Rehab vs New Construction

[Ethan Perry]

Hello All, 

I apologize if this topic has been discussed in detail elsewhere, I was unable to find it if it has. 

I'm writing because I was presented an opportunity to purchase an empty lot in a very desirable part of town at what seems like a fair price. To this point my experience is with rehabbing and wholesaling homes, not new construction. 

In your experience, what have you found to be the biggest difference when building new vs rehabbing a home? The obvious things --foundation,utility hookups from the street, different permitting I know to expect. Really I'm just trying to get a grasp on what the hidden costs/barriers to entry are and how I can compare new build cost to rehab cost. 

For example - say it costs me $27 a square foot to renovate a home. Does that go up significantly to build new? What kind of timelines/delays should I expect to build a 1800-2000 sqft home? 

What kind of licensing/experience should my contractor have for this job? The guy I use now is a class A contractor but hasn't done new builds. 

Lastly, how do you all evaluate the land/lots? Is there a divisor - if ARV is X, I should purchase the lot for no more than Y?

Thanks in advance for the feedback

[Jay Hinrichs]

second @J Scott  thought process here.. completely different animal from rehab.

the GC will and is Key to your success.

along with how are you going to finance it.. spec loans are not rehab loans.. very small niche and generally not available to first timers..

now owner builder move into the home there are plenty of those loan products out there from local banks usually.

I think moving into new construction is a progression... myself it was as a lender in possession IE I foreclosed on would be builders who went busto .. and I HAD to finish the projects as I was the money....  then came to realize hey I think I can do that.. since I am the money I take all the risk anyway or at least the biggest strip of risk.. that's how I got my feet wet then just kept scaling up as I got banks that would loan me money.. I would never borrow from someone like me to do a new build rehab only.. Money is too expensive and new builds always take longer. and in many cases I the lender will make more than you will.