Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Land & New Construction
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated 11 months ago, 02/07/2024

User Stats

154
Posts
44
Votes
Nicholas A.
  • Rental Property Investor
  • Dallas, TX
44
Votes |
154
Posts

How To Not Build your First House

Nicholas A.
  • Rental Property Investor
  • Dallas, TX
Posted

I was hoping that I could post this anonymously, honestly.  Slightly concerned that I might catch a bunch of undesired feedback. The following post is purely to show that I have learned a lot on my first ground-up home build and partnership, or really lack there of. I put this together quickly and hope it will bring value to those looking to embark on their first home build... with a partner possibly. You don't know what you don't know until you learn it.... and sometimes these lessons cost money, stress, and time.

Enjoy -

How To Not Build your First House

Embarking on the journey of building your investment home from the ground up is an exhilarating prospect. However, the path is fraught with challenges, many of which can be avoided with careful planning and consideration. Drawing from the lessons learned in my firsthand experience, here is a fairly comprehensive guide for first-time home builders.

In the early stages, a significant oversight became apparent: the gross underestimation of the total funds needed. The lesson learned here was to meticulously calculate all expenses, including those often overlooked. The builder's fee, for instance, should not be an afterthought but an integral part of the budgeting process. This seemingly minor detail can significantly impact your financial stability throughout the build.

Building a home often involves partnerships, and it's essential to ensure balance. Partners should bring not only financial resources but also relevant experience to the table. Unequal yolks in a partnership, such as a lack of equal funding or varying levels of experience, can lead to friction down the road.

Financial planning goes beyond securing a construction loan. It's imperative to have a plan for covering interest-only payments once the reserves within the loan are exhausted. Additional costs like HOA dues, neighborhood maintenance funds, and property taxes over the duration of the build should be factored into your financial strategy.

The foundation of any successful partnership lies in a robust operating agreement. Ours was weak and unprofessional, lacking essential elements such as an arbitration clause, dispute resolution mechanisms, and clearly defined communication methods. Ensure that your agreement includes specific responsibilities and emphasizes the importance of timeliness.

Choosing the right builder is a pivotal decision. It's not enough to review blueprints and designs on paper; a face-to-face meeting with potential  builders is imperative. This provides a valuable opportunity to gauge their past experience, assess the quality of their work, and even visit current job sites to witness the built quality firsthand.

Understanding the market is essential when designing your home. Investigate what features are most desirable within your target market. In our case, we learned the hard way that a one-car garage is highly undesirable. Additionally, a 3-bedroom home without a private master bathroom suite may struggle to attract buyers.

Communication breakdowns can be a significant source of frustration. Our operating agreement lacked clarity on communication expectations, response times, and methods. Set these expectations early with your builder and partners. Documenting every expense, transaction, and correspondence diligently is a practice that pays off in the long run.

Many aspects of the home-building process are negotiable, including the builder's fee. Don't shy away from discussing and negotiating the terms of the builder's compensation. This can have a significant impact on the overall project cost.

In conclusion, building a home from the ground up is a monumental undertaking that requires careful consideration and planning. By learning from the mistakes and oversights made during our journey, future home builders can embark on their projects with a clearer understanding of the potential challenges and how to navigate them successfully.

Learn from the mistakes of others, it's cheaper and less stressful - Nick 

Loading replies...