newest podcast episode with Brandon and Josh and we talked a lot about how I have been using this strategy.

We also stick to the A+ neighborhoods of Portland and with that comes retail sales prices of 700K to 1 million once completed, which brings with it some great profit margins. We also focus on buying existing homes and tearing them down, that way we are not competing against other builders on the buying side.....which keeps our costs pretty low compared to buying through realtors or off the MLS. We are also building a home in the 2013 Street of Dreams for Portland that should be completed towards the end of next month.....and our list price for the home will be 1.95 million.
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Mathew Wray
Real Estate Agent · Portland, OR · Member since 2013 · 412 posts · 219 votes
13y
Tucker,

I'm so glad you've posted and looked forward to hearing your podcast. I've looked at buy, tear, build in-fill in Portland before and it seems like it'd work. You're proof that it does! I love this city and think there is so much potential that is overlooked...I'm happy that you're able to take advantage of it!

Bravo!

Mathew
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Tucker Merrihew
OP
Investor · Portland, OR · Member since 2009 · 42 posts · 18 votes
13y
Mathew Wray - Thanks for posting....and yes I agree Portland is a very overlooked market, but that is just the way I like it. I hope you enjoy the podcast episode.
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Bryan Hancock
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
13y
We're building infill new construction projects as quickly as we can locate good deals. Austin is quite nutso right now.
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Tom A.
Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
13y
Looking at doing my first infill new construction project. I just nailed down the acquisition of the existing house today in an area that has seen a real upsurge in infill development in the last 18 months.

Tucker Merrihew, your podcast comes at a very timely juncture. I'll be cueing it up shortly. BTW, I lived in Portland for a short time about 25 years ago in the apartments on the river between the Steel and Broadway bridges. Nice city.
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Lynn Currie
Investor · Austin, TX · Member since 2013 · 452 posts · 309 votes
13y
I'm also doing in-fill building in Austin. My focus is on the higher end neighborhoods in central Austin. We build either SFH or paired homes that then get a condo regime overlay and sell separately.

The model is working well for us, but like Bryan Hancock mentioned, lot acquisition is getting more and more difficult.
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Jean Norton
Flipper/Rehabber · Austin, TX · Member since 2009 · 405 posts · 168 votes
13y
This is the wave of this next year and beyond. Just like Tucker Merrihew said - the A+ neighborhoods to feed the pent up demand. It's been happening in California and everyone I've spoken to have enjoyed bigger profits.
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
I have a banker who says "egregious profits attract egregious competition." Prepare to modify your plans as the market dictates.
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Tucker Merrihew Bryan Hancock Grant P. What are you having to pay for lots in your areas? Approximately what percent of your costs are devoted to land purchase? Here in Orange County if you can find a lot, it's in high $300's on up!
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Tucker Merrihew
OP
Investor · Portland, OR · Member since 2009 · 42 posts · 18 votes
13y
@karen Margrave - We are paying between 250K - 350K for scrapers in the A+ high end neighborhoods in Portland. The exit price for the new homes is then between 700K - 1million. The beauty of this strategy is that we don't have to buy the scrapers for much less than market value (given its a fixer house around 1,000 sq. feet or so), which makes it an easy sell to the homeowner. We then target these types of homes throughout Portland's best neighborhoods to keep our pipeline full of new build deals.
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Tucker, what size homes are you building? What are your construction costs?
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Grant P.
Denver, CO · Member since 2012 · 218 posts · 48 votes
13y
Karen Margrave There is a scrape listed on the block of the house I posted, 33'x125' listed at 599k.

In todays market the house above would be somewhere in the 1.8-2.1mm range.
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Steve K
Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
13y
Have a few new construction projects in the pipeline, but only one is infill. Currently looking for more infill sites but having issue finding quality lots at reasonable prices.
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Originally posted by Grant P.:
Karen Margrave There is a scrape listed on the block of the house I posted, 33'x125' listed at 599k.

Side setbacks? Sounds like an interesting design challenge.
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Grant P.
Denver, CO · Member since 2012 · 218 posts · 48 votes
13y
Jon Klaus The setbacks are 5 feet. Same as the house I posted above. The house above is 23 feet wide, 4400 sq feet.
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Grant P. Sounds like you have a lot of the same challenges with properties there as in high demand areas here. We are currently looking at a lot, and there are several old houses under 500-1000 ft. that have sold for $500k +/-, however; they haven't actually started doing any construction yet, therefore; no comps of new houses. Having the old houses still there, with such a high price, looks like "houses" are selling for that much, and it's a challenge justifying high asking prices in the neighborhood, though obviously those properties were sold for the lots and their ocean views.

There are areas such as Huntington Beach where houses are 20' wide, walking distance to the ocean. A lot of these properties are vacation rentals during the summer months, it's how the property owners pay for their houses the rest of the year.
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Tucker Merrihew
OP
Investor · Portland, OR · Member since 2009 · 42 posts · 18 votes
13y
@Jon Klaus - we are building higher end homes for between $85-$95/sq. foot and we generally build 2800-3800 sq. foot floor plans on our infill lots.
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Ben Johnstone
west hollywood, CA · Member since 2014 · 37 posts · 3 votes
12y
@Karen Margrave

What are you construction costs per sq like in Orange County? Have the changed much in the last year or two?
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Ben Johnstone Here's a link that you might find interesting. Construction Costs On our jobs, we do some of the work ourselves, where we think we can save considerable money, such as excavation, electrical, design, etc.

We haven't been building in Orange County that long, but figure around $130 per foot for base price house. Each city has their own fee structures, etc. and can vary consderably. Of course, it depends on the style of the house too, rooflines with a lot of cuts, etc., pop outs, roof top decks, all add costs, the closer to a box you build the lower the cost.
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Ben Johnstone
west hollywood, CA · Member since 2014 · 37 posts · 3 votes
12y
@Karen Margrave

Thanks, I actually already saw that thread - Unfortunately as mentioned in that thread, its pretty difficult to compare. Most in general are by people building anywhere but califonia which really doesn't help me much. Even more confusing, is I'm sure ppl are calculating there cost sq/ft differently.

Whats including in yours? Do you include all the inspections and permits? utilities? finishes? and what about sg ft, do you include a garage when working that out?

I live in LA, and I'm pretty sure permits etc are considerably more even compared to OC. $130 sounds pretty great to me!

Thanks Karen(big fan)!
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