Building spec homes as an investor for a profit
Robert EllisBusiness Member
Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Section 8 Launch52 Reviews
Building spec homes as an investor for a profit
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
from my experince you can deduct 20% or so from gross selling price to get a net. so looks like about a 40k or so NET NET NET profit and that assumes the 258k cost has profit for Robert and the builder or if the builder is Robert then profit is built in.. Investor Risks 258k plus 10% for tax insurance debt utls etc. and the other 10% is sales costs and ( in todays market) seller assist closing costs or interst rate buy down.
I have remote spec built in Charleston SC 500k to 2.2 million 30 plus homes there. FLA Northern 4 homes 275k profit margins to small.. Indy terrible experience would not go back there. And of course my 90 home project here in Oregon 650k to 1 mil.. so I would check out what is happening in spec building in Columbus would have to be decent rates and leverage on spec construction loans to make it worth the effort and risk.
29 Replies
- Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes2y
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
- Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
Section 8 Launch52 Reviews - Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes2y
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
- Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
Financial modeling is much more in depth than what you have there. cost of money, closing costs, realtors. I think the entire point of your reply is just to argue. If you want to actually discuss the purpose of the thread let's talk. I can't argue with someone who doesn't actually take the time to review numbers and who doesn't know much about new construction.
Section 8 Launch52 Reviews - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @V.G Jason:
The cost to build is just under median house price, and the price to sell is well over? How much are we talking from a land value aspect?
It seems to sell $375k in Columbus, you got to be in a decent area at least.
These are infill lots I'll send you a PM we have a ton of data on this
Section 8 Launch52 Reviews - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Robert Ellis:
Quote from @V.G Jason:
The cost to build is just under median house price, and the price to sell is well over? How much are we talking from a land value aspect?
It seems to sell $375k in Columbus, you got to be in a decent area at least.
These are infill lots I'll send you a PM we have a ton of data on this
I would have zero interest. If there was a mechanism to short these developments I would. I don't think I'd help lend here either as I do not want the underlying asset. - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @V.G Jason:
Quote from @Robert Ellis:
Quote from @V.G Jason:
The cost to build is just under median house price, and the price to sell is well over? How much are we talking from a land value aspect?
It seems to sell $375k in Columbus, you got to be in a decent area at least.
These are infill lots I'll send you a PM we have a ton of data on this
I would have zero interest. If there was a mechanism to short these developments I would. I don't think I'd help lend here either as I do not want the underlying asset.these aren't developments.
Section 8 Launch52 Reviews - Member since 2024 · 1 post · 0 votes2y
Quote from @Robert Ellis:
Is anyone building in markets as an investor with builders where you are an out of state investor and building in a market not local and hiring a general contractor to build at which point you sell spec? We are pitching this strategy and I'd like to get someone with some experience to look at our underwriting and floorplans and budget to see how it compares to opportunities they see in other markets around the Nation. Our specific market is Columbus, OH. We build a spec home for approx $258k and resell for $375k.
Send me your Deck information for this project in Columbus OH
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
from my experince you can deduct 20% or so from gross selling price to get a net. so looks like about a 40k or so NET NET NET profit and that assumes the 258k cost has profit for Robert and the builder or if the builder is Robert then profit is built in.. Investor Risks 258k plus 10% for tax insurance debt utls etc. and the other 10% is sales costs and ( in todays market) seller assist closing costs or interst rate buy down.
I have remote spec built in Charleston SC 500k to 2.2 million 30 plus homes there. FLA Northern 4 homes 275k profit margins to small.. Indy terrible experience would not go back there. And of course my 90 home project here in Oregon 650k to 1 mil.. so I would check out what is happening in spec building in Columbus would have to be decent rates and leverage on spec construction loans to make it worth the effort and risk. - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Jay Hinrichs:
Quote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
from my experince you can deduct 20% or so from gross selling price to get a net. so looks like about a 40k or so NET NET NET profit and that assumes the 258k cost has profit for Robert and the builder or if the builder is Robert then profit is built in.. Investor Risks 258k plus 10% for tax insurance debt utls etc. and the other 10% is sales costs and ( in todays market) seller assist closing costs or interst rate buy down.
I have remote spec built in Charleston SC 500k to 2.2 million 30 plus homes there. FLA Northern 4 homes 275k profit margins to small.. Indy terrible experience would not go back there. And of course my 90 home project here in Oregon 650k to 1 mil.. so I would check out what is happening in spec building in Columbus would have to be decent rates and leverage on spec construction loans to make it worth the effort and risk.I'd be happy to share it with you. nothing special. just tract home building, buying wholesale, buying cheap land, working and pricing multiple builders. ohio is cheap to build in. why do you think American homes for rent is here and mi homes, one of the largest builders who is also publicly traded. we have 10+ tract builders like any builder. NRP is here, DR Horton, etc. I have our full underwriting broken out on three different deal structures as well. I'll PM you I'm always open to feedback. I have 600 hours into our materials and know more than our market than anyone I've ever met in new construction.
Section 8 Launch52 Reviews - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Robert Ellis:
Quote from @Jay Hinrichs:
Quote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
from my experince you can deduct 20% or so from gross selling price to get a net. so looks like about a 40k or so NET NET NET profit and that assumes the 258k cost has profit for Robert and the builder or if the builder is Robert then profit is built in.. Investor Risks 258k plus 10% for tax insurance debt utls etc. and the other 10% is sales costs and ( in todays market) seller assist closing costs or interst rate buy down.
I have remote spec built in Charleston SC 500k to 2.2 million 30 plus homes there. FLA Northern 4 homes 275k profit margins to small.. Indy terrible experience would not go back there. And of course my 90 home project here in Oregon 650k to 1 mil.. so I would check out what is happening in spec building in Columbus would have to be decent rates and leverage on spec construction loans to make it worth the effort and risk.I'd be happy to share it with you. nothing special. just tract home building, buying wholesale, buying cheap land, working and pricing multiple builders. ohio is cheap to build in. why do you think American homes for rent is here and mi homes, one of the largest builders who is also publicly traded. we have 10+ tract builders like any builder. NRP is here, DR Horton, etc. I have our full underwriting broken out on three different deal structures as well. I'll PM you I'm always open to feedback. I have 600 hours into our materials and know more than our market than anyone I've ever met in new construction.
sounds good.. I have a personal friend that is on the Board of AH4R. Interested to see what you got and if you have some completed to check out
- Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Jay Hinrichs:
Quote from @Robert Ellis:
Quote from @Jay Hinrichs:
Quote from @Jeremy Horton:
Quote from @Robert Ellis:
Quote from @Jeremy Horton:
What is that like a 50% profit margin? I don't know much about building, but I'd say something seems off just from those numbers. Seems a little too good to be true
Not too good. Ohio is very cheap to build. One of the cheapest nationally. The large tract builders average $140 per square foot. We have a one story with an attic truss that sits on top so technically living space in the trusses which a lot of new builds don't. I have 10 years of real estate, finance, development, and over 15000 projects bid nationally in the past 6 years. We also have bids on every trade at that cost. It's not 50% profit margin at that cost. We try to deliver for investors to sell them around $170 per square foot. If you don't know much about building I wouldn't comment on construction costs without doing your research or due diligence. We base all of our finishes off of affordable housing and tract builders. LVT is $1.13 per Sq ft, carpet is $0.87 a sq ft, builder grade windows, slab on grade no basement, panelized construction as much as possible, simpler lighting packages. New construction homes from tract builders are selling as low as $350k for a 2200 sq ft house in our market. Ours is meant to compete and is just a little bit better engineered and designed.
I've done plenty of rehabs/flips and couldn't care less about your personal flooring costs or construction costs.
Buddy these are your numbers not mine-
Costs you 258k
You sell for 375k
(375-258)/258 = 117k or 45%
Looks like your making close to a 45% return to me
If it was that much cheaper to build - why would anyone buy over build?
from my experince you can deduct 20% or so from gross selling price to get a net. so looks like about a 40k or so NET NET NET profit and that assumes the 258k cost has profit for Robert and the builder or if the builder is Robert then profit is built in.. Investor Risks 258k plus 10% for tax insurance debt utls etc. and the other 10% is sales costs and ( in todays market) seller assist closing costs or interst rate buy down.
I have remote spec built in Charleston SC 500k to 2.2 million 30 plus homes there. FLA Northern 4 homes 275k profit margins to small.. Indy terrible experience would not go back there. And of course my 90 home project here in Oregon 650k to 1 mil.. so I would check out what is happening in spec building in Columbus would have to be decent rates and leverage on spec construction loans to make it worth the effort and risk.I'd be happy to share it with you. nothing special. just tract home building, buying wholesale, buying cheap land, working and pricing multiple builders. ohio is cheap to build in. why do you think American homes for rent is here and mi homes, one of the largest builders who is also publicly traded. we have 10+ tract builders like any builder. NRP is here, DR Horton, etc. I have our full underwriting broken out on three different deal structures as well. I'll PM you I'm always open to feedback. I have 600 hours into our materials and know more than our market than anyone I've ever met in new construction.
sounds good.. I have a personal friend that is on the Board of AH4R. Interested to see what you got and if you have some completed to check out
I know the guy who does all of their entitlements locally for build to rent they are getting a lot of pushback. but yes looking forward to talking further.
Section 8 Launch52 Reviews - Flipper/Rehabber · Alpharetta, GA · Member since 2014 · 65 posts · 22 votes2y
Hi
The return seems amazing in this market conditions.
Would you mind telling
Does 258k include
Permit fee (soft costs…etc impact fee)
Loan cost
Selling cost(realtor, closing costs)
GC fee
Holding cost(tax, insurance, utilities..)
Thank you
Reddy
- New Orleans, LA · Member since 2019 · 127 posts · 66 votes2y
My main question is why you're using tract home construction costs from large national builders like DR Horton to calculate construction costs on a single residential property on an infill lot ... to the best of my knowledge these tract home builders get MUCH lower costs than any GC possibly could, and you'd have to work with a regular GC / custom homebuilder if you're building one house at a time on infill lots, no?
- Contractor · Columbus, OH · Member since 2017 · 85 posts · 83 votes2y
We have an investor only GC Company here in columbus as well as a High Performance Custom Homebuilding Group. I would be Interested to see if there was an application that could bridge the two strategies. Let me know if you have time to discuss.
- Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Zac Mckenzie:
We have an investor only GC Company here in columbus as well as a High Performance Custom Homebuilding Group. I would be Interested to see if there was an application that could bridge the two strategies. Let me know if you have time to discuss.
Yes we have 4-5 builders we already are vetting and general contractors that take it for a fee I'll send you a PM. most of the interest we have now is in joint ventures and equity players for a turn key business plan.
Section 8 Launch52 Reviews - Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes2y
Crazy. Where I'm at, it's $400/ft2 just for builder's grade (IKEA), $800+ for decent quality. Theres a few places being built here now that are going to be $2,500/ft2! I don't know how you can build for $140/ft2. I was just visiting a buddy who is a builder in Costa Rica and the minimum they can build for there is $150/ft2 (more like 300-500 for what most expats want), and thats with labor at $6/hr.
- Flipper/Rehabber · Alpharetta, GA · Member since 2014 · 65 posts · 22 votes2y
@robert Ellis
Could you answer to my questions above
Thanks
Reddy
- Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Thripura Vemireddy:
Hi
The return seems amazing in this market conditions.
Would you mind telling
Does 258k include
Permit fee (soft costs…etc impact fee)
Loan cost
Selling cost(realtor, closing costs)
GC fee
Holding cost(tax, insurance, utilities..)
Thank you
Reddy
Land is purchased as equity, turn permits in while we wait to close the home, once the site is entitled and "shovel ready" we close on the construction loan. We build these as well as 4 other builders that we have vetted to take on additional capacity if needed. We are currently pitching hedge funds, reits, and individual investors. I have underwertiign that accounts for all of what you are talking about. hard build cost is $148 per sq ft and then lot and tap fees are typically considered soft costs. Land is equity that you bring as a contribution to do the deal. I'll shoot you a PM
Section 8 Launch52 Reviews - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2ywe don't pay by the hour. Framer's here for example are $6 per square foot labor. In Colorado, west coast, etc the majority of framers want $10-$14 per square foot labor. The carpet DR Horton puts in their houses is $0.67 per square foot. we use the same carpet. install is $1 / sq ft. everything we have is broken out with transparency. can we be wrong? Sure but these are vetted subs with pricing and multiple builders who can get this under the price we talk about.
Quote from @Steve K.:
Crazy. Where I'm at, it's $400/ft2 just for builder's grade (IKEA), $800+ for decent quality. Theres a few places being built here now that are going to be $2,500/ft2! I don't know how you can build for $140/ft2. I was just visiting a buddy who is a builder in Costa Rica and the minimum they can build for there is $150/ft2 (more like 300-500 for what most expats want), and thats with labor at $6/hr.
Section 8 Launch52 Reviews - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2y
Quote from @Leilah Davis:
My main question is why you're using tract home construction costs from large national builders like DR Horton to calculate construction costs on a single residential property on an infill lot ... to the best of my knowledge these tract home builders get MUCH lower costs than any GC possibly could, and you'd have to work with a regular GC / custom homebuilder if you're building one house at a time on infill lots, no?
we can buy from the same vendors at wholesale pricing. you cut out distributors. I get the same pricing on flooring that DR Horton does to answer your question.
Section 8 Launch52 Reviews - Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes2yA lot of that has to do with lot price too. I spoke to Jay above where in his market lots are $200k sometimes. In columbus we are building on lots that are sub $25k.
Quote from @Steve K.:
Crazy. Where I'm at, it's $400/ft2 just for builder's grade (IKEA), $800+ for decent quality. Theres a few places being built here now that are going to be $2,500/ft2! I don't know how you can build for $140/ft2. I was just visiting a buddy who is a builder in Costa Rica and the minimum they can build for there is $150/ft2 (more like 300-500 for what most expats want), and thats with labor at $6/hr.
Section 8 Launch52 Reviews - New Orleans, LA · Member since 2019 · 127 posts · 66 votes2y
Quote from @Robert Ellis:
Quote from @Leilah Davis:
My main question is why you're using tract home construction costs from large national builders like DR Horton to calculate construction costs on a single residential property on an infill lot ... to the best of my knowledge these tract home builders get MUCH lower costs than any GC possibly could, and you'd have to work with a regular GC / custom homebuilder if you're building one house at a time on infill lots, no?
we can buy from the same vendors at wholesale pricing. you cut out distributors. I get the same pricing on flooring that DR Horton does to answer your question.
I'm not just talking about materials. Framing and MEP's are the biggest costs, how are you able to get such low subcontractor pricing? That's my real question. The subcontractors that do work for DR Horton and other large-scale developers simply don't do one-project at a time like you're describing, at least not that I'm aware of. Why would they?? They can pick up 300+ houses in one single contract with Dr Horton, why would they sign a contract for a single house on an infill lot with a developer they've never worked with before? I mean if you've worked with framers and MEP subs who are generally available, reliable, AND able to give you the same price for a single home that a tract builder can get ... then good for you, you seem to have found all the needles in the haystack.
Your $140 / sq ft price actually sounds realistic to me (that should be development cost, NOT including the land.) and it's pretty close to what we wind up paying. My husband and I just built a house for ourselves actually and we came out just over $140 / sq ft .... EXCEPT we are a very lean operation (minimal overhead costs), we pay cash for everything (no loan fees), we do the house designs ourselves (minimal architect fees), and we GC the projects ourselves (no GC fees). Even at the very low $140 / sq ft construction cost it doesn't pay to build spec in my city right now, because the market is just so slow. It doesn't pay ONE investor, let alone two.
Just curious ... I see that you're currently trying to get this "Lillian" project off the ground. have you actually completed and sold other spec homes before? If so, why are you looking to partner on this investment, why not just do it yourself?
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Leilah Davis@Steve K. As I was mentioned in this thread I did have long conversation with Robert and he sent me a mountain of back up on his research and cost analysis which to me at first blush look in line with what I am used to seeing in less expensive markets..
When I was building infill in Charleston SC I would wonder out to suburbs where DR was building and I could not even build the homes for what they were retailing them for.. But of course our exit price was 100 to 200k higher for the same sq ft. We also paid 600 a sq to build one home in the historic district of Charleston. and we built starter infill for about 200 a foot there.
www.ivyridgeestatescanby.com is my current Oregon 90 home project exit 650 to 1mil.. We started 3 years ago at about 150 a foot and are up to 200 ish today. these are not production builds we are retailing these for 50 to 250k higher than Lennar in the same city depending on floor plan. Lennar made a run at some of our lots on a JV deal and their build cost as stated above was below what we could build for given same quality.. ours are semi custom theirs are track different buyer profile.
I would think infill in Columbus unless your buying high end lots would need to be more in the builder quality range than semi custom. As folks in these markets tend to shop for homes looking at price per sq ft compared to our project were no one asks how much is it per sq ft.
In FLA were we built production style U can build pretty cheap.. but keep in mind these are basically built to the minimum ubc codes. Minimum windows tiny kitchens with minimum cabinetry so on and so forth.
ON the point about labor in our new builds we just get a set price from the sub and its per sq ft. our framer is 7 bucks and he installs the windows and includes the nails. Same framer in Charleston was 15 bucks. our painter is 2 to 2.25 a foot in and out 3 colors and includes paint.. Cabinets are all custom built at cabinet shop pre painted and installed and warrantied. In Oregon we have a custom appliance package most builders use the builder grade drop in micro above we are two steps above that in our homes. WE do engineered hardwoods no LV granite or quartz slabs under mount sinks upgraded lighting package and full finish carpenter wrapped windows .. along with all our closest are done by our finish carpenters no wire racks.. fully landscaped fully fenced . AC included fully insulated garage and sheet rocked along with man door and way more flat work than any other production builder and of course real Hardi plank NO plastic siding :).. etc etc. so you pick off your buyer that wants quality or price within reason.
And we can do all that for right about 200 a foot on a 200 to 220k lot plus 35k for SDC and hooking all the utls up. Now keep in mind I bought the dirt entitled it and I hired the underground contractor so my all in price on the lots is far below the retail value. Also keep in mind I hired a GC per lot and I control all the books and sub payments etc. GC does one thing builds the houses and I tapped into his sub base which is huge in that market loyal subs will make or break you.. Along with they only need to be paid once a month and they will actually warranty their work first year no questions asked :).. so i would call that a hybrid .. And it also saves me at least 30 to 40k a house compared to a GC set up that the GC gets a % and then hires and pays the subs and of course marks up all the sub trades. HUGE difference to our bottom line.
Out in the mid west were you can buy lots for less than you could create them for.. IE less than what it would cost to buy dirt and do a full subdivision infrastructure build out thats were one can pick up profit on these deals as long as you can control build costs and buyers will pay for infill compared to buying in a community. In an urban setting like Charleston it was fantastic we had no competition save a few local builders .. the big boys cant get scale so they dont bother with urban. Sadly we the amount of infill lots is a fraction of what it was 9 years ago when i started there and we have been shut out last few years. So need to find new markets .
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