ADVICE - New Construction Lot

3 Replies

Hello Guys - I would appreciate if you guys can provide your precious advice. I have done about 10 fix and flips in last two years but I don't have any experience in new construction. I am looking at a lot where the comps are pretty solid. The lot is clear and flat already. I have spoken to a developer and he provide me a verbal bid of 108K for a 1500 Sqft house with two card garage. so the total sqft is about 1900. He told me price include all permits as well. I have three questions :

What should be due diligence in terms for buying the lot in addition to comps and ARV ?

Is the price for a basic builder grade home at about 108K looks reasonable ?

What are the other cost involved beside the development cost.

Any help would be appreciated

Thanks

@Irfan Saeed Your two best resources would be the local municipality (city building department or county if unincorporated) and a local architect.  You want to investigate any building restrictions the municipality may have related to zoning, setbacks, lot coverage etc.  Check availability of utilities and the cost to bring them in or tap on to existing.  If the contractor is paying for building permits, check to see if that includes impact fees, utility meters, etc.  You will also have design and engineering costs in addition to construction.  Also consider that your construction time will be much greater than flips so holding costs will be more expensive.

In Phoenix, 108K would be a very good price to build that size of home, to the point I would be a little suspect.  Builders often quote the cost for the building only, so you might check to see if it includes landscaping, fences, finish grading, driveway, etc.  Also check to see what type of finishes they are including, if any.  Good luck -

You need to make sure you know what you are getting. Is everything included? All the permits and fees? All the horizontal development? What will be your closing costs when you sell?

@Irfan Saeed   I think that $108k for a 1900 sqft house is crazy low. That's $56/ft2 total or $72/ft2 living.  That's going to be very very basic construction, even if they guy will be able to finish the job.  I would check around with this guy and make sure he has finished projects.

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