New Construction in Rochester NY

2 Replies

I currently own 3 building lots in the suburbs of Rochester, NY in the Town of Henrietta. They're all on the same street of my home and a couple of my rental properties.  I'm exploring building rentals on these lots and wanted to see if anyone in the area has experience in this little niche. My intention would be to build and hold. 

My rentals in the neighborhood do quite well, and my rough numbers indicate that I can build a new rental for approximately the cost of buying a "used" at retail prices home in the neighborhood. In fact there are two other builders/investors doing the same type of infill construction in the neighborhood and holding them as rentals.  I've spoken with these builders and we've tossed around the idea of working together on the project, but haven't taken the discussion too far. 

Does anyone else in this community have experience in a project like this?

I work for a national commercial real estate developer as a construction project manager so I'm well versed in the construction industry - I've just never dipped my toes into small scale residential new construction . Locally I have good connections with engineering firms, surveyors, contractors, financing etc. My next steps are to get plans done for the house I'll build (x3) and get solid bid numbers for the various parts of the project together. 

There are a couple of very specific pockets in the region where I could see this model work very well.

Maybe it's your connections that allow things to work out, but when I've run the numbers on doing new construction as rentals, it's never worked out to something I wanted to put my money into. And that's with building a 4 unit building on land I already own outright (it was thrown in as a sweetener on another deal.) I don't invest in SFRs in this area at all, because they're just not worth the hassle to me. 

I'm not saying your numbers are wrong, or that it's a bad idea - but it's one I've explored and I've never been able to see how to make it work in the long term (which is all I care about.) I'm also not an expert in Henrietta, which you obviously know fairly well, so that could make a big difference as well. 

For the area, I know Henrietta is still doing very well, and all market indicators are good, so I expect new construction to continue out that way. Have you tracked the value of your lots at all? You might be able to hang onto those a while longer before selling them off to a different developer for a decent profit as an alternative to managing a couple of new construction projects and rental units. Then again, considering your profession, you could probably do it in your sleep!

Thanks Jason. The lots probably wouldn't be worth it to anyone other than the two guys I mentioned who are already building in the neighborhood. They may be interested as well. It doesn't seem to work out in most areas around Rochester unless you are going for a real large scale project. The lots are all in the immediate neighborhood of RIT where the demand for single family rentals within walking distance of campus is really high, and there's very few of them which drives the rents up quite a bit. 

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