Flipping to New Construction

[April C.]

Hello there, 

I have been successful with flipping, and holding rentals and now I am ready to add New Construction to my investment strategies. I have acquired 2 tear downs through seller financing which was a sweet deal. On one lot,  I plan to build a new construction to sell (already have plans) and the other I will build my own home. Both properties have asbestos and were built in the 60's.

Couple of questions:

1. Is there a formula that anyone uses to analyze my return? What percentage return do you look for?

2. Which give me a better return? flipping or new construction?

2. can take care of the asbestos abatement through my own contractors?  the cost is astronomical.

3. If I am an experienced flipper (built additions to an existing houses) what are some challenges that I might face with new construction.

[Jay Hinrichs]

Originally posted by @April C.:

Hello there, 

I have been successful with flipping, and holding rentals and now I am ready to add New Construction to my investment strategies. I have acquired 2 tear downs through seller financing which was a sweet deal. On one lot,  I plan to build a new construction to sell (already have plans) and the other I will build my own home. Both properties have asbestos and were built in the 60's.

Couple of questions:

1. Is there a formula that anyone uses to analyze my return? What percentage return do you look for?

2. Which give me a better return? flipping or new construction?

2. can take care of the asbestos abatement through my own contractors?  the cost is astronomical.

3. If I am an experienced flipper (built additions to an existing houses) what are some challenges that I might face with new construction.

depending on region of the country.. profits are generally 10 to 20% of gross..   so 400k home you should expect 40k net any better and your doing pretty darn good.  we hit 20% very occasionally and averge closer to 15%.

the nice thing about new construction is its easier to stay on budget.. no major surprises.. and in our area subs can carry a tune.. IE you pay them once a month they buy their own materials. 

ASbestos remediation is real and its expensive on one project I paid over 40k... so for me tear downs have to me SMOKIN deals to deal with this and lead paint.   I will pay more for shovel ready lots by a long shot than a tear down.. and that usually causes a problem with the seller as they just have no clue as to what it takes to tear the house down and what it costs.