Building a house on a sf-3 zoned lot

[Stephen Nava]

I have a sf-3 with .21 acre lot at Austin, Texas. I am interested in building a unit, but I do not know where to look or what I want. This particular lot is in a desirable area and once I take out a construction loan, I need to make sure that the property will cash-flow. What are the steps I need to take and what do I need to look out for? Are there any books or forums you can suggest I read. I am very excited to do this project in the future and I need to know what I am getting myself into.

[Tracy P.]

I did new construction for my own home on a completely vacant half acre a couple years ago.

Time is not on your side, you need to have everything nailed down as much as possible before even thinking about the construction loan. They require bids from your contractor, which basically means that you need to have not only the design (architecture and engineering fees need to be paid upfront), but also foundation/excavation, permitting, utility pole, sewer connection, trenching, etc. all baked into your final number.

Keep in mind that after the bid is in, any changes result in change fees which is where a lot of money is made. Sometimes it's unavoidable, but you can definitely minimize it by being really comfortable with your original plan, and where you will cut the fat when (not if) you need to.

Then, the construction loan is only very short term so you need to make sure you have solid contractor who can get things done on a timeline. My construction loan specified 24 months and then exorbitant interest would get charged, so you definitely want to be in a conventional loan before that deadline.

Start with the planning dept and go from there. In CA it's a complete maze so be prepared to spend a lot of time getting bounced around.

Take it one step at a time, and expect everything to take twice as long and twice as much money as quoted, and you'll be ok. Good luck!