Fix & Flip vs. Build & Flip

[Account Closed]

Hello All,

Does anyone on here prefer to build and flip the new construction?

The market where I live has become extremely tight, I started flipping homes and slowly had to shift my business to buying spot lots to build new homes on. Now I'm finding even single building lots aren't leaving much room for profit so I'm considering multi-lot developments. Seems to be a big gamble in this market, especially with the road costs between 500 and 800 a foot. 

I was lucky to find a decent 1978 home to flip for my next project, but I'm going to have to consider larger tracts of land in the near future and was curious what other investors are doing in tight markets where good deals are hard to find. Has the build and flip strategy worked for others and has anyone been able to scale it up to larger developments?

Any advice would be greatly appreciated!

- Luke

[Allan Smith]

Builds are easier with more profit, but sometimes a lower roi due to increased cost and time. Run your numbers. It's usually pretty obvious which strategy is the highest and best use.

[Evan Polaski]

@Account Closed, yes and no.  While I have not done a true new build, I have several friends that are both builders and flippers.  In fact, they have done several projects where they bought an older property that had an extra parcel, renovated and flipped the existing house, and building a new house on the second parcel to sell.

With both, they can pay more because they do it full time.  And therefore have their full time crews for most trades.  They outsource the pouring of the foundation, but have their own framers, drywallers, painters, plumbers, electricians, etc.  This is where they are making their profit.  For instance, my wife and I did a full gut flip and our reno was about $250k.  One of our builder friends mentioned another house that he would partner with us on, and for a very similar level of work scope and finish selection, he estimated his team could do the reno for $120k.

So I can't speak to your pricing, but in my experience, the new builds are "easier", unless you go into a flip assuming going to studs and new everything.  And if you aren't doing enough to have your own full-time crews, you will almost always be taking a reasonable gamble on whether you can turn a profit.  (Thankfully, my wife and I made a good profit on the deal we spent $250k on the renovation alone)

[Scott E.]

I've done both. I prefer building new, and most contractors I know do as well.

The bar has been raised in my market a LOT. Meaning if you are going to do a rehab on an old 1960s block home, in order to be competitive you need to add square footage, convert the carport to a garage, vault the ceilings, replace the sewer line, replace the panel. By the time you do all that, it starts to make more sense to tear the place down and start from scratch.

[Emmanuel Y.]

I understand your concerns about the tight market conditions and the need to adapt your business strategy. Building and flipping new construction can be a viable approach in such situations. However, with single building lots offering limited profit potential, exploring multi-lot developments may be a worthwhile consideration, despite the inherent risks, including the high costs of road development.

It's great that you found a suitable 1978 home for your next flip project. As you plan for the future, larger tracts of land might be necessary. In tight markets where good deals are hard to find, other investors have pursued various strategies. Some have successfully implemented the build and flip strategy, while others have expanded into larger developments.

To gain insights from fellow investors, I recommend reaching out to local real estate investment groups, attending industry events, or joining online forums specific to your market. Engaging with experienced professionals can provide valuable advice and guidance based on their firsthand experiences. Additionally, consulting with real estate professionals, such as agents, developers, or lenders, who specialize in your target market, can offer valuable market-specific insights.

[Ricardo Hidalgo]

Quote from @Account Closed:

Hello All,

Does anyone on here prefer to build and flip the new construction?

The market where I live has become extremely tight, I started flipping homes and slowly had to shift my business to buying spot lots to build new homes on. Now I'm finding even single building lots aren't leaving much room for profit so I'm considering multi-lot developments. Seems to be a big gamble in this market, especially with the road costs between 500 and 800 a foot. 

I was lucky to find a decent 1978 home to flip for my next project, but I'm going to have to consider larger tracts of land in the near future and was curious what other investors are doing in tight markets where good deals are hard to find. Has the build and flip strategy worked for others and has anyone been able to scale it up to larger developments?

Any advice would be greatly appreciated!

- Luke

 Flips are faster money with a lower margin. 

Builds are consistent money and more scalable. 

You need to focus on markets that can have faster permitting and resale over 500-600 a foot with lots under 300k and cost to build under 225 to 250 a foot. Our beach market offer us this margin and sometimes more! Panama City Beach, Navarre beach and Inlet is letting is achieve a 40-50% margin per deal.