We got a pretty good deal for the area, and each new phase builders in the area release tend to go up $30-50K in base price before custom options. 

Do you have any lessons learned, builder contract clauses, contingencies that should be considered before I embark on this venture?

The only way we're having success is by leveraging relationships to get an "in" with builders and other trades.

When I met with my builder and explained I had 250k, he laughed and said we're looking more in the addition spectrum, turning the home into a 2b/2b. and that's it.

Dress well, don't drink, and ask for help.If you don't have a car, start with nearby professionals: realtors, builders, general contractors, tradesmen, handymen, and hobbyists.

Hey CJ,A large part of the problem is finding land that is zoned for multi-family housing/finding a builder willing to stop making crazy money building single families to transition.I will send you a PM with another idea!

That gives you a couple months leeway for builder issues. 

(There is new construction going on in some of these neighborhoods, but that's largely due to the City's new incentives for builders to build in these neighborhoods.

Builders are building SFH that are way out of price range for typical renters.

@Deniz EkerConstruction to perm loans are good for a few reasons:they're paid out in draws so you only pay on money borrowedthey fund the construction so you don't have tothere are some out there that only have one closing, saving you moneythey allow the flexibility of building on your lot, the builder's lot or purchasing the lot with the first drawyou control the draw so if a sub skips town before they're finished, they don't get paidback to one closing.