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Douglas Gratz
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My New Construction Journal From Start To Finish

Douglas Gratz
  • Rental Property Investor
  • Philadelphia, PA
Posted Apr 30 2022, 00:45

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.

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Douglas Gratz
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  • Philadelphia, PA
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Douglas Gratz
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  • Philadelphia, PA
Replied Nov 7 2022, 16:44

11/7/22

I totally got side tracked...When I logged on I wanted to just say, waiting is the absolute worst when you have been waiting for a year from lending company to lending company. For those of you who are new, when getting a loan , you a loan officer who collects ALOT of information on you. In the case of new construction I have found they really care about experience. The only spot where I lacked and would have had all companies say no, which is why I brought my builder on as a partner. Other than experience you have budget, tax returns, bank statements, IDs, personal financial statement, proof of everything on your personal financial statement, real estate schedule, social, they run your credit WHICH I LEARNED A TRICK from one of the lenders I dealt with...

Having hard credit pulls is no good for your credit or for getting loans, having a lot of hard pulls in a short period sends a bad signs to banks. Here is the work around, tell them you will do your own soft pull, if underwriting approves using it, then they can do the hard pull and if it all matches up you are good to go. If you do it the other way around like I did until I learned this, you will get hard pulls which brought down my credit just later to get rejected by the underwriters.

Anyway once it gets to the underwriter stage , you wait and at his point OMG is it tough, time is running out so I cant wait too much longer.  Luckily I am dealing with a non-bank to which they look at a-lot of different things and have said based on my hard credit pull, its just formality from here, but I have heard that before so waiting = NERVE WRECKING...only because of how many times I had to wait this year, normally its not that bad. They said 3 weeks today and we should be at closing if approved so even though I am leaning toward selling, its not final. 

Tomorrows election will play a large role in my decision.....To be continued

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Douglas Gratz
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Douglas Gratz
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  • Philadelphia, PA
Replied Nov 7 2022, 17:21
Quote from @Bruce Woodruff:
Quote from @Douglas Gratz:

What do you think @Bruce Woodruff you have always been brutally honest. If I sell know I think I could make 200k?


I may not be the best person to ask this of, but at least you know I will not blow smoke up your skirt.

You mention taking a 'low number loss' just to get exposure and experience. I would say no. You can get both of those other ways and keep your money. Unless you have real deep pockets and the loss literally means nothing to you, but even then it sets a bad precedent in your mindset.

If this deal isn't going to work, just suck it up and move on...there will be others. It isn't just losing the money you should consider here, you are losing time (which is of ultimate value, and not replaceable) and putting yourself under a great deal of stress. None of us need that in our lives......

Just my .02, but best wished in whatever you decide.

PS - Next project, start smaller and let some of us run your numbers up front for you :-)


The chance of taking a loss is extremely low. And yes I know of opportunity cost, one of the few things I remember from school lol, but one of the good things in REI is that its not extremely hard to focus on more than one project at a time. A no my pockets are not that deep, I sold my home for the downpayment of the lots and two rentals to cover interest on the loan for the lots. So thats where my real loss with come from, if I do not move forward and sell, id just have to use the proceeds to rebuy a few rentals and wait a bit to buy my own house. To sell would mean I had regressed , not that I cant come back easy from it, just would suck due to such a waste of time and energy and hope.

You know what, why is it so hard for me to follow logic. The wise move is obvious (selling) , emotions and attachment are a powerful thing. Its one reason I really like Buddhist Philosphy, takes a-lot of practice though. I am attached to how much work I put into it and afraid to say I failed. Pride, I have been talking about this project to all my friends and family for ever, guess its not that bad to just say that it ended up not working out because of uncontrollable economic forces...

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Caroline Gerardo
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Caroline Gerardo
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Replied Nov 7 2022, 20:08

Bad loans closed on inflated valuations in 2021 and 2022 same as 2006/7. Lenders hurried and sloppy, we are seeing the forbearance people limping along not making full payments. Gigs do not sustain a mortgage based on valuations and income from 2020 2021. When you are in a down turn no one tells you to hold on tight to the life raft, they get their seat and one for wife.

Philadelphia sees price cuts with very little homes coming on the market. Philadelphia I know the politics there and they are the same as 2008. Today 1 million people laid off in mortgage and vendors since February 2022. 

The buyer I described a while back: a Doctor age 40, their  income is squeezed by insurance and the market and paying 7 % or more to buy seems not palatable. 

If you learned a big chunk then consider that the cost of a MBA at a mid level school costs $140000 an Ivy $300000 DO NOT BEAT YOURSELF UP

Be of good cheer and make your bed like Admiral William McRaven says (I'm Navy) so go look his speech up it will give you the kick you need.

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Mike Smith
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Mike Smith
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Replied Nov 10 2022, 13:06

@Douglas Gratz You didn't ask me, but I would strongly recommend selling the lots even if it means absorbing a small loss.  I just received notices from both of our main concrete suppliers indicating a cost increase of $12 per yard.  The cost increases aren't stopping, but the demand is slowing dramatically, which will ultimately affect retail sales price.

I should have warned you about dealing with banks.  We used private money when we first started.  We switched to a guidance line with a large bank.  They wanted so much paperwork and took so long to process it (6 months, when we had perfect books and great ratios/credit scores/etc).  They finally called to congratulate me that the line was approved and they were ready to disburse funds on the first two homes on our application.  I informed the loan officer that those homes had been occupied by the new owners for over a month and we weren't going to pay any points/fees on those homes.  He was pissed!!

Yes, we were able to draw plans, submit for permits, build the home home and have buyers move in for over a month in the amount of time it took the bank to process our application.  Keep in mind, we were building 20+ homes per year at that point and had been for years.  We were not inexperienced or having problems sending them a cost breakdown.

Many commercial bankers don't like to say no, so they will stall you to the point that you just go away.  This may be happening to you on some of your deals.

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Douglas Gratz
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Douglas Gratz
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  • Philadelphia, PA
Replied Nov 10 2022, 19:03

@Caroline Gerardo "Bad loans closed on inflated valuations in 2021 and 2022 same as 2006/7. Lenders hurried and sloppy"

you really think so? Getting loans ever since 2008 has been the strictest thing I have ever seen. When my finances were almost perfect in 2017 I still had to have a co-signer to meet the debt/income ratio....Maybe private lenders were giving out sloppy loans but you would know more, it says lender next to your name lol....

I haven't seen price cuts or a slowdown in northern liberties at all. Homes are still selling within a month. 10/27 a house sold the day it was listed for 1.4M, I feel it is insulated from the macro environment to an extent given the high desire to live there and limited supply of homes .

I see your point though and agree .

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Douglas Gratz
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Douglas Gratz
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  • Philadelphia, PA
Replied Nov 10 2022, 19:16

@Mike Smith @Bruce Woodruff

If you had a choice to build now or hold, would you both hold for a better time, maybe a year from now?  I think I am able to refi these lots out of the hard money lenders' hands and into a regular mortgage.  If I did this, this is what it would look like

1. Current loan 499k 10%, expires jan 31

2. I am able to refi and actually get 100k out of it , however same % but can use the 100k to pay the interest since when I Do build and sell, it'll just end up making 60k less

3. at the same time  I have to free and clear rentals I want to finance and refi when rates go down

With number three I would gain 174k

4. I close on a flip in two weeks and will make 115k

5. My partner will be putting up his 200k contribution

6. use 11k of my 100k credit line

So here is what I am thinking, refi the land. If I add up all the above numbers that's 600k. I pay off the land loan and own it free and clear. Both lots together with homes on it have been appraised at 2M each, without homes 1.1M...So if I own them free and clear I will have 1.1M in equity to which I could do a lot from getting a LOC to buy rentals to doing nothing. My net worth will rise significantly and when the time is right I build, what do you think about that plan/scenario ? If I can achieve this, would you say its better to hold then to sell the lots?

So build or hold? I ran comps today, homes in Northern Liberties where my lots are, are only on the market 15 days or less, one sold for 1.4M the day it was listed. This area has no land left or supply of empty homes, I believe this dynamic helps in stay insulated to a point from the overall market. The obvious answer seems to be "hold" to much uncertainty now, but at the same time, a year from now, we could be out of the woods or things since they arent that bad yet, could get bad then....

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Replied Nov 11 2022, 05:59

Nice thanks for sharing

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Caroline Gerardo
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Caroline Gerardo
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Replied Nov 11 2022, 06:34

Philadelphia has more for rent signs than in five years, price cuts on 80% of listings. Philadelphia does not have tech jobs or an attraction that brings high paying employment.

NonQM loans closed with a bank statement 2020-2021 for income and many of those NonQM lenders filed bankruptcy in the past four months.

Prices in most parts of the US ballooned up 25% and in some markets 60% during covid. People closed sales on properties where the appraisal was short and they made the difference in cash which became the tract new high normal price (inflated).

People scrambled to refinance to 2.75 with online call center lenders often the work all done overseas and sloppy. 

6 million people got forbearance, then a modification with big lump sum added on to the loan. Some are limping along making payments now, some thinking about selling into the wind.

Our economy is in poor condition. About a million layoffs in mortgage, real estate, and vendors in four months.

It will come back in a year or two. 

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Bruce Woodruff
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Bruce Woodruff
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Replied Nov 11 2022, 06:53

@Douglas Gratz If you want my opinion, I will keep it simple - don't build now, wait. These time are too turbulent and I see no advantage to rush into this since it's taken you so long to get going anyway.....

Just my .02.....

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Douglas Gratz
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Douglas Gratz
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Replied Nov 11 2022, 12:38

@Bruce Woodruff Quick question, what are some good metrics to use to attempt to get a good idea what things might look like 6 months from now? I want to do some research, but I am not sure what to use as my basis for my predictions.

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Douglas Gratz
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Douglas Gratz
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Replied Nov 11 2022, 12:40
Quote from @Caroline Gerardo:

Philadelphia has more for rent signs than in five years, price cuts on 80% of listings. Philadelphia does not have tech jobs or an attraction that brings high paying employment.

NonQM loans closed with a bank statement 2020-2021 for income and many of those NonQM lenders filed bankruptcy in the past four months.

Prices in most parts of the US ballooned up 25% and in some markets 60% during covid. People closed sales on properties where the appraisal was short and they made the difference in cash which became the tract new high normal price (inflated).

People scrambled to refinance to 2.75 with online call center lenders often the work all done overseas and sloppy. 

6 million people got forbearance, then a modification with big lump sum added on to the loan. Some are limping along making payments now, some thinking about selling into the wind.

Our economy is in poor condition. About a million layoffs in mortgage, real estate, and vendors in four months.

It will come back in a year or two. 

 You are probably right. Had I start building 6 months ago I would be in good position. I just ran some comps and homes in Northern Liberties are still selling above market price in under 30 days, most under 15....A home for 1.4M sold the same day it was listed 10/27/22...I suppose people trying to lock in the 8% rate we are at now... You also might have a good idea, what metrics can I start looking at to try and get a grasp on what things might look like 6 months to a year from now aside from what you have already mentioned?

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Bruce Woodruff
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Replied Nov 11 2022, 17:26
Quote from @Douglas Gratz:

@Bruce Woodruff Quick question, what are some good metrics to use to attempt to get a good idea what things might look like 6 months from now? I want to do some research, but I am not sure what to use as my basis for my predictions.


 Lol....this site is as good a tool as any. Mainly I would just use my own common sense and knowledge of past history....

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Jay Hinrichs#1 All Forums Contributor
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Jay Hinrichs#1 All Forums Contributor
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Replied Nov 11 2022, 18:55
Quote from @Douglas Gratz:
Quote from @Caroline Gerardo:

Philadelphia has more for rent signs than in five years, price cuts on 80% of listings. Philadelphia does not have tech jobs or an attraction that brings high paying employment.

NonQM loans closed with a bank statement 2020-2021 for income and many of those NonQM lenders filed bankruptcy in the past four months.

Prices in most parts of the US ballooned up 25% and in some markets 60% during covid. People closed sales on properties where the appraisal was short and they made the difference in cash which became the tract new high normal price (inflated).

People scrambled to refinance to 2.75 with online call center lenders often the work all done overseas and sloppy. 

6 million people got forbearance, then a modification with big lump sum added on to the loan. Some are limping along making payments now, some thinking about selling into the wind.

Our economy is in poor condition. About a million layoffs in mortgage, real estate, and vendors in four months.

It will come back in a year or two. 

 You are probably right. Had I start building 6 months ago I would be in good position. I just ran some comps and homes in Northern Liberties are still selling above market price in under 30 days, most under 15....A home for 1.4M sold the same day it was listed 10/27/22...I suppose people trying to lock in the 8% rate we are at now... You also might have a good idea, what metrics can I start looking at to try and get a grasp on what things might look like 6 months to a year from now aside from what you have already mentioned?


keep in mind builders may be doing rate buy downs to entice these buyers I know we are going to do that.

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Caroline Gerardo
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Caroline Gerardo
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Replied Nov 12 2022, 14:11

Jumbo rates declined greatly after the election. Have buyers look at 10 year interest only loan with no points, plan to refinance when something really crazy makes rates come down in the future. With perfect FICO they can get to 5.5 with 25% down APR 5.772 but no idea what rates will be when you are complete. Do not worry about rates. Things we cannot control are not a real weight.

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Douglas Gratz
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Douglas Gratz
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Replied Nov 18 2022, 20:26

11/18/22

So it seems I have received a blessing in disguise and proof that everything happens for a reason. Had my first construction loan closed, my home would be finished in April, or May of next year and most likely in the middle of bad times. As you can see from this journal, things have been changing constantly due to the difficulty of getting the construction loan, so for being all over the place, one day I am close to closing and the next I am not , one day I am doing this and then I am doing that, for that I apologize, I am just updating and writing as the changes occur

I still feel like I have a leg up being that the demographic I am catering to could afford 25% down for a jumbo loan to keep their rate down like @Caroline Gerardo pointed out; however, I am not putting much stake in that. To me, it seems best to wait out the storm, and if I am lucky enough, and I believe I did hit such luck, I am able to refinance the current land loan out of hard money to avoid an expiration date or paying fees to extend it, which is allowing me to hold and wait.

With the current refi plan in place, closing in 14 days, (current loan 499k) the refi is giving me 625k after LTV so I will end up with around 100k in my pocket which I will use to pay the interest for the next 6 months to a year so I can get a better idea of what the economy is going to look like in the future before I start the build. On top of that, now that I am not getting a construction loan, I am able to refi rentals if I so choose. Not something I would do at these rates since I am locked in at 3.5%, but the option is always there.

The opportunity cost may be worth the 8-10% interest refi on two rentals. I would get 175k that I could use on some no-doc loans and purchase 2-3 more duplexes, in which case the 10% rate wouldn't be so bad, and then refi again when rates go down in a few years. 

I am not completely sure where I am going just yet, but I do feel better. There is one scenario I am planning for that I really like and it goes like this:

1. refi land loan +100k

2. refi two rentals +175k

3. Have my partner contribute +200k

4. see if my father would like to invest to make up that +150 I am short

This leaves me about 150k short of being able to own the land outright which is worth approx $1,000,000. If I can achieve this, I could use that equity to get a large LOC to use for even more rentals....This is just one of many scenarios in my head.

This is why I love real estate! OPTIONS! If you want to be a good investor or good at anything, you need to become an amazing problem solver and use these skills to figure out ways to pivot. So far this has been a wild ride, to say the least. But as of now, I do not think I am going to take up my lender on the construction loan, and wow does it feel like the world is off my shoulders and I have breathing room and peace of mind I have not had in a while.

Either way, so far it has been difficult like @Bruce Woodruff and @Mike Smith  @Jay Hinrichs @Eric James @Jay Pateland anyone else I am leaving out had said it would be and I have not even started the build. I feel I have gotten all the hard leg work out of the way through, getting the construction loan with no experience has been the hardest piece of this puzzle thus far, but whether I take this lender up on his loan now or later, at least I now know that I will be able to get it when the time comes.

It's been hard, but it's also been fun. The amount I have learned so far, you can't put a price on and I am so grateful. I might not be building just yet, but I feel that I have figured out how to do many difficult things/processes of the new construction process. Most importantly I am grateful for BP and all the people that have been following and commenting on this forum post. It's cool to see people rooting for you (me) on, this is a very good community and I am glad I started this journal. I have received a lot of private messages thanking me for it and I hope to keep the journal going and help as many people as I can in their journey by reading this journal and seeing what I have been doing to get where I am. As I continue writing in this journal, I don't hope to make mistakes, but if I do, I can't wait to write about it so the next person can avoid it.

To everyone reading this, I promise I won't leave anything out due to shame or fear, I am going to keep keeping it 100. Thanks for the support everyone.....Until the next update, have a good thanksgiving, and feel free to message me with any questions about anything you feel that I can give some insight on. The biggest thing and most important is to plan for all scenarios so that if you have to pivot, you are ready and not wasting time figuring out because you have already figured it out that if plan A doesn't work, move to plan B, then to C and so on. Preparation especially when taking on something you have not done before is of the utmost importance and has been key in helping me stay ahead and keeping me alive in the game sort of speak. All that said I WILL SUCCEED MARK MY WORDS! it is just a matter of time. I was hoping for sooner rather than later, but there are forces out of all of our control, so you need to just roll with it.

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Caroline Gerardo
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Caroline Gerardo
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Replied Nov 19 2022, 06:58

Give this storm a year and swim out with the rip tide, it will pass. New commercial- a Whole Foods, some restaurants and services will pop up and revitalize Northern Liberties by next year. Pick up the pennies on the ground with your left hand and smile, you have luck and love in your life. Check out every construction book at Parkway Central and study. Keep your day job and find a cash gig. Keep those 3.5 rate loans and get seconds if you have to.

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Bruce Woodruff
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Bruce Woodruff
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Replied Nov 19 2022, 07:21

I'm not sure I like you getting high interest loans just to hold and sit on this. But it sounds like you have options and will hopefully recoup some of that money. You sure are not a quitter! But that's not always a good thing as I've learned myself :-) 

We wish you luck!

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Mike Smith
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Mike Smith
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Replied Dec 1 2022, 07:50

@Douglas Gratz As always, I appreciate your open and honest journaling about this entire process.  However, your statement of "
getting the construction loan with no experience has been the hardest piece of this puzzle thus far" couldn't be more true.

At this point you simply don't know what you don't know.

Building this complex of a home in an urban environment will be 20x harder than getting the financing was.  Just to get you prepared.

Before you started, I imagine your timeline for getting a construction loan was:

1. Walk into bank and talk to commercial loan officer.  One hour.

2. Fill out application. Two hours.

3. Receive approval.  Two weeks.

It's now been seven months of blood, sweat and tears. Congrats to you for having the fighting spirit to get to the goal line.

 Unfortunately, I feel building the home is going to have similar amounts of vast underestimation of time and effort.  And, your financing didn't large costs involved.  If you go over by 50% on financing points it costs you $20,000 less profit.  If you go over by 50% on build costs, you will lose $400,000 on this deal.

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Bruce Woodruff
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Bruce Woodruff
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Replied Dec 1 2022, 08:01
Quote from @Mike Smith:

Unfortunately, I feel building the home is going to have similar amounts of vast underestimation of time and effort.  And, your financing didn't large costs involved.  If you go over by 50% on financing points it costs you $20,000 less profit.  If you go over by 50% on build costs, you will lose $400,000 on this deal.

This has been my concern as well. His budget is suspect to begin with and in these crazy economic times, the rules are all changed. Most people don't realize how a few little oooopses here and there can add up...so quickly. 

$30k here, $50k there and next thing you know you're upside down....


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Douglas Gratz
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Douglas Gratz
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Replied Dec 6 2022, 20:24

Dec 6, 2022

I received the closing HUD on the REFI of the land out of the hard money. I cash out 125k which I plan to use on the interest and 30k on a downpayment on a triplex. The whole point of the refi was to get more time to figure out which direction to take it. Right now the plan is to wait, revisit the consruction set, see if we can get the budget down. While doing that, keep an eye on material and home prices. If in 2-3 months we start to see a drop in material prices, and a trend that it will continue, the plan will be to build 6-8 months out. I am also going ot be keeping an eye on interest rates. I hope to see them level out, but if they keep rising fast, then 6 months from now my loan will go from 11-12% to 14, if I see that, we may start the build alot sooner. My proforma factored in 12% so there will be no point to wait and build if material is not going down much. But either way in the mean time, I am going to try to find a cheaper but still luxurious siding since right now thats the largest line item in price 180k. Right now the plan has PAC-CLAD ACM PANEL all over, which I think is overkill, the facade definitely, its beautiful, but I think the architect used way to much. So I hope to find something the will go well with the PAC-CLAD ACM PANEL that will be on the facade. The plan also calls for like 5 wet bars, there are places in the house they dont need to be, also the spot designated for the kids beds has 2 bathrooms, I dont see why its cant be one shared by two doors...Things like that are what me and my builder are going to try and change to get the budget down, raise money to not have to take that large of a loan out, maybe sell 2 rentals since I dont want to give much equity away,,,,These are all pieces of the puzzle I am working to figure out. Keep you guys posted, but in a nutshell plan is Refi, cut budget, wait to see where rates and materials are going, raise capital, and revisit when to build. Having hte luxury of time has taken a huge weight off my shoulders (dont use hard money unless your plan is clear and ready to go or you have a plan to refi out of it)

until next time!

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Douglas Gratz
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Douglas Gratz
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Replied Dec 6 2022, 20:40

@Mike Smith I hear ya, and I hope having my builder as a partner takes away the factor of I dont know what I dont know and he picks up where I need him to. He was not a partner in the beginning, so its a little different now. and yeah, going over the budget is one of my main concerns and reasons aside from not have a loan closed, well lets say the reason I want to wait, and thankfully now have the ability to do. At the budget of $1,144,000 and sale target of 2.2M theres some room there. I have factored in 15% above that budget number, but not 50% . But the take offs were done when prices were at their highest, going over seems to happen, which is another reason we are going to work on getting the budget down.

What do you mean by this exactly "I feel building the home is going to have similar amounts of vast underestimation"?

And @Bruce Woodruff your right about that, you need to know when to quit bc its not always good to keep going, when if that day comes, ill sell the land, depending on the "when" holding costs and all will decide how much profit I make from it. The way I see it, if i quit, worst case I have to sell them what I bought them for and I am out all my soft costs, I can recover from that...I still have offers for over 900k and they havnt waivered, if they havnt waiver now, I think they will be there if the time comes. Theres larger people who can get this done 15% cheaper for whatever reason (volume, stock pile of supplies, etc etc) and the interest on the refi is 2% more. If I wasnt getting a cash out of 125K I wouldnt be doing it, since Im using that money to pay the interest for at most a year and change , though gas prices are back down, china is coming out of lock down, time to wait for the supply chain to recover.

@Caroline Gerardo whats Parkway Central? and I dont have a day job, but ever since I hired a property manager to devote my time to this, I have too much time , so I actually have been applying for jobs, but theres a reason I dont have a day job, I am a felon, just about makes my degree useless :/ but I am humble, I might not be able to get the 60-80k salary job and might have to take a lower level job, Ive never had a job job like that, so I think it will be a fun experience, have co workers, work friends, maybe find a good woman. Everything happens for a reason, who knows i dont get out much, maybe I will meet my future wife at this job I am looking for :)

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Douglas Gratz
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Douglas Gratz
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Replied Dec 6 2022, 21:00

@Bruce Woodruff forgive me the refi is 1% more, one point in and out.

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Bruce Woodruff
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Bruce Woodruff
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Replied Dec 7 2022, 06:51

@Douglas GratzWell my friend, you have a good attitude! That will get you farther than money. Lots of miserable rich people out there.....

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Caroline Gerardo
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Caroline Gerardo
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Replied Dec 7 2022, 06:58

Parkway Central is a big library. 

Find job in the arena of happiness.

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Douglas Gratz
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Douglas Gratz
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Replied Dec 8 2022, 13:36

@Bruce Woodruff well thats because money only takes away one stressor of life, bills, might allow to buy things that make you happy for a week, but its not sustainable....Question, do you know of any comparable sidings to plac clad acm panel that is cheaper in price but looks just as good and just as durable?