Building SFR and relisting?

Question

I’m about to close on a 1/3 acre lot that I acquired from cold calling. I got it quite cheap and my original plan was to flip it for 10-15k profit. After looking at the area I found a small new construction home listed on a 1/3 acre down the street from my subject lot. The property is listed for $224k. This got me thinking about squeezing as much as I can out of this deal and building 1400-1500sqft home on this lot. The subject lot has utilities (there was actually a small frame house on the lot at one time until termites took the house).

My question is: How do investors go about building new homes? It seems like all the builders in my area are for retails buyers. The price per sqft is too high.

Thanks.

Merle Sauvola · Answer

You say that you cold called your way into a lot that you could make 10-15k. With a home price point in that neighborhood of 225k (yep, price just went up since you posted 2 hours ago lol). If this is true, you can get about 35-45k for that lot. If you’re still in the profit with that number, I would flip the lot to the builder down the street, and start cold calling on more property.Find a handful of builder that you can flip easily dividable property to (road frontage). Talk to a civil engineer about how many lots that you can divide without getting into major subdivision standards.Keep flipping land. I’m not trying to be negative Nancy, but If you don’t have the experience in building right now, building a spec will eat your lunch. The reason I say this...Building a house as a GC is not hard at all once you have the process (I hired someone 3.5 months ago that didn’t know anything, and he’s currently running 10 houses that are on schedule, and homeowners are singing his praises).. The hard part is getting, and keeping a list of great subcontractors that will get you on budget (but you need to know what budget you’re shooting for to sell 1400-1500sf for 225k. Believe me, I know this price point is a tight budget, because that sounds very similar to our S Carolina market). When we started this building company, it took 6-8 months to line up a list of solid subs that would get us on budget. I knew what we were looking for because I have many friends that build, and used to build houses before the housing crash. But with no experience, I would expect you to break even on your lot, and house for the first few specs.So, back to flipping land. A builder needs to spend 15-20% of the sale price of the new home on a building lot. If it’s steep, less (10-15%). If it’s a clear, flat field, more (20-25%). If you can keep some small builders (up to 25 houses per year) fed with lots that meet this criteria, then you can do well. I just bought a 6 lot road frontage piece where the wholesaler made 80k on the flip. I overpaid a bit on that one because we were running out of lots, but that’s not a bad deal for my friend, the wholesaler... sounds like you have that skill, and possibly the time to cold call on land?

Matthew Paul · Answer

You become a builder . And this isnt the time , with material costs up sky high and labor in short supply even the big players are having problems with supplies . I am a contractor , I can build a new house , I wont . There is much more $$$ in home improvement . The turn around is faster .

Merle Sauvola · Answer

Ps. He’s probably shooting you close on the cost (without land). 175k with the lot. Depends on when he bought the lumber of course.

Eric James · Answer

Highly experienced builders/developers have reported here on BP that on average their profit is around 15% of the final sale price of a house. Would you want to go through this process for that kind of profit? And, to make money in TX you need to be able to build with dirt cheap labor.

Jesse Davis · Answer

@Matthew PaulAgreed we are all out here to make money! My question is how do investors go about building née homes and turn a profit?

Matthew Paul · Answer

Builders dont care if you call yourself an investor . They are builders , they do this for a living .

Merle Sauvola · Answer

No problem.If Texas is similar all around, I would figure 7k bring a cat 953 out to get the lot pad ready (if it’s clear)

Jesse Davis · Answer

@Merle Sauvola What a great response!!!! Kudos to you!Yeah you’re right I do love cold calling and talking to sellers and originally yes it was the thought to flip the land which would be the easier way out. I really want to get into new construction and thought this would be a feasible way to work my way in. I actually just talked to the builder of this small home down the street and we plan to have lunch in the next couple of days to discuss options. This was his first build but says he has done several remodels. He said he built his home for $130k. My insight was that I could come out bigger with a new build and gain some experience. I think the land will have to be built up in one spot where. There’s a small dip in the middle. How much is this usually to get a lot ready for building? Thank you so much for all the info! Such great value!