How to start constructing new homes for profit

Question

Hello,I have fixed & flipped properties but looking into doing new construction & selling for profit. Any tips or advice? What’s the best way to secure financing? & where to get questions answered as challenges arise?peace & blessings!

Joe Almeida · Answer

I've done both new construction and fix & flip.  I enjoyed and appreciated new construction the most, but probably more risk due to the time it takes to build.  Cost of materials is critical but that affects both types of projects.  Doing a new construction building schedule I found to be easier.  Not very many surprises vs renovations.  I used to use conventional new construction financing but later switched to private money lenders - a lot less aggravation.  The biggest problem I had with new construction was pre-selling the property before it was completed.  Buyers always wanted to make changes and this inevitably delayed the project.  Many of my clients agree and no longer sell a house until completed.  Good luck and have fun!

Mike Smith · Answer

I think your best bet would be to get a job working in the new construction industry.  Building new homes is complicated enough, it's not something that anyone can even you get you started on.  I would recommend reading everything by Charles Shinn (shinnconsulting.com) and looking at recommended reading at from SMA Consulting (https://smaconsulting.net/).

The problem with only reading books, is they can't explain the nuanced situations that always arise.

It would be similar to trying to learn golf by just reading books about how to play golf.  You almost have to start swinging a club to understand what's being discussed, but new construction will bankrupt you if you make very many mistakes.  So just diving in headfirst is not recommended....

J Scott · Answer

This might help:

https://www.biggerpockets.com/...

Rehaan Khan · Answer

Thank you, I appreciate your input.

Nick Gill · Answer

I admire your enthusiasm but as others have said be vary careful under present circumstances. Material costs are changing rapidly and finding good workers is difficult. Make sure you do your due diligence before you start. That being said Good luck!

Rehaan Khan · Answer

Yes, I definately agree its complicated but it's do-able if you understand the basics. I come from a civil-engineering family & saw first hand how houses are built fairly quickly if the project is managed properly. I'm hoping to do the same in the near future.

Rehaan Khan · Answer

Thank you Scott! I've listened to your audio books & loved your tips on negotiation. Keep up the good work!

Rehaan Khan · Answer

The numbers are tight but I believe its do-able if the project is managed right. I prefer to manage projects myself closely & negotiate reasonable prices with my contractors and labourers. New contruction seems risky but I've heard from builders they can be easier than fix & flips because the process is straight forward once the research is complete. In my market it makes more sense to build houses worth at least $400k since its hard to compete with larger firms building smaller houses in dozens.

Malcomb Stapel · Answer

Are the numbers still making sense in your area? With the price and sometimes unavailability of construction materials, plus rising mortgage rates, I would think that new construction would be a risky proposition. What cost segment are you looking at building in?

How to start constructing new homes for profit

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