All Forum Posts by: 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?

Hey there. I'm not the *most* experienced person in this area, but my husband and I have built and sold 8 spec homes, and we just completed construction and moved into a home for ourselves. 

Are you planning to obtain a GC license yourself? If not, I suppose I'm confused by what your plan is... What do you see as the difference between being a "passive investor while an experienced GC handles the day to day" vs "developing yourself"? If you're just lending some money to a GC and letting him develop the property how he pleases, meaning that you're not involved in any of the decision making, then it's more like you're just lender or you're an investor in HIS company. Which is fine if that's what you want to do, I just want to make sure I'm understanding you correctly. 

And when you want to get more involved as the developer, what do you see that transition looking like? I assume you'd continue working with the same GC/Builder to develop those properties .... so you'd pretty much just be asking him to take a back seat and follow your lead ... and he'd make less money for himself in the process. I mean, maybe you could find someone who would partner with you like that, but I personally wouldn't take that deal. 

The real question is, what are you bringing to the table? If you have funds to be able to be a "passive investor" (i.e. lender / investor in his company) that's great, but the builder would most likely want to keep you doing that, which doesn't serve YOUR long term goals. 

@Hamlet J. I don't mean to be rude ... but did you use ChatGPT to write that reply? It just sounds like something an AI would write. After looking at your previous posts it seems a lot of your responses are written this way. Very formulaic. "Congratulations on wanting to do XYZ. here is a bullet list of basic advice about XYZ. In summary, XYZ can be difficult but rewarding. Good luck!" 

Seriously, no judgment, but I am curious why you'd waste time responding on a free public forum using AI. What are you hoping to get out of that? 

J Scott did this "Diary of a New Construction Project" and I remember it being very helpful when I was first starting.

https://biggerpockets.s3.amazo...

I am a spec home builder in New Orleans (my husband holds our GC license, but I have acted as project manager & superintendent on many of our projects) and happy to answer any specific questions you might have. Feel free to DM me!

Hey Luke, I know this post is a few weeks old but just wanted to jump in here. Of course every market is different but yes, what you described has been the case in my area for at least 6 months now. As a spec home builder, we're just sitting and patiently waiting. There is practically no construction going on in my city right now at all, so it seems most builders & developers are doing the same. If you got a good deal on those lots then there is no harm in just waiting it out, the market will shift again eventually. Good luck. 

@Douglas Gratz Very curious to get an update on this. 

WOWWWW this thread was quite a read!! Holy **** ... 

@Douglas Gratz I am significantly less experienced than a large number of people who've already commented on this thread, but I do build homes and have found success doing so. My husband and I are in business together, we are a licensed General Contractor. My husband has design-build experience, so he does the designs and we just pay a small fee for an engineer to review and stamp the plans. We are using our own money to fund the projects, so we have no loan costs and the risk is significantly minimized. If we lose it all, that's all we lose. Nobody's coming to take the house we live in, or any of our other assets if we "lose it all". We manage the projects and the subs entirely ourselves as well, so nobody else gets a cut of the profit. I am also a licensed agent, so I am saving money on commissions as well. We are currently working on my 5th house, and getting ready to break ground in a week or two on my 6th house. The houses we're building are small, but nice. Not luxury or high-end but, nice finishes and in up-and-coming neighborhoods. They are around 1500 - 1600 sq ft each, and our profit per house is in the $90k range.  

And still ... with everything I said above, with the amount of experience I have at the moment, I would DEFINITELY NOT feel comfortable taking on the project that you have in front of you!!!! Even some of the more experienced people on here said that the project you're describing would be out of their element. You keep responding talking about how "the numbers work". We have no way of knowing if the numbers work, as we don't have all the data, but I can tell you that IF the numbers do truly work, they will only work if you know what you're doing ... and you don't. You've made that very clear. For that reason alone, because this is YOUR project, and YOU are the one carrying all the risk, and YOU'RE the only one who will be held accountable if the numbers don't work, YOU need to know what you're doing (not your consultant, not your GC - YOU). The only way to know what you're doing is to gain the experience over time. It's just not something you can step into.

The ONLY thing that others have said which I don't necessarily agree with are construction costs. I'm currently building at $130 / sq ft. Granted, we're saving a TON by being our own designer, GC, and developer ... and we aren't building luxury homes, but yeah that's what we're currently building for. Just thought I'd throw that out there. 

Also, you said a lot of alarming things in your posts, but here's one that really stuck out to me, which nobody else has commented on - "Comps in the area dont have many homes this large downtown Philadelphia." Why do you think that is? Do you think that the builders and developers in the area just never thought to go bigger? NO!! They just have the basic common sense to know what works and what doesn't. If the house you're building is bigger (and therefore more expensive) than everything else in the area, then NOBODY WILL WANT TO BUY IT. There was a newbie developer in my area who just made this exact mistake. He purchased 6 lots all at once, and immediately started construction on one of the lots. The house he built is huge for the area. It's about 2000 sq ft, whereas everything else in this particular neighborhood is under 1800 sq ft. It's also the only house on the block, so it's surrounded by empty lots and therefore undesirable. He initially listed it at what he THOUGHT was market value, based on the square footage selling prices of other homes, but he clearly didn't take the vacant lots into account, nor the fact that the home is too big for the area. It literally just went under contract after sitting on the market for A YEAR. While all the other houses have been consistently selling relatively quickly for $250+ a sq ft, he had to continue lowering his price to even get potential buyers through the door. The last final listing price was just $180 a sq ft, and who knows what the final offer actually was. You mentioned at once point a "worst case scenario" of the house taking 9 months to build .... the amount of time your house will sit on the market is also a huge factor to consider. Also during this time, when his plan was to sell this house and roll the profits into his next build, he had to sell off the other lots. Or he tried anyway, nobody wanted the lots. I don't know the guy personally. I can only imagine what his finances are like at the moment. 

Anyway, as others have said, you seem convinced that you know what you're doing and you're going to move forward with it, so there's nothing left to say except I wish you luck. 

 

Wow that's wild about the rules in MD!!! Yes this thread is very old and I have done quite a few off-market deals since this was posted. I ended up just calling my licensing board directly to get clarification and they said that any real estate deal in which I am a principal (and assuming I am not representing anyone else in the transaction) do NOT have to be run through my brokerage. The only thing that would be an ethics violation would be if I did not disclose my status as a licensed agent. I live in Louisiana, for reference. I haven't run any of my off-market purchases through my brokerage, although I'm sure they're aware that I'm doing this, and they definitely don't seem to mind, because we do spec homes and I always list the final listings with them when we sell. That's where they're getting the commissions anyway, so yeah I don't think they mind at all.  

As far as disclosing, no I don't do anything particular other than mentioning it on the phone and putting a line in the offer that says "Buyer Leilah is a licensed real estate agent. This has been disclosed to the seller." A lot of the people we end up buying property from are investors and they know the drill. If / when I'm buying from someone who is less aware of how to buy and sell real estate, I usually will have to explain that I'm required by my licensing board to disclose that I'm an agent, but that I am not acting as an agent in this transaction and that nothing I say should be taken as advice or expertise, and that no commissions would be collected.

Hope this helps! 

My husband and I do "development" (we call them spec homes) on in-fill lots in a metropolitan area. Happy to answer any questions you might have. Feel free to DM me if that's the route you're interested in taking. Can't offer much in the way of suburban or rural land development, but there seem to be others who've already responded who might be able to help you with that. 

@Waylon Zook we didn't say you were an idiot, just that most of us wouldn't go about it that way. But I am glad to hear it worked out for you!

@Todd Williams Here's the link to that thread if you're interested. We all discussed this exact topic, and I think everything that I would say here I already said there. https://www.biggerpockets.com/...

As for the selling side, yes I list my properties "myself" however as an agent, not a broker, you still only get 70% or whatever of your side of the commission back, so just keep that in mind. But yes, definitely best to list with your broker so as not to piss them off, especially if you plan on doing this regularly. You can discuss with them what percentage you want to take as the seller's agent, and since you're representing yourself you broker will likely be fine with a smaller percentage.