After a bunch of PM’s I thought I would detail my adventures into the world of becoming a new home builder. I will tell you why I chose new homes over flips. What led to me this and my adventures in building 4 new properties in 15 months and flipping 3 of them.
Back last year I had taken a shot in playing poker full time after losing my job. I had two years salary behind me and the only debt was my mortgage on a duplex I lived in. I realized I was good enough to make money every month but not enough to live the lifestyle I wanted. I mentioned to a friend I was going to start looking for work. He asked me if I would hold off and sit down with him and discuss an opportunity. He mentioned he had some cash and wanted to get involved in flips or buying an old house and bulldozing it and building new. He wanted me to run it and we would split the profits. I would also receive a Project Management fee for running each one. He would get a set return on his investment.

I did some research and found that finding flips would be hard as there are so many guys doing it and would be hard pressed beating them at the game of finding that property. I mentioned to him that we would be better off buying a lot in a new subdivision or finding a bulldozer special and building a duplex instead of a house. His sister just got into Real Estate and she would help us find properties and would get all our listings. We looked at many properties and I just did not find the right one. In the mean time I would walk my pooches through a new subdivision every day and noticed a bunch of empty lots. I contacted the builder and found they had 5 they wanted to sell. All were restricted to Bungalows.

I met with my partner and said I wanted to buy a lot and build our first bungalow which I wanted to keep. I figured it would be the easier project than bulldozing and building. I purchased the first lot for $137,000 plus tax. A week later our realtor found a old 1941 600 sq ft Bungalow in the trendy Riverdale area that was on a 50x150 lot and zoned RF 2 which allowed a duplex at the cities discretion. Boom We now have our second property at $350,000.

I plan on detailing my adventures on Building 4 units and flipping 3 of them by the end of this year. I will detail my adventures from the start and try and write something each day till I am caught up to the present. My experience in construction is limited to Hiring trades to complete my basement renovation though I do have project management experience. Also my brother had built 3 houses 10 years ago and knew the overall process and would be asking him a few questions. Also on my walks with my dogs I was lucky enough to have met a gentleman that was a small builder that builds 4 high end houses a year. As for location I am in the City of Edmonton in Canada Our province sits on the largest oil reserves in the world and has an economy that was a little slow but is now starting to boom again. We see the market as remaining flat.

Feel free to ask me questions along the way. I apologize in advance if my grammar isn’t the best. I could write 4 months of work so far but that would be a long read

Here are pictures of the status on the First house and the bulldozer special we bought.

My first lesson in building DO NOT build in the Winter.

First Project

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Bulldozer Special

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Thanks, lozen. Another interesting read and another thread I am going to follow.

That second picture looks familiar. Where have I seen it before?

Also, could you go into more depth about the financials as far as your initial analysis for making the investment decision?

What kind of potential payoffs are you estimating?

I look forward to many pictures.

The house I posted in another thread as some one asked about building new


Will go more into financials next post. I thought if I wrote 4 months on it would be a long read. Next week Ill post more as the project is shut down as we are forecasting temperatures below -25 to -30 all week. Most trades cant work as it will damage their equipment

As for returns The bungalow will come in at $375,000- $400,000 cost. Appraised value will be $525,000 and will sell for approx $500,000

The Bulldozer special we are looking at a $850,000 total investment and selling for $500,000 a unit minimum.

We also just added another lot 5 doors down from the other for $142,000

Note also all build will be high end finishes

Lozen,

I'm looking forward to following your progress- thanks for starting this up.

Just wondering about the cost of capital: How much are you putting down on these properties? What are interest rates like out your way?

I'm also curious about how taxes work in Edmonton. In the states, flipping 3 houses in a relatively short period of time might classify you as a dealer-trader in the eyes of the IRS, which turns the gain into ordinary income, which may wind up being taxed at higher than capital gains rates.

What are you estimating to pay in sales commissions?

Sorry if these are boring questions, but I think they're important (and interesting) issues.

On the first lot. We paid cash and I am paying the costs to develop out of my savings and cashed in my RRSP 1/2 last year and 1/2 this year. RRSP is a retirement fund. I looked to finance the build but the banks here will not fund you if it is your first house acting as a General Contractor. They require you to have a builder. Once we complete one that changes. My partner will move into one duplex and live in it for a year. He may end up keeping it. He loves the area

The Bulldozer special we bought with a partners line of credit at 4%. We will fund that with a builders loan at about the same rate.

The new lot we are closing on was $15,000 down and balance in 90 days. We may have the foundation done before we close on the lot. The balance will be paid by a line of credit and builders loan on balance. My partner has the option to finance anything at a 4.5% return if he so chooses

You are correct if you sell a home in Canada i the first year you must pay capital gains tax. I plan on moving into the first build as I sold my duplex and currently live in the bulldozer special. I needed to sell my duplex to fund the first deal. I was lucky and sold in 3 days after listing only $2000 off my asking.

Real Estate Commissions here in Alberta are 7% on the first $100,000 and 3% on the balance

Let me add my research has also led me to believe Bungalows are the way to go. Build them in higher end subdivisions also. As the population ages many seniors live in two storey homes and want to switch to Bungalows. They have lots of cash and want quality and high end features. It is the same strategy the builder I spoke to on my daily walks with my pooches utilizes.

Added note a small developer completed the house beside my first lot and listed it in comfree at $579,000 and sold in 3 weeks for around $570,000. Little bigger but finishes will not be as good as mine. He did finish the basement though.

Thanks for the detailed reply, Lozen. Your access to cheap credit and savings is a huge advantage, and the lower sales commission is a bonus as well.

Sounds like you've got a solid read on the local market. I agree with you on the bungalow/smaller house concept and the aging population- I'm working on renovating a 1000 sq. ft. house for a single senior and we're building for wheelchair access, safety (grab bars everywhere, etc.) and general ADA compliance, and I'm looking to specialize in this niche.

I'm sure you're going to be incredibly busy overseeing these projects, but I hope you have time for the occasional update. Good luck on everything.

Ok so I Have bought an empty lot and next step finding House plans. The subdivision has restrictions on all lots and this one is restricted to a Bungalow. As I do daily I walk my dogs through the subdivision getting cards from contractors and advice on building. I ran into my friendly builder whom directs me towards his architect. He also asks me how much I paid for my lot and was shocked at how good a price I got. I sat down with the architect and over two sessions had plans done up for $2500. I than had to have the house plotted on the land. Included in this price was the surveying for the dig.

I am now ready to get quotes and need a truss layout and beam layout as they are required for a permit. This takes about a week and must give a deposit for the layouts. I am now ready to head down to planning & development and apply for a permit. Also thinking that this is a 1 -2 week process. I have my form and plans and plot plan and truss and beam layouts and apply. Guy looks over everything and says. Your missing your stone engineer letter for all the stonework on the front of the house. Sadly I leave and also find out the process once my application is in is 3-6 weeks.
I have no clue were to get this letter. I call the stone company and they give me an engineer in town that can do it. I call them and they say e-mail the plans and drive over and it will be ready for $150. I pick up the letter and just about to leave when I ask" Are there any other letters I require for City Hall that you may do?" Well yes there is I need a Pad letter stating that they will support the load of the house. The pads are poured in the basement and the tele-posts carry the load of the house. She does that letter up while I wait Another $250.

Back to City hall and apply. I have everything I need and they use me to tell the guy next to me about being prepared and having all the documents required. Permits run me $2500 and now I wait. This is a two stage process. First they issue a development permit. This allows you to pour your foundation and than they issue the Building Permit.

Now I wait

One thing I was told my builder friend after telling I could be waiting 3-6 weeks for permits was that I could pour my foundation without permits. As it is Late October no snow or frost has hit yet. When talking to the engineer he tells me the same thing. So I tell the construction company to go ahead and do the excavation. I found these guys on my walks also. So hole is dug now the cribbers come in. I decided on 9 ft ceilings in the basement as it is a great selling feature and only adds $1000 to the cost.
For those of you that live in warm climates basements are required as your foundation must be below the frost line as when the ground freezes your house would shift without it. So now my house foundation is poured and that must set for a week. I call city hall no permits yet.

I now require waterproofing for the foundation I decide to upgrade here to a System Platon is a drainage layer that comes with a 25 year leak free basement warrantee. This is installed along with weeping tile sump pump system.

I now am as far as I can go as i require an inspection but cant get an inspection without a development permit. A few days later I get my development permit and inspector is called in. I pass my foundation and Sump pump system inspection. Now nothing till building permit. My framing crew will not be ready for 3 weeks anyways. I found them on my dog walks also.


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ahhhh very cool, keep us updated!

This is so interesting- thanks for the update. $2500 for full plans including survey seems like quite a deal. $5400 total and you're ready to roll? Wow. I'm surprised a random engineer would sign off on the pad letter for $250. I'm also surprised that your formwork is not required to be inspected before pouring the foundation.

What's the sq. footage of the basement?

Plans were actually $2200 and Surveying and Plot plan another $1100.

The sq ft is 1470. I would post the plans but are PDF and cant block out some personal info

Let me add at the start I figured I could build for $125 sq ft not including lot and would be completed by the end of March.

Your building costs seem quite reasonable. How in the world can you get away with pouring a foundation without a permit and inspection? I'm so curious.

Good luck with your endeavors. What are you long term plans for this? Is this something you see yourself doing over and over until you retire? Are you set firmly in the demo and rebuild idea or will you consider doing rehabs and flipping? The reason I ask is that with the demo and rebuild plan I can see issues of finding enough suitable properties to buy (cheap lot/land and able to sell the newly built house for enough of a profit).

That is what I had planned based on a few factors. Stay tuned it changes
Even if I had my permits they would not do the first inspection until it is completely poured. It was common practice to do it this way as we just came out of a huge boom. They assume you will pour it according to the specs on the plans.

So far I love it and my partner is in it for the long haul his goal for me is 4 properties a year. My goal is 3 or 4 a year in the spring through fall Head to Phoenix or Vegas Jan -Feb and start over. We may look at some flips if the right deal comes along. Problem is the good flippers grab the great properties before you can see them. As long as developers will sell us lots we are OK