All Forum Posts by: Douglas Gratz
Douglas Gratz has started 33 posts and replied 254 times.
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
Quote from @Isaac S.:
Why ask for advice and then ignore it?'
$200 per sq.ft in a major metro, first timer, and the most expensive cost of capital that is still increasing, seems highly improbable, especially since you posted this thread because you don't even know, what you don't know...that's the lowest level of the competence hierarchy....so, basically, the most likely scenario for expensive surprises.
I hope you get there! Best of luck!!!
@Isaac S. I Am not ignoring the advice , I just know that a friend of mine just finished almost the exact same build at 175k sqft, less luxurious and 1000 sqft smaller,,,And I didn't make this post because I dont know anything, I just wanted to know the steps in order so when I manage the project I can do it right. Furthermore the person I mentioned above has been hired as a consultant, so it may be my first new construction but he's done some huge projects. So where I lack in knowledge he will be there all the way to make sure its done right. So lets take the first timer thing out of this equation.
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
Quote from @Nick Richards:
Quote from @Douglas Gratz:
Quote from @Nick Richards:
Quote from @Douglas Gratz:
@Bruce Woodruff and yes its going to cost $180 per sqft not $300. I do not know where you got your numbers from. This 1.7millino home I am buying will need top of the line finishes yes, but its the location that makes the price so high , not the house here. (the house obviously will need high end finishes, but you catch my meaning) Where do you get $300 from?
The lots is 40x60 of which 31x51 will be built on. I have to lots back to back . And I am simply asking the above (not being defensive) all opinions welcome here. I like the truth
I agree with most of what you had to said and gas prices will effect my budget. I have a 15% contingency on a 1,140,000 budget we are actually at 196/sqft. And although I agree with how gas prices will effect me,
I am new to the investing side of things, but I have been swinging a hammer, pouring concrete and pulling wire since I was 5 years old, I am now 40.To think that you are going to build a high end large home 4 stories for $180 a square foot is dreaming, especially with costs as they are right now. The guys driving to your site are paying $5.00+ per gallon gasoline, same for the Diesel in the trucks delivering the materials, which means prices of lumber and steel are not coming down as much as they could from the insane levels they peaked to mid pandemic.
The other issue you have here, is you are trying to build tall, which means that there is a natural increase in cost simply for getting everything up to the upper floors because it is going to have to be hoisted up there with a telehandler or a crane.
Because of this you are going to be throwing a substantial amount of equipment rental costs on top of your build, and that equipment runs on $5.00+ a gallon diesel fuel.
Then you have to consider that labor costs are also going up because of inflation, When McDonalds is paying 13-15 an hour, skilled labor is starting to demand 25-50 an hour depending on the trade, and then the contractor is putting a markup on that before you are being billed for it.
Additionally with the structure being as tall as what you are constructing, the walls have to be built stronger than a standard two story construction would be, and that weight has to be transferred to a very solid foundation that costs more money to build.
The price of concrete is going up because it has to be trucked several times, and again, Diesel fuel is so expensive right now, and the same for the steel that has to be used to reinforce that concrete.
There is another issue with building tall as well, is that your guys are going to need to have scaffolding and man lifts to get to the exterior of the house to work on it, and going 4 stories up, that is a lot of scaffold to build, not to mention that the employees working up there have to have fall protection training and so on.
This is further compounded by the fact that working up high, it just takes longer so you are going to have way more hours involved because for anything they do, they are either having to perch themselves in the man basket of the lift, or working around the support structure of the scaffolding.
And before you even start building in the site prep there again, you are going to have to pay for big earth moving machines, that run on that $5+ a gallon diesel, and pay for a truck to move those machines to and from your job site, and if those machines are big enough you have to pay for the permits for them to go down the road.
When this kind of construction could be done for $180 a square foot, Bill Clinton was president.
In 2000 looking at building single or two story dwellings if you could get by for $100 a square foot you were doing well. The currency has almost halved in value since then.
I don't see any way you get that done at 180, 300-400 is far more likely.
To give you a good example, look at this listing:
https://www.zillow.com/homes/f...
They got the structure of this house up, then got destroyed on the costs trying to finish it out, and it has sat like this since 2001. it is only 2 stories with a daylight basement. Just finishing this place out with the structure there (assuming it was all good) I would estimate at 150-200 a square foot. (And mind you if this property was in the lower 48 not Alaska)
I would suggest if you want to learn the construction side of things, start with a much much smaller project, a 2br 2bath where you are putting less than 2-300k on the line.
Building bigger projects like you are wanting to tackle takes knowing the right people and having the right connections to get it done, and the only way to get those is to start with smaller projects to weed out the non hackers.
Construction is one of the most difficult endeavors there is to do efficiently because there are so many moving parts, which is why so many shy away from it, and why the people who are good at it can make the big money.
I agree with most of what you had to said and gas prices will effect my budget. I have a 15% contingency on a 1,140,000 budget we are actually at 196/sqft. And although I agree with how gas prices will effect me, I do not think it will be a deal breaker. what everyone here fails to see is that with a budget of lets say 1.4million and I sell the home for 2.2 million and I do that twice thats gross 1.6mil profit and we should get 2.3 million and lets say I can only sell for 1.9 million (look at the comps) my soft costs are 60k+85k closing +140k interest =285k I would still net 214k per house....My point is, so long as I get it built I should profit . Now lets say **** hits the fan and we are in a real bad recession, I could sell these homes for what it cost to build and lose no money and learn alot....a 2 million dollar house listed for 1.4 million is a steal.....If things get even worse maybe I will lose 100k.....Risk/reward is definitely on my side
I don't see how you get that build done for 196 a square foot. If it was a single story sure, but building a 4 story, not a chance.
I would expect closer to $400/sqft, which is gonna be about 2 million, which sounds about right for building a 4 story home in a major metro.
If your GC is telling you they can do it for 196, they are probably leading you along to get the work, and then are going to over run you with additional costs later.
@Nick Richards You have no idea what your talking about no offense. My friend just built the same thing (10 feet skinnier in width) but still 4 stories. He did it for 175 sqft bc it wasn't a luxury home, cheaper finishes all around
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
Quote from @Nick Richards:
Quote from @Douglas Gratz:
@Bruce Woodruff and yes its going to cost $180 per sqft not $300. I do not know where you got your numbers from. This 1.7millino home I am buying will need top of the line finishes yes, but its the location that makes the price so high , not the house here. (the house obviously will need high end finishes, but you catch my meaning) Where do you get $300 from?
The lots is 40x60 of which 31x51 will be built on. I have to lots back to back . And I am simply asking the above (not being defensive) all opinions welcome here. I like the truth
I agree with most of what you had to said and gas prices will effect my budget. I have a 15% contingency on a 1,140,000 budget we are actually at 196/sqft. And although I agree with how gas prices will effect me,
I am new to the investing side of things, but I have been swinging a hammer, pouring concrete and pulling wire since I was 5 years old, I am now 40.To think that you are going to build a high end large home 4 stories for $180 a square foot is dreaming, especially with costs as they are right now. The guys driving to your site are paying $5.00+ per gallon gasoline, same for the Diesel in the trucks delivering the materials, which means prices of lumber and steel are not coming down as much as they could from the insane levels they peaked to mid pandemic.
The other issue you have here, is you are trying to build tall, which means that there is a natural increase in cost simply for getting everything up to the upper floors because it is going to have to be hoisted up there with a telehandler or a crane.
Because of this you are going to be throwing a substantial amount of equipment rental costs on top of your build, and that equipment runs on $5.00+ a gallon diesel fuel.
Then you have to consider that labor costs are also going up because of inflation, When McDonalds is paying 13-15 an hour, skilled labor is starting to demand 25-50 an hour depending on the trade, and then the contractor is putting a markup on that before you are being billed for it.
Additionally with the structure being as tall as what you are constructing, the walls have to be built stronger than a standard two story construction would be, and that weight has to be transferred to a very solid foundation that costs more money to build.
The price of concrete is going up because it has to be trucked several times, and again, Diesel fuel is so expensive right now, and the same for the steel that has to be used to reinforce that concrete.
There is another issue with building tall as well, is that your guys are going to need to have scaffolding and man lifts to get to the exterior of the house to work on it, and going 4 stories up, that is a lot of scaffold to build, not to mention that the employees working up there have to have fall protection training and so on.
This is further compounded by the fact that working up high, it just takes longer so you are going to have way more hours involved because for anything they do, they are either having to perch themselves in the man basket of the lift, or working around the support structure of the scaffolding.
And before you even start building in the site prep there again, you are going to have to pay for big earth moving machines, that run on that $5+ a gallon diesel, and pay for a truck to move those machines to and from your job site, and if those machines are big enough you have to pay for the permits for them to go down the road.
When this kind of construction could be done for $180 a square foot, Bill Clinton was president.
In 2000 looking at building single or two story dwellings if you could get by for $100 a square foot you were doing well. The currency has almost halved in value since then.
I don't see any way you get that done at 180, 300-400 is far more likely.
To give you a good example, look at this listing:
https://www.zillow.com/homes/f...
They got the structure of this house up, then got destroyed on the costs trying to finish it out, and it has sat like this since 2001. it is only 2 stories with a daylight basement. Just finishing this place out with the structure there (assuming it was all good) I would estimate at 150-200 a square foot. (And mind you if this property was in the lower 48 not Alaska)
I would suggest if you want to learn the construction side of things, start with a much much smaller project, a 2br 2bath where you are putting less than 2-300k on the line.
Building bigger projects like you are wanting to tackle takes knowing the right people and having the right connections to get it done, and the only way to get those is to start with smaller projects to weed out the non hackers.
Construction is one of the most difficult endeavors there is to do efficiently because there are so many moving parts, which is why so many shy away from it, and why the people who are good at it can make the big money.
I agree with most of what you had to said and gas prices will effect my budget. I have a 15% contingency on a 1,140,000 budget we are actually at 196/sqft. And although I agree with how gas prices will effect me, I do not think it will be a deal breaker. what everyone here fails to see is that with a budget of lets say 1.4million and I sell the home for 2.2 million and I do that twice thats gross 1.6mil profit and we should get 2.3 million and lets say I can only sell for 1.9 million (look at the comps) my soft costs are 60k+85k closing +140k interest =285k I would still net 214k per house....My point is, so long as I get it built I should profit . Now lets say **** hits the fan and we are in a real bad recession, I could sell these homes for what it cost to build and lose no money and learn alot....a 2 million dollar house listed for 1.4 million is a steal.....If things get even worse maybe I will lose 100k.....Risk/reward is definitely on my side
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
Quote from @Bruce Woodruff:
Quote from @Nick Richards:
To think that you are going to build a high end large home 4 stories for $180 a square foot is dreaming, especially with costs as they are right now.
@Nick Richards - you are absolutely right and we all agree. I got my GC license in '83 and have been doing construction since the '70s. But the OP seems to think he has figured things out and that the general rules do not apply to him. We have been warning him for months and yet he is set on his path. Now all we can do is wish him luck and hope he can recover from this fall. I hope he can prove us wrong, but reality is reality......
I'm trying to nicely say that you are wasting your time here :-)
Bruce,
Could you message me your email, I would like send you my budget so that you could share some constructive criticism and where you find error, enter what you think the line item should cost?
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
Quote from @Mike Smith:
@Douglas Gratz Your initial post was from about 6 months ago and the lot was nearing build ready state. I'm imagining you are about half way through the home build by now, as you were projecting 12 month build time. I'm interested in an update on two items builders track religiously:
1. Estimates vs actual costs - How are your completed costs coming in vs your initial budget? What are the reasons for your large variances? What are your plans to reduce/eliminate these variance on the next build?
2. Estimates vs actual schedule - How is your actual schedule progressing compared to your initial schedule? What are the reasons for any large schedule delays? What are your plans to reduce/eliminate the large schedule delays on your next build?
I have not broken ground yet, the permits actually just were issued last week however having trouble with the construction loan. Since rates rose so fast, the terms I was going to close with were no longer profitable for the lender so we had to revisit that. Now my interest rate is 12% and just waiting to close. Ill keep you posted
Post: My New Construction Journal From Start To Finish
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
June 18, 2022 2:26pm
Once the second permit is approved, aside from breaking ground , another important step is to file for tax abatements. Unfortunately I missed the deadline for a 10 year tax abatement, which for those who do not know, this adds value , in that the buyer of the home will save 100k (if taxes are 1k a year) This increases the value of the home. I am able to get a 5 year tax abatement, but that is one of the next steps to take. I should note that I hired an architect firm for a premium who takes care of all the permit and tax abatement filings. I could have spent 20k less and have done it myself, but this was during covid so I wanted to decrease my chances of getting it, so I decided to stay in as much as I could and have them take care of it all. On top of that, I did not want to miss anything , being this is my first new construction, I wanted to make sure everything was done perfectly. I had helped another investor friend of mine, so I am familiar with the process here in Philadelphia, so I could have done it myself.
However, my immune system is compromised as I had stage 3B Melanoma, diagnosed in 2017, so I just passed the 5 year mark in remission, but the treatments unfortunately put me at high risk of getting covid and having it be more dangerous for me than someone who has a better working immune system. Talk about life changing :(. I was 30 at the time, and at that age you feel invincible , but when I was diagnosed, I faced reality, I am not invincible , it was really scary. BUT I PUSHED ON! Not knowing if it would come back or not along with the expensive treatments, I had to really grind to afford them and so I did. Went into full overdrive, working harder than I have ever worked before! I started REI back in 2014. By 2017 I had 6 duplex's (12 doors) between 2017 and now, I have bought and held 20 more duplex's and over 10 fix and flips. I did not know if it would come back so I wanted to make sure I had my kids taken care of, talk about motivation! All is good now and onto bigger and better things. Once I successfully build these I plan to build large apartment complex's and dabble in self storage and other low maintenance REI, parking garages, mobile home parks, sky is the limit baby!
The lots are all flagged out meaning all the lot boundaries are marked, public water and sewer is marked, along with gas lines, and its time to break ground!
Post: My New Construction Journal From Start To Finish
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
@Bruce Woodruff I think our definitions or how we feel about. words like rough, low risk, etc etc are on different spectrums. When things get hard I do not see them as getting rough. I have worry about the economy but I have been reading about my market and asking a lot of people on their thoughts on the impact of a recession will have on selling these homes, and the only thing I heard was builders build all the time during recession and the worst is that homes take longer to sell. I believe that to be true, but I also believe I have a leg up in that in this specific neighborhood, there is no more new construction builds and if you can afford a 2 million dollar home than I dont think a recession will hit the upper class as much as it would middle class. As a matter of fact , my demographic usually make money (investments like stock, shorting them , going long, whatever it might be) but I see my demographic making money in both a good and bad economy. I would not say that I am wealthy , but with the disposable income I do have, I made 100k shorting the cruise lines , specifically Royal Caribbean . This took 12 days on a 6/17 expiration $50 put when the stock was at $58 I also see many companies being over sold which is more opportunities , so the way I see it and maybe I am wrong, but if you can afford what I am about to build, then a recession probably wont break these guys
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
@Bruce Woodruff the words seamless, easy, top notch, low risk might not exist in the world of new construction, but being well prepared is going to make this easy and seamless. And I dont know why you dont believe the words low risk in this scenario. Let me clarify. In the worst possible scenario these homes will sell for 1.4-1.6 million in a heartbeat. This is what I mean by low risk in that, aside from a Great Depression , I will be able to make all the money I spent building them back. Thus low risk in losing alot of money or any if that. Thats what I mean when I say it has low risk and this stands to be true in everyway.
You dont know the market the I am building in, there is no supply left NONE! On top of that people are dying to live in this area. It is what it is, and what it is, is a grand slam
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
@Chris Seveney I have everything covered, I am not the GC ,I have a builder who does luxury homes all around the city. I also have a consultant who has built over 20 homes and three large apartment complexes (600 doors). @Scott Mac Yes I know the crowd I am catering to and what is expected in these homes, but as I said above I have an experienced team with me as well who (my consutlant) is getting 10% of the net profit , so he is motivated to get the most out of it. He is a good friend of mine and he has built some magnificent homes. As for design, I have hired an interior decorator who will be drawing up 5 different color schemes, tiles etc, and I will choose one , this specific designer has worked on 5 homes in this area that sold for 1.9 million , so she and her team know what people are looking for in this area. Not that I dont, I have done extensive research, but I am covering all my basis since its my first new construction and luxury at that. You guys all thing this is a tremendous undertaking, and it is, but I know what I am doing and for things that I dont, my team does.
@Caroline Gerardo thank you, I really appreciate that. My real estate agent and his team do some amazing marketing, he will be making a website and all that you have mentioned. Brochures with different finishes, great signage and the best thing is these homes are off the Main Street (well one of them is) so people will be driving by all the time wondering....The best thing I have going for me is that there is no more land in this area so I have supply and demand in my corner. I listed the house for just 2 days with the plans and renderings, last week, and have had over 10 people call about it already, however , I need to get the frame up so interest parties can buy it and customize if they want. I am only building one at a time, if one pre sells fast I will start the other, but its possible by the time I am done the second house, the economy might be in better shape and or materials for the build of the 2nd home could go down. Thanks for your support
Post: What is the new construction process? Dig lot, pour concrete, etc
- Rental Property Investor
- Philadelphia, PA
- Posts 260
- Votes 145
@Caroline Gerardo The building permits just came in. Up until than I have been picking everything out , we even ordered the wolf appliances and windows already . Those two items will take a while to get. My real estate agent knows what people in the neighborhood and price point are, this is his area and has sold a lot of 1.3-1.9 million dollar homes here. He knows his customer base well. Even then I have a design team who has come up with 5 different shchemes, they are almost done for me to chose from. I am not using the rendering to the exact, like for the garage doors and few other items. @Karen Margrave I think my last budget posted was low, as we are about to start and have all the take offs the budget has gone to 1.2 million I think from close to 980k....Comps in the area are good, it took one day to sell a 2.1 million dollar home. Given our current economy, I might not get my high end price point at 2.2 million but I am happy with 1.7-1.8 million regardless and they will sell, we have alot of interest already and once I have the design plans I will be able to make brochures for certain customizations, anything above budget is on them, And yes Karen, supplies are short. I am ordering my ranges a year early, thats the wait time. I am as prepared as I can be and I have heard from alot of developers that recessions, might make It take longer to sell, but in the luxury space, impacted of course, who isn't, but shouldn't deter interested buyers. @Chris Svendsen. I actually got an offer close for the land 1.1 million, its my exit plan if I dont feel comfortable. And yes people would buy it for investment purposes, not to build a home to live in. But things are just getting started. The permits are in and we are set to break ground Monday, once the framing is up the interested parties would like to discuss things further, if they are still there of course, interest is coming in all the time still though so I am hopeful. @Bruce Woodruff I could hold, I sold a few small cash flowing single family homes I have been wanted to sell for a while and could get the loan of the land and wait, but the though the economy isn't helping, some areas are worse of than others, and the market has not slowed here in the city of Philadelphia nearly as much as other cities.The comps still hold, the budget is up but if I make a 25%ROI instead of 33%, well I wont complain. Scared money wont make money. You just need to be smart. Stupid money will lose money, but frankly, even in this economy , I am optimistic , you'll just have to wait and see, I am keeping a journal https://www.biggerpockets.com/...