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 · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
12y
"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."
What can I say. You're special. I believe you meant the first 1 inch of rain water. Here in my neck of the woods, they want us to capture the first 2 inches of rain water on-site.
Jon,
Same with our market. It has slowed after the 1% spike in interest rate in late May early June. However, our market was on fire since early 2012 and it kept going and going till June of this year. It didn't slow down at all through the winter. History indicates that things should pick up in Spring 2014. We'll see.
What can I say. You're special. I believe you meant the first 1 inch of rain water. Here in my neck of the woods, they want us to capture the first 2 inches of rain water on-site.
Whoops! Yes, that's exactly what I meant -- the first 1"...thanks Minh!
Investor · Midwest, USA · Member since 2012 · 204 posts · 33 votes
12y
In my market, to sell a $250k to $275k house, you have to pay $40k to $50k for the site. This drops the profit % down to about 10% which is just too risky for my blood. It sure doesnt take much in cost overruns or a soft market for 10% to turn into 0%.
In my market, to sell a $250k to $275k house, you have to pay $40k to $50k for the site. This drops the profit % down to about 10% which is just too risky for my blood. It sure doesnt take much in cost overruns or a soft market for 10% to turn into 0%.
Hey Larry,
Yup, new construction isn't something you're going to want to try to tackle if you're not confident about your building costs or -- at very least -- are willing to take a risk. That said, it's a lot easier to estimate new construction (once you have experience) than it is to estimate rehabbing distressed properties.
After this project, it's not too tough to estimate build costs solely based on the square footage. Certainly there are other factors, but those aren't too difficult to account for once you have a per-square-foot number.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 299: C.O. IN HAND
Since the price drop last week, we've had several showings on the house. The consistent feedback is that the neighborhood is a turn off and the interior of the house is awesome. The inconsistent feedback is on the exterior of the house -- while some buyers think it's perfectly fine (nothing exceptional), we had one serious buyer who thought the exterior was very unappealing.
Anyway, we're still collecting feedback from the weekend showings, and as of now, we still have no offers.
The area is a mix of very old houses (1920s-1950s) interspersed with major rehabs and new construction (tear-downs that were rebuilt). The houses on either side of this one are old (worth less than $100K); the one across the street was built in 2007. One street over has a few new builds as well. The new builds and the major rehabs have been selling in the $230-300K range.
Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
12y
This is common in infill development. It's the same for my area. We're building 500k-600k spec homes next to some eyesores that need to be 'taken care of' :)
This is common in infill development. It's the same for my area. We're building 500k-600k spec homes next to some eyesores that need to be 'taken care of' :)
And just the same where we are building in Austin.
Investor · West Bloomfield, MI · Member since 2009 · 358 posts · 306 votes
12y
And in the Detroit suburb we're building in. The numbers only work in my area if the new builds are selling for at least 4X or more than what you have to pay for the house you're going to knock down. Inherently then, you'll have blocks with houses that sell for $100K or less next to houses that sell for $400K or more.
And in the Detroit suburb we're building in. The numbers only work in my area if the new builds are selling for at least 4X or more than what you have to pay for the house you're going to knock down. Inherently then, you'll have blocks with houses that sell for $100K or less next to houses that sell for $400K or more.
And in the Detroit suburb we're building in. The numbers only work in my area if the new builds are selling for at least 4X or more than what you have to pay for the house you're going to knock down. Inherently then, you'll have blocks with houses that sell for $100K or less next to houses that sell for $400K or more.
In the Denver neighborhood I concentrate on, we are paying 250-280k for a scrape on a 33ft wide lot, and selling for about 600k, so we are just over 2x what we pay. These things are regional and its wild to see how different everyone's markets are, and how they can still be successful.
I love this site, and how much info everyone is willing to share with the community.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
DAY 319: PRICE DROP / FINAL BUDGET
We're finally starting to get some more traffic through this house (we've seen more buyer traffic on all our houses), and thought it would be a good idea to refresh the MLS listing and try to get some renewed (and new) interest. So, we dropped the list price from $274,700 to $269,900 -- and are offering a $1000 bonus to any agent who can close with a full price offer.
We dropped the price on Thursday evening, and started getting a bunch of calls yesterday. We had 5 showings today and couple more scheduled for tomorrow. By the end of the weekend, we'll hopefully have some good feedback and will know if the house is price correctly or still too high.
We've received nearly all of the invoices from our contractors, and have a good idea of what the rest will look like. Based on that, here is our near-final budget on this project (click to enlarge):
Given that we went nearly 700 square feet over estimate and only $5500 over budget, I'm very happy with this. Not to mention that $60/sf build cost -- in Atlanta, that puts us right in the range of what the big guys are building for.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
$60 PSF is vey impressive. The project I just finished was double that. We went high end in a few areas, but even if we were going for low price on everything, we probably would have been at $75 PSF, at best. Great work on cost control.
Thank you for posting the real building cost. It's a great guidance for my future projects. Thanks!
Joe
Hey Joe,
I certainly wouldn't assume that my numbers translate to your market, your project or your contractors. It's more than likely that the prices you'll see will be higher or lower than what you see above -- you should get real bids if you want to estimate the actual costs you'll see in your area.
Real Estate Investor · Austin, TX · Member since 2013 · 50 posts · 6 votes
12y
hey, J Scott,
I am not assuming that the numbers in my area ( Austin, TX) can be as low as yours.your list helps me understand the cost of "big items". Thanks! Hope to hear your good news soon.
$60 PSF is vey impressive. The project I just finished was double that. We went high end in a few areas, but even if we were going for low price on everything, we probably would have been at $75 PSF, at best. Great work on cost control.
$60 PSF is vey impressive. The project I just finished was double that. We went high end in a few areas, but even if we were going for low price on everything, we probably would have been at $75 PSF, at best. Great work on cost control.