New Build PRICE PER SQUARE FOOT Estimate !???

Question

Hi! I'm a new investor and am looking to possibly build new on an empty lot. I've talked with 2 other investors from my area and each one has told me that price per sq. ft. to build new is about $120-200/sq. ft. That seems SO HIGH to me!? I trust these 2 individuals and do not doubt their numbers, but I am just wondering- is this how it is all over the U.S. right now for new builds? Is this low? Is this high? Do we think pricing is coming down soon?! Maybe it's because I am new, but that just seems like a lot to me! Any input is welcome. Thank you!  :) 😊

Ed O. · Answer

Word of caution to a newb considering build to rents - beware of bad opportunities to purchase a cheap lot in a terrible neighborhood. Lots of people are drawn to cheap lots, but the surrounding neighborhoods are 99% of the time a very poor match for a new home.

In other words - make sure the neighborhood is a good fit for a new house. Also, make sure the lot doesn't have costly defects you'll have to pay for to remedy. Good luck!

Carlos Ptriawan · Answer

Easiest to answer is check with the local insurance agent how much is the building cost in there at this time.Honestly looking at $120/sqft I thought how come it is that cheap ?

Michael Norris · Answer

New build for under $150 per square foot would not include land - maybe you could get close if you are doing your own GC and hire sketchy trades and/or undocumented laborers. Why? Pre-covid you could get a tear off roof replacement for about $150 per square post covid they want $450 per square and they are booked out. You can find guys to do it for less than 450 but you'll wait for when they are available and you better hope no one falls off the roof. Roll that out across all the various trades and you'll understand why it's so expensive to build. The only things that seem comparable to pre-covid pricing is windows and the wood floor refinishing guys. All the suppliers have lost their dang minds. In the last 14 months the cost of Kerdi raw materials for waterproofing showers went up like 60% and that is after all the increases during covid.

Hannah Simpson · Answer

Hi Jake! Thank you for your insight! Wow, the market in Reno, NV for new builds sound intense and definitely frustrating! I would not wish that kind of situation on anyone. I am treading lightly and doing my due diligence for sure. I am also debating on doing 1 or 2 flips to start, in an effort to help build my capital for the new build. However, I am also wary of not picking one niche and becoming and expert in that before branching off. I've been reading a lot of the BP books, and listening to all the podcasts, and I know most advise against over-leveraging yourself in too many niches as a beginner. I don't want to get analysis paralysis with all the options out there.

Jake Andronico · Answer

@Hannah Simpson

We have unfortunately seen a lot of projects take years, countless dollars, and never be completed here in Reno, NV....

Of course things are inherently different in Austin, but we have the utmost respect for successful developers. For just starting out, this is no small feat in my opinion.

If you have people around you that you know well, trust, have done it in your area recently, and know the ins and outs, then this may make sense, but we have seen sooo much more success with renovating existing properties (especially with newer, smaller investors).

Not necessarily trying to talk you out of it, but just wanted to put that out there. Would hate to see your excitement for REI dwindle quickly.

I wish you the best of luck, and for some more prospective, here in Reno we're hearing around $250 per sq ft!

Hannah Simpson · Answer

Hi @Carlos Ptriawan ! Thanks for those data points! Agreed, it varies greatly depending on your market for sure. My market is a very small country town, and I was actually able to find a reputable builder who is a tad less than my original price per sq. ft. quote. My goal for building new is long-term rentals that I won't need to pour money into for repairs for the foreseeable future. I will likely do a few flips, and/or BRRRR, along the way as well to help sustain capital.

Carlos Ptriawan · Answer

Here's two data points, I just checked it online, the building cost in CA right now is whooping $500 sq/ft. Last week, a WI insurance agent gives me quote that the building cost there is about $250 sq/ft - $300 sq/ft.

Honestly I don't know how new homebuilder could sustain this, if they have to buy land and build after 2023. It's way easier just to rebuild/rehab older house. Even that's only making sense at area where average home $ ~= average rebuilding cost.Or maybe there're just so many that I don't understand lol

Hannah Simpson · Answer

Hi @Michael Norris! Yes, correct! The land would already be purchased in this case. The $150 per square foot is for new build construction cost alone. Wow, that is great insight in regards to pre-covid and post-covid pricing. Being a new investor I am unfamiliar with how things "use to be" but I do believe you are right! I hear a lot about how much cost has raised for materials, labor etc. during covid and it does not seem like pricing has come down yet... :(

Hannah Simpson · Answer

Hi @Carlos Ptriawan thank you! I didn't know that a local insurance agent would be a good source for this information. I will call around!

Hannah Simpson · Answer

Hi Ed! Thank you! These are great tips and I will definitely be cautious of neighborhood and costly defects!

New Build PRICE PER SQUARE FOOT Estimate !???

Most Popular Reply