My New Construction Journal From Start To Finish
Hello fellow investors! I began a post a few months ago in regards to a new construction project I will be starting soon and after all the great input I thought it would be nice to start a journal in order to help new investors who plan to start new construction projects for their first time. Here's the down low in a nut shell.
I am building two SFH in Northern Liberties, this is a very sought out neighborhood in the city of Philadelphia. Minutes away from downtown and all major highways. Each home will be as follows: I bought the lots for 720k in total
1. On 2400sqft lots
2. 5800 sqft houses
3, 4 stories , garage parking, roof deck, elevator, and skyline views
Attached are the 3d Renderings of what I plan to build
Last week a home 4500 sqft just sold for 2.1 million dollars in one day. So thats the market as of now and I am told that pre-selling these within a month of breaking ground is very realistic and that I could get as much as 2.3 million per house. We shall see!
Here's how I started. As I am new to the new construction game I hired a consultant to guide me on my journey . I interviewed 3 builders and 5 luxury real estate agents and their team. I was told to not use my usually agent as when doing luxury at this level, you want someone who specialized in selling high priced homes. Someone who has the clientele , know how, and team to get it done.
So I interviewed builders and got budgets from all three. One builder said he could do it for 180 sqft another quoted me at 225 a sqft. When I compared their budgets I began to feel a bit worried since thats a large discrepancy between the two. During my interviewing process, I visited projects these builders have done and are doing to get a feel and look at the quality of work they produce. Both builders have experience in luxury home and the one I am going with just finished a 16 unit project in the heart of covid, which is one of the main reasons I chose him. He will know supply issues and how to circumvent them (ordering wolf appliances the day I break ground because he knows they are a year out, Anderson windows, same deal, etc etc). But back to the budget discrepancy . The builder I chose has it at 1 million per house and the other is closer to 1.2....That said I am going to build in a contingency and put money aside just incase.
I am using hard money which makes this very risky, but I sold 3 of my 9 duplex's so that I could have a cash reserve of 400k to make sure I do not run into money issues. I also have a buyer lines up, who is willing to buy the land with permitted plans for 1.2 million which would give me a profit of 500k without doing anything. I lined up buyers as another contingency/ exit plan, incase the lending doesn't work out, or some unforeseen issue , where I need to unload the lots. So as backup I have some built in exit strategies.
Onto the steps I have had to take :
1. I had to first subdivide the lot from 4 1200 sqft lots into 2 2400 sqft lots
2. I hired an architect to build out the plans, submit zoning permits, do a structural survey of the land, and ultimate after getting zoning approved we just submitted the building plans. This is a process in itself. You want to make sure your architect knows the zoning laws in the area you are building, this is very important because, if my architects did not have the knowledge, I could have run into problems where zoning would not approve and I would need to wait months just to get variances IF I could even get them. So make sure your architect knows their zoning! As a matter of fact, my guys knew their zoning but they assumed I knew it too...The original plan was to build 4 homes on 4 1200 sqft lots, and the architect went along with this (assuming I knew I would need a variance since it did not meet the 1400sqft per lot requirement) BUT I DID NOT KNOW....this set me back another month because I had to pivot. It turns out it worked out for the better because with my original plan, I would not be able to get garages (which is a huge selling point in the city) After finding all this out, I had it subdivided for a second time into two 2400 sqft lots and looked up zoning laws where I saw that if I put a 5ft side yard on each side, it will be considered a detached home and not a row, which would allow for built in garage by right. This pivot ended up working out because instead of having to wait another 6-8 months for a variance to sell 4 homes at 800k each, I am now able to build two larger homes for just about the same price but am able to sell each for 2.2 to 2.5 million , so I went from a gross profit of 3.2 million to a gross profit of around 4.4 million with a lower building cost. 4 homes would have been approx 650k each to build for a total of 2.6 million where as two larger homes cost 1 million each to build, maybe 1.2 million, either way it ends up being less to build but almost close to the same amount of profit.
a. the architect gave me schematics of the build
b. we went over them in stages and made tweaks here and there until I was satisfied with the final schematic
2A) Got general liability insurance and preparing to get builders risk, but not paying for it until the building permit is approved
3. While all the was happening, once I got the preliminary plans I gave them to my builder so he could price it all out. I learned that builders or yourself have to give the plans to a supply house and they run whats called "take offs" on all the line items and give you estimated prices of what everything will cost (Wood for framing, windows, siding, and the list goes on)
4. After this was done my builder had a budget which my hard money lender wanted and I needed so I know how much I will need to get a loan for in order to build these homes. After careful consideration, since hard money is expensive and risky, I decided to build one house fully and one "under roof" which means exactly how it sounds, build just until the roof is on so outside elements cant get in. The plan is to pre-sell one then have the lender release the rest of the money needed to finsih the 2nd house
5. Now we are at today. I am waiting for the building permit and in the mean time I am working with my builder to make sure we get the budget as close as we can to the actual cost.
I purchased the land in February, but began the process in November, so its taken 6 months to get to where I am now (submitting for building permits) To be continued.....The permits should be approved in about a month from now and we will break ground.
Congrats and success !
Hey Douglas,
Congrats on the new build!! This journal is very helpful to me because I am also a new investor and would like to build a duplex from ground up, however, I don’t know where to start. Currently in the process of looking for agents and architects but not sure where to look. If you can provide me with some guidance of where to look, I would truly appreciate it!
@Jay Patel Where are you from? I would love to help
Quote from @Douglas Gratz:
@Jay Patel Where are you from? I would love to help
I’m from Bensalem, PA.
May 7, 2022 Time:2:58pm
Im very Excited and afraid at the same time, very confusing lol
So yesterday, May 6, 2022 I got loan commitment letter for $2 million. Before I go further I needed a loan to purchase the land, so I have a 499k mortgage on it, I payed the difference 720-499. So you have to consider Loan to. value % which is 70% which means I actually get 1.4 million dollars (my plan is to build one house at a time and not over extend myself further) so of that 1.4 million:
250k goes towards the land mortgage
40K Closing costs
Which leave 1,050,000 to build with (which is what my budget calls for). I said above I am excited and scared. Im excited that it solidified that I will be able to fund the project, but scared because thats a large loan. But fear is good and possibly unwarranted in that maybe I should be more confident because all the numbers make sense and I have a great builder and real estate agent. But I suppose its the economy that is leaving this doubt/fear in my mind. Scared money wont make money though, big risk big reward . But thats why I am building one at a time, taking it slow, with that profit I can pay off the loans both construction and on the land, and I can just hold the land until I feel the economy is more stable and wood prices go down. If wood goes down, when I do build the second house the profit will be higher (home prices staying the same or normalizing at this level) Right now I stand to make anywhere to 800k-1 million on each house
Thats where I am at today, the building permit (that last permit needed to start breaking ground) should be in 2-3 weeks from now...To be continued, thanks all!
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good job incredibly fast to to get to building permit stage..
sounds like you got this.. !!!
Quote from @Douglas Gratz:
Hello fellow investors! I began a post a few months ago in regards to a new construction project I will be starting soon and after all the great input I thought it would be nice to start a journal in order to help new investors who plan to start new construction projects for their first time. Here's the down low in a nut shell.
I am building two SFH in Northern Liberties, this is a very sought out neighborhood in the city of Philadelphia. Minutes away from downtown and all major highways. Each home will be as follows: I bought the lots for 720k in total
1. On 2400sqft lots
2. 5800 sqft houses
3, 4 stories , garage parking, roof deck, elevator, and skyline views
Attached are the 3d Renderings of what I plan to build
Last week a home 4500 sqft just sold for 2.1 million dollars in one day. So thats the market as of now and I am told that pre-selling these within a month of breaking ground is very realistic and that I could get as much as 2.3 million per house. We shall see!
Here's how I started. As I am new to the new construction game I hired a consultant to guide me on my journey . I interviewed 3 builders and 5 luxury real estate agents and their team. I was told to not use my usually agent as when doing luxury at this level, you want someone who specialized in selling high priced homes. Someone who has the clientele , know how, and team to get it done.
So I interviewed builders and got budgets from all three. One builder said he could do it for 180 sqft another quoted me at 225 a sqft. When I compared their budgets I began to feel a bit worried since thats a large discrepancy between the two. During my interviewing process, I visited projects these builders have done and are doing to get a feel and look at the quality of work they produce. Both builders have experience in luxury home and the one I am going with just finished a 16 unit project in the heart of covid, which is one of the main reasons I chose him. He will know supply issues and how to circumvent them (ordering wolf appliances the day I break ground because he knows they are a year out, Anderson windows, same deal, etc etc). But back to the budget discrepancy . The builder I chose has it at 1 million per house and the other is closer to 1.2....That said I am going to build in a contingency and put money aside just incase.
I am using hard money which makes this very risky, but I sold 3 of my 9 duplex's so that I could have a cash reserve of 400k to make sure I do not run into money issues. I also have a buyer lines up, who is willing to buy the land with permitted plans for 1.2 million which would give me a profit of 500k without doing anything. I lined up buyers as another contingency/ exit plan, incase the lending doesn't work out, or some unforeseen issue , where I need to unload the lots. So as backup I have some built in exit strategies.
Onto the steps I have had to take :
1. I had to first subdivide the lot from 4 1200 sqft lots into 2 2400 sqft lots
2. I hired an architect to build out the plans, submit zoning permits, do a structural survey of the land, and ultimate after getting zoning approved we just submitted the building plans. This is a process in itself. You want to make sure your architect knows the zoning laws in the area you are building, this is very important because, if my architects did not have the knowledge, I could have run into problems where zoning would not approve and I would need to wait months just to get variances IF I could even get them. So make sure your architect knows their zoning! As a matter of fact, my guys knew their zoning but they assumed I knew it too...The original plan was to build 4 homes on 4 1200 sqft lots, and the architect went along with this (assuming I knew I would need a variance since it did not meet the 1400sqft per lot requirement) BUT I DID NOT KNOW....this set me back another month because I had to pivot. It turns out it worked out for the better because with my original plan, I would not be able to get garages (which is a huge selling point in the city) After finding all this out, I had it subdivided for a second time into two 2400 sqft lots and looked up zoning laws where I saw that if I put a 5ft side yard on each side, it will be considered a detached home and not a row, which would allow for built in garage by right. This pivot ended up working out because instead of having to wait another 6-8 months for a variance to sell 4 homes at 800k each, I am now able to build two larger homes for just about the same price but am able to sell each for 2.2 to 2.5 million , so I went from a gross profit of 3.2 million to a gross profit of around 4.4 million with a lower building cost. 4 homes would have been approx 650k each to build for a total of 2.6 million where as two larger homes cost 1 million each to build, maybe 1.2 million, either way it ends up being less to build but almost close to the same amount of profit.
a. the architect gave me schematics of the build
b. we went over them in stages and made tweaks here and there until I was satisfied with the final schematic
2A) Got general liability insurance and preparing to get builders risk, but not paying for it until the building permit is approved
3. While all the was happening, once I got the preliminary plans I gave them to my builder so he could price it all out. I learned that builders or yourself have to give the plans to a supply house and they run whats called "take offs" on all the line items and give you estimated prices of what everything will cost (Wood for framing, windows, siding, and the list goes on)
4. After this was done my builder had a budget which my hard money lender wanted and I needed so I know how much I will need to get a loan for in order to build these homes. After careful consideration, since hard money is expensive and risky, I decided to build one house fully and one "under roof" which means exactly how it sounds, build just until the roof is on so outside elements cant get in. The plan is to pre-sell one then have the lender release the rest of the money needed to finsih the 2nd house
5. Now we are at today. I am waiting for the building permit and in the mean time I am working with my builder to make sure we get the budget as close as we can to the actual cost.
I purchased the land in February, but began the process in November, so its taken 6 months to get to where I am now (submitting for building permits) To be continued.....The permits should be approved in about a month from now and we will break ground.
Very bold. The topic of whether the real estate market will have a downturn is critical for you. Or materials costs should increase sharply again.
@Jay Hinrichs Thank you!
Post 2 May 19, 2022
11:17pm
I am getting close to the closing date for the loan. In order to close they want to see double the years interest in my bank account. Just a heads up for any other new builders, all lenders differ, but this one wants a "INTEREST RESERVES ACCOUNT"
I didn't know this and I am $50,000 short and we close at the end of may. Hmmmm Luckily you have to pivot just as much when flipping homes so I am pretty good at solving my problems and here's what I am doing. First I am postponing closing and using the same lender to do a cash-out refi or HELOC.
I own 5 duplex's that I bought and was all in for no more than 100k. Well One has no mortgage and another I owe 75k on. BUT it appraised for 275k. Its a little painful that I have to accept higher interest rate to get the $50,000 I need, but that's why I love multifamily homes, they cash flow AMAZING! So I can afford to take a hit of adding $200 to my loan payments. I am going to get a mortgage on the house without one (I am so stupid for waiting) that will give me $100k and I will have 50k more than I need. I am also going to cash-out refi the house I owe 75k on which should get me 175-75= another 100k. I want this cushion incase my budget ends up being a little higher than anticipated . I already calculated a 15% room for error into the budget, so now I have extra extra cushion for the pushin.
THATS ANOTHER GOOD RULE I LEARNED to add 15% to your builders budget to be ready for overages.
All of my duplex's positive cashflow around 1000-1300 a house, so that's good.. I love multifamily rentals and if housing prices were not so high right now, I may have been using my money to buy more rentals as opposed to building. HOWEVER....I couldn't pass up a great deal. 4 plots. of land at 720k with offers to buy it off me for 1 million right now. But see that's my exit plan.
Again for anyone new , you need to play it smart incase things go wrong. Lets say for some reason I cant come up with the 50k I need to close the loan, well I have to say, I think Im still doing alight with a profit of around 280k for doing nothing but learning the building process. I think I could get 1.2 Million for the lots, if someone offered me that I would take it. It would me a 60% return where as after I build I am looking at a 33% return. If someone offered me 1.2 million I would take it, and use it to buy some multifamily homes once they let foreclosures happen and there is a pool of cheap homes! Thats it for tonight friends, have a great week!
Thanks for the info. All good stuff and a pleasure to read.
your welcome, anytime! Thats why I am doing it, to help others gain the knowledge that I am learning @Richard Ware
Quote from @Douglas Gratz:
Hello fellow investors! I began a post a few months ago in regards to a new construction project I will be starting soon and after all the great input I thought it would be nice to start a journal in order to help new investors who plan to start new construction projects for their first time. Here's the down low in a nut shell.
I am building two SFH in Northern Liberties, this is a very sought out neighborhood in the city of Philadelphia. Minutes away from downtown and all major highways. Each home will be as follows: I bought the lots for 720k in total
1. On 2400sqft lots
2. 5800 sqft houses
3, 4 stories , garage parking, roof deck, elevator, and skyline views
Attached are the 3d Renderings of what I plan to build
Last week a home 4500 sqft just sold for 2.1 million dollars in one day. So thats the market as of now and I am told that pre-selling these within a month of breaking ground is very realistic and that I could get as much as 2.3 million per house. We shall see!
Here's how I started. As I am new to the new construction game I hired a consultant to guide me on my journey . I interviewed 3 builders and 5 luxury real estate agents and their team. I was told to not use my usually agent as when doing luxury at this level, you want someone who specialized in selling high priced homes. Someone who has the clientele , know how, and team to get it done.
So I interviewed builders and got budgets from all three. One builder said he could do it for 180 sqft another quoted me at 225 a sqft. When I compared their budgets I began to feel a bit worried since thats a large discrepancy between the two. During my interviewing process, I visited projects these builders have done and are doing to get a feel and look at the quality of work they produce. Both builders have experience in luxury home and the one I am going with just finished a 16 unit project in the heart of covid, which is one of the main reasons I chose him. He will know supply issues and how to circumvent them (ordering wolf appliances the day I break ground because he knows they are a year out, Anderson windows, same deal, etc etc). But back to the budget discrepancy . The builder I chose has it at 1 million per house and the other is closer to 1.2....That said I am going to build in a contingency and put money aside just incase.
I am using hard money which makes this very risky, but I sold 3 of my 9 duplex's so that I could have a cash reserve of 400k to make sure I do not run into money issues. I also have a buyer lines up, who is willing to buy the land with permitted plans for 1.2 million which would give me a profit of 500k without doing anything. I lined up buyers as another contingency/ exit plan, incase the lending doesn't work out, or some unforeseen issue , where I need to unload the lots. So as backup I have some built in exit strategies.
Onto the steps I have had to take :
1. I had to first subdivide the lot from 4 1200 sqft lots into 2 2400 sqft lots
2. I hired an architect to build out the plans, submit zoning permits, do a structural survey of the land, and ultimate after getting zoning approved we just submitted the building plans. This is a process in itself. You want to make sure your architect knows the zoning laws in the area you are building, this is very important because, if my architects did not have the knowledge, I could have run into problems where zoning would not approve and I would need to wait months just to get variances IF I could even get them. So make sure your architect knows their zoning! As a matter of fact, my guys knew their zoning but they assumed I knew it too...The original plan was to build 4 homes on 4 1200 sqft lots, and the architect went along with this (assuming I knew I would need a variance since it did not meet the 1400sqft per lot requirement) BUT I DID NOT KNOW....this set me back another month because I had to pivot. It turns out it worked out for the better because with my original plan, I would not be able to get garages (which is a huge selling point in the city) After finding all this out, I had it subdivided for a second time into two 2400 sqft lots and looked up zoning laws where I saw that if I put a 5ft side yard on each side, it will be considered a detached home and not a row, which would allow for built in garage by right. This pivot ended up working out because instead of having to wait another 6-8 months for a variance to sell 4 homes at 800k each, I am now able to build two larger homes for just about the same price but am able to sell each for 2.2 to 2.5 million , so I went from a gross profit of 3.2 million to a gross profit of around 4.4 million with a lower building cost. 4 homes would have been approx 650k each to build for a total of 2.6 million where as two larger homes cost 1 million each to build, maybe 1.2 million, either way it ends up being less to build but almost close to the same amount of profit.
a. the architect gave me schematics of the build
b. we went over them in stages and made tweaks here and there until I was satisfied with the final schematic
2A) Got general liability insurance and preparing to get builders risk, but not paying for it until the building permit is approved
3. While all the was happening, once I got the preliminary plans I gave them to my builder so he could price it all out. I learned that builders or yourself have to give the plans to a supply house and they run whats called "take offs" on all the line items and give you estimated prices of what everything will cost (Wood for framing, windows, siding, and the list goes on)
4. After this was done my builder had a budget which my hard money lender wanted and I needed so I know how much I will need to get a loan for in order to build these homes. After careful consideration, since hard money is expensive and risky, I decided to build one house fully and one "under roof" which means exactly how it sounds, build just until the roof is on so outside elements cant get in. The plan is to pre-sell one then have the lender release the rest of the money needed to finsih the 2nd house
5. Now we are at today. I am waiting for the building permit and in the mean time I am working with my builder to make sure we get the budget as close as we can to the actual cost.
I purchased the land in February, but began the process in November, so its taken 6 months to get to where I am now (submitting for building permits) To be continued.....The permits should be approved in about a month from now and we will break ground.
Does the 185/sqft and $225/sqft include all the finishes in the inside too like cabinetry, flooring, countertops so basically everything?
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2 things make me a little nervous about this -
1) You say you have $1,050,000 to build and that is your budget number? I've done what you're doing a 'few' times and never saw the budget number be the actual finish number. Never.
2) A lot of folks think with the incoming recession that RE prices will drop regardless of any other variables.
I wish you all the luck in the world, but you're running pretty tight here, my friend.....
@David P. not sure where you got 225/sqft but yes 185/sqft includes everything.
I figure prices would drop in a recession, my target goal which was achievable without a recession was sale price of 2.2 million dollars, I could still make out good even if that dropped 300-400k. What are your thoughts on how much prices will come. I am hoping that people who can afford houses this expensive, that the recession does not hurt them as much ....
I agree its running tight with an incoming recession but some supply items might drop in price as well, helping me stay within budget
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While it's true that people with big bucks are not in reality affected as much by a recession, I've found that they are even more sensitive to a bad economy in their minds....
Hey who knows, we could bypass the whole recession thing..... ?
June 17, 2022 8pm
I submitted my building permits in the beginning of March 2022 and I am HAPPY to share that one has been issued and approved! I am waiting on one more for the house right next to it.
In the beginning both home were going to be the same, but later I decided to give one home a larger master suit to allow for his and her closets and eliminated the double height living room that can be seen in the picture above. I thought it would be a good idea to have a second option because you never know who you might be catering to. In these 2 million dollar homes, there might be a member of the family wife or husband who has alot of clothes and would like their own HUGE walk in closet . The home I chose to do this with is the home that wont be on the Main Street so to attracted buyers, I wanted to throw in something special.
The permit for the 2nd house should be in , in about a week and I will be able to break ground! I suppose your asking why cant you break ground on the home you have the permit for. Well, and you have to look out for little things like this. The 2nd home is off a small st, almost an alley so it would be impossible to get material down that street. These homes are back to back , so we have to bring material through the Main Street and if I built that house first, then Id be in a sticky situation. So once we get that permit , its a GO! I am so excited!
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@Douglas Gratz That is good news, just move forward as quickly as possible....things are gonna get rough.
@Bruce Woodruff I think our definitions or how we feel about. words like rough, low risk, etc etc are on different spectrums. When things get hard I do not see them as getting rough. I have worry about the economy but I have been reading about my market and asking a lot of people on their thoughts on the impact of a recession will have on selling these homes, and the only thing I heard was builders build all the time during recession and the worst is that homes take longer to sell. I believe that to be true, but I also believe I have a leg up in that in this specific neighborhood, there is no more new construction builds and if you can afford a 2 million dollar home than I dont think a recession will hit the upper class as much as it would middle class. As a matter of fact , my demographic usually make money (investments like stock, shorting them , going long, whatever it might be) but I see my demographic making money in both a good and bad economy. I would not say that I am wealthy , but with the disposable income I do have, I made 100k shorting the cruise lines , specifically Royal Caribbean . This took 12 days on a 6/17 expiration $50 put when the stock was at $58 I also see many companies being over sold which is more opportunities , so the way I see it and maybe I am wrong, but if you can afford what I am about to build, then a recession probably wont break these guys
June 18, 2022 2:26pm
Once the second permit is approved, aside from breaking ground , another important step is to file for tax abatements. Unfortunately I missed the deadline for a 10 year tax abatement, which for those who do not know, this adds value , in that the buyer of the home will save 100k (if taxes are 1k a year) This increases the value of the home. I am able to get a 5 year tax abatement, but that is one of the next steps to take. I should note that I hired an architect firm for a premium who takes care of all the permit and tax abatement filings. I could have spent 20k less and have done it myself, but this was during covid so I wanted to decrease my chances of getting it, so I decided to stay in as much as I could and have them take care of it all. On top of that, I did not want to miss anything , being this is my first new construction, I wanted to make sure everything was done perfectly. I had helped another investor friend of mine, so I am familiar with the process here in Philadelphia, so I could have done it myself.
However, my immune system is compromised as I had stage 3B Melanoma, diagnosed in 2017, so I just passed the 5 year mark in remission, but the treatments unfortunately put me at high risk of getting covid and having it be more dangerous for me than someone who has a better working immune system. Talk about life changing :(. I was 30 at the time, and at that age you feel invincible , but when I was diagnosed, I faced reality, I am not invincible , it was really scary. BUT I PUSHED ON! Not knowing if it would come back or not along with the expensive treatments, I had to really grind to afford them and so I did. Went into full overdrive, working harder than I have ever worked before! I started REI back in 2014. By 2017 I had 6 duplex's (12 doors) between 2017 and now, I have bought and held 20 more duplex's and over 10 fix and flips. I did not know if it would come back so I wanted to make sure I had my kids taken care of, talk about motivation! All is good now and onto bigger and better things. Once I successfully build these I plan to build large apartment complex's and dabble in self storage and other low maintenance REI, parking garages, mobile home parks, sky is the limit baby!
The lots are all flagged out meaning all the lot boundaries are marked, public water and sewer is marked, along with gas lines, and its time to break ground!
First, well done sir. Both of taking on this adventure and 2nd for documenting it. Not sure if this is possible but you might considering hedging. By that I mean sell one of the lots and build the other. I am building a house on a property, we are installing floors this week. I learned sooo much ie I did soooo much wrong lol. If you can lock in good profits on the lots I would try to do it on one. You will probably be glad you did, but also be thankful for what you learned through the process. Having a smaller "project" is probably better the first time. That said, that is purely from a risk standpoint. If your anything like me you are probably a college dropout and this is truly learning on the job or MBA on the job training as I like to call it. Good luck. The one thing I wish I spent more time on in the design phase which you might be able to benfit from was value engineering \ simplification. For example, my project is a large high end "farm house" style. The metal roof has soooo many angles and dormers and corners etc. It didn't bother me but I also did love it. Now that I found out how hard ( how expensive and slow) it is to install I would have gone with something more simple. Architects do things with a pencil GC use hammers, ask the GC what he would change to make the house faster and cheaper to build. My GC isn't great so I probably would have need to ask the roofer and framers etc but you get the putting. Please keep posting. I love hearing what you are doing. I'm not too far away, just in north jersey maybe I can swing by for a tour once you start building. Good luck
-Chris
Quote from @Chris Turek:
First, well done sir. Both of taking on this adventure and 2nd for documenting it. Not sure if this is possible but you might considering hedging. By that I mean sell one of the lots and build the other. I am building a house on a property, we are installing floors this week. I learned sooo much ie I did soooo much wrong lol. If you can lock in good profits on the lots I would try to do it on one. You will probably be glad you did, but also be thankful for what you learned through the process. Having a smaller "project" is probably better the first time. That said, that is purely from a risk standpoint. If your anything like me you are probably a college dropout and this is truly learning on the job or MBA on the job training as I like to call it. Good luck. The one thing I wish I spent more time on in the design phase which you might be able to benfit from was value engineering \ simplification. For example, my project is a large high end "farm house" style. The metal roof has soooo many angles and dormers and corners etc. It didn't bother me but I also did love it. Now that I found out how hard ( how expensive and slow) it is to install I would have gone with something more simple. Architects do things with a pencil GC use hammers, ask the GC what he would change to make the house faster and cheaper to build. My GC isn't great so I probably would have need to ask the roofer and framers etc but you get the putting. Please keep posting. I love hearing what you are doing. I'm not too far away, just in north jersey maybe I can swing by for a tour once you start building. Good luck
-Chris
7/22-8/9/2022
THINGS GOT TOUGH! BUT IT WORKED OUT
I Have not posted recently on here because I have been not stop trying to fix a big problem, my original funding fell thru on 7/22/2022. I realized at this point , after going to other lenders, that with no new constructions experience, rising rates, and economic uncertainty , I was not going to get a loan on my own. So I have been working with my loan officer, who frankly, got me into this mess, and he found a bank and I stress the word BANK because before I was using hard money lenders. He found a bank who wants a presence in Philadelphia and really likes the project, so he got me the loan at 6%! Much lower than the 10%, and that really adds up. So GREAT NEWS , but I still needed that partner. I told myself I would not give up and sell the land unless I tried everything I could. I reached out to family and friends . Last but not least I said to my builder "why dont you just come in with me, put up the money we need to close on the loan and we can split it 70/30 my way. Mind you this verbal commitment was just made yesterday on 8/8/2022, lawyers are drawing things up now, but from 7/22/2022 It was a grind, not just as work, a mental grind to keep trying. I would still make out okay flipping the land, in fact it would be my best flip to date , but I really wanted to build this. So now I wait yet again......and are these waits (underwriting, permits, plans) new construction takes a lot just to get off the ground. And I am sure there will be a whole new set of problems to solve, mainly trying to do it under budget. Until next time.....We are almost there, hope to break ground within 3-4 weeks, I will keep you posted. Have a great day friends!
@Chris Turek Congrats on starting your I hope it yields what you put in. However I graduated Summa Cum Laude 4.0 GPA from La Salle University, Granted it was not one of the harder schools. But still in new construction I am just starting college lol.....That is a good idea to value Egineer. I had done that with one of the builders I almost hired. I should get me and my builder and new partner together and do that because our siding is so expensive . And from an easy stand point, thats something good to thing about too, THANKS! I am grateful....Spending to much time , if that can be avoided with a simpler X....This will be hard though, I am building Luxury homes with an ARV of 2.2 Million Dollars. So I can only value Egineer what works and thanks to you I am going to find all that out tomorrow. I will look for your journal. Where are you from?
8/28/2022
Update:
I got the JV agreement from the builders Lawyer. I gave it to my lawyer to look over and hope to have his revisions (since there are always things that should be more in my favor or vice versa depending on who's lawyer draws it up) I hope to have it tomorrow. My lawyer is also adding him to my LLC to keep thing simple. I will let you guys know soon! Keep ya posted
@Douglas Gratz Thanks for posting the updates. There are quite a few posts about newbies talking about diving into new construction on BP. I think your series of posts and updates will help people understand the time and budget difficulties that can come with new construction, especially if it involves land development.
It seems than many real estate investors assume if they've done a few fix-n-flips or BRRRs that involved paint and carpet, they are ready to dive into new construction. New construction is 10x more complicated than light rehabs and land development is about 100x more complicated.
@Mike Smith Yourwelcome everyone , I am doing this journal more so for everyone else to see what I have gone thru to get this done and if I succeed or not. There are many on this site that think I will fail and I really cant wait until the final entry of this journal and show them! (hopefully lol)
It absolutely is harder. It comes down to how well you can make a solid budget, find a good builder (I would not be building this if I had to find the subs, im not ready for that) making sure you account for any problems that might occur and make sure you have extra money if they do and that the numbers work in all the scenarios you can think of....It also comes down to you ability to manage and ability to do things in general which I am confident I have the ability just based off my life experiences when it comes to doing new things . Making sure I've asked all the right questions, read what I need to learn about, etc etc....
Who knows, maybe this flippers do have the ability, you wont know unless you try. I wouldn't just do any new construction though , this piece of land, it will be hard to lose money on. or at least lose a significant amount which is why I feel comfortable doing it (along with the team I put together, my builder is now an investor so that makes me more comfortable as well) But you do have to dive in somewhere or how else will people like me get into new construction?
However I agree, a few fix and flips or bRRRS is to little experience . I have done over 30 flips, most have been full gut jobs with a ton of re-framing, floor additions, basement digging. I think my biggest difficulty will be in doing some value engineering , because the architects chose a really expensive siding.
As of now, the holiday is holding me up, but hope to break ground by next Friday. It has been really difficult so far and it has not even started. Having to change the schematics a bunch of times and with that changing the subdivision twice to avoid needing variances that would take 6-8 months and cost alot in money lost in interest. Rates going up which made me had to find a new lender . That worked out for the better because instead of hard money for the construction, I got a bank at 6% instead of 11% and 3 points.
I will keep everyone posted!