Looks like realtor, investor, builder bought at 1M, teardown/rebuild and selling at 2.5M. Good timing now, but how much would have costed him after buying at 1M?
2585 * 300 = 800K. Probably a bit less for a builder himself if they are the investor. > 700K profit?
This is excluding carrying/financing cost.
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My guess is much less than 800k cost.
2x4 cost have jumped to $4 per. But a house like this would probably require 600 pieces or so thatâs ONLY $2400 in 2x4 material cost.
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2x4s are peanuts but construction labor costs are skyrocketing too. 20 years ago framing labor and materials cost about $6/SF each. Now $$40-50/SF each???
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The cost of construction is crazy high right now. Iâm seriously contemplating delaying and waiting for a good recession. We have one parcel (1 acre) that should be developed, luckily it has 4 houses on it that are good to carry the property. The vacant land, no choice, it has to be built now. Good thing is that resale prices have exploded just as much as the cost of construction. Even better that I bought the land cheap.
Some aspects construction, the companies can basically name their price. Weâre looking at bids for a foundation right now. I have a legal licensed & insured guy who can do the foundation for $55k. The company that we have a contract with had put $104k in the contract. Last week they told me that due to the recent run-up in construction cost, âeveryone is busyâ, itâs going to be $193k.
I have personal friends who are in the construction trade. Like a guy installing underground utilities. Heâs been operating heavy equipment for over 20 years. Those companies bill over $100/hour for a guy to dig with a shovel and $145/hour for the foreman. My friend is such a foreman. He still earns $40/hr. The guy who digs with a shovel still earns $25-$30/hr. The markup goes all in the pockets of the business owners. Not much of a trickle down effect.
All that said, this is the extreme time in the cycle. Iâve been working with a certain painter since 2009. In 2010, he painted the interior of a rental for $1400. (two-tone paint). In 2017, he came back to paint the same house again, in the exact same colors. Primer wasnât needed. It was $3500 in 2017.
In 2010, he just took the job to keep his business alive; he did not make a penny on the $1400. Now heâs making up for it.
The momentum will change⌠Iâm piling up cash right now, in case there are some juicy foreclosure auctions coming back. Might even sell bitcoin for that 
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This is what my architect is also telling me, it is hard to find people to work.
For me to add on bath room, the lowest quote (from GC) was 40k, and very few responded/visited.
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If you are in the development business you need to be prepared to do you own work. Buy a contractors business, do a joint venture or go get your license and hire your own crew.
Your advice is sound. Cannot say it any different way.
We built 2 SFRs (2 separate projects) where we were the GC and hired all subs ourselves. Previously, we had built ~10 SFR where we had a GC but we were very close involved in all steps. Neither me nor my business partner are licensed contractors.
Now, for a condo project, no engineer will touch it if you donât have an OCIP policy to protect for 10 years from a law suit. The OCIP company forced us to work with a reputable GC (and yes, they checked his track record).
So, in hindsight, I should have gotten a GC license 5 years ago and built some of those houses under my license, to qualify for a condo project. Iâm sure that path would have presented other downsides.
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I was also wondering about the cost of construction and availability of workers⌠There is a house being built down the street and it is going very sloooow, I hardly ever see anybody there working⌠and people working at weird times (late evenings, etc)⌠I guess they are taking extra jobs and âmoonlightingâ on this house?
compared to how houses used to pop-up overnight in my previous state, it is very noticable.
Donât ever build condos. Sell the project with a liability release. I moved into most the houses I built to minimize liability. Sold as used with lots of disclosures
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They are actually townhomes, not condos. But the lawsuits are just as likely.
Build a house, move in and then sell as used⌠it works up to a certain number, I would think. If you do it too often, plaintiffâs attorney will see right through that. But itâs good if it worked for you.
If you expect likely lawsuit, better to form a company for each condo/townhouse set. Close the company after a while. This way, you get some protection.
You need to have holding company where all operations happens, then sub-corps under the holding that is related to specific building set. It costs you some money and efforts.
I am past the ten year statute of limitations as a builder No suits. Compared to several as an engineer. Mainly due to inexperienced developers and stupid contractors⌠The problem is with HOAs who would rather call a lawyer than a roofer or plumber. Remember 90% of all construction litigation is water related. Donât skimp on plumbing roofing and flashing. No basements, no decks over living no flat roofs. Donât let your architect draw you into a lawsuit
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I got past my first construction defect lawsuit already⌠was 2 SFR, not condos. Every single bill was paid by the LLCâs check book, ownership was LLC from beginning to end, but guess what name was first in the list? Myself, the 2nd officer, then the LLC, then the GC, his insurance and the RE broker.
We settled just a few weeks ago in March. They were asking for low 7 figures and got about 25% of that. Most of the money that they received went to their team of attorneys and construction experts.
Jil: You cannot âclose the companyâ⌠thatâd be the worst to do. Because then you automatically assume all liability that previously (in theory) was limited to the LLC. You need to keep the LLC in good standing for 10 years.
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nice play with words.
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My friend built this and used more than 60% of subs. Both of these guys are completely working 12 hours a day and spend lot of time. I let them borrow the floor plan I did 6 houses in MV last year with.
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Whatâs the cost - for my curiosity? For a serial builder like yourself, and for a hobbyist builder? You get the scale. how much did it cost these guys?
How cloud can reveal his friendâs cost (he will want to protect his friends internal !). If ownerâs are working 12 hours/day, they try to minimize the cost. We can guess the cost will be between $200/sqft to $225/sqft. They may get a nice profit.