RTR New Builds Cape Coral
Member since 2021 · 12 posts · 4 votes
RTR New Builds Cape Coral
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Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes
4yHi @Bhavya Shah, I was one of the first investors in Cape Coral through Rent to Retirement. I identified my first property in February of last year and officially closed in April. It will be finished next month. So 10 months total. The builder shares pictures along the way and I've also had both my parents and a contractor friend go through the house and they were very pleased by the quality of the build. I'll actually be going down there next week to inspect myself and then likely back out when it's done in February for a final walkthrough.
When I first signed the contract in April, I was told my property would rent for around $1,850/month. Now that it's nearly complete, the PM plans to list it for $2,400! I was also "all in" for $238k including the lot, and the same model on similar freshwater canal lots are appraising for $375-$410k so I'm definitely very pleased and will plan to cash out refinance as soon as I can. Right now I have 4 lots under construction including the one mentioned above.
I've not heard builds taking 18 months. I have heard 12 months however. I read somewhere that Cape Coral has something like the 2nd most new builds/capita in the nation right now and their permitting department is absolutely inundated. That's the real bottleneck and unfortunately that's out of everyone's control.
To your other question, I've learned to be patient. After you close on the construction loan, you'll be staring at a piece of dirt for months and think nothing is going on. Behind the scenes there is a flurry of activity: surveys, design docs, permitting, ordering materials and delivering to the site, etc. So just be patient. It's been a long ride, but the built-in equity upon completion, strong cash flow, and appreciation I've had has been just incredible!
25 Replies
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
Hi @Bhavya Shah, I was one of the first investors in Cape Coral through Rent to Retirement. I identified my first property in February of last year and officially closed in April. It will be finished next month. So 10 months total. The builder shares pictures along the way and I've also had both my parents and a contractor friend go through the house and they were very pleased by the quality of the build. I'll actually be going down there next week to inspect myself and then likely back out when it's done in February for a final walkthrough.
When I first signed the contract in April, I was told my property would rent for around $1,850/month. Now that it's nearly complete, the PM plans to list it for $2,400! I was also "all in" for $238k including the lot, and the same model on similar freshwater canal lots are appraising for $375-$410k so I'm definitely very pleased and will plan to cash out refinance as soon as I can. Right now I have 4 lots under construction including the one mentioned above.
I've not heard builds taking 18 months. I have heard 12 months however. I read somewhere that Cape Coral has something like the 2nd most new builds/capita in the nation right now and their permitting department is absolutely inundated. That's the real bottleneck and unfortunately that's out of everyone's control.
To your other question, I've learned to be patient. After you close on the construction loan, you'll be staring at a piece of dirt for months and think nothing is going on. Behind the scenes there is a flurry of activity: surveys, design docs, permitting, ordering materials and delivering to the site, etc. So just be patient. It's been a long ride, but the built-in equity upon completion, strong cash flow, and appreciation I've had has been just incredible!
- Investor · Miami, FL · Member since 2021 · 38 posts · 29 votes4y
Wow Trevor. You sure got an incredible price. My total cost right now (without lending costs) is sitting at $298,500 for construction and lot. The numbers still make sense, but you must be really happy!
- Member since 2021 · 12 posts · 4 votes4y
Originally posted by @Trevor Fleck:
Hi @Bhavya Shah, I was one of the first investors in Cape Coral through Rent to Retirement. I identified my first property in February of last year and officially closed in April. It will be finished next month. So 10 months total. The builder shares pictures along the way and I've also had both my parents and a contractor friend go through the house and they were very pleased by the quality of the build. I'll actually be going down there next week to inspect myself and then likely back out when it's done in February for a final walkthrough.
When I first signed the contract in April, I was told my property would rent for around $1,850/month. Now that it's nearly complete, the PM plans to list it for $2,400! I was also "all in" for $238k including the lot, and the same model on similar freshwater canal lots are appraising for $375-$410k so I'm definitely very pleased and will plan to cash out refinance as soon as I can. Right now I have 4 lots under construction including the one mentioned above.
I've not heard builds taking 18 months. I have heard 12 months however. I read somewhere that Cape Coral has something like the 2nd most new builds/capita in the nation right now and their permitting department is absolutely inundated. That's the real bottleneck and unfortunately that's out of everyone's control.
To your other question, I've learned to be patient. After you close on the construction loan, you'll be staring at a piece of dirt for months and think nothing is going on. Behind the scenes there is a flurry of activity: surveys, design docs, permitting, ordering materials and delivering to the site, etc. So just be patient. It's been a long ride, but the built-in equity upon completion, strong cash flow, and appreciation I've had has been just incredible!
Thank you so much for that in depth response. Its exactly the type of response I was looking for. I am very happy to know your build is getting completed in the next month or so.. since that will start giving us the real idea of the tenant situation there.
Are the lots that you are building on, all side to side? Did you choose the off-canal or on-canal lots?
I agree with you that I will need to be patient and thank you for letting me that theres stuff going behind the scenes. I will keep that in mind.
- Member since 2021 · 12 posts · 4 votes4y
Also, how does the loan process typically work? I understand that initially you will need to take a high interest rate construction loan from a private lender. And the only thing you will be doing until the certificate of occupancy is issued, is pay the interest. So, when do you end up paying the principle back? Is that principle paid back when you end up taking the conventional loan? So at what point would you be doing cash-out refinance?
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
@Jorge Siverio yes I really did luck out. I wish I would have bought 100 of them! As they say, hindsight is 20:20. However, I did decide in late November to build on three of my additional lots and my costs (without lending) were $289k so not too far off from what you're seeing now. I'll likely be helping my dad with a couple builds for him later this month. Agree that the prices have risen dramatically - especially the land - but the numbers are still quite strong so I'll continue investing so long as the numbers make sense. Good luck Jorge and definitely keep me updated how your build goes!
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
@Bhavya Shah great follow-up questions. I'll answer what I can based on my experience, but I'd highly encourage you to reach out to the Rent to Retirement team if you haven't already.
My lots are spread throughout NW Cape Coral. They are all fresh-water lots. Here are some of the pros and cons to fresh-water vs dry lots I've learned:
Freshwater Lots:
- Cost about $3-5k more than dry lots
- Rent about the same as dry lots - possibly $25-$50 more at most right now
- Usually an additional $5k for the developer to construct a 4:1 grade in the backyard down to the canal in lieu of a seawall
- The same model on a canal lot has been selling for roughly $15-$20k more than a dry lot
So all that to say, you'll pay more up front for a freshwater lot. However, as the saying goes "you can change anything about a house except its location." If you plan to hold the home indefinitely as a rental, maybe it makes sense to just have a dry lot. If you plan to sell or cash out refinance where an appraisal will matter, you may want to consider a canal lot.
You have to understand that Cape Coral - especially North Cape Coral - is essentially a myriad of quarter acre plots owned my hundreds of different people - some investors, some not. So you don't have one large developer who can come in and buy 1,000 acres and build a huge development for example. While some investors have been able to purchase a row of lots, that's more of the exception than the rule. As such, small investors like you and me are on a more even playing field.
Regarding the loan process, that will typically depend on the lender you go with. For me, I purchased the lot, received pre-approval, signed the construction contract, put down a deposit with the builder, then closed on the construction loan. Thereafter, it is indeed interest payments during construction. When you near finish, you'll approach a long-term lender to refinance into a conventional loan and pay off the construction loan in the process. If things go how they have been thus far, you'll not only pay off the construction loan, but often the new build will appraise high enough that you'll be able to pull out some or all of your investment as well (i.e., a new construction BRRR of sorts).
- Member since 2021 · 12 posts · 4 votes4y
Originally posted by @Trevor Fleck:
@Bhavya Shah great follow-up questions. I'll answer what I can based on my experience, but I'd highly encourage you to reach out to the Rent to Retirement team if you haven't already.
My lots are spread throughout NW Cape Coral. They are all fresh-water lots. Here are some of the pros and cons to fresh-water vs dry lots I've learned:
Freshwater Lots:
- Cost about $3-5k more than dry lots
- Rent about the same as dry lots - possibly $25-$50 more at most right now
- Usually an additional $5k for the developer to construct a 4:1 grade in the backyard down to the canal in lieu of a seawall
- The same model on a canal lot has been selling for roughly $15-$20k more than a dry lot
So all that to say, you'll pay more up front for a freshwater lot. However, as the saying goes "you can change anything about a house except its location." If you plan to hold the home indefinitely as a rental, maybe it makes sense to just have a dry lot. If you plan to sell or cash out refinance where an appraisal will matter, you may want to consider a canal lot.
You have to understand that Cape Coral - especially North Cape Coral - is essentially a myriad of quarter acre plots owned my hundreds of different people - some investors, some not. So you don't have one large developer who can come in and buy 1,000 acres and build a huge development for example. While some investors have been able to purchase a row of lots, that's more of the exception than the rule. As such, small investors like you and me are on a more even playing field.
Regarding the loan process, that will typically depend on the lender you go with. For me, I purchased the lot, received pre-approval, signed the construction contract, put down a deposit with the builder, then closed on the construction loan. Thereafter, it is indeed interest payments during construction. When you near finish, you'll approach a long-term lender to refinance into a conventional loan and pay off the construction loan in the process. If things go how they have been thus far, you'll not only pay off the construction loan, but often the new build will appraise high enough that you'll be able to pull out some or all of your investment as well (i.e., a new construction BRRR of sorts).
Thanks for the very thorough details on the pros and cons of the dry vs fresh water canal lots. Loved how you were able to tie it to the bottom line of holding it long term vs cash out refi. That definitely makes sense. For now, I am thinking of going for the dry lots for 2 reasons: (1) as you mentioned for the long term (2) I may also end up having less maintenance cost down the lane.
Regarding the lots: that makes a lot of sense. It wasnt very clear from their pro forma whether these lots are all together in one central location or spread out but your answer helps me understand that.
Regarding the construction loans: this is in line with what I thought it will be but just wanted to re-confirm. I have reached out to RTR already but it always helps talking to fellow members here and learning about small things which can go unnoticed during initial talks. Correct me if I am wrong but this is how it will work, right: For example, as per their current rates, build price is abt $250K and so lets go with that as the construction loan amount. Now until the house is built, i understand all I will be doing is pay the interest. makes sense. Once the build is complete, I will approach a LT lender and lets say at that point, the house has appraised to $400K. I think the lender only gives abt 80% of the home value.. So in this case, $320K. So the LT lender will pay off the principle amount to the private lender and hand me a cash of 70K (if I choose to do cash out refi). There is no additional down payment or money out of my pocket at that point, is it? I may still have to pay for closing costs, i suppose?
- Investor · Miami, FL · Member since 2021 · 38 posts · 29 votes4y
Hey Bhavya,
I'm assuming in your example you are factoring in buying the lot cash and using that equity as part of your down payment to finance the construction.
From what I've seen, LT lenders will usually cash out refinance 70-80% of the value ... depending on which you decide to use. You do have to factor in closing costs for the new LT refinance.
Remember to also factor in carrying costs (interest, closing, orignation points) when calculating cash needed for the construction piece, whether you are using hard money or a 2nd home loan.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Trevor Fleck:
@Bhavya Shah great follow-up questions. I'll answer what I can based on my experience, but I'd highly encourage you to reach out to the Rent to Retirement team if you haven't already.
My lots are spread throughout NW Cape Coral. They are all fresh-water lots. Here are some of the pros and cons to fresh-water vs dry lots I've learned:
Freshwater Lots:
- Cost about $3-5k more than dry lots
- Rent about the same as dry lots - possibly $25-$50 more at most right now
- Usually an additional $5k for the developer to construct a 4:1 grade in the backyard down to the canal in lieu of a seawall
- The same model on a canal lot has been selling for roughly $15-$20k more than a dry lot
So all that to say, you'll pay more up front for a freshwater lot. However, as the saying goes "you can change anything about a house except its location." If you plan to hold the home indefinitely as a rental, maybe it makes sense to just have a dry lot. If you plan to sell or cash out refinance where an appraisal will matter, you may want to consider a canal lot.
You have to understand that Cape Coral - especially North Cape Coral - is essentially a myriad of quarter acre plots owned my hundreds of different people - some investors, some not. So you don't have one large developer who can come in and buy 1,000 acres and build a huge development for example. While some investors have been able to purchase a row of lots, that's more of the exception than the rule. As such, small investors like you and me are on a more even playing field.
Regarding the loan process, that will typically depend on the lender you go with. For me, I purchased the lot, received pre-approval, signed the construction contract, put down a deposit with the builder, then closed on the construction loan. Thereafter, it is indeed interest payments during construction. When you near finish, you'll approach a long-term lender to refinance into a conventional loan and pay off the construction loan in the process. If things go how they have been thus far, you'll not only pay off the construction loan, but often the new build will appraise high enough that you'll be able to pull out some or all of your investment as well (i.e., a new construction BRRR of sorts).
these lots were created in mass prior to land use laws we have today.. between cape coral and lehigh Acres there are literally close to a million of them and they have been swapped traded lost for tax's prices run up prices crashed for the last 50 years.
looks like it could be sustainable this time around.. good luck guys with these properties.
I was on a State of CA steering committee in the mid 80s working on what to do with all these antiquated subdivisions through out america that if you used modern zoning and entitlement process's would never be approved.. the poster child was Lehigh acres and we have a big conference there with folks from all over the US.. the reality as it related to Lehigh acres was if Every lot got built out there would be gridlock as there was not proper long range planning and infrastructure to handle the influx of peeps roads cars etc..
I so slow build out will allow this stuff to catch up.
- Rental Property Investor · Culver City, CA · Member since 2014 · 221 posts · 79 votes4y
@Jay Hinrichs
My grandparents from Michigan bought 2 Cape Coral lots close to Lehigh Acres in the 60s for $3k . They bumped around in value, went up to $90k in 2005 then back to $3k when my parents had them.
Apparently banks were doing 100% financing on lots in 2005. Ideally they would have sold then. Hindsight, haha.
- Member since 2021 · 12 posts · 4 votes4y
Originally posted by @Jorge Siverio:
Hey Bhavya,
I'm assuming in your example you are factoring in buying the lot cash and using that equity as part of your down payment to finance the construction.
From what I've seen, LT lenders will usually cash out refinance 70-80% of the value ... depending on which you decide to use. You do have to factor in closing costs for the new LT refinance.
Remember to also factor in carrying costs (interest, closing, orignation points) when calculating cash needed for the construction piece, whether you are using hard money or a 2nd home loan.
Right. the way it works with RTR is that you will be buying the land up front (while it acts as a down payment for the construction loan) with cash. The point of confusion for me is when the LT lender offers 70-80% of the appraised value of the home.. what about the other 20-30%? From what I know, lenders will require that I have a 20% equity in the home.. But if the land cost (of 40K) is the only thing I have paid for so far, thats like 10% equity only (based on appraised value)? Isnt it? So would I need to funnel in another $40K to get the loan from the lender?
- Investor · Miami, FL · Member since 2021 · 38 posts · 29 votes4y
@Bhavya Shah let's use some of my current numbers as an example. Build $258,500 ($5k more for freshwater), lot (estimated $40k... they are going fast and I have not been able to secure one yet). That's a total cost of $298,500 (without lending costs). The total loan would be $258,500. If, and this is a big if, 10 months down the line the LT lender appraises the house at $400,000 then 75% of that would be $300,000. Meaning I would be able to cash out refinance and get back about $40k. Note that this is excluding lending costs (approximately $19k if using hard money). So I'd still have $20k in the deal (assuming I can get 75% LTV). Remember that you will have immediate equity on the home (if the market stays the same) so you will have about 35% equity off the bat (258/400).
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
Thanks for sharing @Jay Hinrichs. That's a fascinating background. I may try reaching out to the Cape Coral zoning and planning group to see what I can find out about their plans for future expansion.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Jeff T.:
@Jay Hinrichs
My grandparents from Michigan bought 2 Cape Coral lots close to Lehigh Acres in the 60s for $3k . They bumped around in value, went up to $90k in 2005 then back to $3k when my parents had them.
Apparently banks were doing 100% financing on lots in 2005. Ideally they would have sold then. Hindsight, haha.
your exactly correct in 2007 there were hundreds if not thousands of spec homes. one builder from Alabama had 125 of them they were selling for 250k before the crash I bid 100k each.. and did not close.. as we know capital dried up.. by the time 09 rolled around I was buying these same homes at the court house steps for 30 to 40k each.. Now I am certianly not predicting another round of GFC if i thought that was going to happen I would not be out there building myself these days.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Trevor Fleck:
Thanks for sharing @Jay Hinrichs. That's a fascinating background. I may try reaching out to the Cape Coral zoning and planning group to see what I can find out about their plans for future expansion.
The west is full of antiquated plated subdivisions even Los Angles county.. San Bernidino and Riverside county which are huge there are easily a million platted vacant lots that were done by RE speculators back in the turn of 1900 to 1940s.
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
@Jay Hinrichs what's stopping RE investment on those vacant lots in places like San Bernidino and Riverside? Lack of infrastructure? Getting easements?
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Trevor Fleck:
@Jay Hinrichs what's stopping RE investment on those vacant lots in places like San Bernidino and Riverside? Lack of infrastructure? Getting easements?
Just google earth it.. Look for Edwards airforce base .. Its high desert.. most of the lots are larger 1 to 5 acres so no water .. roads were just bladed in over the desert.. when you google earth it you will see trailer homes dotted here or there.. those are desert rats that live off the grid.. If you Look at Lucerne CA. and get to a GIS map you will see 6k platted lots and old dirt roads cut into them but these are all on fairly steep hillsides and are 5 to 10k sq ft lots legal lots of record yes and these get bought by the Land geek guys then sold on terms to buyers who really dont understand what they are buying..
- Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes4y
@Bhavya Shah agree with the others! I started my process with R2R for a new build in early June. Closed on financing end of July 2021. Trevor is right that the permitting office is absolutely slammed. Right now I am about to finish permitting. In fact, I was just told lot clearing and filling is beginning as of today. In total, I am definitely looking at the 12 month window you mentioned. The numbers are great though. My all in cost was $265k and mirror what Trevor is suggesting. I am very happy with my decision and purchase. Even at todays prices, if I had the money I’d buy more but I have It tied up elsewhere! Feel free to reach out to connect. Good luck!
- Member since 2021 · 12 posts · 4 votes4y
Originally posted by @Trevor Fleck:
Thanks for sharing @Jay Hinrichs. That's a fascinating background. I may try reaching out to the Cape Coral zoning and planning group to see what I can find out about their plans for future expansion.
I am keen on learning about this too. So would love it if you could share what you find out.
- Member since 2021 · 12 posts · 4 votes4y
Originally posted by @Patrick Bavaro:
@Bhavya Shah agree with the others! I started my process with R2R for a new build in early June. Closed on financing end of July 2021. Trevor is right that the permitting office is absolutely slammed. Right now I am about to finish permitting. In fact, I was just told lot clearing and filling is beginning as of today. In total, I am definitely looking at the 12 month window you mentioned. The numbers are great though. My all in cost was $265k and mirror what Trevor is suggesting. I am very happy with my decision and purchase. Even at todays prices, if I had the money I’d buy more but I have It tied up elsewhere! Feel free to reach out to connect. Good luck!
Thanks Patrick,
I read your post as well and that was one of the threads I was tracking. The numbers are great but I just had a chat with NCH for LLC formation and I am seeing almost $2500 in annual expenses in maintaining the LLC alone (a bit higher for me since I am in CA). What are your plans around the LLC requirement and do you plan on keeping it around post your move to LT lenders? I have sent out a connection request to you as well if you want to chat about it offline.
- Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes4y
@Bhavya Shah great question. Agreed offline will be better for the finer details, I'll PM you my number but in the meantime, NCHI is charging too much IMO. I spoke with them as well and then had a talk with my REA and I'm setting up the asset protection in the future the same exact way, but for a lot less. Land trust followed by LLC beneficiary. It's a few hundred dollars compared to what they offered. Only difference is mine is in FL there's is in Nevada. My REA (real estate attorney) who is doing all this for me has done It for hundreds of clients in the past.
- Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes4y
@Rong Tan hey Ron, good to hear from you. Negative, it’s a personal relationship that I know out here in Fort Lauderdale. I never asked R2R if they had a recommendation, but they might. Shoot me an email and I can intro if you’d like
- Investor · Miami, FL · Member since 2021 · 38 posts · 29 votes4y
That's an interesting asset protection setup Patrick. I'll have to talk to G about that.
- Investor · Nevada City, CA · Member since 2019 · 21 posts · 28 votes4y
Hey community, i wanted to chime in on this thread. First want to say thanks for all the posts, it helped me make the decision to move foward with new builds in Cape Coral. I just started the process and so far its been seemless. Im buying my dry lots for $50k now, all the available dry lots were around 49k-50k and water lots were 60k-75k. Seems like prices are going up more and more. My total all in lot and build are looking around 300k. Rent to retirement referred me to a lender who does 90%LTC so only 10% down with i believe was 8-9% interest. Im assuming my out of pocket costs will be about 80k ish. (50k lot + 25k new construction loan and any other interest and loan fees)
After only one day of filling out my credit app i was approved for 3 new builds. I was so surprised i decided to do 2 builds. So far we are just about to open escrow on my lots and its probably hasnt been more than 2 weeks between my first conversation with rent to retirement and where im at now. Its been moving really fast which i love. Everyone is fast to respond and fast to take action. They really nailed it to make it as simple as possible and answer all your questions in all the pdfs and documents they provide. If anyone has any questions, I'd love to share my experiences along the way.
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