Building Our First Spec Home in Tampa! Weekly Updates

[Asad Shaikh]

Pictured above is a rough rendering of the first speculative home projects that I will be investing in. If you want a little context from over a year ago (when I was going to go down this path but it didn't end up working out), check out this previous discussion I started on BiggerPockets that had a ton of great discussion:

https://www.biggerpockets.com/forums/44/topics/517...

Anyhow, here are the cliff notes of the new project- what has happened up til now, rough numbers and structure behind the project, and challenges going forward.

-This project is located in the "North Hyde Park" neighborhood of Tampa. It is a gentrifying neighborhood with older resale homes trending in the 150-250k range, and new construction trending in the mid to upper 400s. This neighborhood is the closest to Downtown Tampa, and depending on the lot of a home- walkable to a brand new and hip Urban Park at the beginning of Downtown.

-I identified an off-market piece of vacant land in this neighborhood through a real estate broker who is a friend. I'm an agent myself, so I had told my network of agents my specific lot acquisition criteria a few weeks back. (Within 2 miles of Downtown Tampa, neighborhood with current new construction activity, price point for dirt under $100k.)

-Comps for single lots in this neighborhood were going for 115k-135k at the time I purchased. Now they are more like 120k-150k depending on the block in the neighborhood. That being said, those are standard sized lots which are 45X95 in dimension. The lot I purchased was for $80k, but a subprime size of 25X95.

-This lot was under the minimum size needed to build technically speaking, but still it was a historic "lot of record" it was fully buildable as I verified in person and in writing with the city. (Always get things in writing from the city. Pro tip on approaching the city, always approach them in a humble and open minded fashion. This helped me move through the bureaucracy a lot quicker.)

-After acquiring the lot, I quickly realized a few things: #1 I probably overpaid on the lot a bit or paid close to market value, it retrospect I could have probably negotiated $65k on it. #2 This was a very, very narrow lot and given the building setbacks, it would be very difficult to accommodate a sizable home on it. #3 Without any construction background, hiring the right builder to co-venture on this project with me would be critical. A cookie cutter builder would not suffice.

-My vision for this lot, which any common sense person would think is a narrow crappy lot, is the following (we'll see how it pans out in a few months): modern home, geared towards a younger urban buyer, three stories high with a master suite that offers downtown views on the 3rd floor, 3 full bedrooms and 3.5 bathrooms (so three full suites which adds value for a single professional that may lease out 2 extra bedrooms), striking interior finishes vs vanilla.

-I quickly began driving around town and taking pictures of homes that looked appealing to me, then looked up the addresses in our permit search system to see the contractors/builders who pulled permits etc.

-After doing this, I connected with 4-5 builders and finally the right fit that looked at this project as not a burden but saw the vision and was excited to work together. This builder also had a great track record.

-We visited the city together after developing a plan set (I generated ideas, he did all the detailed drawing and engineering). We were able to negotiate setback exceptions, stormwater drainage exceptions, and even a design exception for the style of build we were doing. We submit for permits within a few days. So what do the numbers look like? The build we came up with is around 1950 heated square feet and 3 bedroom/3.5 bathroom.

-Anyhow here are the costs:

Dirt-80k

Surveys etc (boundary, tree, topography)-1k

Construction budget hard costs-230k

"Oh sh**" budget-10k

Builder Fees, Architectural Plans, Architectural Consult Through Project- 35k

Total all in: $356,000

Projected sales price: $435k (conservative). Based on activity in the area, very realistically pull up to $475k.

On sales price of $435k, net proceeds after realtor fees & closing costs are $408,900 or profit of $52,900.

We are self-funding the project, and would pay out only 20k of builder fees on front end, so total investment is about 341k for a 53k return or 12.2% in my low-end situation. 93k in the stretch situation, which is 26%.

We are doing the first one in cash, because we don't want to deal with a bank draw schedule but I plan on doing the next with financing if this one is successful.

What am I missing? Will be sharing updates as project moves along.

[Tom Parris]

Hi @Asad Shaikh,

Getting permits approved is something you'll need a lot of patience for.

I see that you were able to negotiate design exceptions, but does that include how high the building can be, or just putting a modern style home in a older neighborhood?

Where will you have your end buyer park? I know there's considerable amount of value in garages. Do you think your asking price will be impacted if the end buyer will be forced to resort to parking on the street? Or is there an alleyway at the rear that can feed into the backyard where there will spots?

From the elevation shown, are you planning on having a crawl space vs a traditional slab? If so, why?

Do you have trees on the land currently? Those have been and and continue to be an issue for me. Make sure you budget for time, consultations, removal, root raking, in-fill, soil testing, compaction testing, and tree replacement costs. 

What is your projected time frame from NOC to CO? 

Do you have impact fees on the property budgeted for?

Windows are something that should be ordered immediately. 

I recommend picking every single thing out now, put it on a schedule and stick to it. Changing something small mid-build can have a ripple effect which you may not know the end of. 

Best of luck!