Going on 14 units and counting with the New build Strategy

11 Replies

A lot of people ask us why we build new instead of renovating and I just wanted to share a few reasons with you guys to get your thoughts!

1. We have complete control over the budget from day 1

2. Finished value is always far higher than our actual costs to build

3. My husband quit his job at 25 to build full time as he’s able to pull a salary from the budget by doing the labor himself

4. Purposely built buildings, better layouts, functionality and overall designs (I do the architectural/permit drawings myself)

4. Energy efficiency (low utility costs for the tenants)

5. Low maintenance

6. We know exactly what’s behind each wall

There’s a whole lot of other perks that for us just make the most sense and I know building new doesn’t work in every market (like markets where the value of the homes are just lower than what it would cost to build) But I’m curious to know what you think since I don’t see a lot of investors taking this path.

Also, any pro builders out there have any tips for us as we grow our portfolio?

@Natalie Cloutier the biggest challenge in most markets is cost. What is your gross rent multiplier and NOI per unit?

Scaling is all about leadership and systems. If you have a business plan and product that works you can do as many as you want. There are no limits.

I've built a handful of SFRs and rent them now. The economics rarely work in markets. Rent has to be reasonable while land value and construction labor has to be cheap. I've only been able to make the numbers work in one town outside my area.

@Greg Dickerson every building is different depending on the number of units they have. The Fourplex we're building now will have an NOI of around 1,700$ a month where our duplexes probably have about 500$-700$.

You’re right about the systems thats what we’re trying to organize now :) trying to go on autopilot as much as possible!

Your timing is perfect! I am wanting to employ this strategy but can't figure out how to do the proper calculations. I'm looking at a particular property now that was subdivided into 4 lots and they're asking $200k for the package of 4. 

I can do site prep and build 4 modest houses for about $160k each and the finished value of each house would be about $275,000. 

Rents would be about $1650/month. 

I've developed two parcels so far and sold them for great profit, but it's time to start holding houses for future wealth. 
Is there a calculator on BP that works for this, or do you have your own approach that you could share? Do I somehow do the BRRR calculator?

Your timing is perfect! I am wanting to employ this strategy but can't figure out how to do the proper calculations. I'm looking at a particular property now that was subdivided into 4 lots and they're asking $200k for the package of 4. 

I can do site prep and build 4 modest houses for about $160k each and the finished value of each house would be about $275,000. 

Rents would be about $1650/month. 

I've developed two parcels so far and sold them for great profit, but it's time to start holding houses for future wealth. 
Is there a calculator on BP that works for this, or do you have your own approach that you could share? Do I somehow do the BRRR calculator?

@Natalie Cloutier   Congrats on building new!  What are your land costs? What are the rents on the four-plex?  Is your husband doing the labor on a daily basis and also acting as the GC while hiring subcontractors, or are you hiring employees?

@Sandra S. to be honest we don’t use any type of calculator we just know our costs really well and we use a spreadsheet and compare with similar projects we’ve done. My husband use to be an estimator so its really easy for him to estimate costs once we have a design done. He’s usually right on point once we compare with the actual estimates from the trades.

Sorry if this doesn’t help you too well :(

@William Coet thank you! :)

Land costs depends on the project, location and if a septic is needed or not. Usually about 100k or so once we have everything ready to build.

The rents for the Fourplex: The top units are 3 bedrooms, 2 baths with a garage and a backyard and rent for 1,600$+utilities+appliances (we never supply appliances). Bottom units are basement units but they’re half outside the ground so they have large windows and are 2 bedrooms, 2 baths and rent for 1,250$+utilties.

My husband acts as a GC and does a lot of the labor work himself: electrical, insulation, drywall, flooring, kitchen installs (ikea), painting and everything else in the finishings. Everything else we sub out. :)

Originally posted by @Natalie Cloutier :

@William Coet thank you! :)

Land costs depends on the project, location and if a septic is needed or not. Usually about 100k or so once we have everything ready to build.

The rents for the Fourplex: The top units are 3 bedrooms, 2 baths with a garage and a backyard and rent for 1,600$+utilities+appliances (we never supply appliances). Bottom units are basement units but they’re half outside the ground so they have large windows and are 2 bedrooms, 2 baths and rent for 1,250$+utilties.

My husband acts as a GC and does a lot of the labor work himself: electrical, insulation, drywall, flooring, kitchen installs (ikea), painting and everything else in the finishings. Everything else we sub out. :)

Thanks for the reply! Are these numbers in Canadian currency?  Are you financing, and if so what is the length of the loan?

 

@William Coet yes sorry in Canadian currency!

We have a loan with a private lender for 9% interest. Closed loan for 6 months then open to pay back whenever. For a total amount of 504,000$ but we borrow in progressive draws so we only borrow what we need basically as the construction progresses not to pay interest for nothing. (We borrowed 150k for 4 months and now we’re at 300k since 2 months) Once it’s done we could get a mortgage for 80% of the full value which we’re estimating to be in the high 700k (Waiting on final evaluation to confirm actual value) & we’ll get a mortgage for just what we need: Enough to pull out a mediocre salary but not too much to make sure we still cashflow nicely every month.

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