I have a client that has purchase the full building plans for 2 lots that she owns in Elgin Texas. She is looking to me to help her put together the right team of experience contractors and subs to put her home together. Her budget is tight but I am really looking for a consultant.
I'd like to know if there is anyone on BP that has taken on a similar project, if so what kind of stories can you share about your very first one. Im grabbing quotes and have meet with several contractors from foundation layers, electricians, general contractors and framers doesn't seem to intimidating but I shall see.
I have built 3 different homes on spec (speculation). I have done many rehab-to-rent projects and many fix and flips.
As a general rule, when you build a new home you will spend about 110% of your budget and get 80-90% of the features you want. Oh, and it will usually take about 50% longer than expected. Sad but true!
Using a general contractor or builder with a great reputation will help smooth out the process and keep the subs on task and on time. Initially people think they can save time and money by acting as the owner/project manager but it rarely works out! If you don't know the construction process top to bottom you will not be effective getting all the moving parts to work.
Paying a GC or builder (cost-plus 10% or so) can actually save thousands of dollars in the long run. Newbies in this space often go way over budget because of incomplete work, lost time and extra financing costs. Established builders also have much better relationships with suppliers and can get materials cheaper and faster than an owner/builder.
That's just my 2 cents!
Here we go, my pet peve again. Folks understand this. That if you do not have any construction experience, do not personally know the tasks involved, do not have the right relationships or connection to material suppliers, do not know how long things take to get accomplished, do not know engineering requirements, do not know soils or issues involved with working with different soils, do not have experience dealing with city building departments, planning departments or civil engineering processes then building it not for you.
New build projects are for people who have allot of experience and more than enough money to pay for a project to get done. This is one area of real estate where people go bankrupt, get divorced over, or get taken for every penny they have.
Get the message people ! Even those that do have plenty of experience will frequently go as much as 70% over budget and take twice as long to complete a project. This is not an area of real estate I would recommend any newbie ever gets involved with.
Let us say you do decide to take on a project of this kind. There are new construction consulting services and they exist for a good reason. At least take the time to have a talk with one. This is not the type of project you should do with unknown contractors. You should know who you can trust to do the project on budget and according to schedules and understand the processes needed to accomplish these two very important items.
My contractor took too long, My contractor over charged me, My contractor did not put in the finishes I wanted. My contractor did things without my knowing about it or my authority, My contractor................................................................. It can go on and on.
These projects are emotional and very very stressful and they frequently end up costing you more than you are prepared to handle.
Because of the time these projects take allot of things can happen, Workers will get sick or get into an accident on the way to your project. Materials can be delayed before they can be delivered to your job site. Workers can and do frequently get hurt while working on these projects.
Your project will be subject to weather conditions possibly adding to the time required to finish your project. There are so many parts to a new construction project that things can get missed my your inspectors which by the way accept no liability for anything they may miss.
Many things on your plans may require they be witnessed and signed off on my your architect or engineer. They may not be available for when you need them. Your project may require special inspections for which you may not budget for and be surprised to find out those special inspections will cost you between $500.00 to thousands of dollars and that is if you can even find the right kind on special inspector to come out and provide that inspection for you.
How well do you know how to analyze a contract and properly or adequately cost out your entire project?
What if your engineer calculates that you will need to excavate 120 cubic yards of soil and remove it from the job site and then you find out its actually 900 cubic yards that need to be excavated and removed from your job site.
How familiar you are you with calculating or the process of soil erosion and required city standards?
What do you understand about proper lot drainage or checking for easements and how they can affect your project?
Will your project require city consul approval or even a vote from your neighbors?
There is allot to know so I hope you have the time to investigate and verify everything you need to.
I hope I have given you something to think about.
All great advice & we have personally experienced it ALL.
My last build was a comedy of errors that we spent too much time having to rectify because they will ALWAYS try to cut corners & will rarely if ever finish on time.
WE have a number of contractor friends & they are always at the mercy of their subs & temps but their reputation is what ultimately suffers.
We also insist on buying our own supplies to avoid calculated overages walking off the job to another project so be aware of what you are in for it's not for the naive.
Gilbert listed a bunch of specifics.
A high level summary is there are often scopes of work that get forgotten. Couple that with ambiguous or nonexisting scopes of work and you can get in trouble quickly.
I am in the Austin area and can provide some guidance. My background is commercial construction but the steps are the same.
I can put together scopes of work for you.
Gilbert brought up a good point about soil. Elgin is in an area that may have expansive clay. You want to make sure you have a civil engineer or structural engineer properly design the slab and subsurface prep.
I think you should hire a general contractor (that is not me) and then you need a consultant independent of your gc. The consultant is there to help you through the process such as contracts, scopes of work, reviewing payment draws, etc. This is where I can help you.
We also live in the Austin area. I agree with much of what @Gilbert Dominguez says above. Even a 'well-planned' project can go way outside budgets that allow for profits. The fact that designs are provided does not mean the project will be profitable. I have taken on projects already started and, due to intense budget constraints, worked with the designer and engineer to revise back unnecessary design features that added little to value but much to cost. @Hugh Ayles is right about scope of work definition. Without the right team for the construction, it is better to sell the package at a small premium and get something for the project than to loose your shirt trying to salvage a bad one.
New building is certainly not for the faint of heart. This is especially true for anything to requires variances, rezoning, or something out of the ordinary for the city.
Projects often do go over budget. One of the hardest things to manage with independent contractors is TIME in projects. Time is the most expensive element of many builds because if it runs long it can decrease your inventory turns. Try managing that when Austin floods, it rains for a month, or the subs get a better deal from your competitor down the street. You and/or your investors are likely to be unhappy.
A single good builder can be a bid deal. Keep in mind that someone that is excellent with 2 - 5 projects may suck royally with 10. Scaling is tough to do quickly.
Building looks easy, but as many have pointed out above doing it well (on budget, on quality, and on time) is very difficult to do.
Ran into these issues with my parents future home. There home burned down a couple years ago near Dell in Round Rock. They ended up purchasing the lot that they had been renting on with the intention of building a new house or duplex on but got deterred with all the legalities. It is no easy task with new construction especially for the new investor. Best of luck to you sir an hope you document the journey should you decide to take part.
Thanks guys for all the feedback,
Based on what I'm hearing I need to have the client take the amount that she has and use it as a down payment to leverage more cash because this thing can go way over budget and it's better to be safe than sorry. I was thinking about finding some private cash, because the client has about 75-80% of what she needs to get this done but not the credit, and borrowing the additional 25-30% so that we can have a cushion. On top of that I would need to have some type of moratorium for about 6 months on the loan. Does anybody have a guy?
Hi Andre, I can definitely help. Please message me for more info.
Free eBook from BiggerPockets!
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.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.