All Forum Posts by: Brady Morgan
Brady Morgan has started 2 posts and replied 47 times.
Congratulations on getting licensed! That is a huge step that will open up a lot of potential for you. I started as an investor myself, left a corporate career to work in construction and now im a builder doing specs and rentals for my own portfolio. I have also recently started a YT channel to teach others how to GC and be profitable, message me for the link or just search my name on YT.
My first piece of advice is not to shop banks until you have engineered plans. Lenders are way more likely to lend a project that already has some work put into it and that they can get an appraisal on. No plans and they have nothing to judge the project by. If you can purchase the land yourself that will go a long ways, however it is possible to get the bank to pay for the land and use your "GC fee" on the build as equity allowing you to start with very little capital (10k maybe), typically the lender needs to have a relationship with you for this though.
If it were me I would find a potential lot for sale, get some plans, and get engineering done so its ready for permit. I would prefer to purchase land with cash then get permitting done then find financing, although personally I actually build with cash now so I dont have financing costs unless I hold it as a rental in which case I finance when it is completed. But you will likely have to build some specs and save the profits for a while before you can build with all cash.
Lots more I could say about the topic, I enjoy helping others learn the process, which is why I started my youtube channel. Just some build series videos right now but I will start creating more content and live streams discussing construction management, business, investment strategy, etc. soon, so if you are interested check it out.
Post: Gross Margin Calculation for New Construction
- WY
- Posts 50
- Votes 32
Quote from @Devin James:
Quote from @Brady Morgan:
Appreciate you sharing your numbers, always interesting to see what costs are in other parts of the country. I actually just did a live stream yesterday on my channel (youtube.com/@brady_morgan) that went over this exactly. In particular the part where I talk about market, is important. It looks like you are doing an affordable build based on the cost but hard to say since you didnt provide info on the build itself such as square footage and finishes. Also, you didnt mention any financing costs, was this built with cash or do you roll that into your cost of construction?
Thanks!
The home is 4bed/3bath and 1990sqft
Finishes= quartz countertops, fully tiled showers, 8ft doors, LVP flooring throughout
Financing isn't included in Gross Margin.
To calculate Net Profit, we need to deduct: Construction Financing, Investor Capital, Overhead, Insurance, Warranty, Etc.
Finishes sound okay, but I would build a little bigger. Under 2000sf for 4bd/3ba is small. You need to target upper middle class, second or third time home buyers, to get the best profits in a spec. Theres a reason very few builders do affordable homes these days unless your goal is to do charity work. Wish that wasnt the case but it is what it is.
Post: Looking to build some new spec homes
- WY
- Posts 50
- Votes 32
Quote from @Jay Hinrichs:
Quote from @Brady Morgan:
Quote from @Jay Hinrichs:
Quote from @Brady Morgan:
A few suggestions from an investor turned builder.
Learn the code for your area forward and backward. Just about everywhere in the US uses some version of IRC for its base code and then makes some changes to that as they feel necessary for their locality. I would suggest starting with reading the IRC book all the way through multiple times. Then add any other codes required where you want to build and study those as well. Do not rely on your subcontractors to know/perform the code correctly for your area. This is one of the biggest things that people dont think about when they decide to skip hiring a GC.
Become a familiar face with your local planning and zoning board/committee. This is who will approve or deny your plans when you apply for a permit. Go to some meetings ahead of applying, talk to the members of the board and ask questions if you have any. A lot of problems that arise during permitting and planning can be avoided by being proactive.
Build relationships with sub contractors. This is a tough one for new builders. The good subs in your area will likely have plenty of work already and may not even return phone calls. This is one area where it helps tremendously to have per-existing relationships with people in the industry such as family or friends. The best way to get through the door with subs is a recommendation/connection from someone they respect. Also talk to the local building inspectors and find out who they recommend and who they constantly have problems with. I am also the building inspector for my small town and I certainly know who the good subs are and arent. On the topic of building inspectors, make them your best friend. They can make or save a lot of headaches for you. Make sure you understand exactly what they want to see and when, all through the build process. Nothing will piss off the inspector faster than missing an inspection.
My last piece of advice, in an effort to not make this a book length post, deals with the money. You need to know what things cost. I have spreadsheets filled with material lists for every phase of the build that includes pricing for materials as well as labor, and sources that I use for them. Underwriting a new construction is like a flip on steroids in terms of volume, however you will find that you can get a much more accurate budget in the end because unlike a flip, there are very few unknowns going into it. The trick is just not forgetting something.
Hope this helps! I am a big proponent of self GCing new construction investments, as long as it is done correctly. Not an easy thing, but saving 20% or more on the cost of a new home seems well worth the time and effort if you ask me. I am currently working on starting a youtube channel that will teach what I have learned in becoming a builder, along with following some of my builds start to finish.
you live and die by your sub contractor relationships.. this is the key in my mind. I am an accidental builder IE lent to builders who went busto and had to take over the projects. that was in 2013 muddled my way through the first 4 projects that I had to take over .. then felt WTF I am putting up all the money basically and taking the lions share of the risk why dont I just try to do it all.. Since i had capital and had access to my commercial banks for the best rates possible on vertical and horizontal loans.. So if I can do it anyone can I had really zero experience . I did get my GC license which in Oregon is all law so it was simple test for me.
so now here we sit 500 or so spec / pre solds later and well its been a wild ride.. But worth the effort. having a local commercial Banker is key I would never go with a national HML for construction.. unless I absolutely had to .. like right now I am at 1/2 point and 7% for my vertical loans no junk fees and my bank even pays or the appraisals . :) these are not credit score loans ( I mean I have a credit score) but thats just a formality its all about capital and relationships with your bankers and deposit relationships thats key as well.
It really is one of those things that seems more daunting than it is, getting into managing new construction. Hard not to when you look at the portion of the profit the GC takes on a build. Once you get past the initial learning curve and have some basic knowledge, it gets a lot easier though and at that point most knowledge gaps can be filled as they come up.
You are absolutely right about the lending. I briefly worked in commercial lending after I finished grad school and that really opened my eyes to the inner working of that industry. Personally I like to build with cash to avoid the extra expenses, so I dont actually finance anything until its done and I have decided to hold it. Not the most scalable method, but I like the benefits it affords me while I am still a smaller operation.
Completing 500 builds in just over 10 years is impressive for someone who just sorta fell into it. You clearly found an excellent niche for yourself, hoping to do something similar myself.
I could not have done it without my banker of 30 years one.. and two my wife.. She is an integral part of our construction business.. And I have only GC ,d one project one couple mil spec home everything else I hire a GC.. who is really a site super.. I control all the money and pay all the subs directly.. that's how we got in trouble the first time GC not paying subs..
But by and large I like the construction as the sub trades are far more professional than most any one who is doing rehab work on houses.. U know bill once a month after work is done etc
Absolutely right! Its a whole different caliber of contractor you deal with in new construction (typically).
Quote from @Jay Hinrichs:
Quote from @Brady Morgan:
A few suggestions from an investor turned builder.
Learn the code for your area forward and backward. Just about everywhere in the US uses some version of IRC for its base code and then makes some changes to that as they feel necessary for their locality. I would suggest starting with reading the IRC book all the way through multiple times. Then add any other codes required where you want to build and study those as well. Do not rely on your subcontractors to know/perform the code correctly for your area. This is one of the biggest things that people dont think about when they decide to skip hiring a GC.
Become a familiar face with your local planning and zoning board/committee. This is who will approve or deny your plans when you apply for a permit. Go to some meetings ahead of applying, talk to the members of the board and ask questions if you have any. A lot of problems that arise during permitting and planning can be avoided by being proactive.
Build relationships with sub contractors. This is a tough one for new builders. The good subs in your area will likely have plenty of work already and may not even return phone calls. This is one area where it helps tremendously to have per-existing relationships with people in the industry such as family or friends. The best way to get through the door with subs is a recommendation/connection from someone they respect. Also talk to the local building inspectors and find out who they recommend and who they constantly have problems with. I am also the building inspector for my small town and I certainly know who the good subs are and arent. On the topic of building inspectors, make them your best friend. They can make or save a lot of headaches for you. Make sure you understand exactly what they want to see and when, all through the build process. Nothing will piss off the inspector faster than missing an inspection.
My last piece of advice, in an effort to not make this a book length post, deals with the money. You need to know what things cost. I have spreadsheets filled with material lists for every phase of the build that includes pricing for materials as well as labor, and sources that I use for them. Underwriting a new construction is like a flip on steroids in terms of volume, however you will find that you can get a much more accurate budget in the end because unlike a flip, there are very few unknowns going into it. The trick is just not forgetting something.
Hope this helps! I am a big proponent of self GCing new construction investments, as long as it is done correctly. Not an easy thing, but saving 20% or more on the cost of a new home seems well worth the time and effort if you ask me. I am currently working on starting a youtube channel that will teach what I have learned in becoming a builder, along with following some of my builds start to finish.
you live and die by your sub contractor relationships.. this is the key in my mind. I am an accidental builder IE lent to builders who went busto and had to take over the projects. that was in 2013 muddled my way through the first 4 projects that I had to take over .. then felt WTF I am putting up all the money basically and taking the lions share of the risk why dont I just try to do it all.. Since i had capital and had access to my commercial banks for the best rates possible on vertical and horizontal loans.. So if I can do it anyone can I had really zero experience . I did get my GC license which in Oregon is all law so it was simple test for me.
so now here we sit 500 or so spec / pre solds later and well its been a wild ride.. But worth the effort. having a local commercial Banker is key I would never go with a national HML for construction.. unless I absolutely had to .. like right now I am at 1/2 point and 7% for my vertical loans no junk fees and my bank even pays or the appraisals . :) these are not credit score loans ( I mean I have a credit score) but thats just a formality its all about capital and relationships with your bankers and deposit relationships thats key as well.
It really is one of those things that seems more daunting than it is, getting into managing new construction. Hard not to when you look at the portion of the profit the GC takes on a build. Once you get past the initial learning curve and have some basic knowledge, it gets a lot easier though and at that point most knowledge gaps can be filled as they come up.
You are absolutely right about the lending. I briefly worked in commercial lending after I finished grad school and that really opened my eyes to the inner working of that industry. Personally I like to build with cash to avoid the extra expenses, so I dont actually finance anything until its done and I have decided to hold it. Not the most scalable method, but I like the benefits it affords me while I am still a smaller operation.
Completing 500 builds in just over 10 years is impressive for someone who just sorta fell into it. You clearly found an excellent niche for yourself, hoping to do something similar myself.
Quote from @Brady Morgan:
Forgot the @ in the link, it should be youtube.com/@brady_morgan (sorry still kinda new to social media stuff, I dont use it much).
Quote from @Shannon Vistisen:
@Brady Morgan You are a life saver!!! Bookmarking your youtube channel as soon as you share it :)
Haha wow completely forgot to leave the link. youtube.com/@brady_morgan
Quote from @Andrew Lawlor:
Quote from @Brady Morgan:
A few suggestions from an investor turned builder.
Learn the code for your area forward and backward. Just about everywhere in the US uses some version of IRC for its base code and then makes some changes to that as they feel necessary for their locality. I would suggest starting with reading the IRC book all the way through multiple times. Then add any other codes required where you want to build and study those as well. Do not rely on your subcontractors to know/perform the code correctly for your area. This is one of the biggest things that people dont think about when they decide to skip hiring a GC.
Become a familiar face with your local planning and zoning board/committee. This is who will approve or deny your plans when you apply for a permit. Go to some meetings ahead of applying, talk to the members of the board and ask questions if you have any. A lot of problems that arise during permitting and planning can be avoided by being proactive.
Build relationships with sub contractors. This is a tough one for new builders. The good subs in your area will likely have plenty of work already and may not even return phone calls. This is one area where it helps tremendously to have per-existing relationships with people in the industry such as family or friends. The best way to get through the door with subs is a recommendation/connection from someone they respect. Also talk to the local building inspectors and find out who they recommend and who they constantly have problems with. I am also the building inspector for my small town and I certainly know who the good subs are and arent. On the topic of building inspectors, make them your best friend. They can make or save a lot of headaches for you. Make sure you understand exactly what they want to see and when, all through the build process. Nothing will piss off the inspector faster than missing an inspection.
My last piece of advice, in an effort to not make this a book length post, deals with the money. You need to know what things cost. I have spreadsheets filled with material lists for every phase of the build that includes pricing for materials as well as labor, and sources that I use for them. Underwriting a new construction is like a flip on steroids in terms of volume, however you will find that you can get a much more accurate budget in the end because unlike a flip, there are very few unknowns going into it. The trick is just not forgetting something.
Hope this helps! I am a big proponent of self GCing new construction investments, as long as it is done correctly. Not an easy thing, but saving 20% or more on the cost of a new home seems well worth the time and effort if you ask me. I am currently working on starting a youtube channel that will teach what I have learned in becoming a builder, along with following some of my builds start to finish.
I have finally started my youtube channel. Uploaded some build series videos for now, but will have some videos up soon discussing how to GC builds and general investment strategy.
A few suggestions from an investor turned builder.
Learn the code for your area forward and backward. Just about everywhere in the US uses some version of IRC for its base code and then makes some changes to that as they feel necessary for their locality. I would suggest starting with reading the IRC book all the way through multiple times. Then add any other codes required where you want to build and study those as well. Do not rely on your subcontractors to know/perform the code correctly for your area. This is one of the biggest things that people dont think about when they decide to skip hiring a GC.
Become a familiar face with your local planning and zoning board/committee. This is who will approve or deny your plans when you apply for a permit. Go to some meetings ahead of applying, talk to the members of the board and ask questions if you have any. A lot of problems that arise during permitting and planning can be avoided by being proactive.
Build relationships with sub contractors. This is a tough one for new builders. The good subs in your area will likely have plenty of work already and may not even return phone calls. This is one area where it helps tremendously to have per-existing relationships with people in the industry such as family or friends. The best way to get through the door with subs is a recommendation/connection from someone they respect. Also talk to the local building inspectors and find out who they recommend and who they constantly have problems with. I am also the building inspector for my small town and I certainly know who the good subs are and arent. On the topic of building inspectors, make them your best friend. They can make or save a lot of headaches for you. Make sure you understand exactly what they want to see and when, all through the build process. Nothing will piss off the inspector faster than missing an inspection.
My last piece of advice, in an effort to not make this a book length post, deals with the money. You need to know what things cost. I have spreadsheets filled with material lists for every phase of the build that includes pricing for materials as well as labor, and sources that I use for them. Underwriting a new construction is like a flip on steroids in terms of volume, however you will find that you can get a much more accurate budget in the end because unlike a flip, there are very few unknowns going into it. The trick is just not forgetting something.
Hope this helps! I am a big proponent of self GCing new construction investments, as long as it is done correctly. Not an easy thing, but saving 20% or more on the cost of a new home seems well worth the time and effort if you ask me. I am currently working on starting a youtube channel that will teach what I have learned in becoming a builder, along with following some of my builds start to finish.