I have 30 parcels of vacant land, can I build cheaply?

Question

This may be the dumbest post on Bigger Pockets, but I have to start somewhere.

I have been investing in vacant land for many years. I buy parcels in North Florida cheaply through my fathers connections. Most are in low-medium income neighborhoods. Some I have owned for 10 plus years. I havent touched this stuff bc I was in college or away with the USN. Finally, I am poised to make a move forward:) This leads me to my question:

Has anyone gone through the process of building a RE/ cash flowing "Empire" by building on vacant residential land? Can I build cheaply? How did you do it? Should I run for the hills and contiunue to flip land? What resources did you use? Is there a youtube channel I shoudl watch?

I talked to about five builders in my area and they all mentioned about $100 sqf/foot.

I recently listed some parcels with a REA, but I started to think about building vs multiple streams of income. Right now I only make money from my 1099 job, capital gains on the parcels I sell, and rental income from (4) pre-existing mobile homes.

Thank you in advance!

Greg Dickerson · Answer

The margins are no where near 50%. More like 10% net to the builder after a 20% total margin. $100 per ft is average for most areas. Some may be a little less others more. My area starts at $150 ft as costs a bit higher. Also keep in mind the smaller the house the more it will cost per square foot.

Modular will not be cheaper at the end of the day but may save some time.

Greg Dickerson · Answer

I grew up in Pensacola. Yes I have done this my entire career. You can absolutely build to hold and rent. Costs are relative and greatly depend on the lot itself, type of construction and finishes, permits etc. You need to run the numbers and work the deal Backwards. As long as the cost and rents work for you then go for it. If you want to sell the land a Realtor who works with builder would be a good bet or you can contact builders directly.

Ryan Braman · Answer

@Kevin Parekh Thanks for your service..wish I had the wisdom as a young airman to put my extra $$ into real estate..thought I was smarter than my dad and ignored his advice for my own 'hunch' to put everything in the stock market...and here I am 20 years later on BP.

$100/sqft sounds high if you haven't built before...I've been beating my head against this for the last 7 months and in my limited experience that's what it will average out to be. Track houses can be built for quite a bit cheaper b/c the extreme efficiencies in building 200 of basically the same model. Since utilities are already in place, you could shave that down a little more since site work would be limited to building access (driveway/parking) and possibly some light grading. You might be able to get it a little more with some sweat equity and creative purchasing/contracting. As @Ryan McKimm mentioned, zoning might allow you to put in a MFH, or if you have contiguous plots that can be rezoned into a larger plot that will allow MFH and you can capitalize on one roof for two houses, shared wall, other efficiencies. If MFH is not allowed, see what the zoning permits for accessory buildings, mother-in-law suites, etc..anything else that could get you more income.

Follow what @Greg Dickerson said to figure out what you can afford. I use Jay Scott's SFH rental analysis spreadsheet (I believe it was in his filespace)..an hour tweaking the spreadsheet and understanding what auto-populates and what values you need to provide, and you can end up with an awesome tool to tell you what you need to control for. This is how I figure out my max offer for a property, you can play around in order to get it to tell you what you can max spend on building..just put building costs into the "Improvements" cell.

Valerie Kasnick · Answer

Have you considered manufactured homes?  They can be done much faster and avoid some of the costs/hassles of site built homes.  You might even find a company to work with that will provide some financing!

Kevin Parekh · Answer

Thank you for the reply! I have a very few raw pieces of land, one of which I split in half to increase the value. Here is an attached picture of piece of land I have listed on the MLS. Most parcels are on a paved road... 70% need septic, power and water hook ups.

Ryan M. · Answer

@Kevin Parekh I just finished building 3 duplexes in Bay County, each unit about 1100 sq ft, 2bd/2bth with a 1 car garage. $250k for all your costs, such as land clearing, septic, plans, permits, construction, bank financing at prime + 1% and other holding costs would be a good goal, plus or minus 5-10%. That's not including your land costs. Mine was in a similar looking area with mobiles and some stick built homes. I was going to build a single family spec home, but with  the zoning and mobiles, I decided to build some income producing duplexes.

Ryan M. · Answer

@Kevin Parekh Check zoning to see if you can build multi-family. Also, get some quotes on clearing that lot.

Andy Bauman · Answer

Another option is to owner finance the land to end buyers to create cash flow.

Tariq B. · Answer

@Kevin Parekh I’m in your area let’s connect! I have a 7 unit I am looking to add a couple more units by building.

I have 30 parcels of vacant land, can I build cheaply?

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