Building a rental home

[MyronGainz]

Hey Guys,

I bought a rental property about 2 years ago and it came wit ha 4500 sqft vacant slot of land. I am talking with a home builder to build a 2 or 3 unit rental property there. Anyone have experience doing this?

Let me know, any advice or tips is appreciated.

Myron

 

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[Frank C. Parker]

I own three properties in my town but all a pre build homes. Never build any of my property, but have experience of rent out the property. I have my property consultant who done all paper work and also find tenants for my property. custodian wealth builders complaints

 

[biggeemac]

My dad has built many houses in his life. The only reason he is able to do it and make money is because he knows the code, the laws, the inspectors, the ins and outs.....how to source the materials, wood, soil, plumbing, electrical, wht things do do himself, and what not to do himself, etc. Matter of fact, he has several places around the city that he stores materials that he managed to buy for dirt cheap so that he can use them later. He also retired from his company which does road construction for major state projects and can get dirt and rock for really cheap. Even with everything that he knows, he says its difficult. Most people cant possibly do.....in this day......what he can. He pretty much sticks to his guns in saying that its better to find a distressed house, buy it for cheap, and fix it up rather than build new, unless you have a real penny pincher like him in your back pocket. The tricks he had to pull to get his current house past inspection was insane.

Why would you dump that much money into something that has a very high risk of getting tore up by shitty tenants? Also, you are probably going to outsource your entire project which means that you will be paying top dollar for this place.

 

[dbjennings]

I don't do this, but my brother flips, rehabs, tears down, builds, etc full time. I know a bit about building as I had a contractor's license several years ago. I'd say this: if you don't know what you are doing, stay out of the construction process. Depending where you are, the value of the land may make new construction of rental property viable. Find out what it will cost to have someone build for you, and run your numbers as you would if you were purchasing an existing building as a rental property. What is the difference?
If it meets whatever criteria that you use when you purchase an existing house, it's a good deal. Make sure you cross your t's and dot your i's with your contractor so you don't get hit with unanticipated costs for construction.


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[Shdreams]

It's already zoned residential. your biggest hurdle is finding out how to legally sever the lot into two properties. The city could say yes or they could say no. your a few phone calls away from an answer. If you don't know a quality general contractor personally. Get many quotes from the biggest and best builders in your area. Go with the best in town. It's your only safe bet. don't stinge on your GC. Don't pay for his retirement either, but that's what multiple quotes are for. Building new can be cheaper. I promise stress will increase 100 fold until it's complete though.

We get to fix Other peoples crap all the time! And I hate it! I walk away from 3-4 side jobs a year because people hired the cheapest guy. I always feel terrible to. Two years ago we de-constructed the 3rd and second floor of a 3 story town home. and rebuilt it basically slab up. customer fired one of the high end companies in my area and hired dirt cheap chain saw framers.

 

[CashFlowDepot]

Before you go too far in to the process, you need to determine what the impact fees will be. These are the fees that the city will charge to tap in to water and sewer lines from the vacant lot. These fees are sometimes HUGE - just depends on where you are.

A friend was ready to start building on a vacant lot he bought cheap. He had already signed a contract to build a small house for $100,000. Then he found out the impact fees would be $55,000. That killed the deal in a hurry.

 

[CashFlowDepot]

Reminds me of this story ... read this

http://www.cashflowdepot.com/blog/a...blems-are-the-real-source-for-creativity.aspx

 

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[ericj]

I would start with your permit department and check requirements. Also, the local health department if your able to do a septic waste system where your located. Check out the county/city water for tap and meter fees, or a well builder pending your location. Check your local power company, and get an estimate to bring electricity to what/where your building including overhead/underground/and meter.
Get a feel for the inspection process and building codes for your area if your going to play contractor. Can be a nightmare.

Your going to want to pick a floor plan that is simple, low pitch roof if possible (Toronto might need steep roofs though), gable ends, and preferably a split level or two story. These designs are cheaper to build. Keep interior basic, and do not get emotionally attached like it is your personal house. Neutral colors and builders grade material are all you need.
Never skimp on foundations, and dont forget about the access to the property. Driveways, land/lot lines, etc.

I have built before, and it is a PITA. Might be worth it though, and if it is worth while to you then remind yourself of that reason when it becomes a nightmare! Good luck

 

[jlwilliams]

Honestly, with so much inventory on the market, why bother building. Sure, it will be right next door to your other rental. How big an advantage is that? Big enough to tie up your cash and credit and time for as long as it takes to build the house and get it rented? Probably not. I'd sell the lot to a builder and put that money toward something you can put a tenant in the day after you close on it.

 

[Investfourmore]

I've got 11 rentals and done many flips. THe only reason I would build id if it was significantly cheaper to build then to buy an existing home on the market. I like to buy homes cheap and building is usually not the best way to do that.

 

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