One of the great things about the real estate investing business is that you never know where your next exit strategy will take you. Seemingly out of the blue, you can be presented with an opportunity that catches your eye and can be very profitable at the same time. Accordingly, you may have never considered new construction before, but in the right circumstances it can be a real home run. Like anything else in real estate, you need to have a good idea of what you are getting into before you get involved. Working on new construction can be very rewarding, but it can also eat away at your time and money if you get in over your head.
If you have never dealt with new construction, it is advised that you work with someone that has experience where you may lack it. Reading this blog alone should not qualify you as a new construction expert. The biggest difference in new construction is that you need to do more legwork than you could image before you break ground. Between permits, blueprints, budgets and bids, the actual work will seem like the easy part. If you fail to pull the proper permit or if the plans are off even a little, it can cause you to backtrack and redo work – costing you both time and money. Before you start, you need to know the process.
The process begins like most any other purchase – with the acquisition of the land or the property. New construction simply deals with the act of building a new property on the land. This can mean you knock down the existing building and start from scratch or you build on the land you bought. Before you buy, you should have an idea of what you are going to do with your new construction. You don’t need to talk to an architect just yet, but you should do at least some legwork with your town and see what the property is zoned for and what the specs of the house may be. From there, you can work to formulate a budget and do your due diligence on the neighborhood. You will find that your initial budget may be way off if you are not experienced. This will have a ripple down effect on the rest of the process. Before you buy, you need to have an accurate budget and know that your plans are realistic.
With the help of your architect and blueprints, you can begin to break ground and get the work done. Before you do that, however, you need to start getting bids on the various projects and see if they are in line with your estimates and budget. You can start with a general contractor and work your way down to excavation, electrical, plumbing, painter and carpenter. You are building from scratch, so you are obviously going to need everything done that a house requires. When receiving bids, make sure that everyone is on the same page and you are comparing apples to apples. It is also important to tell everyone when you need the work done. You can find a great carpenter, but if they are booked for the next two months, you may not want to wait around for them. There is nothing wrong with getting multiple bids for each job. Price is important, but you will get a greater return on the quality of their work and the timeliness of when they can finish it.
Before you do any work it, is important that you understand town codes. Most towns require inspections that are done in phases so you will only get as far as any workers allow. If they are shoddy in their work and fail inspection, it sets the process back and you may have to wait weeks before an inspector makes their way back to your house. Losing a day here and there may not seem like a big deal, but over the course of the project, when added together, you can lose a month on scheduling conflicts. Most of this will fall on your general contractors lap, but ultimately this is your house and the buck stops with you.
If you are looking to sell the house as quickly as possible, it is important not to waste any time in starting to promote it. You don’t have to wait until the property is finished to get the word out. You may not want to have people inside the house, but you can certainly start talking to realtors and leaking some pictures on social media. This will help you hit the ground running after the house is finished and hopefully have a few interested parties when the finishing touches are completed.
New construction is a process that certainly takes time, organization and patience, but can offer a great reward if you have the right property and do the right work. If you are interested in this area of the business, you should contact a local builder or even architect and ask if you can view their next project from start to finish to get an idea whether or not it is for you. New construction projects are different from the traditional rehab and wholesale projects that you may have done previously, but the more you do them, the more comfortable you will be.