Building a condo in South Austin

10 Replies

Hi fellow investors!  My wife and I, in our spare time, have started a small sf real estate business over the last 2 years.  We have 3 properties and are looking to scale up so that we can afford to quit the rat race.  Our first property is a 780sf house in a really hot area and its sitting in the back corner of a 1/4 ac.  We are exploring the idea of setting up a condo regime, and building a large(3,000sf) condo and selling it(or refinancing and renting).  However, having never built and having a limited amount of cash on hand, we are trying to figure out how to finance the deal and how to choose an architect and builder.  Any advice or connections is extremely appreciated!

Thanks!

Matt & Mary

Hi Matt,

I can't offer any advice as I am further behind than you having just got me second property in Austin under contract but I share the same goals as yourself to get out of the rat race.

I just wanted to follow this thread and follow the progress you make.

Thanks

Scott

Hi Matt, Does your proposed use comply with city regs?

 For official legal verification of the zoning on a particular property, please call the Development Assistance Center at

Please have the County Appraisal District reference number of the property (14 digits) ready prior to calling. You can get this number from the Geographic Information System viewer once you have the address and have clicked on GO. Once the red marker appears on your map, under Map Tools (top right side of the screen), click on the TCAD Profile link to get the reference number.

Here is the link to the GIS Viewer tutorial.

Great advice Ronald!  I'll check that out.  I'm meeting with a couple different architects/builders this week and I'll make sure that they are covering all the bases, but they do these projects all the time in this location and I think they will have their ducks in a row!

If you are building it to occupy, it should be fairly easy to get a construction loan since you already own the property. Many banks will allow you to count the property as your down payment and the rates will be quite low and interest only. If it is purely an investment construction loan,that gets a little tricky. I know a couple of REI lenders that do construction loans, so you can PM me. Rates are higher, of course, but they will also let you count the property as a down payment if you own it free and clear. If you have it mortgaged, you’ll probably need to talk to them about the scenario. There is a lender in my state that loans to owners and investors who want to build their own properties, without a general contractor, but they do not loan in Texas. You could search to see if there are any in your state. When I built in our upscale market, I found it difficult to find a builder who would do the size project that we needed without charging us so much that all the profit was gone from the project. You might encounter that problem in Austin as well, especially given all of the reconstruction efforts that are going to be in progress for sometime in Texas and Florida and Puerto Rico.

 Also, architects can vary widely in their fees. I’ve heard of some charging $150,000 for whole house remodel plan. We paid about $5500 for our plans for a 1850 sf house that preserved the foundation and a few walls of an existing home.

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Thanks John-yeah, we will be needing some financing for sure!  We will also be looking at private money for the rest of the loan.  We're going very high end to maximize the potential of the property, and that ain't cheap!  Thanks for your info!

@Matt Heerwald great to meet you two last night. Hope to see you again. Are you occupying the property now? If so, the financing is probably easier as an owner occupied property.  Even if you plan to occupy but do not presently, I've found it difficult to finance the construction with bank financing (about six months ago I tried to do that in Austin and spoke with a number of lenders). If not occupied by you, the construction loan may a bit complicated. You might have to record (via an attorney with the county clerk) a condo declaration on the property at the outset and get a construction loan on only the unit A. I found it interesting what you said in that the profit for just selling the land are almost as much as if you develop. That certainly makes one reconsider. Hope that helps you a bit. Good luck, -- Whit

@Whit Ewen it was great meeting you last night too, and everyone else!  It really was a mixed bag of investors, and aspiring investors and I got a lot out of the discussion.  Having talked with the city, builders, bankers, attorneys and cpa's, I think if we go the build route, we would get the plans, submit those to the attorney who would draw up a condo regime, and then secure the financing to build.  If we are able to clear $500K in profits before capital gains kicks in, then I am much less concerned about selling it before our 2 years of occupancy in it over the past 5 years runs up.  And to your point of being able to cut and run by selling it as is, yeah, we wouldn't have to get our hands dirty and spend a year developing the property and realize a significant profit thats not far from what we would get from the build out.  I also would value the process of doing the build, it would be a huge learning experience and I'd meet people from all sides of the process, so that is also not lost on us either... 

Thanks for the advice, and we'll talk soon,

Matt

Matt,

To answer your question about finding an architect, I would suggest perhaps attending a local event that architects would usually attend.   The AIA, or other organizations will likely host events locally that could be a good place to meet the better quality architects, who are seeking to improve their knowledge of the field.  Here in New York there are several places where architecture lectures occur frequently, and some of the best architects in the city will be in attendance.  If you are near a university, the architecture department usually has a lecture series that will attract the local architects as well.  If you aren't interested in going to an event,  there are many design blogs that architects post their work on.  If you are looking for a talented designer, you can peruse the blogs, search by location and the credit is usually given to the firm responsible for the project showcased.  Here are some design blogs that are the center of the architecture community:   Architizer, Archdaily, HomeDSGN, Dezeen, Designboom, Houzz, etc.  Good luck with your project.

Cheers,

-Sean

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