All Forum Posts by: Mike Wood

@James Johner How long have your crew been working on the framing?  I assume holidays have delayed finishing the framing a bunch.

@Antonio Cousin I agree with others. The area you are talking about Eagle & Palm quite rough. I would not expect to see any value appreciation there any your best case scenario is to own a section 8 rental. I also don't see gentrification happening in this area.

@Michelle Shriver If you don't have experience with Section 8 in New Orleans, this would be a huge jump into the program.  I don't have any Section 8 rentals, but everyone single small investor that I have spoke to have had issues with Section 8 units in New Orleans.  Most have stopped using the system.  Tenants are just really hard on the properties and can create more than their fair share of issues.

Given that you stated the rents are around $1070k for a 3bed, this property has got to be in a C- or D location (my guess in New Orleans East).  You are correct that rents will not be able to be increased, since your only market is Section 8.

@James Johner  First, I did not mean to indicate that you don't know what your doing. What I was really referring to was differences between your budget and the actual cost, particularly with materials.  I think you mentioned most of your experience was in larger commercial buildings, but maybe I assumed incorrectly.

I think most of us that build do that same thing, detailed cost estimate with fixed prices on any subs/labor.  But inevitably, some of the material cost will be different than the budget.  Maybe due to errors in the budget, maybe to do price increases.  Heck, I'm on duplex new build 5 and I still miss some of the material budgets on some of the basic items like framing, insulation, drywall.  I don't select finishes until the build is in process, so its pretty common for me to not stick to my finishes budget exactly (flooring, vanities, lighting, etc).

If I understand what you stated, your the GC, so there is no cost for that.  Do you sub out the piping, mechanical and electrical (PME?) to subs or do you have your own crew?  Having your own crew would be save money.  

I assume that if you sell this, your going to have alot of the finishes as allowances, that way the buyer will be responsible for any costs for those items above/below the allowance budget (i.e. if the buyer chooses $4/ft2 engineered wood flooring, but the allowance was for $1/ft2 laminate).

I assume that you can talk sales numbers until after the close.  

Two more questions;

1) One (1) air handler per unit? How do you plan on handling the two levels with a single unit if that is the case?

2) Would you mind showing the floor plans?  Curious how you laid it our to fit a 3/2 in your ft2.

@James Johner Thanks for the update.  I assume your drawings are the cause of your framing and fire separation issues.  Sounds like your plan designer does not know what they are doing and the city's plan review department did not do a good job reviewing the plans. If that plans are the issue, I would expect more problems from them (your still very early in the process).

One question, how are you pricing the project for sale?  Given that you are so early in the project, how can you guarantee that you wont loose money?  Are they buying the project as is, or are you selling it complete for a fixed price.  As I mentioned, your projected cost is crazy low, which could mean alot of risk that your sale price could be lower than the finished construction.

@Nathaniel Wilson  My guess is the area where you are talking about are in less than desirable areas of the city.  In marginal and decent areas of New Orleans, as @Braden Smith mentioned, its a sellers market for land, unless the lots are overpriced.  But there are large sections (NO East, chunks of Gentilly, chunks of Algiers, etc) of the city where land is almost worthless as its too costly to build based on the value of surrounding housing stock.  If the existing housing stock is not selling for over $100/ft2, the area will generally not support new construction.

@Jesse Phillips  As other have said, very high turnover rates for students.  I have a duplex directly across the street from a large university, and typically only rent one (1) unit to students due to the high turnover.  Also, very high vacancy in the summer months for these types of rentals.  I have not had any issues for significant damage from students.

@Account Closed As others have said, it should include all the build costs, but not survey, design and engineering.  There will be some items that will be allowances (like cabinets, lighting, plumbing fixtures) unless you do all of your selections in the front end and specify them. Connections to city water/sewage may or may not be in the cost, depending on how easy it is get those cost nailed down early on.

Additionally, the framing material and labor would be a decent chunk of costs. On my recent new construction I have, framing material and labor is running me around $18.50/ft2, not including GC markup.

@James Johner Wow, less than $74/ft2 is crazy low, especially for a 3/2 duplex.  As mentioned by @Kyle H., I also can't get anywhere near those costs. My recent builds are in the $85-100/ft2, excluding land.  The current one I have under construction (2/1 duplex, 1800ft2) is running right at $100/ft2 (excluding land) and my last one that I finished 12 months ago (2/1 duplex, 2,000ft2) ended up being $93.07/ft2 (excluding land).  I hope your numbers end up that low.  

I assume that each unit is 1050ft2, which to me seems way small for a 3/2.  The bedroom must be pretty small (like 10'x10' to max 12'x12')?  The only 3/1.5 I build (all the rest are 2/1 or 2/1.5's) was 2450ft2 total and I thought that was tight.

Are you GC'ing the project and not accounting for those costs?  Are you not installing any major expense (like central A/C, which would save $10-12k on your project)?

As for time frame, its also surprising short, especially given its winter.  Mine run anywhere from 6 months to 9 months.

@James Johner Congrats on starting construction. Hope all of your problems are in the rearview mirror. It  would be good to see some of the details of the development, size, costs, projected rents, estimated time frame, etc. if you care to share.