Happy Chinese New Year 🐰 to anyone who celebrates.
What are you looking forward to today?
I'm going to hit an 8K run for lunch and then my parents + sister are coming over for dinner.
Livin' La Vida Luna y Luca
Luca: Get me outta here, pls.
New Construction Samosas
A few weeks ago, my mom yelled at me about my new construction project.
❌"Why didn't you just buy a house that was done?"
❌"Why did you have to make it so hard on yourself?"
✅ Cause I'm a glutton for punishment, and -
✅ Cause I can't unsee what I know
I had to explain it to her in a way she could understand.
So I said, "Mom, when we go to Indian restaurants, how come you never let us order Samosas as an appetizer?"
She says, "I refuse to pay $3 per Samosa when I know the ingredients cost less than 1 dollar"
That's why I'm building this house instead of buying something ready.
Because I (kinda) know what it costs to build a house, and it's hard for me to pay the premium when I know the individual ingredients come out to less.
Although I won that battle, it sort of feels like I'm losing the war.
Building a new construction home is an absolute trip, and I'm beginning to question if the juice is worth the squeeze.
3 Major Challenges:
1. Fronting The Money
It shouldn't come as a surprise to anyone when I say funding this project has been difficult.
Especially because the lender will NOT reimburse us for costs incurred until installation is complete.
Right now, the house is being framed and that should be done by the end of January.
But because we want to get ahead of schedule on materials, we placed orders and paid for all supplies:
Windows: Anderson 400 series (black)
And Framing (Labor + Lumber)
When you add it all up:
- $68K - Supplies
- $34K - Windows
- $100K - Framing (Labor) + Lumber
Roughly $200K out the door before seeing a penny back from the bank funding this project.
I originally estimated a $500K build cost, which was based on a similar home being built (on slab) for $400K back in 2019.
So while we accounted for a 25% increase in costs, what I didn't account for was the ~$65,000 worth of site work just to get this project to the "starting line".
...$265K, and counting.
Let's not forget the "soft costs" that the bank will NOT be reimbursing us for.
3. Timing (Delays)
We originally bought this property in December 2021.
Without getting into why - it took until December 2022 to get the foundation installed. 😅
Carrying costs have been brutal.
We're currently at ~$45K between interest, taxes, and insurance. That's not including balloon interest due, which accounts for another ~$40K to date.
Despite the costs, all hope is not lost.
3 Major Wins
1. The Market
Despite current macroeconomic factors , there are still buyers for new construction products in premium markets.
Based on recently sold comps, I believe the after-repair value of this property will exceed my original expectation of $1.5M by a good margin.
For example, a 2,756 square foot home recently sold for $1,625,000. The home we're building is 2,830 feet with similar finishes and bed/bath count.
2. Builder / Subs
When taking on a project of this magnitude, the biggest concern is execution risk.
Did I put together the right team to bring this project across the finish line?
We got off to a slow start, but that was my fault alone.
Since the foundation was installed a few weeks ago, we've been rockin' and rollin'.
3. My Confidence
There was a lot of self-doubt coming into this project. I hadn't taken on a project like this alone since building out my restaurant, which was an absolute disaster.
So I offered 50% equity to my mentor just so he would hold my hand throughout the process.
Thankfully, he rejected my offer to split the project. He believed in me more than I believed in myself, and he's been guiding me every step of the way anyway.
There have been some significant challenges on this project, but so far we've figured everything out. And each time I overcome an obstacle, the light at the end of the tunnel becomes a little bit brighter.
Finally, this project is getting me invited into the right rooms.
Last week I had a meeting with a local builder (~200 new construction homes over a 40 year career) and Mary Weichert (daughter of Weichert Founder).
And next week I'm speaking at an event where investors from around the country are coming to learn about how to find, fund, fix, and flip deals just like this one.