New construction vs rehab

I have purchased and rehabbed a number of properties. The return has been nice. However, I , along with a couple of other people that I have invested with in the past would like to switch gears to new construction.

We have a contractor that would oversee the projects. But, this is new territory for me. My plan is to purchase 5 acres, split into four 1.25 acre parcels and build one house at a time.

I would appreciate your feedback.

I think it depends on what state you are in. And how the local government acts towards new construction. Number one issue is Zoning, this will tell you what you can do with a property, how it can be divided (if it can be divided). Some areas, expecially where I live it is not uncommon to have 3/5/6/10/20 acre zoning. This means one house per 3/5/6/10/20 acres. So if your lot is 5 acres and zoning is 3, you can not subdivide that property. You can try and get a variance, but you will more likely fail, expecially in one of those Nimby towns.

Can money be made in New Construction? Of course, but most builders I know build 5 houses at a time, it’s cheaper that way in the long run, and these are small time builders. One house at a time would take forever, expecially if you are building larger homes. Yes Toll brothers can throw together a crapbox in 4 months, but they already have all the crews hired, materials bought, land subdivided and everything that has to be in placed, in place.

Dan is right on the money about the zoning. Additionally, you can rarely subdivide 5 acres into exactly 4 - 1.25 acre lots because of services, rights of way, etc. if the piece is perfect (long and narrow with frontage access), it can sometime be done…