What is the new construction process? Dig lot, pour concrete, etc

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@David Butler that was amazing. Thank you for your well thought out response, that will go a long a way as a start to get the process exact, including room for error, if something changes along the way. Yes I have a developer, but I want to Make sure I know as much of the process rather than relying on information that may or may not be correct , but wouldn't know else wise. If I knew any good subs I would figure this process our 100% and hire subs, but work is so hard to find here right now .

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OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Jaron Walling I own 15 rental units and came Acroos an amazing land deal, so I am doing my first new construction project. I take your opinion openly, have you built new construction before and if so, what price per sqft do you think it would cost including finishes

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Mike Wood the $750 does not include the cost of the land...but hold up let me finish reading

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Mike Wood I wish I could get a construction loan from commercial bank, but what exactly is a commercial bank, everyone I have applied with has denied me. My debt/income ratio is lower than it really is because I own alot of rentals so for tax purposes and depreciation, my taxes dont show the whole real picture. I make 80k a year more than my taxes show..

I would love to use a bank, can you point me in the right direction?

1 Reply

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Mike Wood @Jaron Walling @David Butler. Just to help clear some things up, the price I have to build this including finishes is approx 180k per sqft. I am actually working with my architect to get the schematic (less sqft)

I have a developer but have contemplated being my own GC however I do not know any great subs I would trust with a 1.7 to 1.9 million dollar home

Comps in the area dont have many homes this large downtown Philadelphia. There are at least 10 with lots sizes 20 X 60 some of these sold for 1.3 mil and have 1000 sqft than I am proposing, bigger lots 25x90 sold for 1.9 million

my lot is 40X60 Wide home (not narrow) in the best part of Philly. There are lots 20. x 60 that sold for 1.5 million as well...So I am hoping to sell each home (2) for 1.7 mil minimum 2.3 mil max.....

Im not going to lie, it is scary, we are going through covid, but at the same time this is once in a life time opportunity , you dont find land in this area much anymore let alone 180k per 20x60 lot (4 of them converted into (2) 40x60 lots).

Hard money has me the most scared but if things go well the profit should be approx 700k and the way I look at it, if it goes over time, I will lose money in interest, but with my calculations in the worst case if it would take 6 months to sell id lose 90k in that 6 months out of my profit, and so on...I see (unless we hit a depresssion) as lower risk in that it would take over a few years of not selling before the profit becomes negative (you can see my perspective)

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

I could sell the lots and make a good chunk, but I cant sell them because of fear. I believe fear is natural in your first big venture/big risk high reward.....So I am trying to know as much as I can to make sure delays are at a minimum (preferably none at all but we know thats not feasible haha), materials are ordered ahead of time to account for supply chain issues going on in this country (windows is the most backlogged and its one thing I may not be able to order from the jump because things could change)

but I cant help myself but think to take 1/4 of what I think my profit will be and sell them because of covid and its uncertainty , rates going to go up eventually (maybe that helps people rush to buy if I get them done in time), inflation etc etc....But I also feel its more about the money and more about seizing the opportunity and feel if I back out then I will regret it, you know

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

@Douglas Gratz I am a recently retired builder...I used to build houses exactly like you are describing. There is absolutely no way you are going to build that for $150 SF. Try $300-$400. It will cost you approx $1.5 mil to build a quality house like you describe.....maybe more

And your developer is not a GC, you need a good GC to work with you.....no way you can do this yourself either. As @Paul Sofia said, you are a rookie playing a championship game.

Pass on this, you are clearly over your head.....this could ruin you.

16 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

4y

Originally posted by @Mike Wood:

@Douglas Gratz First off, I think using hard money for a build is way too costly and risky. I would only recommend using a commercial bank with a construction loan. Second, you need a builder/general contractor. I think you will find it is not possible to act as your own GC for such a build in your town/county on a new construction project that you do not intend on living in.

I also question your costs, as you have indicated that you plan to build a 5000ft2 house for $750k, including land, soft and hard costs. Are you truly including all costs?

As for you first steps, your builder/GC should be letting you know. For me, the first three things that happen on my builds is 1) site prep, survey, foundation/piling marking and temp power installation, 2) foundation/piling driving, 3) start of framing. Item 1 could be done by the owner and owner selected subs, items 2&3 are typically handled by the builder/GC.

I would be shocked if any lender would lend in this scenario.. I suspect or advise for this project he needs to hirer a very experienced GC on a fee basis.. I think the lender will probably require it I would be shocked if they dont.

Also as you mention HML can really eat you up especially the rates in NJ PA and NY not so bad west coast were experienced folks can get 1 and 7 and only pay on drawn funds.. bank rates are not a lot different maybe 1 and 5 to 1 and 6.5 but no way someone with no new construction experience will even get a loan.. lender taking uber risks.

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OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@David Butler your answer was so in depth I was wondering if you wouldn't mind, in order, writing each sub I would need to get (what kind of profession am I looking to hire) From your list, it all pretty much common sense, but I cant make mistakes so I want to double check).

its a basement , four stories, and a roof deck in the heart of philadelphia. I wanted to get rid of the basement and save some sqft, but houses in the 1.7 million dollar range, that expect it all....The stories get smaller as you go up else wise id be over building. At the moment I am trying to figure out what size is perfect, as I get towards that 1.7 million range, my marketing demographic becomes much smaller...Tough decisions already and have not even started haha

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Bruce Woodruff I am over my head which is why I freely gave away 15% of my net profit to an experienced professional who has had over 20 homes built. If not I would have sold the land when I bought it for a 200k profit.

@Jay Hinrichs I have a consultant who has been building houses for while now, but I see where you are going with that

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

@Douglas Gratz I assume you've run the numbers....? I doubt they're correct. Why not post your budget spreadsheet for us to look at? Might be something we can help with...I spent a career doing this.

You just cannot build a house like you're describing for that $ SF. Even if your 'expert' worked for free it would be tight. And you're giving up 15%? Is that his fee to general this whole thing?

Not trying to be critical, just hate to see someone make a huge mistake like this...

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Bruce Woodruff and yes its going to cost $180 per sqft not $300. I do not know where you got your numbers from. This 1.7millino home I am buying will need top of the line finishes yes, but its the location that makes the price so high , not the house here. (the house obviously will need high end finishes, but you catch my meaning) Where do you get $300 from?

The lots is 40x60 of which 31x51 will be built on. I have to lots back to back . And I am simply asking the above (not being defensive) all opinions welcome here. I like the truth

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Bruce Woodruff if it lets me upload it ill get on that, I dont have the blueprints left so this is all rough estimates for the most part, the price per sqft includes finishes

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

Originally posted by @Douglas Gratz:

@Bruce Woodruff and yes its going to cost $180 per sqft not $300.

I never built a house for $180 SF, esp not high-end like you're talking....just sayin'.......

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Bruce Woodruffundefined

OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Bruce WoodruffI know for a fact I am missing some items and remember yes the house will be worth 1.7-2mil but its the location not so much the size or finish. However I do know it needs top of the line if its selling for that much regardless....The interest is based of drawing all the money at once which will not be the case...I wish I knew a commercial lender but I do not, so hard money is my only option, that or run scared from a once in a life time opportunity that will allow me to grow my business, I am not sure I could live with that. The 200k I would make selling the lots wont get me really far as It could afford me another duplex or triplex, but since I have 9 Freddie Mac mortgages, and my tax returns dont really show the truth of what I make due to depreciation, I cant get loans, so that 200k wont do much in so far as my goals....I am selling two of my single families t o get debt of my sheet and some profits, but that'll take approx 4 months from start close.....But I know the risk here, but I am afraid to walk away and afraid not to :/ its a conundrum...So all I can do is have a consultant who can make sure everything is going as it should and I learn in the process....My goal right now is to learn as much as I can before even breaking ground as to not be reliable on someone when I have alot at risk.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

4y

Originally posted by @Bruce Woodruff:

Originally posted by @Douglas Gratz:

@Bruce Woodruff and yes its going to cost $180 per sqft not $300.

I never built a house for $180 SF, esp not high-end like you're talking....just sayin'.......

you know its that old adage it depends.. I built a nice custom a few years ago before lumber went nuts and other componants in Charleston sc historic district 2200sq ft no garage cost 1mil to build plus soft costs plus 500k for the lots so in it 1.6 sold 2.2 so i get the nice spreads.

right now in Oregon our semi custom product homes are costing about 150 a foot.. to 180 a foot.. to build

and in florida were we are building dingers those are running 100 to 120 a foot and used to be 80 2 years ago.

and you know how cheap they build in Texas and OKC.. starter houses.

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OP

Rental Property Investor · Philadelphia, PA · Member since 2018 · 260 posts · 145 votes

4y

@Paul Sofia with your experience why wouldn't you? 180k per lot, 4 lots....In the 2nd most gentrified place in the country where houses 3 strories 3 beds 2300 sqft sell for 700k on lots 15x60? The comps in my area are astonishing

1. 4 bed 4 bath 3 4300 sqft with garage parking (which is unheard of in the city , but I will have) lot size 20x60 sold for 1.3 million two months ago

2. 4 beds 4 baths 4700 sqft with garage, lot size 20x90 sold for 1.9 million

3. 3bed 3 bath 3300 sqft new construction 950k

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

@douglas

We need the construction cost breakdown, not project costs. If your construction costs are wrong, you're in trouble....Attach a price to each of the following:

General Conditions

Site Prep

Grading/Excavation

Concrete/Foundation

Framing

Electrical

Plumbing

HVAC

Windows and Doors

Wrap/Vapor Barrier/Waterproofing

Insulation/Fenestration

Roofing

Siding

Drywall

Cabinets

Countertops

Tile/Stone/Masonry

Flooring

Paint/Stain

Finish/Trim Carpentry

Railings

Glass/Mirrors

Other

8 Reply

David ButlerPro Member

Flipper/Rehabber · Lake Geneva, WI · Member since 2016 · 39 posts · 27 votes

4y

Wow, this question is wide open. Do you have a general contractor? If not, I might start there as they will already have the answers to your questions. You will pay them for their expertise, but with such a high price tag, I don't know that I would take the role of GC myself and hire my own subs. Should you decide to undertake the role of GC, before your break ground, you need to select all of your subs which will be required to get the building permit. One sub may be able to refer another as they all need to work well together. You also need to at least talk to the electric and gas company to find out their processes. You don't need them today, but will shortly so it is best to have them lined up. In general, the order should look something like this: excavation, inspection, footers, inspection, foundation walls, damp proofing, drain tile/sump pump, inspection, backfill, plumbing (if you are putting anything in the floor of the basement like a stub for bathroom, drain, etc.) Are you connecting to city sewer and water? Well/septic? This has to be hooked up. Pour basement floor (assuming there is one.) While this is all taking place, you need to get your wood package including floor trusses or iJoists there so you can start setting once you have the concrete floor poured. iJoist/floor truss set, subfloor, exterior walls with sheeting and wrap. 1 story? 2 stories or more? Keep going up. In WI, house has to be under roof before the electric service main can be added. Interior walls have to be added but each of your subs will know their process and what needs to be done before the next step. I have probably missed tons of small decisions that needed to be made to be on schedule hence the recommendation for a GC.

1 Reply

David ButlerPro Member

Flipper/Rehabber · Lake Geneva, WI · Member since 2016 · 39 posts · 27 votes

4y

Douglas: I wish you all the best on this but this seems really high risk, but perhaps there is a big reward. It sounds like you have the basic idea of your building but need specifics. I would start with the architect and knowledgable agent to know what is going to give you the biggest return. I still strongly suggest the GC--I don't know anything about Philly building codes but when I here big city, it think big red tape and your GC is going to be huge walking through the permit process. As for subs, you probably need them all at the beginning so find the sub that makes you feel comfortable and ask them for recommendations on other subs. Your excavation company is going to start work first but that does not have to be your first sub selected. You need all before the permitting process (at least here in WI.) My excavator gave me the foundation guy who gave me the electrician. I go to church with my HVAC contractor so I knew him. I honestly cannot remember where my plumber came from, but I really like him and have used him on more projects. Eagles fly with eagles.