Multi-Million Dollar San Diego Rehab/Spec Project

[Mark G.]

Hello,

I have not seen much in terms of case studies of $2M+Rehabs in the Bigger Pockets Forums so I wanted to contribute a little bit:

My partner and I primarily organize joint ventures with developers on ground up construction of small subdivisions and rehabs/specs of multi-million dollar coastal homes.

We recently closed on a $2,500,000 ocean view home in La Jolla, San Diego with a 17,000 square foot lot. We recently went through plan check for a 2,300 square foot expansion of a 3,700 square foot home and plan to have permits in hand over the next 2 weeks. We are gutting the entire property and adding an amazing basement, huge master and outdoor amenities that will rival some of the best homes on the street.

Rehab numbers came in at $1,000,000 including supervision and a $85,000 contingency. 

We anticipate a resale value between $4,800,000 and $5,200,000 for 6,000 square feet.

Lessons:

At the high-end market (when including additions) estimating costs is more difficult because of structural designs and final approvals from the City along with the general pricing of the very high end finishes - it takes time. 

It is critical that the general contractor is highly skilled and experienced. We have one of the best single family contractors in town who has had experience building over 5,000 homes so you get the idea.. (yes, 5,000).

The quality of the team organized must be unsurpassed at this level. Our architect, engineer, contractor, Realtor sales team and investor are all over 55 years of age.

I hope this short case study gave you some idea of what its like in this price range.

Feel free to ask questions!

Mark Gottschlich

[Manolo D.]

@Mark Mathews I would suggest a gut-out rehab as a first step before jumping to development, for sure if you don't have a team/permit expediter, and if it is a < 700k ARV, the permitting along will eat your profit. Demo a pool on a small property is expensive at ARV sense, as heavy equipment will have hard time, I imagine that the one's at La Jolla is a large pool that it makes much more sense doing a demo compared to repairing, a 500sf pool takes almost the same time to build compared to a 200sf pool.

@Mark G. That was a very thorough post, you should keep a diary about that, lol. Sub inputs is a new one to me. Why didn't you simply change the structural engineer? Doesn't your A&E firm have a structural engineer? I would agree with the architect part, they try to make everything pretty on drawing, even if it will cost you a 16"x16" beam on the design, then they will say the beam is too big, they don't really think about costs too, and often their manpower estimates are way off. And probably the structural engineer has "too many" years experience that their design criteria is still stuck on the 70's.