Big Profits from New Construction SFR Build in Cape Coral, FL

[Trevor Fleck]

Investment Info:

New Construction - Single Family Residential 

Purchase price: $238,000
Cash invested: $23,800

I worked with Rent to Retirement (RTR) to identify a builder, purchase a lot, and construct a 4 bed/2 bath, 1,536 sq ft SFR home in Cape Coral, FL. I purchased the canal lot in NW Cape Coral in February of 2021 for $11,500 and the actual construction cost was $226,500 at the time. My construction contract was signed April 1, 2021. Certificate of Occupancy was received 14 1/2 months later around June 15th. I listed the property and have it under contract for $377,500. 

What made you interested in investing in this type of deal?

The combination of cash flow (if I chose to rent), high likelihood of appreciation, and instant equity since RTR was able to use their client volume to negotiate construction costs far below what an individual investor could find on the market. I also liked the idea of virtually no maintenance and a higher likelihood of attracting a good tenant. 

How did you find this deal and how did you negotiate it?

Through Rent to Retirement's team

How did you finance this deal?

Private Loan with 10% down

How did you add value to the deal?

By leveraging RTR's network and financing the construction costs for the builder, I was able to construct for well below market build costs and walk away with over 6 figures in equity. 

What was the outcome?

I had an enviable choice of renting at roughly $2,600/month (I had initially expected $1,800 when construction started over a year ago) or sell and walk away with over $100k. I took the cash and grossed nearly $140k that I'll 1031 into more RTR opportunities!

Lessons learned? Challenges?

New construction can be challenging - especially given supply chain issues, materials price volatility, labor shortages, and local/state government permitting delays caused by COVID 19. The rewards are absolutely worth it, but investors looking at new construction should know there will be delays these days no matter where they invest.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

As always, Zach Lemaster and the team at RTR provided an incredible investment opportunity along with ongoing support and strategic planning. I'm light years ahead of where I would be otherwise in my real estate financial independence journey thanks to them. My realtor, Peter Davis with John R Wood properties has also been a joy to work with. I highly recommend!

[Zach Lemaster]

@Trevor Fleck

Thanks for sharing Trevor!!  Congrats on successfully completing this deal.  We all know the delays of construction was not enjoyable to experience, but it was worth the wait with a huge win ultimately!

[Don Miller]

@Trevor Fleck
Congratulations!  The property looks great; I was excited to see it go under contract the other day.  I appreciate your encouragement and insight in regard to the area and R2R late last year and since that time.  Your success with this build definitely keeps me motivated through the grind of the permitting/construction process.  I'm eager to see your continued success in Cape Coral and where it takes you.

[Trevor Fleck]

Thanks so much for the kind comment @Don Miller. Can't wait to see where you end up once you have your new build under your belt. 

[Pretty Khare]

Quote from @Trevor Fleck:

Thanks so much for the kind comment @Don Miller. Can't wait to see where you end up once you have your new build under your belt. 

Thanks for sharing your success, Trevor. I am so happy to see that you had an awesome ROI on this deal. Hope you get similar ROI (or better) on your other properties that are under construction in Cape Coral.

Curious how you made the decision between renting out vs selling?

[Peter Davis]

Thanks Trevor! It's been my pleasure!

[Ruchit Patel]

Thanks for sharing  Trevor. Congratulations on the big fish.

Can I ask about your motivation to sell and not to rent? Do you mind sharing your plans with that big paycheck you have!? 

--Ruchit

[Olan Marbun]

Trevor,

Congratulations! I'm so happy your deal was a success and I wish you all the best with your other Cape Coral projects!! It's reassuring to hear that these projects can eventually be completed. I'm hoping my projects will one day be finished.

I also went through Rent to Retirement. Unfortunately, my experience has been the total opposite. I signed my construction contract on 4/21/21. As of 8/10/22 (almost 16 months later) we still haven't gotten my construction permit approved! It has been a very frustrating process and Rent to Retirement has been of zero support to me the whole step of the way. They pretty much turned a cold shoulder to me and said figure it out myself with the construction company they set me up with. 

I  just thought other readers should be aware that for every Rent to Retirment success story there are negative ones. 

[Zach Lemaster]

@Olan Marbun

As you know, we are not your builder that you hired & entered into a contract directly with.  We present the best investment opportunities throughout the country to our investor database based on where we feel excellent opportunity is.  We are always here to advise throughout the process as much as needed (assuming you reach out), but you will need to take responsibility to communicate with your builder directly to get updates.  If you are having trouble getting updates from the builder, then please, by all means, reach out so we can assist you.  I just looked through my email history and I do not have a single email from you asking to assist.  RTR is not the one that will be providing build updates to you, or that is in control of the progress of your build.  Now, all this being said, if you would still like some assistance or guidance I encourage you to email me directly as I have always stated.  You are the investor hiring the builder, so you do need to take responsibility in communicating with your builder appropriately to see this through.

Let's look at the big picture for you.  Here are the facts:

-Yes, the permitting process has taken much longer than anyone anticipated & it hasn't gotten any better.  Unfortunately, much of this is in the hands of the city.  You can track this online to see exactly where things are at in terms of progress.  If they are waiting for the builder to turn in items, then you can remind your builder to do so.

-The lot you purchased is probably worth 2-3X what you paid for it. That means if you decided you wanted to cancel this build and just be done with it you could likely sell your lot for a large gain still making a significant return on your capital! Over 100% ROI on land is not a bad position to be in. I don't see how this is a negative experience...

-The cost to build the home that you have a contract for is extremely below market value allowing into the 6 figures of equity when the home is completed.

Ultimately you are in a very good position.  You have a choice to continue the process to wait for the home to be constructed for a large equity position when it is, or you can decide not to proceed and still have a significant amount of equity in the land you purchased to build on.  Either way, you are in a good position & you have choices.  We are all aware that SWFL building is somewhat of a nightmare right now with permitting delays, health inspection delays, etc.  That means the process will take much longer than anticipated.  This is the exact same situation with my own personal builds there.  Scott has shared resources with you on how to look up your permit status on the city site & what the expectations are in terms of contacting your builder to get an update.  If you feel stuck, then you simply need to communicate this to us and we can provide some assistance.  We understand you are frustrated about the timeline as we all are, but this does not mean you are in bad position from an investment perspective.  Things are just taking longer than expected.

After investing in this area for a few years now, this is what I can tell you after seeing many completed projects.  New construction will most definitely take longer than expected.  This is a combination of city permitting, health inspection & survey delays.  This is also on the builder as well in many cases when they do not remedy permitting delays in a timely manner.  So either way, builds will take longer, but the market value and rents are also much higher than expected (significantly)!  We originally projected these properties to rent out around $1,800, and now they are renting for ~$2,500.  We projected they would have ~$30k of equity when completed, but we are seeing them well over $100K of equity now due to the market & demand for housing in this area.  No one is happy about the process, but everyone is happy once the homes are completed and they see the results!  Please reach out directly if you'd like to discuss further or review your options.

[Don Miller]

@Olan Marbun
16 months of planning, surveys, and permitting is definitely the most extreme I've heard thus far.
For the sake of transparency, can I ask who your builder is and what they have said about such major delays with your permits?

[Dmitriy Fomichenko]

Congratulations!

[Olan Marbun]

@Zach Lemaster

Thank you Zach for promptly reaching out to me about my situation. Our phone conversation this morning was very helpful and cleared some things up for me. I can tell that you truly care about your Rent to Retirement clients and us having successful outcomes. This is my first new build and it has definitely been a learning experience. It's great to know that I can now reach out to you directly for any guidance with these projects. I do agree that once these projects are finally complete it will be a very nice ROI. I look forward to working with you on this and hopefully more future projects.

[Peter Davis]

There was a story on the local news here in SW Florida last Friday night that Cape Coral has shut down its permit counter on Fridays to work through the backlog of over 7,000 permits in processing, and they're planning to hire 20 new employees to assist. I wish they had done this a year ago but hopefully it will help. I have several clients that have been waiting many weeks for their CO's from the city. It reminds me of the classic film Casablanca where everyone is seeking and/or waiting for their letters of transit to leave occupied North Africa. Fingers crossed.

[Bethany Primeaux]

Trevor its so exciting to hear of your sale. We are still in the preconstruction phase… patiently waiting, lol. Although its taking longer than we had hoped, your success gives me reason to still be excited about the process.