Real Estate Investor · Denver, CO · Member since 2011 · 74 posts · 24 votes
All- I am a experienced rehabber...I have renovated 50+ homes over the years. I now looking to get into new builds as our market in Denver is becoming really strong. Inventory is extremely low right now.
Curious what others are seeing for general price per sq foot cost? I understand each market is different; however I want to get a general idea.
My belief is that I can do it for around $125-140 per foot.
Jacksonville, FL · Member since 2013 · 226 posts · 115 votes
12y
Jon,
We get our land from investors who have accumulated vacant lots from tax deeds over the years. This keeps our land costs very low. Once our due diligence (quiet title, title check, field explorations) is complete on the land we start the design and construction process. We do mostly everything in-house. I do all the engineering and plans, my dad builds it, installs solar, and lists it on the market. This is what keeps all our costs down. We have all the licenses to do it mostly in-house (P.E., G.C., Roofing Contractor, Solar Contractor, Real-estate broker.)
Obviously when you say "net zero" this is highly dependent on individual usage and other factors. We will educate all our future buyers on how to consume less which will help their home become "net zero". You give them the amount of energy that the solar is expected to produce over the year (pvwatts) and you compare it to an estimated usage. This is very approximate but you can get ballpark numbers.
We just started but our first house is about 90% complete and we have 2 more houses in the beginning of the construction phase with 18 more in the pre-design phase and on the drawing board.
This first house we haven't listed on MLS yet, but I put it on zillow a few weeks ago and we have received a swarm of attention. Depending on the area the house is built, we are shooting for around $80 to $90/sqft for sale. I understand this is a big range but we are just starting and should be able to narrow it down soon. Also, the $55/sqft cost to build is a little conservative based on the numbers so far for the first house. We are expecting to come in around $52 or $53/sqft including the solar and all the added energy efficient appliances, HVAC, and building materials.
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
12y
@Nick Foundas I consider new construction as the most risky. Takes a long time, many approvals, many mouths to feed and you've got nothing really marketable until you're done.
I'm new at this and would love to make new construction a big part of my strategy (inventory levels are extremely low right now in my area (Boston market) and there are a surplus of qualified buyers ready to pull the trigger, multiple offers everywhere). For a newbie, This tool looks great, may not be perfect but I think the multipliers would definitely help get the cost in range for your local market. Would this tool work for calculating single family development? Also, what does "Finished Lot Cost" mean? Is that the cost of purchasing the land/lot?
A finished lot is a building permit ready lot i.e. the lot is recorded with the county, graded and utilities stubbed in. A finished lot is typically carries the least risk because the approval and development risk is mitigated. An engineered lot has county approvals but is not developed. A raw lot has no approvals.
As a simple example, many of the townhouse deals I work on are priced at $5000 for a raw lot, engineered at $50,000 and finished at $100,000. We may buy at pre approvals with most of the engineering done but will rarely ever buy something raw. It can easily take 2-3 years to progress everything.
Your IRR will almost always be greater with a finished lot deal barring something bad happening but you can make much more money if you self develop and much much more money if you self engineer but it will take a long time to realize any returns.
Your IRR will almost always be greater with a finished lot deal barring something bad happening but you can make much more money if you self develop and much much more money if you self engineer but it will take a long time to realize any returns.
Perhaps it's a bit nitpicky, but actually, in most cases, your IRR should be higher for an unentitled/raw lot, not with developed lot. While the time frame of the project will be much longer with raw land, the bulk of the money will go in towards the end of the project (when you start building), and IRR is sensitive to the timing of inflows and outflows, not just the total duration.
That said, if you do a basic ROI calculation, it would likely be the other way around (higher ROI with developed land), as ROI isn't sensitive to the timing of cash in/out, just the duration of the project.
Real Estate Investor · Lutz, FL · Member since 2013 · 5 posts · 4 votes
12y
Yes, recent developer activity shows average cost to build a house or townhouse in Tampa is around $55/psq too same like your Jacksonville area. Kevin Martin I see you finished the house with shingles instead of metal roof ? what is a cost issue you went different way than your planned ?
Asking because I did shingles and 35 sq roof ended up for $40K complete, I looking for cheaper solution, maybe "flat" (almost flat) hidden is the one ? anybody know ?
Perhaps it's a bit nitpicky, but actually, in most cases, your IRR should be higher for an unentitled/raw lot, not with developed lot. While the time frame of the project will be much longer with raw land, the bulk of the money will go in towards the end of the project (when you start building), and IRR is sensitive to the timing of inflows and outflows, not just the total duration.
That said, if you do a basic ROI calculation, it would likely be the other way around (higher ROI with developed land), as ROI isn't sensitive to the timing of cash in/out, just the duration of the project.
We could argue this all day, but assuming an apples to apples comparison, a finished lot deal should almost always net a greater IRR because your timing, as you mentioned, is much shorter even though you are most likely paying more money for a finished lot as opposed to a raw or engineered lot. I've seen finished lots selling for very little in REO deals but they are few and far between anywhere you would want to live in Maryland.
There are ways to work scenarios, i.e. an option purchase to defer payment until after recordation or an extremely low raw lot basis or an extremely disproportionate value for a finished lot, which would allow a development deal IRR to overcome the additional 24 months+ of cash outflows but it's not very realistic. Again, there are no certainties in real estate, but in general, this is the case.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
Actually, I think we're both right/wrong -- I made the bad assumption that your area is similar to mine, which it likely isn't. For the types of deals you probably do, you're probably absolutely correct that IRR will be higher for already developed lots. For the types of deals I've done (probably fewer than you, btw), I'm going to see higher IRR for unentitled/raw land.
I'm guessing that you tend to buy relatively expensive land (relative to the cost of construction) in areas where it takes a long time to entitle. I'm accustomed to buying dirt cheap (pardon the pun) land that can be entitled relatively quickly, because of where I have been buying (Atlanta). You probably have higher margins on your development; I probably have lower margins. Both of which contribute to different levels of return.
Just a good reminder that real estate is local, and I need to remember not to assume that the types of deals I'm doing are the same as the types of deals others are doing. Especially important now that I'm living closer to where you invest... :)
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
I've never used it myself, but have any of you ever used RS Means for cost estimating? I think they have info by zip codes, and I was just curious as to how accurate it is.
Investor · Bellingham, WA · Member since 2010 · 308 posts · 230 votes
12y
@Karen Margrave RS Means and other cost books will give you a ballpark but contractors forums are full of long discussions about how the cost book numbers don't match what the contractors themselves are seeing in their costs. The only way to really know is to get the project bid out by contractors you would actually hire to do the work.
Professional · Baltimore, MD · Member since 2014 · 93 posts · 23 votes
12y
No big deal. I assumed you were in Howard county and understood how much more we pay for land. We got a 200+ lot deal approved yesterday and I probably spent 300 hours of analysis on it.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
Congrats! I recently bought my first piece of land in Maryland (Howard County), and am certainly starting to appreciate the fact that the land/improved cost ratio is much higher than I'm used to... :)
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Giovanni Isaksen I am actually a general contractor (I don't physically work on jobs) and we price out everything, I was just curious if anyone used the RS Means online etc.