Calculating New Construction in LA

[Kwon Do Lee]

I am currently studying to become a RE agent in LA mainly to gain experience in real estate and make connections and I tagged along with my RE agent friend to a meeting with an investor in the LA area who is looking to take down old houses, do a new construction then sell for profit.  

The investor wants my agent friend and me to bring potential deals with numbers laid out for him to look at. I get that it's not quite possible to get an accurate new construction price since it depends on his contractor's prices but I was wondering if any of you have had any experience in new construction and things to look out for when dealing with new constructions.

My goal is to bring him a potential deal with a booklet full of necessary numbers and attention to detail on a deal to try and impress him. I, however, have zero experience in any of this and my knowledge is just from podcasts and books. What are some things, as an investor, would you like to see from an agent that would impress you?

Thank you for reading and any criticism, related to this topic or not, is welcome.

- Kwon Do Lee

[Nick Marrs]

Kwon, I am a strutural engineer in Los Angeles so I can give you an idea on new construction costs.

You can expect to pay $150/SF (square foot) on the low end and upwards of $400/SF+ on the high end.  Most of the cost is in your interior and exterior finishes, so it really depends on you budget and what you want to do with the finishes (standard home with cheap finishes vs custom home with high end finishes). In general, the bigger you build it the bigger the return on your investment.  Every development starts with the location, so you need to research what the property is zoned for, figure out the lot size, floor-area-ratio (ratio of buildable floor area vs lot area), and figure out how big you can build. The price per square foot mentioned above will also vary based on how big you build the home.  Overall there is a smaller profit ratio on homes than larger developments like multi-family. Good luck to you and your investor with the development!