Transitioning from Rehabbing Houses to Building Houses: Key Steps

[LaMancha Sims]

Shifting from rehabbing existing properties to building new homes is an exciting but challenging transition for real estate investors. While both strategies involve real estate, the skills, resources, and processes differ significantly. Here’s what you need to successfully make the move from rehabber to builder.

1. Education & Industry Knowledge

Building homes requires a deeper understanding of construction, zoning laws, and permitting. Unlike rehabbing, where you work within an existing structure, new construction involves:

• Architectural design and engineering
• Soil testing and land surveys
• Municipal building codes and inspections
  Consider taking courses on residential construction or partnering with experienced builders to learn the ropes.

2. Land Acquisition & Feasibility Analysis

Finding the right land is crucial. You’ll need to evaluate:

• Zoning restrictions and allowable uses
• Utility access (water, sewer, electricity)
• Topography and soil conditions
• Development costs (impact fees, grading, permits)
  Work with a land surveyor and real estate agent specializing in vacant lots.

3. Strong Team of Professionals

Rehabbing often relies on contractors, but building requires a full team:

• Architect/designer
• General contractor (or acting as your own GC)
• Engineers (structural, civil)
• Subcontractors (framers, electricians, plumbers)
  Building strong relationships with reliable professionals is key to staying on schedule and budget.

4. Financing & Budgeting

New construction financing differs from rehab loans. You’ll typically need:

• A construction loan (short-term, interest-only)
• A contingency fund (15-20% extra for unexpected costs)
• A clear exit strategy (sell, rent, or refinance)
  Lenders will scrutinize your experience, so having a solid track record in rehabbing helps.

5. Patience & Risk Management

New construction takes longer than rehabbing—often 6-12 months or more. Delays due to weather, permit approvals, or material shortages are common. You’ll need patience and strong project management skills to navigate these challenges.

Final Thoughts

Transitioning from rehabbing to building homes is a major step that requires planning, education, and the right team. Start small—perhaps with a single spec home—and scale as you gain experience. With the right preparation, you can successfully expand your real estate portfolio into new construction.