All Forum Posts by: Eric Teran

@Sue Hough I definitely agree with you that the distinction is in the foundation and utility hookups. All my posts are in regards to modular construction with a permanent foundation and utilities. 

I'm curious as to why you say that modular is not allowed in Chicago? I googled it and found numerous articles on modular homes being built in Chicago. Bob Villa even had an article and here is the latest article from the Chicago Morning Star from a month ago. I don't know Chicago so maybe this isn't in Chicago city so please correct me if I'm wrong. I know all of DC is allowed modular but some streets are too small for the trucks to get to the site so modular isn't an option. 

@Jon H. the building guidelines are the same. I believe every state either uses the IRC (International Building Code) or they base their codes off the IRC. The guidelines I believe @Sue Hough is referring to is your loan withdrawals. In traditional build, there are usually 6-10 withdrawals after certain milestones are met during construction. For example, excavation, site work, framing, rough-ins, finishes, final site work, and so on. For a new home, this process will take about a year. Each bank will have its own withdrawal form that they are comfortable with. 

A lot of banks do not have a form for modular construction because it has a completely different schedule. When I built my house we only had four withdrawals and we had to work with the bank and modular company to come to an agreement. The big difference is that when the modular boxes arrive on-site the home is 70% - 90% complete. This is a big chunk of money. My modular company would not install the first box onto the foundation until the bank showed that it wired the money and the bank would not wire the money until there was proof that the boxes were ready to be installed. The morning of installation, once the bank was comfortable they wired $250k and then the modular boxes were installed that day. 

Going back to the withdrawal process, with modular it is site work, modular installation, and then finish work. For my project, we split the finished work into two. $300k of my $360k construction loan happened in the first 30 days. This is much faster than a traditional build. Also, remember, I had to put up a lot of money until the bank reimbursed me for the work completed which is why we split the finish work into two withdrawals. The bank always reimburses. They don't lend money upfront in construction and hope that it gets finished. 

@David Edwards might want to weigh in as well. We are usually both on the same threads advocating for modular. 

@Stefan Folkert I designed and built my own modular home in Alexandria, VA in 2017 and it has appreciated just like the rest of the homes in the neighborhood. Probably more because it is new.

The issues that @Jody Sperling brings up is more of a design issue than modular. I have no idea why they would place the windows as they did but that is design. There are limits to how big an open space may be but if done correctly you can get an 18' x 45' open space. The secret is starting the design from the beginning with modular in mind. Biggerpockets doesn't like me to post my personal blog about daily construction building a modular home because it takes you to my architecture website. If you want I can PM you a link or you can find it on my profile. 

I also, wrote a Biggerpockets blog on why I like modular design and construction. It isn't going work for every type of project but it will work for a lot. I think a lot of folks and fellow Architects don't understand it. Some people will tell you that you will not save money. However, you will always save time during construction and time is money. 

As @Jon H. mentions it all depends on the market if you will make any money. If I would have flipped my house I would have broken even but it was always I house where I was going to live with my family so that didn't matter. The biggest factor is finding the land or home to demolish at the right price and all the site utility fees. However, that is another topic. 

@Megan Ghothane did you look into doing a seepage pit rather than a leach field? Usually when the soil is bad they do a seepage pit. They are also usually more expensive than a leach field.

@Colleen Cunningham I am doing exactly what you are describing on a few of my projects for various reasons. When I start a conversation with a potential client I always tell them that I want to do my own projects and possibly partner with someone. You never know who may know someone that needs your skillset. I'll give you two examples. 

This was for a single-family home being converted into a duplex. This was the developer's first time doing a project this big as they normally did smaller projects that only required finish work. They were nervous and didn't have that much money. They never do. I gave them my proposal and it was too expensive for them. Rather than walking away, I offered to do the permit set for a reduced fee of $5k. However, once the two units were sold I would be paid the $5k and get a percentage of their profits. I think in the end I'll make around $3k - $5k more. The drawback is that I do have to wait for a year or two but it will feel great to get that check.

The other scenario is I have a client who I did some work for on his rental property. We were speaking how to take an existing building and build it out to the maximum allowed by-right scenario. He found a building but we will have to get a special exception and heard by the public review board. To get to that point for the hearing it may cost up to $25k in consultant fees and it may be denied. If we are denied the special exception we will split the cost. If we are approved then I continue with the permit set of plans and pay for all the soft costs and provide some capital to meet the investor quota. In the end, my payment will be one of the 12 units we build. Once again this is a risk. I may lose thousands of dollars. However, if this works out I will have a unit that can sell for around $200k or earn rental income around $2k a month. 

The first scenario was pretty straight forward with the contract. The second one there will be lawyers involved. However, I see this as a great opportunity and mainly my time and some money are at risk. Hopefully, these go well. 

In some book or maybe podcaster they said to always tell everyone what you want to do in real estate because you never know who will be able to help you on your journey. 

@Mark Cruse and @Russell Brazil both of you have been playing this game for a while so I am sure you have the right relationships. I can tell you the bids I see a homeowner get compared to a developer/investor is significant. It also depends on the neighborhood. My Capital Hill and Georgetown homeowner clients pay significantly more than clients further north in DC like Petworth or Brookland for roughly the same project. Contractors know that certain neighborhoods have homeowners who make more money and are willing to spend more. A Capitol Hill client just received a bid for a cellar condo conversion for $180k! The lowest bid from four contractors was $100k. 

A full gut rehab is not expensive as long as it is all finishes. Once you start to do an addition, add a foundation, drop a slab, reconfigure the existing structure, and so forth is when the price starts to jump significantly. I agree with both Mark and Russell that they are getting those prices for a single-family gut but it will be extremely hard for a beginner to get those same prices on their first project with no relationships. 

@Mark Cruse my ballpark figure is for people just starting out. As @Arthur C. mentioned I was talking about a full gut where the slab has to be dropped, a third-floor pop-up, stairs reconfigured, all new utilities, and so on. I do have clients who have been developers for a long time and they have their own team in place and can do these types of projects for much lower than a beginner. They either have a GC who knows that they will get more projects from them and be paid quickly or they have their own crew and do not need to pay a GC. If there is no GC it can be done for a lot lot lot less. 

If @Muju Hussain finds a property and teams up with a developer who has his own team that may workout as well. Less return but a lot less risk and a good way to learn.

@Muju Hussain as an Architect I have helped numerous clients (developers and homeowners) in the last few years in DC and it all depends what you want to do. If you are in an RF zone you can create two dwelling units. If you are in a R zone you can creat an ADU. Both have pros and cons and different budgets for numerous reasons. You can also keep it as a single family residence.

Most basement separations that create a separate dwelling unit will be between $100k to $175k This is only the basement. There is a big range because it depends what needs to be done. Also, contractors are not hurting for work so they price everything higher.

For a third story pop up you are looking at another $100k. Maybe more if the structure needs to be upgraded. If you want a full gut, a unit in the cellar/1st floor and another on the 2nd/3rd floor it will easily cost $300k to 400k.

Once you establish some relationships then the soft cost will come down and the GC will be willing to make less profit on a job because they know another one is coming. However, that first project will be a pretty penny which is why it all depends on the price you buy the house.

You make your money when you buy the property.

@Mindy Jensen I appreciate the BP team getting this started. I read a few reviews and they were very detailed. How local can we go on our request? Can it be a lender or realtor or contractor, etc. that is only specific to a certain region like the DMV or LA Metro area?