All Forum Posts by: Johnny L.

The only way you will get a profit on this situation on the first home is if you are building in an area where the home price will go up substantially during the time you are building it.  

But, if you do one build and are not a pain customer constantly changing things, wasting the contractors time with questions or demands, he may give you a discount on a future house.

Then again, after one build you may never want to see that contractor again!

You obviously didn’t read “never split the difference” or you would have negotiated them down by now

@Johnny L.

I wont waste time echoing what a lot of others what said but will add something new.

Even though this is not a development, you can still make money doing new builds, but you need to find ways to add value. Its incredibly hard right now to make money on new builds when you are just a client. Material costs are through the roof right now on pretty much everything. For example, a piece of wood sheathing went up $5 a sheet where I am at in just one month! So this material price increase have absolutely eaten ALL the profit margins that would be a typical in-fill build that you are doing. Even the demand from the housing shortage can't make up the difference. 

First thing I would suggest, since you've invested a lot of time already into this specific lot (hopefully you havent bought it yet) is to look into Construction Consultants. The title is pretty broad title, so not every CC will do what you are looking for, but there are some that will act as a "partial GC". By that I mean they will act as a typical GC but will push some of the work on to you. For example, the one I am working with does all the typical responsibilities of a GC but leaves paying ALL the subs to me. This saves him time, over head costs and liability (so less insurance and risk). So he doesn't charge as much as a typical GC would. He also charged me a fixed fee instead of a percentage and does not charge for COs (Change Orders), which is where most GC will make extra profit and add more costs on to you. Now, I know what I'm doing so the changes I've made during construction (there are always some) have been minimal and mostly do to trying to have to cut costs in this market. I don't know if you'll find anyone like this in your area or not but its worth a look. Maybe you'll be able to find some profit margins...odds are they they wont be enough. 

The next thing I would suggest is not building on this specific lot. It sounds like its a market value lot that is targeted to a person looking to build their family home. You need to find a empty lot that is way under market value or one that you can add value to. By that it usually means subdividing a lot. Be warned though, this is not cheap because it requires cash up front. But in this market, especially this market, developing or building anything is very difficult. Prices are all over the place for material and labor and basically impossible to nail down as they are changing daily. If you dont factor in a large enough profit margin or large contingency costs...you will get eaten alive. 

Its not impossible to make money here. You just have to be even more cautious and extremely picky right now. Thats how its always been when your at the top of the market bubble....covid just made it worse.

As an old school Master Journey Carpenter I politely disagree. For those cut of our cloth, we first will take the time to help correct a person in nice PC manner. You do it a 2nd time, like "Skippy" did, on purpose to antagonize I might add, were gonna make it crystal clear, as I did. 3rd time, be good at ducking because a tool is flying through the air your direction. 

 I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it. 

It sounds like you've got plans and are approaching this as a "custom build" even though you've got the designs drawn up in an economical way.

May I suggest that you look for builders in your area that have, for lack of a better word, cookie cutter homes that they build?  For example, in my market there are a few pre-fab construction companies that have factories where they make large parts of the home.  You can't bring these guys a set of plans, you have to pick their off the shelf models.  But the result is that you enjoy some of their economies of scale.   There are also traditional construction companies that have a menu of houses they offer, with pricing that is very transparent.

I think you will run into fewer problems if you find a company that continually builds one particular design, and just hire them to do what they do.  If you come to someone with plans, I think the price is likely to be higher.  

One company in my market I am consider using for a few upcoming projects is Simplicity Homes.  You can google them and see how they have different options available, and how the prices are very competitive.  I've found similarly competitive prices from other companies that offer this business model.  If they have a mass produced house that fits your needs, you're likely to do well.

@Johnny L.

Hey Johnny my background is in construction. We hear stuff like this all the time from prospective customers. If this is your first build there’s no guarantee you’re going to have a second. Contracting is one giant headache and a huge pain in the *** regardless of how simple it cost effective a job may seem on paper. Your best bet is to hang out at Home Depot and look for independent guys that hold a general contractors license in the state what you’re trying to build and see if they’ll work with you

Best of luck

@Johnny L.

Johnny, I have relationships with several GCs here as development is my primary business and it’s all about how you approach them.

What’s your value proposition? Most of the general contractors I know are great at building houses but do not know the financing/investing/sales side of the business.

I’ll use one of our GCs we’re currently building with as an example. When my partner and I bring him an infill lot, with the construction financing already arranged and a buyer (with cash and a prequal for permanent loan) interested in building on our lot - suddenly he’s very interested in doing business with us.

It’s all about providing value, feel free to message me if you’d like so we can talk offline in more detail.

Dan

@Johnny L. Your original post shows that you have a good sense of what you're looking for (to be "treated as" a developer, not just get going -- responses were focused mostly on cost and that's only part of the picture). Since you don't have the financial clout (yet) to get what you need, go back to the ones you already talked to and ask them if they know of anyone in the industry who's just getting started out. Odds are someone's son / daughter / former employee is just getting started out, has the skill but not the clientele. Find a contractor (soon to be developer) who trained with the best, someone who makes sense for your scenario. If you don't want to go with someone just starting out, then bite the bullet, pay premium price and get past your 1st project.