New home development strategy

[Kevin WANG]

Hi Folks,

I was sending message to Rich Weese and seeking advice about new home development strategy. It might be a better idea to post it here so everyone could share and exchange ideas. Here is my message:

[/u]Hi Rich,

I am an owner of distributor company. I am thinking to do real estate investment and building new homes is one of my options.

I had been reading your excellent postings in BP and learnt a lot.
Here are my questions:

Question 1:
How did you find good deals on building lots? Your new homes investment in McAllen, Texas is very successful. Did you live there for a while and found this deal?

Question 2:
How to choose location? Your lot in McAllen is very cheap but how about schools, local employment, neighborhood etc?

Question 3:
You have projects on different locations. How do you manage to monitor each project? If you are new to the town, how did you find reputable general contractors or sub contractors without supervise them?

Thanks!

Kevin Wang

[Lynn Currie]

Hi Kevin,

I'm doing new construction development so I'll jump in and help with this one.

Question 1 - Finding Good Deals
For me, this requires a lot of networking. Deals can come from a variety of sources, but mine are primarily coming from realtors and individual sellers. The term "good deal" is subjective. I'm not necessarily looking for a bargain, I'm looking for a piece of property that fits my model and budget.

Question 2: How to Choose Location
I have a variety of things that I look at when choosing my locations. For the most part, I keep my properties within a certain area of town that 1. I know well and 2. Prevents me from having to drive all over the place for management.

The ultimate driver though is the business model. I know what the land costs, I know what my build costs, I make conservative estimates of what my actual sell price will be, I know what I want my margins to be, and I know what my fire-sale price would be.

I plug those numbers into a calculation and make sure the lot works by doing a drive-by. If it works and (this is important) I like the property and would personally want to live on the lot, I make an offer.

Question 3: Managing Multiple Projects and Subs
As mentioned, I lump my projects by geography. As of this time, I haven't had to NOT do this so I can't help you with that part. I do have a plan for the day that I need help though. I keep a mental list of people that I would offer the job to if I need to.

When it comes to project managing subs, it's just part of the job. I'm constantly on-site at my projects. I ask a lot of questions and I point out things to my crews if I feel it is wrong. For me personally, I feel that keeping my good subs happy, enables me to build quality homes and keeps my projects on schedule. I have some crews that are amazingly good at what they do. I respect them and their work. This means that I don't nickel and dime them to death and I give them the time they need to do a good job. When I need someone new, I ask other folks that I know that build houses. Many builders will share this information freely.

I hope that helps,

Lynn