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John Blackman
  • Developer
  • Austin, TX
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New Home Build End-To-End

John Blackman
  • Developer
  • Austin, TX
Posted Jul 7 2014, 09:12

@J Scott inspired me with his diary of a new construction project to do one of my own.  So not to be outdone, I'm actually going to do two.  This one will be for a project that we have recently completed.  I'll add new content every couple of days that represents a week's progress.  The other thread will follow the project we just crowdfunded on iFunding.com.

Just for some context, this is our 12th new construction project, so they are starting to look kind of familiar by now.

So with that let's get started on 1106 Berger. 

This is an East Austin lot about 6500 sqft.  That number is important because it is too small to build a duplex, so it has to be priced to build a single family home.  It has a large tree on it, but it's near the property line.  We later found out it is one of the largest trees in the county.

It's a corner lot too as you can see which means setbacks are going limit our buildable space.  It's also near a creek, so we'll need to check the flood plain.  It turns out that it is in the 100 year flood plain which is ok.  We can build the finished floor elevation 1 foot above said plain and according to the models it shouldn't get wet even in a 100 year flood event.

The Floor to Area ratio requirement is 40% (This is specific to Travis County, Texas) or less which would mean the maximum house size we could build is 6500 * 40% = 2600 sqft.  Sounds great right?  Well, we don't want to build too much house for the neighborhood or we would price ourselves out of the market, so we went for a simple 1500 sqft 3 bed 2 bath design.

The comps in the area at the time of purchase of the lot were about $180/sqft for new construction exits.  So our target exit would be $270,000.  We want to have at least a 20% margin after all costs are tallied and we budget $110/sqft to build for this area, although we are pretty good at coming in under this if the lot is not complicated.  This buys us room for surprises and if we beat our target we can give a little more back to the investors.

That means we are going to spend $165,000 on design, engineering, permitting, utilities, sidewalks, bushes, grass, fences and house construction, $19,000 on transaction costs (7% of sales price), and some amount on land.  We want at least 20% of our out of pocket costs (land + construction) in profit.  This is critical because it means we can stomach a 20% dip in home prices and still sell the project without losing money.  You can speculate on future prices, but that is what gets you killed during a market down turn.

This leaves a max land purchase price of roughly $45,000 which we were able to achieve.  The light is green, let's go buy it!

The story behind this lot is kind of neat.  The neighbor owns it and just used it for a place for his kids to play as they grew up.  They have since left the house and now he doesn't use the lot, so there was only a small tool shed on the lot to demo which didn't cost very much.

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