New Spec Coastal North Carolina

61 Replies

Ok, I am brand new here and have spent the last 4hrs (at least) reading diaries and listening to the podcast episodes at the same time. I am so impressed with the complete openness in this community, it is truly amazing! 

I am located in Carolina Beach, NC (south of Wilmington, NC) and am just starting out on my own as a new home builder. I have been in construction for over 25yrs, and spent the last 3+ yrs as a project manager where I managed 150+ new homes and townhomes. A couple of months ago, my position as Project Manager was eliminated, and I was let go. I had already seen this was coming, I just thought I had until next year. 

This put me in panic mode, and I immediately started working on getting started. I had no plans designed, no funding, and no cash. Because I had foreseen my making this step eventually, I had pitched my ideas out to some friends with connections in the private investment realm. Nothing had come about by that at this point. 

As soon as I lost my job, I took a hard look at what little bit of cash I had and decided I could survive for a few months and decided to go full speed ahead at making this happen. I started my LLC, invested in a new design, researched competitive market analysis for where I wanted to live, etc...

I knew I wouldn't be able to get traditional financing, so continued courting private funding options. I finalized my plans and put the entire project out to bid. Armed with all this data, it made my project an easier sell. 

Long story (and helluva roller coaster ride), I partnered with an investor and we secured funding for my first three specs, including lots, last week. 

My plan is called "The Aruba", rendering and floorplans:

I have so much more to tell, but for now I will leave you with this:

Lot Cost: $91,500 (it's 5 blocks to ocean, yet out of flood zone, prime lots)

Construction Cost: $185,00 (just under $110/ft for build, I may be able to get that to $100/ft)

Sale Price: $359,900

I plan on closing on the lots in a few weeks, then starting 3 in a row (one every 30 days). 

Ultimately, I have a goal to buy and hold with my profits over my overhead/bills, actually I like to call it a build and hold. Areas I will likely do this will be off the beach, lots $30-$50k, build costs $80/ft, ultimately with no debt initially, so one per year starting in 2016. 

I look forward to learning from you all, and thanks to all of you for creating such a great community and sharing your stories!

@Keith Bloemendaal  congrats on the new venture, the design and overcoming the funding hurdle.  The rendering looks great. Would love to check it out when i am there this summer.

@Keith Bloemendaal  Sorry about your job, but hey that opened up doors for new opportunities. Your project looks awesome! 

Originally posted by @Derek B. :

@Keith Bloemendaal congrats on the new venture, the design and overcoming the funding hurdle.  The rendering looks great. Would love to check it out when i am there this summer.

 Thanks, I'd be happy to show you my homes when you come down in the summer!

Originally posted by @Roy C. :

@Keith Bloemendaal Sorry about your job, but hey that opened up doors for new opportunities. Your project looks awesome! 

 Thanks Roy, I look at losing my job as a blessing now, who knows how long it may have taken me if I had solid paychecks coming in!

How I Secured My Funding

As most of you know, securing funding for a project as a newbie is difficult and daunting. I knew my credit, cash, and experience (new contractor on my own) wouldn't even be worth going to the bank with. Private money would be my route, and I knew that from the start. 

I had a friend that was on the inside of a group of people that invested in companies. I presented him my project and met with him several times. He pitched it to at least a dozen investors, but these people/groups were more in the VC type investments, they wanted a piece of my company, and more than half the profits on most cases. Needless to say, I walked away from every single one of them. 

All of this was going on before I lost my job, so I wasn't too upset, I still had a job, and because I still had a job, I wasn't overly worried. 

Then I lost my job..... panic mode.

I had begun talking with someone a close friend of mine introduced me to. This guy was interested in diversifying where he was putting his money so I sent him about 30 pages of market analysis, budgetary numbers, comps in the area (new construction), avg DOM, my plans, etc.. Everything I could possibly come up with and had gathered over the past several months, I sent. 

Then I waited... and waited....

Finally he calls me up and wants to meet (he was in Raleigh). Him and his wife were interested and wanted to come see the lots I was looking at and have a sit down. 

We looked at the property and some new homes going up in the area, then had lunch and they asked me a bunch of questions (experience, goals, etc..) Basically, my investor was interested, I just had to sell it to his wife. 

Well, I did. A couple of days later, he called and said lets figure out an agreement that works for all of us. 

Hybrid Funding

After several more meetings, my investor/partner (more on the partnership later) decided we would use a combination of cash (his) and construction lending from a bank. We started talking to some bankers I had built relationships with as the Project Manager at my previous job, none were working out and one even told my investor we were in a housing bubble again?!?!?!? 

I finally talked to a small banker I knew and had worked with, he agreed to meet and discuss. After going over all the numbers, my investors financials, etc... he approved us for 3 specs. 

So, basically my investor is putting up $400k and the bank is committing a little over $500k. Not bad for a newbie with no credit and no money huh? We plan on starting three, in phases, and starting a new one every time one goes under contract.

More on the partnership in the next post... Have a great weekend!

@Keith Bloemendaal  

Man that is absolutely awesome! Losing that job was a blessing in disguise. The rendering looks beautiful as well. I would definitely not mind having one of those as a vacation home. You're well on your way to being a BiggerPockets success story. I'll be following this thread for updates for sure. Keep us in the loop on your progress!

@Michael Jobe  Thanks! I am new to this forum, but I love it! I was inspired to do this after reading a couple of other "diary" type posts, and am looking forward to sharing my story as I build this first home. 

Partnership/Investor 

As I already stated, I had been shopping my new builds around for a few months and finally landed an investor/partner. Having been a project manager for a decent sized builder ($10M per year), I understood financing for new homes, and that it isn't always easy to come by. You can forget about and of the national chain banks. We worked mostly with credit unions,community banks, and private money. 

Being that I was pretty much broke, my credit wasn't all that good (low 600's), which is another story from rebounding after losing my plumbing business when the market crashed, I knew I needed a private investor to fund my projects. 

I had offers to partner and take 70% of my building company, no thanks. The agreement and partner I finally got agreed we would start a completely separate LLC and be partners. That company would be the landholder and investor. I own 50% of it, so does he.

We had some pretty simple terms to discuss, and we agreed completely on all of them, so that was a good start. One of them, and maybe the most important one, was that if one of us wanted out, that's it.... we would finish whatever projects we had started, sell off all property and dissolve the partnership. Essentially, partnerships agreements typically have a clause that says majority rules. Since it was just 2 of us, one person creates that majority, and we agree on that. 

Another term we completely agreed upon, he would handle the financials, I would build homes. My partner just happens to be a savvy investor and a conservative financial pro. I am completely good with that as well!

A new relationship was born. LLC is set up, bank accounts are being set up, and I hope to put my lots under contract next week.

Picking up my little girl tomorrow and have her the rest of the week for Thanksgiving, much to be thankful for. Everyone have a great Thanksgiving. 

@Keith Bloemendaal  

Hard to find a much better partner than a financial pro/established investor! You've definitely got a lot to be thankful for. I'll be anxiously awaiting your next update.

New Update:

Meeting at 10am with the land owner for the lots I am trying to purchase. I am going in at $85k per lot, they are asking $91.5k. In my few phone conversations with them, they seem unwilling to negotiate and don't care that I am buying 3 lots for cash, so we will see how it goes. I will either be having a martini with blue cheese stuffed olives with lunch, or iced tea ;-)

These are the lots my partner and I want, the value is there at full price, but if I can get them cheaper obviously it's better for my bottom line. Being project manager for the last several years, I have seen and signed over 120 OTP's, but always on the selling side. Let's see how good my negotiating is for the buying side. No realtors involved other than the land owner is a realtor, but only sells his own land (he has a ton here). 

So, my plan is to have the lots under contract TODAY. Get surveys done next week and get submitted for permits asap. We will have a dual closing for the lots and the construction loan at the same time to hopefully save on closing costs. By the time we close (30 days or less) I will have permit in hand and can break ground immediately. 

Congrats and good luck!

Ok, lots are under contract, they refused to budge from asking price (I was prepared for that) and mentioned lots will most likely go up in price after the 1st of the year. 

Regardless, they are under contract and I will be meeting tomorrow with Realtor to get some premarketing in place. 

Originally posted by @Keith Bloemendaal :

Ok, lots are under contract, they refused to budge from asking price (I was prepared for that) and mentioned lots will most likely go up in price after the 1st of the year. 

Regardless, they are under contract and I will be meeting tomorrow with Realtor to get some premarketing in place. 

 Congrats. Excited to follow along.

@Keith Bloemendaal   gotta say, great job man!  I am pumped just reading this!  Looking forward to hearing more!

Sir you cost is too high, consider 10% just to sell the property, you margin is to small.

Originally posted by @Morry Eghbal :

Sir you cost is too high, consider 10% just to sell the property, you margin is to small.

 Hmmm, according to my numbers, We should clear $60k on the home, after fees, closing etc... 

Just a quick update:

First of all, I want to wish everyone a Merry Christmas! 

Had some slow progress the last couple of weeks trying to get the operating agreement completed for my partnership LLC. Lawyers and accountants sure do make simple things complicated! We finally completed it late yesterday and signature pages are being Fed Ex'd to me today. We have a closing date of Jan 6th for the 3 lots and my first construction loan for the spec home, I doubt we will make that but hopefully we can close that same week.

I am awaiting my plot plan to come back and will get my permit submitted as soon as it comes in. I also have crews lined up to clear all three lots the day after we close (lots are heavily wooded, see image below) and am working on my project schedule. I am also working on my second spec design to hopefully start 30-60 days after this one begins. 

@Keith Bloemendaal  

Merry Christmas indeed! I'm happy to hear that the ball is still rolling for you on this project. Gotta love the attorneys & accountants...can't live with them; can't live without them. Are you using your own crews or a tree company to clear out that forest?

Originally posted by @Michael Jobe :

@Keith Bloemendaal 

Merry Christmas indeed! I'm happy to hear that the ball is still rolling for you on this project. Gotta love the attorneys & accountants...can't live with them; can't live without them. Are you using your own crews or a tree company to clear out that forest?

 I have a clearing subcontractor. Merry Christmas to you as well!

Thanks for journaling this experience- I look forward to hearing what comes next!

Always Double Check Your Plot Plans

Below is a screenshot of my plot I received yesterday. I ALWAYS double check them, and I have used this same surveyor for over 150 properties, but anyone can make mistakes. 

My lot(s) I just purchased allow for setbacks of:

Front: 20'

Rear: 10'

Sides 7.5'

These lots are small, so I always move the structure as far forward as possible to give more backyard. He placed my home at 25' setback which only left ~17' back yard, moving 5' forward may not sound like much, but it is, not only does it open the back yard up, it saves me 5' of dbl driveway concrete costs. 

I sent this back with my comments and should receive back today. 

Putting this together to submit for permit hopefully this week. 

Ok, after getting the closing attorney everything she needed, we now have a closing date of 1-9-15, next Friday. 

I have everything I need to submit permit and will likely submit Monday, that should get me my permit about 1 week after I close, which works fine since I will need to clear and grade and can form the slab before permit is issued.

I received my plot with some mistakes so I sent it back with comments (always double check setbacks and measurements). Final plot is below. 

So far, it's a good start to 2015! I will pot when I get the permit submitted Monday just for documentation purposes.  

Disaster averted today. I am supposed to be closing at 1pm this Friday on the lots, and have scheduled excavator and crew to clear the lots starting next Monday, so I decided to get my building permits submitted this morning, and while I was there I also filled out the clearing/grading permit application, which is really just a formality with no fee, just to let them know you are clearing. 

I hadn't even left the building before getting a call from the head planner informing me the lots I was applying to clear were located in a "potential" wetland. He informed me I could call a private environmental consultant who could have it verified and mitigated or approved from the Army Corps of Engineering. 

I then called the consultant, he informed me it could take up to 2 mos to get the Corps to approve it. Obviously that wasn't what I wanted to hear. 

Next I called my partner who lives out of town and informed him of the hiccup. I told him rather than buy these lots and be held up, I wanted to approach the seller and amend the contract to 3 lots outside of this potential wetland, that way we could still get started right away and only be held up an extra week. 

Everyone agreed on that and my partner is heading down tomorrow to walk some lots with me. 

Many phone calls later, the environmental consultant is meeting me in the morning and after looking at the aerials and topography he believes he can get the Corps to approve, but it still may take a month or longer. 

I had an idea after this call, what if we get the seller to extend the due diligence period for 30 more days so I can keep these lots under contract and just purchase one other lot that is verified not in the wetland area. My partner agreed to purchase 3 lots cash, but when we set up the construction loan we realized the bank would take that lot down anyway so we would be left with 2 lots paid for, why not buy one lot under the construction loan by itself, then buy these three when the wet issue resolves, giving us 4 lots. 

The other part of this is that the seller has been pretty clear that prices are going up after the "family meeting" which typically happens after the first of the year, given our market, I'd say at least $10k increase, and possibly $20k. This way, I keep my 3 lots locked in at current price, and get another one at current price, saving me at least $10k later. 

Anyway, I need a bourbon after this long day, I'll update more tomorrow after my meetings.  

@Keith Bloemendaal  

Happy Monday! After a day like today, the rest of the week should be a breeze for you. Hopefully the seller is willing to extend the due diligence period out another 30 days so you can clear up any potential issues. Just make sure that the head planner doesn't have an environmental consulting business on the side and using the "potential" wetland thing to boost his 1Q profits!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you