Spec new construction in Austin

74 Replies

Originally posted by Lamar Cannon:
@Jon Klaus Great work!! How are you deciding how much you will offer for a lot or home in your target area of Austin?

Thanks Lamar. This is a bit complicated and subjective, since opportunities come in many flavors. My most general criteria is a $100k minimum profit target.

Looks like an inviting place to live and very nice finishes for that $/sq ft.

Would be interested to know if your team does any work next state over in Louisiana. I have a development project on 2.3 acres as an urban infill in it's early planning stages. This design and thought process could work here, Jon. May try to call you next week.

Originally posted by Jason Grote:
Jon, That is one of the nicest modern/contemporary new builds I have seen yet. I love all of the wood and especially the combo tub/shower area. Congrats!!

Thanks a lot Jason. I assume you've seen it in person? It's just 4 blocks west of your wholetail deal you did last year. The one I considered buying from you.

Originally posted by Barry H.:
Looks like an inviting place to live and very nice finishes for that $/sq ft.

Would be interested to know if your team does any work next state over in Louisiana. I have a development project on 2.3 acres as an urban infill in it's early planning stages. This design and thought process could work here, Jon. May try to call you next week.

Welcome to BiggerPockets, Barry. I just bought a lot with a single home on it that we plan to scrape and build four singles in a condo regime. I think it will take year to get all the predevelopment stuff done. I'd like to hear more about your deal.

Originally posted by Carolyn L.:
@Jon Klaus - this is beautiful. I lean more traditional in design style, but the wood finishes really make this contemporary space warm and very livable! Nice job and congrats on a successful project!

Thanks a lot, Carolyn. I also like traditional design better, in fact I live in a Victorian. The typical Central East Austin buyer feels differently, though. You can really take some design chances in the neighborhood without nearly as much risk. A fun place for a progressive architect to play.

I think It looks great.

Like you said it sounds like contemporary and green building is the in thing there.

My personal tastes leans toward traditional. Contemporary for me is too cold and clean lines but not much character. Having said that you build what sells for the area and not personal tastes.

Great job on the podcast by the way.

One question that wasn't asked in the "fire round" that I will throw out here I was curious about.

How do you compensate on a ground up build for the amount of time you would have trapped money before seeing a return plus the fact that in some cases building would take a year or longer from buying the dirt to selling off the finished product??

Seems there would be some risk of a cycle shift in value or the selling market during time going by versus a 2 to 3 month flip. I know things are flying off the shelves now but trends can always change and with long lead times can be left holding the bag on product to market. That's one of the big risks in commercial buildings is time to market and the size of the project requires building in phases. It seems the larger the product the more money to be had but also the more money to be lost in risk.

What kind of returns are private investors getting for funding infill building like your projects?? To be simple put in 100k and in one year the return would be to them?? I didn't see that question in the "fire round" either so thought I would put it out there for everyone.

Some good questions, @Joel Owens . There is more time risk in development deals, than in rehab flips. Some of the risk can be addressed, but some of it can't be addressed. When you are talking about larger deals that are a year or two in predeveleopment, and a year or two in construction/selling/leasing, you need to time the cycles. Right now may be late to start on one of those multi-year developments.

With a one year deal, the risk is less, but still there. Here are some of my risk mitigation elements:

  • Buy the property right
  • Use conservative projections
  • Keep some liquidity
  • Have alternative exit options
  • Go as fast as you reasonably can
  • Do not over extend (do more/bigger deals than you should)
  • Stay diligent in watching the market

What else am I missing?

Private money debt investors could expect what is typical on REI backed debt. 7-11%. On equity, that's hard to project with the myriad regulations about what you can and can't do, and can and can't say. I've seen 20-50% unlevered returns.

Originally posted by Bryan A.:
I've been meaning to post more..just been bogged down..as a matter of fact, I think I still need to finish the blogging on a house I sold a year ago!! I think that house looks awesome, Jon. Looks like a rooftop deck maybe? What was the process of weatherproofing? Was the tub cast or the lighter weight option?

The decks are done with torch down. Then wood deck over the top.

The master tub is fiberglass. Not heavy. Around $1000.

Originally posted by Colin L.:
@Jon Klaus love that you're taking some chances with the design. I imagine Austin is a great place to do that. I'm curious what your cost of the stair was in comparison to a standard wood framed stair.

This is one place we went over budget. We spent several thousand on the stairs. We would like to make these standard on some of our future builds. They really create a "wow" factor and set us apart from what other builders are doing. Our contractor has designed a stronger/faster way to make them going forward.

Chapeau M. Klaus!

I now have a new favourite floor to rival walnut and tigerwood :)

I too may be borrowing your tub / shower design.

The cosmetic beauty aside, what nature of efficiency factors did you use? viz. Amount of insulation, windows, grey water, etc.

Originally posted by Roy N.:
Chapeau M. Klaus!

I now have a new favourite floor to rival walnut and tigerwood :)

I too may be borrowing your tub / shower design.

The cosmetic beauty aside, what nature of efficiency factors did you use? viz. Amount of insulation, windows, grey water, etc.

Thanks Roy!

Summer heat is our big energy issue here in TX. We did radiant barrier walls and ceilings, R42 insulation in the ceiling, and the HVAC has a 16 SEER rating. The house is oriented with minimal windows on the south and west, and lots of glass on the east and north. Decent windows, but not super highly insulated. If the market demanded more, we'd do it.

Great home Jon, and great podcast last week. I think you may have mentioned this in the podcast, but how did you GC this build? You, your partner, an employee, outsourced?

Originally posted by @Nate Green :
@Jon Klaus Wow! That house is unbelievably incredible. Beautiful finishes and design. Congratulations!

Thanks a lot, Nate! We really went beyond what we intended and beyond most of the competition, but the market (buyer) rewarded us with a quick sale and good price. My GC admits he went overboard on the staircase, but is taking what he learned to put similar stairs in our next two homes, but with more speed and less materials cost.

I too love the house. My tastes are torn between 1920's craftsman and contemporary, but what sells matters.

Having said that, it seems there's a lot of inertia towards traditional. Was there a debate or any analysis for style?

By the way, prairie modern is what's hot near me. Contemporary seems to sell well in Atlanta as the demographics of in town change.

Well done.

Rick

Originally posted by @Rick Baggenstoss :
I too love the house. My tastes are torn between 1920's craftsman and contemporary, but what sells matters.

Having said that, it seems there's a lot of inertia towards traditional. Was there a debate or any analysis for style?

By the way, prairie modern is what's hot near me. Contemporary seems to sell well in Atlanta as the demographics of in town change.

Well done.

Rick

Believe it or not, it's riskier to spec build traditional in this neighborhood than modern/contemporary. Prairie modern works. Here's one a few blocks away:

It's highly satisfying to develop a new vision/plan, and then execute with little compromise.

Originally posted by @Gerald K. :
@Jon Klaus

Beautiful house. Easy to see how it was snapped up by the buyer really fast. Good job! Seeing a new house come together is really rewarding. I envy you!

Thanks Gerald! Here's a duplex I've got in process nearby:

It's nearly 4000SF on a higher end street one mile from the state capital building. It's my biggest ($ wise) project so far.

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