BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
Back in March 2013, BiggerPockets and J Scott collaborated to release two books -- The Book on Flipping Houses and The Book on Estimating Rehab Costs (check them out here if you haven't already). As part of the book package, J was planning to do a detailed case study of one of his renovations (even more detailed than he does for most of his projects on his blog). We decided that instead of doing a case study only for those who purchased the books, he'd instead do one publicly here on BiggerPockets.
In this thread, J is going to provide a practically day-by-day diary of his first new construction project, from acquisition through sale -- including pictures, spreadsheets, invoices, bids, etc.
We hope you find this valuable! I know that I'm planning on following it closely so I can pick up a thing or two.
1/5/14 Update: The project is complete . . . read on!
2/19/14 Update: We've taken all the content of this thread and converted it into a free ebook for everyone who may be interested. Get your copy here: Diary of a New Construction Project Ebook
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
INTRODUCTION
I'm currently working on my first new construction project in downtown Atlanta (with a partner). While we both have a lot of residential rehab experience under our belts (over 100 projects between us), we have absolutely no new construction experience. The purpose of this thread is to chronicle in as much detail as I can, the process of acquiring an existing house, tearing it down, designing a new house, getting permits, construction of the new residence and finally the staging/listing/sale of the house.
My hope is that this thread will end up being part case study, part diary and (if I don't screw up too badly), part textbook. I plan to provide links to everything that might be useful throughout the process -- pictures, videos, budgets, schedules, plans/drawings, contractor bids, invoices, etc. And if there's anything I don't provide that you want to see, just let me know.
As of this writing, I'm currently about 4 months into this project, but we haven't even started to build yet (you'll see why as we move through the thread). I'm planning to start at the beginning (I've been keeping copious notes), and over the next couple months, I'll try to post updates at least several days per week, and hopefully catch up to real time by the end of the project.
Lastly, I hope this thread will be interactive. There are a lot of BP contributors with new construction experience (Rich Weese, @Karen Margrave, Aaron McGinnis and many others). I hope they'll jump in and provide insight, and I hope others with less experience will ask questions and help us all learn from one another. And again, if there's anything you want me to provide in this thread that I'm not already providing, feel free to ask!
J. based on your current expenditures, have you identified any areas of costs savings for the next new-build?
I think the biggest area for savings is just preparation. I've been very happy with the costs of the individual line items, tasks and trades for this project, and the places where I look back and say to myself, "We spent too much money," are the places where we didn't plan properly.
For example:
1. Not investigating the foundation well enough and finding out -- after we demo'ed the property -- that we needed to remove the entire existing foundation as well. It cost us extra money to send another crew out to demo/dispose of the rest of the foundation, and had we investigated a tiny bit more, we would have known this was needed and could have included it in the original demo bid.
2. They say time is money, and we wasted a lot of time getting our permits on this project (6 months). We eventually decided to go with an "expeditor" who was able to get us to the finish line much more quickly, and had we hired her early on, we likely would have saved several months -- which would have translated to saving money as well.
3. We didn't properly clear the land and cut down trees the first time around, thinking we could work around the existing landscaping more than we actually could. After building the foundation, we realized that two big trees would be in the way of the framing, and we needed to trim those. After framing, we realized that another tree was too close to the property and needed to be cut down. Had we just done all this tree work at the same time (during our initial land clearing), we would have saved money.
There were lots of little situations like this where we didn't realize things up front, and it cost us more to have to go back and fix them. Of course, many of these things we probably couldn't have known the first time around, but other things were just common sense and our own laziness (putting things off and hoping they wouldn't be an issue) contributed to later costs.
I'm sure there will be other areas where I'll look back and think we could have saved money, but this is the biggest area so far.
[b]DAY 64: BAD ASBESTOS NEWS[/b]
Two days from starting demo and we got some bad news today — apparently, the asbestos survey required for demolition indicated that we had a good bit more asbestos in the house than we had figured (mostly in the flooring/drywall). We need to rip it all out before the house is demo’ed, and the total cost is going to be $1800 (that includes the survey/testing).
Another good lesson for us: we should have gotten the asbestos survey BEFORE picking a demo company, so that we could get the asbestos removal work bid by multiple companies…now we’re pretty much locked into our demo company for this one and have to hope $1800 isn't ripping us off.
Just to be sure we're not getting ripped off, we’re going to get a few more bids on this work (even if we don't use the new companies on this job). In the meantime, we’re expecting the asbestos removal to complete in the next day or two by our demo company, and the house will be knocked down in the next few days.
Too bad I just noticed this interesting thread. Thanks for posting it. You can get the asbestos & lead surveys before purchase, and use the results in price negotiations. That survey price was VERY low for 19 samples, and the abatement cost low, so it still come-out well. However, we survey some houses and other buildings where there is noting but framing material and wood sheathing left after the abatement.
Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
13y
J. Thanks for starting this thread. I have only purchased new construction single family homes for my primary and investment homes and it is very interesting to see all the costs that goes into building a home from start to finish. I really appreciate you doing this for all of us to see.
I have a few questions to ask if I may ask.
1) is the cost of lot part of the $67.29/cost square feet? If it is not part of the cost square feet what is the cost of the lot?
2) What are the comps going for in the neighborhood you are building in? I'm curious to know what kind of margin a builder makes in each home they sell.
3) Would you consider developing new single family homes a low risk / high reward business venture with your skills and experience with flipping homes.
4) When you get a construction loan for your project, how much of own money is tied in from start to finish of building home?
Real Estate Investor · Central, TX · Member since 2012 · 479 posts · 165 votes
13y
I looked at your itemized lists and I too thought that everything looked reasonable. I know your extensive experience in rehabbing has helped you with this.
It appears you and your partner are going to do well on this deal. Can't wait to see the finished product and final numbers.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Hey James,
Answers to your questions:
1. No, the lot costs are not part of the construction costs I've been detailing. The lot cost (with the building on it) was $30K. I have a post at the top of Page 2 that details the estimated financial analysis, which includes all aspects of the project.
2. Certainly don't measure what a typical builder is making by this project. I have no idea if our numbers are anywhere close to other builders. That said, we expect resale in the $250-290K range (could be a little higher than the $250-270K we originally anticipated, as the market has improved and the house is a bit bigger than we anticipated).
3. This is part of the reason for this project -- to figure out how new construction differs from renovation, the risks involved, the costs involved, etc. What we're currently finding is that -- unlike with renovation -- the surprises we're seeing are based on our ignorance as opposed to complexities in the house. For an experienced builder, I'm guessing there is very little risk on the cost side, unlike with rehabbing where a surprise renovation task can add considerable cost. The bigger risk with new construction seems to be determining an ARV, especially in areas where there isn't much new construction. The other risk is the longer time-frames to get permits and do the work -- the market can change quickly and longer time frames inherently generate risk in this business.
4. We're paying cash for this one. That said, I'm in the process of learning about construction loans now (we're getting ready to build our primary residence), so once I have a bit more info, I'll write a post on that topic. It's definitely interesting... :)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
DAY 220: STARTING SHEETROCK
First day of sheetrock installation. Given the hot and humid weather in Atlanta these days, we expect sheetrock to take a week, so that's what we'll be doing all next week.
The following week we'll be focused on trim installation and paint, and then the week after that, we'll be doing finish mechanicals, cabinets and flooring.
Some not-too-exciting pics of sheetrock sitting in the house:
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
DAYS 224-225: MOVING QUICKLY
I'm not in town these days (in the process of moving north), but I spoke with my partner this morning who's kicking butt keeping us on schedule (he's by-far the smart one and the productive one of the partnership :-)...
According to him, the sheetrock is drying more quickly then expected, and we're hoping to do final sanding on Friday morning. We'd then prime the walls Friday and Saturday, start trim on Monday, install cabinets on Monday, measure for granite Monday, install granite on Thursday, and build front porch/back deck at some point next week.
By the end of next week, we're hoping to be down to flooring, finish electrical, finish plumbing, tile work and final paint/punch touch-ups on the interior. On the exterior, we should be down to landscaping and some exterior trim work.
Hopefully, we're looking at about 3 more weeks to finish up, which would put us at just over 3 months of construction (with 2-3 weeks lost to bad weather).
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
DAY 226: FINISH SHEETROCK
We substantially finished the sheetrock on Thursday, and plan to kick off priming/painting on Friday. No pics yet of the finished sheetrock, but here's the first and final invoice (right about where we expected...click to enlarge):
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
DAY 227: BUDGET UPDATE
Here's a current budget estimate for this project. We're tracking to about $171,000 in construction costs, or about $64 per square foot (click to enlarge):
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
@J Scott What is the cut off day? I will have to give this some thought, I have several ideas, have to narrow down. What color are neighboring houses? Do you have an address so I can google earth neighborhood?
@J Scott What is the cut off day? I will have to give this some thought, I have several ideas, have to narrow down. What color are neighboring houses? Do you have an address so I can google earth neighborhood?
Reasonable questions...but I'd rather not give out the address just yet...
Cut-off is Monday afternoon, as I believe we'll start painting exterior on Tuesday.
And I'll try to get some pics of neighboring houses and post them!
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
I tried going on to Sherwin Williams site yesterday to look at colors, but couldn't get the color visualizer to work properly. There's a color svelte sage with Dover (white) for trim, that I painted my house in Redding. I've had several people knock on my door and ask the color, and I know one couple actually painted their house that color. Although in all honesty, I wish I had gone with the color that is one shade darker, would have given it more punch. The front door is a orange/red. I think that would look great on your house.
Or..a gray color (a solid medium tone, not to light, not to dark) with white trim. A red door, or if you're not that bold, go with a black door.
Then of course there's always a medium tan color (careful not to get pinkish tone) with white trim, front door a burnished orange color.
Whatever one you choose, I'd say give it enough color so that it has punch, rather than looking like tinted white.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
@J Scott Question for you. Now that you're almost done with the house, are there things you see that you wish you had done differently in the design? Was there anything you changed during construction?
Developer · Billings, MT · Member since 2013 · 19 posts · 7 votes
13y
I've been told here in Montana that all you have to have is a draftsman, the city will review your plans with their engineer to make sure they are up to snuff.
My partner and I are on our second spec build and a lesson we have learned that has saved us some money is that construction material sales places (here locally pro build, thomae lumber, bloedorn lumber) have draftsman and architects that you can utilize for FREE if you buy the majority of your building materials from that yard. Pro Build also has tons of pre designed plans that you can use for free and it is much cheaper to use something like this and have them alter it.
We have also purchased plans from other builders for half the price of original drafting. Here its about 2000 for a new plan and bought our current build plan for 1000 made some changes and the architect cost us about 200. 800 ahead.
My partner and I are on our second spec build and a lesson we have learned that has saved us some money is that construction material sales places (here locally pro build, thomae lumber, bloedorn lumber) have draftsman and architects that you can utilize for FREE if you buy the majority of your building materials from that yard. Pro Build also has tons of pre designed plans that you can use for free and it is much cheaper to use something like this and have them alter it.
Thanks Trenton,
We're using ProBuild for all our dry-in work (framing, sheathing, roofing, siding), and we used their in-house engineers to stamp all our construction docs. Like you said, it's a great resource.
Their lumber yard is pretty reasonably priced as well -- we're using them for all our doors and windows. We found a lower-priced supplier for all our trim, but still like the turn-key aspect of working with those guys.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
DAY 230: PAINTING, CABINETS, TRIM
Looks like my partner on this project (@Todd Whiddon) finally started to get active on BiggerPockets! I highly recommend all the rehabbers out there send him a colleague request; he's a good guy to know. While I'll let him introduce himself if he wants, suffice it to say, Todd has real estate in his blood -- among other real estate ventures, he's done 40-50 rehabs the past few years, including some spec building and development. And his plans for the near future are much bigger.
Anyway, here's the status as of this week...
Apparently, we had a few sheetrock issues late last week, as we were rushing to get paint started. When they sanded on Friday, there was still some wet mud in the corners; those needed to be remudded on Friday afternoon. Our sheetrock guys came back out over the weekend to resand, and our painters spent the weekend priming to be ready for cabinets and trim today.
As of this morning, we're on track for cabinet installation and trim today, with painting continuing through the week. Our granite installer will be out later today to measure for granite tops, and we hope to install granite on Thursday and perhaps start the tile work later this week.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Ooh!! Love those colors! Kinda like one of the combos I liked, but the trim I had was Dover. I like that green. That will look really good Scott! Can't wait to see it.
Ooh!! Love those colors! Kinda like one of the combos I liked, but the trim I had was Dover. I like that green. That will look really good Scott! Can't wait to see it.
@J Scott Question for you. Now that you're almost done with the house, are there things you see that you wish you had done differently in the design? Was there anything you changed during construction?
Normally, I'd have about a million things I wish I had done differently, but on this one, I think I'm so happy that we were able to get through the bulk of the project without any major missteps, that I'm not fretting the small stuff.
I think when all is said and done, I'll have a list of things I would have done differently, but right now, there's nothing major that's popping into my head...