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Let's Build a Spec House!

A detailed account of a Fastlane process...

iAmTrade

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Very interesting project you are undertaking. I do like the home design. I do have prior construction experience, (In New Jersey).

What if I said...I knew a company that can build modular homes for you...

Your @Get Right selling point is- there is a demand for the homes, hence you will supply. How about.... supplying it cheaply, at great quality, impeccably efficient, possible to have it off the grid, self sustainable, VERY VISUALLY APPEALING.

Cash flowing with what I have in mind is to be your new focus. As you won't want to sell.

I have wanted to do this a few years now. 1 problem for myself was- I did not, and still do not have the capital to buy the land to make it worth the venture, nor do I have the capital to finance.

You are to spend 1.03 Million to build these... 3 Homes!?!

How about change that figure. Take the 342K$ for 1 of your homes and build 8 of them instead?

You are looking to profit at 172K$? or 104$? per home after you sell...

What if I said you can have yourself 105,600$ profit per year instead?
---
If you want to "go big" and spend your 1.03 Million$...

Change it, message me @Get Right

And
instead of building 3 homes, you can get 24 at around $320,000.00 a year cash flow.

It doesn't hurt to just talk. Will wait for your message. I do love this, let me say that for certain.
 
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Get Right

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Get Right

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So, my contractor has been dragging his feet for the last few weeks. We should have pilings going in the ground on the first lot but nothing so far.

The contractor hasn't done the following: Energy Reports, Truss Design, Sewer/Water/Gas Taps, site clearing etc. etc. I started getting upset about it at first. I then realized the contractor isn't going to control my destiny. This job is getting done with or without him. This is my dream.

So I figured out how to do all the above and lot more. I didn't ask permission or even tell him they were done (It will be funny when he figures it out). Here is a fun example - about 12 trees needed to get cut and removed for the house. So I fired up the chain saw and got to work:
20160120_121824.jpg


I have a bobcat, backhoe and chipper showing up tomorrow. Dumpsters, toilets and temp power next.

The lesson: Don't let anyone else control your future!
 

Get Right

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As promised, I rented a mini excavator. Dug up all the stumps and finished clearing the site (picture below). It was below freezing and the wind was howling...

So guess who I got a call from today....the contractor :) He says "Wow man, you already finished the site work and pulled the permits". In a very polite manner I said to him "Hey, look. This house is getting built with or without you. I'd love to have you part of the team, but this is the pace I expect."

I hope he got the point. We will see how he delivers going forward.

PS - This particular bobcat is a blast to run :rockon:

BobcatE30.jpg
 

Pete799p

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This is the part where most investors would write a heated emotional post about how they hate contractors. They would feel better and nothing would get done. Congrats on the progress, I am sure you will do well.
 
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4x4ord

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As a project manager I've built about 200 production spec houses on very tight time frames. My cycle times were 50-60 days from permit to delivery and I started about 9 homes per month.

My one piece of advice is to make sure you charge plenty for change orders. Charge high enough to discourage or even make the buyer think twice about making a change. When you estimate a change, there is always something that trips you up that you didn't think of.

Also, I created very thorough inspection checklists for each stage of the build; foundation, rough in, final. These were 150-300 point checks. Room by room, board by board, opening by opening. They are tedious but caught a lot of small issues that would have burned much more time than was spent doing the checklists.
 
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Get Right

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4x4ord

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Dang! I am trying to do 1 a month, guess I better up my game!

Honestly, there are some major advantages to running multiples of houses. The biggest is keeping contractors on your site. They are like herding cats once they go to someone else's job.

A good rhythm for me was starting 2 foundations a week. At that pace I could pretty much role my contractors from one house to the next.

Good luck! It sounds like you are off to a great start. Don't hesitate to shoot me a PM if there's a question I might have an answer for.
 

Get Right

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Thought you might want to see the view from lot #2. Just got it cleared yesterday. 5 hours of cutting and chipping, lots of fun.

Lot%202%20b.jpg
 

MKHB

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Thought you might want to see the view from lot #2. Just got it cleared yesterday. 5 hours of cutting and chipping, lots of fun.

Lot%202%20b.jpg
Oh man... r u kidding me. What a place to work. Nice.
 
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Get Right

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Having an exciting week with the spec houses! The first house finally has the pilings being installed:

20160316_164250_resized.jpg


Lot's #2 and #3 are cleared with site prep under way. The timing isn't going to allow the pile guys to "roll" to the next one. They are putting one job between ours. In the future I will eliminate this with tighter scheduling (saves a few thousand).

I've been noticing that sub-contractors (specifically framers) are very wishy/washy about their pricing. It appears that they favor "seat of the pants" pricing as opposed to itemized detailed proposals. What I found is that this gives big swings in pricing from sub to sub and day to day. I figured out how to swing this in my favor. I simply continue to get bids on the work all the way up until the sub start date. I saved 5k on the framing labor by doing this.

Another money saver is simply using cash. I can move so much quicker and get better pricing. Also - less regulation! No banks wanting ridiculous information and wasting my time. How do I do it? I use that 16 year old rolodex of contacts that I built up. It takes many years of networking, but it works.

Other random bits of knowledge accrued:
  • Make steps on your project every day. I was sick all this week. I didn't want to move let alone work. I made the decision that just 1 tiny step a day would get me closer to my goal. Day 1, I simply put up one "for sale" sign. Day 2, I picked up some prints for the jobsite. etc. Those little steps add up.
  • Take advantage of cheap advertising...you never know what will come up. I have signs on all 3 lots. They are actually generating calls from people that want me to build on their lots! Pretty cool.
  • Focus on what the customer likes/wants throughout the whole process. Ask yourself "what would my customer be happy to see"? Is it a fantastic designed jobsign? A spotless, clean lot? Get in your customer's head. Do things that have them call you and say "wow!" You will know when you get it right...they will tell you :)
Looking forward - I have a meeting tomorrow with another lender. The goal is to get more lots under my belt. When I am able to secure this next round of funding I will start to test the "fastlane" component of building these houses. The main component being time. Once I prove that my time can be mostly removed, we should have a good model for other fastlaners to follow.
 

Get Right

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Please don't take this the wrong way, but if you keep doing things the way you have been, there is no way you'll be successful in removing TIME from the equation. Some things I've noticed:

Ha! I don't take constructive criticism personally. Thanks for the input!

I have a general contractor that is tasked with most of the items you mention. He's not moving at an acceptable pace (agreed). I'm trying to motivate him more effectively. It's not easy to break "beach fever" as we call it.

My projects are 100% legitimate (I'm an Architect). Everybody is licensed, insured, umbrella'd, and W-9'd. I also know the vast majority of them.
 

Get Right

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Does your contract with the GC lay out specific deadlines for deliverables? Does the contract call out penalties for missing those deadlines? That might help him get his butt in gear...
Unfortunately no. I haven't done LD on residential work before but....I bet it would get his attention.
 

Mrs. BRKb

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Managing contractors and subs can be like herding cats, particularly when there's plenty of other work around... lose one job, they just pick up a different one. Crazy.
 

Get Right

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Any update? How is the development tracking along?
Still making progress! Here is a shot of house #1:
20160418_102321.jpg


The decking should be finished today. I'd like to be further along but making steady steps in the right direction. I make it a goal to advance the project every single day.

House #2 and #3 are in permitting. Ideally they will begin in 1-2 weeks.

From the sales side - things are looking good. My realtor thinks house #2 will get a deposit as soon as the pilings are installed. House #3 isn't listed yet (on purpose). My goal is to sell it without the realtor. I'm getting numerous inquiries (and several people stopping at the job site to talk).

All this activity is also getting requests for me to build some custom homes. I'm resisting right now because it violates "Time". This would be easy money and the lure is hard to resist...but I'm sticking with my fastlane strategy. I struggle with this part of the process most.
 

Premixedd

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Still making progress! Here is a shot of house #1:
The decking should be finished today. I'd like to be further along but making steady steps in the right direction. I make it a goal to advance the project every single day.

House #2 and #3 are in permitting. Ideally they will begin in 1-2 weeks.

From the sales side - things are looking good. My realtor thinks house #2 will get a deposit as soon as the pilings are installed. House #3 isn't listed yet (on purpose). My goal is to sell it without the realtor. I'm getting numerous inquiries (and several people stopping at the job site to talk).

All this activity is also getting requests for me to build some custom homes. I'm resisting right now because it violates "Time". This would be easy money and the lure is hard to resist...but I'm sticking with my fastlane strategy. I struggle with this part of the process most.
As someone who grew up building custom homes for 8+ years, I can say that this thread genuinely intrigues me! I have built quite a few spec homes for clients who pay gobs more for just the "unique" design alone. No extra square footage, no additional amenities or benefits, just for the sole purpose of standing out amongst all the cookie cutter houses. I've been considering going this route once I have a little more capital to run with in my fast lane ventures.

I admire your doings and will be following this thread! Good luck!
 

Get Right

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House #2 piles are going in today:

20160427_130336.jpg


Starting to understand how to run multiple builds at the same time. It takes a little more management but the savings are getting to be significant. For instance - I had a small amount of tree trimming to do on this lot. Called out the tree guys, best quote was $850. Didn't want to spend that much so I got my other crew down the street to knock it out after work...for a free lunch :)

If you notice in the picture above there is a fence being built...by me. I didn't like the pricing once again (and I had 4 days free). Frankly, I enjoyed every minute of building it! Fence boards go on as soon as the pile guy is finished.

Trying to get lot #4 under contract now.
 
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Get Right

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Lot #4 is purchased!

Now trying to get #5 under contract. This one will be a little tougher. It's owned by an estate (3 siblings). The price is right but the siblings don't play well together. I'm trying to use my relationship building skills to talk to each party. I'm finding out what makes the deal work for each sibling. I'm searching for how can I provide each of them value. Money, sure but I bet some just want the lot to go away, others might want to see a nice family build a house there. I'll let you know what makes each sibling tick.

Some of you may want to know how I am buying all these lots (all are paid with cash btw). Here is my hierarchy for doing that:

1. I buy it with my personal cash. This method is preferred for obvious reasons, total control. I make cash for this account by doing small Architecture jobs for people, selling on craigslist, building furniture for people and odd handyman type jobs. The trick is that I don't let TIME control me. If I have some downtime from my fastlane I do some work on these projects. I never slow my fastlane down for these projects. I simply squeeze them in (because it pushes $$ into my fastlane). If you have a JOB, this could work similarly.

2. I buy with credit. If I am out of cash I use a Line of Credit (LOC) with a low interest rate (typically 4%). I use these LOC's temporarily until I can produce the cash to pay them off quickly. Advantage here is that there is no "mortgage" or bank to tell me what I can or can't do with the money.

3. I bring on family and friends loans. These typically run 7% and I set the deal up where they get paid at closing. Build time can make or break you with this.

4. Private Investors. My last resort. They usually want 7%+ and a piece of the profit (typically 20%). Not a great strategy but if the numbers work I will use this method.

Notice I never mention getting a mortgage or securing the lot on the LOC's. These remove CONTROL and speed from your deal, not to mention additional closing costs.
 

Ikke

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Will a mortgage not get you a lower interest rate than your friends and family loans? Seeing as mortgage rates for 20 years are now at 2,3%.
 

Get Right

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Will a mortgage not get you a lower interest rate than your friends and family loans? Seeing as mortgage rates for 20 years are now at 2,3%.
Yes, but not worth it because:
Notice I never mention getting a mortgage or securing the lot on the LOC's. These remove CONTROL and speed from your deal, not to mention additional closing costs.
 
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Blair

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Whats the latest update? Love seeing the updates as looks as though construction methods are slightly different to that of my home country.
 

BrandonS85

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Is it normal for houses there to take so long? Up here a halfway decent spec home can be done in 3 months or so, even of the nicer, more luxury-ended ones.
 

Get Right

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Whats the latest update? Love seeing the updates as looks as though construction methods are slightly different to that of my home country.
Busier than ever and having a blast! Currently I have 6 under construction with 2 more in the works. All of these houses are close to the ocean and require pilings for foundations. Basically when the big waves come they wash under the house as opposed to washing the whole house away.

Is it normal for houses there to take so long? Up here a halfway decent spec home can be done in 3 months or so, even of the nicer, more luxury-ended ones.
In my area and this style, yes. We are on track for 8 months per house. We have a severe shortage of framers, always been a problem. I've looked into hiring my own team of framers but then it becomes a job and not very "fastlane".

That said, the OP seems to be doing a lot of things sub optimally and is taking a lot longer than he should be to get to where he is. He may have gotten in over his head with multiple projects simultaneously...
O, come on man why the hatin'?
 
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BrandonS85

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That wasn't meant to be an insult...I apologize...

My point is that you would have been better off building a single one of those properties start to finish and then using what you learned to fast-track the rest of them. You broke ground on the first one over 9 months ago -- I would have focused on getting that one built (and sold!) by now, and then you'd have experience start-to-finish on this kind of project and the next 4 or 5 would have gone very quickly.

As for framing, I highly recommend finding a local framing company that can do pre-built wall panels and trusses and then ship them to the site. The bulk of the work is done in a factory, so the quality tends to be higher and because you don't need framers to build the panels, it can generally get done quickly. Then, once the panels are built, the framing takes essentially no time.

Here's video from a recent build I did -- this is a 4000 sf house that was framed in 2.5 days:

Forgive me for dumb questions but...

If a homeowner came to you and wanted only framing, how much would you charge psf on a two story? Reason I ask is because I want to design my own house, which is to be only a large box that I want to finish inside. I've got resources for almost everything but foundations and framing are two things i don't have a good handle on. I've read so much about wall , roof and floor loading yet still don't understand it all especially when it comes to pricing.
 

BrandonS85

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I'm an investor/developer, not a contractor, so this isn't something I would do for someone else...

That said, to give you an idea, for the house above (three stories, 4000 sf, 10' ceilings, higher-end materials for decking, etc), which was built in Maryland where the codes are pretty strict, we spent about $58K on the framing. That included all the steel beams, framing, sheathing, decking, etc. I think it was another $1200 or so for the house wrap.

Now, this framing job was completely turn-key -- I handed the plans to the framing company (Builders FirstSource, a big, national supplier and contracting vendor) and they took care of everything. Had I subbed it out to framing contractors, purchased the materials myself and done the oversight of the job, I probably could have taken it from $60K to $40K.

Again, this is Maryland. A similar build in Atlanta would have been about 20-30% less, just based on the market and the lower cost of materials. Those are the only two markets I build in, so I can't say what it would be in other markets, but Atlanta tends to be on the low side in terms of costs and Maryland tends to be a bit higher than average.

Now, this was a bit more complicated than framing just big a square box, so that certainly adds cost, as did the high ceilings, a higher-profile roof trusses and a very large/tall garage. But, it wasn't a complicated framing job, so the extra cost isn't significant. It boils down to the number of walls and the linear footage of those walls.

But, that should give you a basic idea...

Are there any good resources out there for learning to cost-cut by DIYing the networking/design and the like? I don't want to do much if any physically with the property, just figure a way to get the largest house imaginable for the cheapest price possible through networking. So far I've had great luck at getting material extremely under cost (At the moment I can do HVAC in some cases for 1/5th of the pricing of what my rental competitors are paying).
 

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