Absolutly Crushing it with New construction

[Jay Hinrichs]

Happy to write this success story.

Our 90 lot new construction project in Canby Oregon has really blossomed.

This project was brought to us through networking with other developers and real estate brokers.

The master plan was done however the first company that was in contract somehow fell out of contract and there was a narrow window for us to move in.. WE had to pay 125k non refundable and released with only 10 days of due diligence.. However being in Oregon and 15 minutes from my home ,  And knowing the situation very well it was not a great risk.. still some risk but not a great risk..

We got the project fully approved in the next 9 months and upon approvals we then went to closing.. We paid 7.3 million for it cash.. And in the same escrow we sold part of it for 2.2 million to the Retirement development to the North of us called Hope Village.. We then entered into a Joint development agreement for common share infrastructure with them as well that will come to fruition in phase 2 ,3 ,4 which we are going to build this late spring summer.

WE got the first phase of 30 lots done and platted.. cost 1.8 million.. this we borrowed from my commercial bank at bank rates. However was an easy loan for them since the dirt was paid for and is Equity not loans.

Lennar was building 70 homes right next to us and we knew we could not go head to head with them they had starting prices at 450k our starting prices were 550k  we are building semi custom they are building production so we have different buyers.. No way we could go head to head with them.  This was somewhat of a calculated risk IE could we find enough buyers that would pay top dollar.. well answer is a resounding yes..  Toll Brothers actually wanted to buy us out.. but they need 800k product and well this site wont quite get there yet.

Then Covid hit and well every one was worried myself included and the bank tighten up and would only give me 5 spec loans to start when they normally will give me 12 spec loans when I start  then pre sales don't count against the 12 and that's how you create sale velocity.

Fast forward to today and since we started selling in August we have pre sold all but 3 homes  our proforma was run at 525k sales price per home and we are at 608k per home.. Now before we all get too excited the lumber jumped as we all know.. so while not all profit still a nice bump.. the original appraiser had tagged absorption at 2 a month we are basically sold out in 7 months..

I just got the MAI on our remaining 60 lots and happy to report the new value of the 60 lots is as much as we paid for the entire 90 lots.. And those lots are free and clear at this time..

The MAI went on to say we have a very big shortage and our absorption could be 6 homes a month if we can build them that fast ( which we cant and keep our quality)..

So far it seems the risk we take as developers is going to pay off handsomely for our side..

Structure of the deal is a small group of investors ( 6) and my team..

All debt is me personally on the vertical loans  10 million plus when we are in full build mode.

My wife is the broker and we are in full control of all aspects.. WE hire a fee build GC at a set price and we control all the money and draws I am on site 4 times a week at least and we have open house every weekend ( which will end here in feb as we are sold out). 

Having fun ?  your darn right  :)  ready to retire NOPE..  Is there a lot of ways to skin the real estate cat  YUP..  choose your lane and go for it.