How is your new construction going?

[Johnathan Trimble]

I have really been wanting to get into new construction. At this point I have flipped around 20 houses and Brrr'd several more. I always hear such mixed things about new construction (same with flipping too though). I would love to hear from some recent smaller builders how things have gone for them and what to expect with tariffs and that affecting price of construction for new build? 

I had a piece of land under contract to build 3 affordable homes on ($275-325k in my market, 3 bed 2 bath with 2 car garage), had the land under contract for pennies, but it was problem after problem discovering the seller did not own the lot behind it like they stated (backed up to another street) and a mortgage had recently been pulled out on it. Retention pond encroached on the lot more than originally anticipated and the very slight slope we learned was needing stim walls put on it, in addition to 2 set of telephone pole easements. We ultimately backed out. 

I would love to hear what peoples strategy has been, what profits have been like, if you went affordable, or luxury, townhouse, multifamily, or single family, and what that experience was like. Any information would be greatly appreciated!

[Doug Smith]

Thanks for posting this. That's a great question (much better than many I've seen on here lately). I flipped my first home in 2008 taking advantage of cheap deals during the last big crash. We did really well at first, but made our mistakes. I had the advantage in that I had been a lender for many years prior to that and my wife's degree was in a construction/design-related field, so we had a lot of things going for us. Over time, we went into new construction of SFRs. My lending company also started financing them, so we've seen it from a lot of other investor/builders' perspectives as well. The cycle for new construction is obviously much much longer. There is more risk and permitting can be a bear. That being said, it's "rarified air" in that fewer people are doing it. I always thought, like you, that affordable housing was where we could make a dent. We found that doing higher-end stuff (not mansions, but $750K - $1.2K) was a sweek spot from a profitability standpoint. At that price, the properties still moved, but there was more margin there. I think a massive key is having the right contractor. Our lending side has 2 investor/borrowers right now that are having to go after their contractors because of scope of work/financial hanky-panky issues. If you ever want to chat and pick my brain, I'm happy to jump on a call some time to discuss the good, bad, and the ugly. I know I wish I had more people to bounce questions off of when we started. Good luck to you.