Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
I've previously posted results of homes built recently compared to rehabbing. Due to our area BOOMING with new buyers, my most recent closing is what I consider a home run. From first shovel to receiving escrow closing check, less than 90 days.(and that was going through Thanksgiving, Christmas and New Years Holidays!)
The most recent home closed on schedule last week. Nice homecoming present after 2 weeks in Dubai. Here are facts of deal.
Lot purchased 1 year ago for 50K.
Total const costs including loan costs $201,140.22
Total Costs $251,140.22
Sales price $349,900
Net proceeds after all costs, commissions, etc.from closing $330,809.12
Net net $79,668.90
My investment was 50K and return was approx 160% in one year. I still feel there is much more potential in many areas doing new const rather than rehab. Anyone else agree with that? I'm just starting home # 5 and building same plan in same area. #6 should start here in 30-45 days. Rich
p.s. If I'd started this home right after acquiring lot, return would've been over 500%. Home just started is on lot just purchased for 68K. This one could be even better return. CRAZY good in my area
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
13y
Originally posted by Travis Haigler:
As Steven Hamilton II said, all I had to do was ask. I did, and I got one heck of an education! It's great that Rich is willing to take the time and help those of us just starting out in real estate!
Like many of us here, I'm guessing Rich has had his share of help along the way from other investors who were more experienced than he was at the time, and now he's paying it forward with other new investors. When ethical, hard working investors volunteer their time to help up-and-coming investors get started, it helps the entire industry, as those values are instilled in the new investors from the beginning.
Just a good reminder to all of us who have had help along the way that we should be paying that forward, not just for the satisfaction of helping others, but in order to better our industry as well. Also a good reminder that despite how much many of us will disagree on some stuff here on BP, when it comes to the really important stuff, most of us are on the same page.
Rich is definitely one of the good guys, and I'm sure there are a lot of people here who owe him a good bit of gratitude for their success...
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
"Rich - what would a young upstart need to bring to your table in order for you to open up you spec building operations to them?"
Glenn – I'm not exactly sure what you are asking here. I think I've been as open as anyone could possibly be with regards to what I'm doing both in Texas and in southern Utah. I even had one thread or blog taking a spec builder from a to Z. Maybe you could elaborate on what it is you would like me to open up with. I think I'm one of the more open guys on bigger pockets so ask away.
One thing I have noticed with general contractors and you might check into this in your area, is the motivation and differences in fees they will charge you. I've actually seen some general contractors that have bid as much as 25% above the actual costs involved in building a home. In my opinion that is ridiculous!
I do absolutely nothing on the homes I'm building in my subdivision in South Texas and I pay the contractor a 10% above cost fee. I have negotiated that down somewhat as I do more and more homes with him. In southern Utah, I take a much more active part in many of the subcontractors I use, that I generated when I lived here 15 years ago and built nearly 50 custom spec homes. I pay the general contractor a flat dollar amount in fee but the majority of what he provides is a general contractors license and his insurance. We do make sure that every subcontractor is licensed for the work that he is performing.
I'm not familiar with your area enough to determine whether your price per square foot is good, bad, or indifferent, but you might find tremendous differences and motivations in the fees that a general contractor might charge you. Good luck. Rich
Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
13y
Rich Weese Oh, no, I agree that you have been very open with your spec building and that you've answered a lot of my questions.
I will be approaching builders in my area and simply wanted to know what I could offer them in order for them to take me under their wing and teach me the finer intricacies of spec building. Generally, I already know the answer to my question but was wondering your viewpoint regarding mentees, apprentices, interns in your company.
Commercial Real Estate Broker · San Diego, CA · Member since 2012 · 37 posts · 1 vote
13y
Question for Rich and other "new build" investors:
Do you any thoughts / input regarding modular construction pertaining to the frame of the home?
In my study of new building practices (energy-saving, etc.) I did some research on modular design. It appears that it has come a long way and adds many benefits to the overall construction process including:
- Reduction in build time: Because the frame of the house is built off-site, it can prepared while the site and foundation work is being done. Once it arrives on site, the frame can be installed in a matter of days versus weeks.
- Increased efficiency: I've read that a typical stick-build home is framed with 2x4 and modular walls usually have 2x6 with thicker insulation.
- Less wear: Because the panels are built in climate-controlled conditions, there is less chance of weather damage during construction which can lead to warping, etc.
I've seen estimate that this type of build can also lead to savings of 10% or more in total construction costs. However, there is still debate as to the long-term appreciation values of the homes.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Clay, I haven't seen modular systems that can be built for $70-$90PSF, all in. Also, they can be harder to get the city to OK them since they aren't familiar with them. Not only that, but lenders don't like anything that is "non-conforming." The positives on modulars are great, but I don't know that they maximize the developer/builder's bottom line.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
13y
Glenn – I checked on your biography and it looks like you have the ability to come up with some funds. Let me tell you how I got a general contractor to take me under his wing and it might work for you also.
In 1988, I had a note payoff for about $80,000. I wanted to use it to replace the income that I had lost when the note paid off. A neighbor of mine, who was a builder, suggested instead of going out looking for another note I should go ahead and build a rental home. I used the money to buy a lot for $15,000 and added some additional funds to build a 1600 ft.² home. He had suggested that I just keep it and use it as a rental and I would receive as much income as I had received from a note, yet with this one I would have tax benefits and appreciation benefits rather than just ordinary income. When the home was almost finished, my general contractor sold a home in the same neighborhood that was quite a bit like mine. I saw the price he sold it for and asked him if he thought I could sell mine for that price and he said I probably could. I put the home up for sale, and in very short period of time it sold and I made about $20,000. I had watched my general contractor on a daily basis, conversed with the subcontractors, and decided I would go ahead and do this again! I had paid this general contractor a fee and had received great information as to how to build a house and how to generate subcontractors. I also had all of the figures as to what each item cost. I bought another lot, found another general contractor that was very motivated to work for a very low fee and built another home right next door. It was always in my mind that if I eventually built a home that did not sell, I would rent it and generate the income that I had originally wanted anyway. 44 spec homes later, my wife and I decided to leave St. George and go full-time RVing for six years.
I don't know if there are lots available in your area of Virginia but if so, and you have funds available, and the building climate is good this would be a way I would suggest you go. It certainly worked for me and I never became a general contractor. If it doesn't sell, keep it as a rental-no maintenance for years! Make sure it is in the bread and butter type price range.
If you lived in my area, Glenn, I would certainly take you under my wing and try to give you suggestions on how to accomplish what you want. I have to tell you another story.
Three days ago I met with a fellow BP member here in St. George, Travis Haigler. We had chatted over a year ago and he wanted to see what I was doing currently. We spent several hours driving the area looking at the homes that I had recently built and sold and the two lots that I'm getting ready to build on now. I think he got a very good education and I tried to answer all his questions about what he might look for. While driving around, we went past a for sale by owner sign on a lot that was four lots down from where I had built a home 15 years ago. While Travis was in the car I called this individual and asked him what he wanted for his lot. He told me it was for $49,900. He also said he was a don't wanter. He had purchased the lot probably 20 years ago to protect his view from a monster home he built up above it. Now, nearing 80 years old, he had sold the big home and moved into a local retirement community and had no interest in continuing to pay property taxes and other costs on this lot. In our discussion with Travis in the car, the seller told me, make me an offer, steal it from me! He even said he might consider some financing on it. After two conversations by phone, I met with the seller and his wife this morning and negotiated a sales price of $30,000! The best part, was that he was willing to take $5000 down and carry the note for $25,000 at 6% interest, payable monthly interest only, all do in 18 months or when the to be constructed home was sold. The even better part was that he agreed to subordinate his loan to a construction loan. I will have a total of $5000 plus closing costs invested in the construction of a new home. My return on investment will be in the stratosphere!
I'm sure when Travis reads this, his juices will start flowing as to how easy it can be to accomplish something!
Clay – I think modular construction to a certain extent carries the same stigma as mobile homes. I realize that it is a step above, but as has been stated before, many areas have restrictions against manufactured housing. That would be the first problem. I can assure you that my framers did not take weeks to frame a home and it will be interesting to see just how long it takes on this home that we should dig footings on early next week. We will receive our permit approval Monday and then we are off to the races. My anticipation is that within two weeks I will have the home to a completed framing stage ready for all mechanical to be done inside, the stucco to be done on the exterior, and the roof to be installed. I'm not sure I could do much better with prefab. I would try to stick with stick building. Rich
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Considering he fact hat you are paying up to $68k currently for lots, $30k is without a doubt a steal. Add in the owner carry with subordination clause and it does not get any better than that.
Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
13y
Rich Weese - Thanks a lot for the great anecdote! I'm taking the next step and starting to really analyze lots and new construction opportunities in my area. Im going to the City tomorrow to figure out impact fees and the process behind permitting for utilities on a couple of lots I'm looking at - should be a good experience.
I know I'll have a bunch of questions but I'll take the time to do my research and due diligence first before I bombard you with them.
Lastly, while I don't plan on moving to any of your investment areas anytime soon, I would love to fly out there and take a tour like what Travis did.
As always, thanks for sharing your experiences Rich.
Homeowner · Saint George, UT · Member since 2011 · 19 posts · 25 votes
13y
I figured I would chime in since Rich Weese mentioned me. It was great getting to visit with him last week and I appreciate all the time he took to show me what he has been doing in the St George area. He showed me some of the houses he built here several years ago, the houses he closed on recently, the lots he is getting ready to build on, and also the raw land he is looking to subdivide -- all while answering my questions along the way. Each time we saw a lot that looked interesting, he was quick to pull over and make a call. He talked with the owner of that one lot for a while, then we ended up going back to the lot to see what view there would be from the house (great view across the city and out to Pine Mountain). He knew the area, knew what would sell, and was quick to pull the trigger on a good deal when it came along. It was fun to watch the process in action.
As Steven Hamilton II said, all I had to do was ask. I did, and I got one heck of an education! It's great that Rich is willing to take the time and help those of us just starting out in real estate!
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Travis, Rich has always been generous in sharing his knowledge and experience. He embodies the spirit of BiggerPockets. The more we all follow that example, the more successful we will be.
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
13y
Originally posted by Travis Haigler:
As Steven Hamilton II said, all I had to do was ask. I did, and I got one heck of an education! It's great that Rich is willing to take the time and help those of us just starting out in real estate!
Like many of us here, I'm guessing Rich has had his share of help along the way from other investors who were more experienced than he was at the time, and now he's paying it forward with other new investors. When ethical, hard working investors volunteer their time to help up-and-coming investors get started, it helps the entire industry, as those values are instilled in the new investors from the beginning.
Just a good reminder to all of us who have had help along the way that we should be paying that forward, not just for the satisfaction of helping others, but in order to better our industry as well. Also a good reminder that despite how much many of us will disagree on some stuff here on BP, when it comes to the really important stuff, most of us are on the same page.
Rich is definitely one of the good guys, and I'm sure there are a lot of people here who owe him a good bit of gratitude for their success...