There are many challenges to making a successful transition from small fix-and-flip projects to larger, new development deals. Jason Gaston, who has completed 75 fix-and-flips and wholesale deals, decided to try his hand at new construction and has first-hand experience with these challenges. In our conversation, Jason explained the main lessons he learned from performing new construction and how he will apply these learning experiences moving forward.
New Construction, New Numbers
Currently, Jason is in the middle of 4 new construction deals. The first project is almost completed and should be on the market by the end of the month. Jason is purchasing infield lots in existing neighborhoods for, on average, between $40,000 and $60,000 per lot. After knocking down the existing building, it costs $80 per square foot to re-build. The new homes are around 1,600 square feet, which means Jason is all in for around $200,000 per new home. These neighborhoods are located in Tampa, where new construction is hot. Newly constructed properties are selling for upwards of $200 per square foot!
Renovation Contractor vs. New Construction Contractor
The main lesson that Jason has learned is that the contractor used to build new construction is not necessarily the same contractor that does the typical renovation projects. He started with the contractor that had done renovation projects for them in the past. However, it turned out that new construction was more than he could handle.
With renovations, you can usually use a handyman and don’t need a full-fledged general contractor. With new construction, you have to use someone that has prior experience in that field if you want to get the job done correctly. The last thing you want to be is a GC’s guinea pig, being the first client for which they have done a new construction build.
Ask Questions to Find Right Contractor
Jason’s best ever advice is that you have to be very meticulous to make sure you hire the right contractor. The first question that Jason will ask is if they have ever been a general contractor on a new construction project. Obviously, if they have never done one before, Jason won’t hire them. Just this question alone can save you a lot of headaches!
Also, Jason has an application form that he has every contractor fill out. The application asks very detailed questions like:
- Do you have your GC license?
- How many people are on their crew?
- What are the total number of jobs have they completed?
- How many new construction homes have they built from the ground up?
- What is the average square footage they have built?
- Can we see some of your recent work?
- Do they have experience doing custom homes?
This last question is specific to Jason’s situation. They are buying lots in a historic area of Tampa. Therefore, to sell the property at the full asking price, they have to build a brand new house with the same style as a 1920s bungalow)
Investigate and Verify
Even after receiving the contractor’s answers to these questions, Jason doesn’t just take it at face value. Instead, he actually conducts further research and finds out more about the person:
- Sometimes, he will do background checks if feels it is warranted
- He check their license number to make sure that it is up to date and active
- He check their references
Some of Jason’s biggest headaches have come from dealing with contractors who weren’t as honest as they should be. Or, they weren’t as experienced as they needed to be for the type of deal he was doing. He has learned that in order to make sure that he is doing business with the right person, whatever they tell him, he investigates and verifies it.
Never take a contractors word at face value. Whatever information you get from their application or interview, make sure that you investigate it to make sure that they are giving you true and hones answers!
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
