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!
Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
12y
House looks good. Impressive that you got the costs psf down so low on your first house. I hope no flippers in my area are reading this thread and realizing that new construction is actually pretty easy.
Are garages not a mandatory item in that area - or did I just miss the garage entirely?
Investor · Decatur Atlanta, GA · Member since 2011 · 610 posts · 232 votes
12y
@J Scott hey I showed your house to a young couple this weekend. Then finally got around to reading your post and saw your pictures and realized it was your home. Man, you've done an amazing job.
@J Scott hey I showed your house to a young couple this weekend. Then finally got around to reading your post and saw your pictures and realized it was your home. Man, you've done an amazing job.
Kevin -
Do you mean you did a physical showing of the property? If so, I'm sure my wife already called you asking for feedback, but feel free to share it here as well -- both the good and the bad! :-)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
MLS LISTING
We finshed cleaning, staging and listing our new construction project earlier this week. List price: $299,900. That's on the high end of what we'd expect to get, so we'll likely drop that price pretty quickly if we don't get much interest.
Here is a PDF of the MLS listing with all the final pictures:
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
12y
J,
Nice. $61/sq.ft. I never thought that was achievable. Yep, new construction is easier than rehabbing since you don't run into surprises and fix other people's mistake. You did really well keeping the cost down on your first new construction project. So when will you get into mass production of new homes?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 276: BUDGET UPDATE
We're almost done paying all of our invoices, and the remaining few (roof, glass shower door, mirrors, final survey) are pretty easy to estimate. Unless we incur additional expenses throughout the selling process, I'm pretty sure we have a good idea of where the final budget will be.
We're tracking to right about $60/square foot, which is better than I could have ever imagined. It's especially impressive to me, given that we used all mid-range and higher materials -- upgraded cabinets, granite, tile work throughout, high-end trim work, hardwoods, nicer fixtures, etc. It helped that we didn't have to build a garage, which wouldn't have contributed to living square footage, but would have contributed to costs.
Here is a current breakdown of costs (click to enlarge):
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 277: ANALYSIS UPDATE
The house has been on the market for nearly a week, and we haven't gotten a ton of interest so far. I don't know if it's just a slow week for buyers, if the listing isn't compelling enough or if the property is just plain overpriced, but if we don't get much traction in the next week or so, we'll likely lower the price a bit. We also haven't been able to get in touch with the agents who've shown the property to get feedback, so we don't have much to go on as of yet.
The property is listed at $299,900. I don't know what it will sell for (again, a lot of this is new territory for us -- both metaphorically and literally), but we're hoping that we'll ultimately get a contract for at least $270,000. Assuming that's the case, here is how we'd expect our final numbers to shake out:
If these were the actual numbers (no idea if they will be), our total investment (Purchase + Rehab + Holding Costs) would be about $195,000, and our $56,000 profit would represent a 28%+ ROI, which would be fantastic as far as I'm concerned.
Rental Property Investor · Hollis, NH · Member since 2013 · 78 posts · 7 votes
12y
@J Scott It looks awesome. I love it!! Thanks for taking the time to post this thread and updating the progress as it went along.
I wish I would have come across this sooner. I put in an offer on a house a few days ago. I was planning on doing a complete tear down and rebuild (just keeping the foundation). I put in a low-ball offer because I wasn't too comfortable with my estimates. After reading this thread, turns out I probably wasn't that far off, but someone else put in a higher offer, so I didn't get it.
There is so much in here to learn. Very inspiring!
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
12y
Congrats on the awesome job!
Couple questions:
Are you or your partner licensed builders? In my state, it's a requirement if building a house that you won't occupy.
I saw on the listing sheet that it's a Supra lockbox. Is that the electronic key version and are those common in your area? We tried those back in the 90's and people who used them had limited showings due to the lack of interest in the product. They ended up going out like Freddie Prinze Jr.
Are you or your partner licensed builders? In my state, it's a requirement if building a house that you won't occupy.
I saw on the listing sheet that it's a Supra lockbox. Is that the electronic key version and are those common in your area? We tried those back in the 90's and people who used them had limited showings due to the lack of interest in the product. They ended up going out like Freddie Prinze Jr.
My partner is a licensed General Contractor (though he only uses the license for his own projects).
And yes, Supra is the electronic lockbox that agent use. In Atlanta, nearly 100% of agents have electronic keys. It's very rare that I see a retail listing these days that doesn't have Supra access.
If you take a look at the analysis I posted above, the "Purchase Price" section covers the cost of the land and the house that originally sat on it. We paid $30,000 for the lot/house.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 286: UPDATE
We've had very little traffic through the property since we listed it, so it's time for a price drop. We're currently at $297,000 and will likely go down to somewhere in the $250-275K range. We'll be looking at comps again today to see where to go, and will be contacting local agents who sell in the area.
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
12y
J,
That's a little disheartening. How's the market in your neck of the woods? How's the inventory? Did you see a slow down after the 1% interest rate spike in May?
Are you or your partner licensed builders? In my state, it's a requirement if building a house that you won't occupy.
I saw on the listing sheet that it's a Supra lockbox. Is that the electronic key version and are those common in your area? We tried those back in the 90's and people who used them had limited showings due to the lack of interest in the product. They ended up going out like Freddie Prinze Jr.
The other reason is they don't work great in freezing cold tempartures.
We've had very little traffic through the property since we listed it, so it's time for a price drop. We're currently at $297,000 and will likely go down to somewhere in the $250-275K range. We'll be looking at comps again today to see where to go, and will be contacting local agents who sell in the area.
I'll post more when we decide how to proceed...
To follow-up this morning's update, my wife just did some research on the MLS, and I just sent the following message to our partner (which gives some additional detail):
Okay, this is what Carol found doing some basic research:
The minimum anything renovated sells for in the area is $225K. This includes any size house, including 1- and 2-bedrooms. So, this should be our absolute low mark.
We hit the market a couple months too late. Had we hit in June, we likely would have gotten offers in the $290K+ range, judging by other stuff that sold in the area.
Our street is less desirable and then others in the area, so it’s possible that this is a factor…but based on the following, we don’t think it’s the biggest factor…
It appears that most recently sold in the area is selling for near, at or above list price. It’s likely that buyer’s agents are assuming that sellers won’t sell much below list and when they see our $297K price tag, they assume their buyer would have to offer in that range to get the house. That says we should be pricing it about where we think it’s worth and should expect offers that are reasonably close to list (as opposed to thinking we’ll get low-balled). So, while our anticipated sales price may not be way off, our listing price likely is.
We looked at the reverse prospecting list, and it looks like we’ve gotten very few views on the listing in the past 2 weeks. This tells us that there just aren’t a whole lot of buyers out there (buyers will typically look at higher-priced listings to compare and with so few looks, that says there just aren’t a lot of buyers right now).
Carol thinks $275K (or something in that area) is the right place to be for now. Again, with few buyers out there, we don’t expect a flood of activity, but that’s less indicative of our product and more indicative of the market.
Carol is still investigating to decide if she should try an email blast before a price drop or if we should just drop today (or something else), but ultimately if we need to drop the price, it looks like $275K is where we should go next.
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
12y
The street is probably your greatest challenge. You'll need to get nearby lookers (Kirkwood, East Lake, East Atlanta) to consider your location. You should do well if you get them there. Price isn't as much the issue (even though you might be a tad high).
Maybe a brokers caravan or an incentive for showing would help. Featured listing on Zillow?
The street is probably your greatest challenge. You'll need to get nearby lookers (Kirkwood, East Lake, East Atlanta) to consider your location. You should do well if you get them there. Price isn't as much the issue (even though you might be a tad high).
Maybe a brokers caravan or an incentive for showing would help. Featured listing on Zillow?
100% agree with your assessment Rick...
We dropped the price the price to $274,700 yesterday and will be offering a buyer agent bonus (though we haven't decided on exactly how much)...
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 288: INSPECTIONS
We dropped the price the other day to $274,700, offered a $1000 bonus to the buyers agents, and we already have a couple showings lined up for the weekend...fingers crossed...
We also started getting some of our final city inspections. We've already passed electrical, plumbing and HVAC. Today, we got sign off from the arborist.
But, we failed our final C.O. inspection. Two minor issues -- the handrail on the back deck stairs isn't to code (too narrow, I believe my partner said) and we need a hurricane strap under the deck. Inspector said that once we get those two things taken care of, the final sign-off should be quick and easy.
We also need to get final sign-off on our site plan, presumably by the storm water management department. We had to install a "rain garden" in the back yard to capture the first 1% of rain water run-off from the structure; this is a new requirement in Atlanta, and as far as I know, we're one of the first residential projects that's been subject to this requirement.
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
12y
Spectacular job on the house!
Its been very interesting and informative watching the progress and updates, appreciate you taking the time to do this and share it with the BP world.
Interesting that you mention the "slowness" of the market. In a meeting with my realtor today, he commented how unusually slow the market has been in October. He has a team of with three buyers agents, said not only his agents have noticed it, but he is hearing it from other top agents in the area.
We put two houses on the market last weekend, one of the houses, not one scheduled showing the first weekend, VERY unusual, typical is 3-7.
Interesting comment about expectations of "lowballing". It is rare that we get an offer significantly below list price. We had one a few month ago priced at 169,000, testing the upper limits for the neighborhood. Had numerous comments about it being over priced from buyers agents. 20+ showings in a three week period. We dropped the price to 159,000. Got an offer for 157,000 - 3k closing contributions. Sold at 159,000, 3k in closing.
I think we as rehabbers expect that retail buyers will offer what they are willing to pay, but in my experience most are uncomfortable offering significantly less.