Looking to build my first single family house

Chicago, Illinois
General Real Estate Investing
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Looking to build my first single family house

Alex L.
Chicago, IL · Member since 2015 · 19 posts · 8 votes

I have done small flips and rehabs over the years and mostly a buy n hold type of investor. I'm about to close on a lot in Chicago logan square shortly and thinking about tearing down the 2-flat for a new single family.

Can anyone who has done this help point me to the right direction? How should I even get started?

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Jonathan KlemmBusiness Member
Moderator
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
2y

Yo @Alex L. - What area of Logan Square is the lot in and how big is the lot?  

I've dabbled in the new construction space here in Chicago and there is A LOT that goes into it...I'd highly suggest spending some 1:1 time networking with some other investors like @Jennie Berger or @Prashanth Mahakali who are both Chicago developers

You make your money with the land purchase and then systems/processes/volume over time in the development game, but it's not easy and competition is high!

I am also happy to link up and share my experience in the new construction space.

[email protected]
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  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    2y

    Yo @Alex L. - What area of Logan Square is the lot in and how big is the lot?  

    I've dabbled in the new construction space here in Chicago and there is A LOT that goes into it...I'd highly suggest spending some 1:1 time networking with some other investors like @Jennie Berger or @Prashanth Mahakali who are both Chicago developers

    You make your money with the land purchase and then systems/processes/volume over time in the development game, but it's not easy and competition is high!

    I am also happy to link up and share my experience in the new construction space.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    2Reply
  • Jennie Berger
    Lender · Chicago IL · Member since 2020 · 357 posts · 228 votes
    2y
    Quote from @Alex L.:

    I have done small flips and rehabs over the years and mostly a buy n hold type of investor. I'm about to close on a lot in Chicago logan square shortly and thinking about tearing down the 2-flat for a new single family.

    Can anyone who has done this help point me to the right direction? How should I even get started?

    Thank you for the shout-out @Jonathan Klemm! :-)

    Hey @Alex L. Congrats on this venture - new construction (for the first time) is incredibly complex and exciting! Lots of moving parts...and it's wonderful to be able to start with a blank canvas and design exactly what you want to build (as opposed to retrofitting based on the restrictions of an existing older structure).  

    Many (even experienced) General Contractors (who have lots of 'rehab' experience) will tell you they can do it, but I recommend workingwith a team / GC who has new construction experience specifically.

    We have spent the better part of the last 3 years designing and building single family homes and small multi-unit buildings (on spec) on the North and NW sides of Chicago. I'd be happy to chat with you about the process, if it's helpful. Feel free to message me and we can coordinate a time via email.

    Looking forward to connecting!

    -Jennie Berger

    Property People

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  • Alex L.
    OP
    Chicago, IL · Member since 2015 · 19 posts · 8 votes
    2y

    Thanks @Jonathan Klemm. it's just couple of blocks west of palmer square and there are standard size new constructions selling for around $1.3million.

    Just closed on the purchase and it's a 40 feet wide lot. Would love to hear your experience. and people have been telling me that it's currently about $150-180/sqft to build new so I don't know if it's financially viable for me to do it at this point.

    @Jennie Berger, thanks! would love to chat more about the process.

    2Reply
  • Jennie Berger
    Lender · Chicago IL · Member since 2020 · 357 posts · 228 votes
    2y
    Quote from @Alex L.:

    Thanks @Jonathan Klemm. it's just couple of blocks west of palmer square and there are standard size new constructions selling for around $1.3million.

    Just closed on the purchase and it's a 40 feet wide lot. Would love to hear your experience. and people have been telling me that it's currently about $150-180/sqft to build new so I don't know if it's financially viable for me to do it at this point.

    @Jennie Berger, thanks! would love to chat more about the process.

    DM'd ya. :)

    *I'd estimate moreso between $195-$250/SF to build, depending on finishes. At your resale price point of $1.3, you'll likely need medium-to-higher end finishes, at least in some areas of the home (appliances, flooring, countertops, etc). Let's chat!
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  • Alex L.
    OP
    Chicago, IL · Member since 2015 · 19 posts · 8 votes
    2y

    Thanks @Jennie Berger. there is no way that it costs builders $200/sqft to build framed houses. Most of them are going to lose money or with a tiny profit from I can see.

    eg. lot aqiuisition at $250k, 4000 sqft of house will be $800k to build. With a sellout of $1.3million, deducting the closing costs and hard money lending interests these people typically have. the builder will be left with about $80K profit. Simply doesn't make any sense.

    I have seen these guys typically have a hard money loan of $600k recorded, which translate to about $150/sqft. and that typically would also include their 'GC fee' already.

    1Reply
  • Alex L.
    OP
    Chicago, IL · Member since 2015 · 19 posts · 8 votes
    2y

    And GC fee typically runs about $100K(flat fee + markups from subs) from what I have heard. so the true cost of building that $1.3 million framed house is like $500K.

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    2y

    I'd echo @Jennie Berger on the cost per square foot here in Chicago!  There are VERY LOW MARGIN in new construction...it's a volume game, not a one-off game.

    For reference, we did a framed single family with a front brick veneer in Bucktown in 2020 sold in 2021 for $179/SF....we probably should have been closer to $165/SF but had some lessons learned.  

    Either way...costs have SKYROCKETED in the building material space...people who are building at such a low fee are likely their own GC and not paying themselves properly

    @Alex L. - What prompted the purchase of the lot?  Was it available at a good price or did you get it off market?

    [email protected]
    Quality Builders4.966 Reviews
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