I don't normally don't post but have decided I am going to start a log of my husband and I venture into building a New construction Spec House. I am still working on my last flip and hope to be done with that soon so I can solely focus on Spec building and new construction. I will say flipping has taught us a lot!! We have been through every thing you can imagine!! I can not tell you how many times we said this is our last flip!! Trying to find good subs, GC's, and houses to flip with any profit at the end has been a challenge. We have done about half in NWI and the rest in Chicago and the burbs of Chicago. We have made some good money on some flips and we have just simply flopped on other one's. Finding reliable, trustworthy GC's and Subs who want to work with you in pricing has been a challenge. Out of the 14 flips I would only use one GC moving forward and a few subs. We have had about 10 different Contractors or GC's thru out the 14 flips that we accomplished. Why are we moving from Flipping to New construction? Here are a few reasons:
1) We have noticed that we do so much work in our flips that people confuse our work for almost new construction and expect everything to be new. Which we are not going to put in a new furnace if the one that is currently there still functions.
2) My design work of what the latest trends are is what really gets people excited and thru the door. But sometimes I am limited in what I can do in a flip due to constrained budgets or unexpected expenses that we didn't catch when we originally bought the house.
3)Our first 6 flips that we did as soon as the 1st showing happened we were made a offer. So close to asking that we accepted and moved on to the next flip even on the 6th one we had 5 offers and accepted 15k over asking. But then we started running into problems with buying correctly and being introduced to other subs and GC's who did not have our best interest in mind but their own. So we hit a bad streak with houses having issues and GC's and subs taking their time to have things completed on time, quality of work, subs not being paid, my husband and I had to much involvement and time spent so we said we have to change strategies.
4) We both work full time jobs so the time we could spend at the job site was limited and hence the reason why you hire a GC but then you start hearing comments "oh it must be nice to work full time jobs, flip houses on the side, and show up here when you want too and do nothing and make all this money!" So envy, jealousy, and simply people try to take advantage of you when and where they can just got overwhelming. We are very nice and trustworthy people and were taken advantage of too many times!!
5)Going into these flips and not knowing all the possibilities of what is exactly wrong and hiring licensed tradesmen and pulling permits with the villages then being told you have to also upgrade this, and this is wrong etc. So you have to pay these subs for all this extra work that the village is requiring and those are expenses you never budgeted for and more time on the books for carrying costs that cut into any profit you were hoping to make.
So I can go on and on but I know the people who have flipped understand and can relate to the above. So that takes me to today....I have approached a couple of builders on possibly partnering on new construction specs. I believe with the design and work ethic my husband and I have that we can bring a quality home that will be all new and relatively spending about the same out of pocket to build new as I was spending on flipping a house that was built in 1962. So the first house that we are building will be approximately 1600 square feet in NWI (Porter County) it will be a 3 bedroom/2.5 Baths two story house. I sat down with the builder and built and designed it from scratch on what I would like the flow, design, bathroom and bedroom sizes to be etc. It will have a upstairs laundry room that I believe adds a great touch and people don't come to expect that in a lower end priced home. We just broke ground last week and I will update numbers and more pics as the project comes along but we are really excited to start our new venture and am hoping for the best. Partnering with a builder who has built homes for the last 20 years and we have personally walked some of his homes under construction currently and some that are on the market currently I think we can bring that difference in design, new technology, and updates that he currently does not have and hopefully grow our JV partnership to many more houses. Any questions or comments please feel free to reply and I will gladly respond to any and all and hopefully we all can learn from this new venture we have started. If your wondering on the partnership we will split profits 50/50 with us funding approximately 65 to 70% of the project. We believe it's fair as we are getting a experienced home builder who has all the same subs for last 15 years and he is getting to build more homes every year and gets to showcase designs that today's customers will want and appreciate!!
I have thought about this myself as inventory is so low right now that finding homes to flip is tough. Ive been making offers for over a month right now with no luck. You will know your costs pretty much up front on the project with few if any surprises. Good Luck!
@Rachel Imhof Wow, so thorough and so great post, I could not agree more with #4, we have government contracts and when you say “we remodel government buildings” the usual reaction will say “oh that’s good money right there”, it is not, we spend efforts and spending a ton of time and money before and after a contract, chasing them and failed bids, then government tells you how much to pay workers, then there’s always that oops factor. Bottom line is not all that glamorous but pays the bills.
I think your idea is great, it requires skill to put together a spec build, design, and sell, not to mention finding the right deal will also be a challenge, the good thing about it is there is less risk of the unforeseen factor aka surprise expense.
I just recently built my own home from the ground up and things have went pretty smooth. Cant be too much different to build a spec house. Building for a customer may have a few more headaches.
@Rachel Imhof , I would like to wave to you as we pass each other while moving in the opposite direction. I will explain, I am a G.C and built homes from the ground up for 10 yrs. After building homes and very large additions in San Francisco and the surrounding Bay Area, I decided to start rehabbing and flipping homes instead. While building homes I dealt with undecided customers, unruly sub contractors and power hungry building inspectors for years. I took all my knowledge I've accumulated over my 30 years being in the construction business and started flipping properties. it started out as a Las Vegas venture but after I caught the bug I expanded to 3 states. Now with 14 flips completed also, I still own my Construction Business here in the Bay Area while doing my investments in Florida, Nevada and California. You would think that being a G.C it would be easy to find and pick out good subs for my flips, not true. I just don't get it, I am fair sometimes overly fair to the tradesmen because I know how hard this type of work can be. All I find is that most are not loyal to a customer who can bring constant work to them. Do to this fact I have to keep a full supply of tools and material in storage units in each area I flip so when the subs decide not to show up anymore I can jump on a plane and go finish the project.
I wish you great success.
@Rachel Imhof Great post! I have thought the same here in Northern California. With such a housing shortage and spending what appears to be similar headaches I would like to try new builds. I know much easier said than done but with all the money you are on the hook for why not a construction loan and give it a whirl. Good luck and let us know how it goes.
Your post lets me know I"m on the right tack...
Just wanted to update where we are at on this new journey. We have broke ground on Thanksgiving week and now as of yesterday we have the first floor framed and will be under roof by the end of the week despite the bitter cold and snow that we have gotten this past week. I will be meeting with the electrician next week. Unlike my other flip I am still working on which is coming up on a year and it is still not at rough or passed any major inspections. Just goes to prove when you partner with the right GC you can make things happen much quicker. I have called my other GC twice this week to understand the game plan on the flip but he cannot even return a phone call which leads me to know for certain there is no one at the house working to get us closer to rough inspections. Very frustrating!! I will keep this updated as we move along and I believe I will have this new construction house completed before I get done with my last flip that had a 13 month start.......
Congrats on the ground up construction. How exciting. I did a build in 2016 that my family moved into and we love having been able to plan and pick everything in the house. And, like you, I feel constrained on what I can do on my flips given the footprint of the homes (built mostly in the 1940's - 1950's) and it's frustrating when a potential buyer "complains" about certain things like they are buying a brand new home.
That being said -- I can't believe that you are 12 months into a flip and haven't even passed rough-in inspection yet. Something is way wrong with that situation, eh?
Best of luck with the build and your future business and thanks for journaling it here for all to see and follow along with. @Rachel Imhof
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