building a fourplex as my first deal. trial by fire.

building a fourplex as my first deal. trial by fire.

Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes

Well, as the title says I am going to try an build a fourplex. And its my first deal. This will be my diary. Come hell or high water, you will have a front row seat.

Before we get into the deal, understand that I am going to consider this a diary so I will put almost all of my thoughts on what I am doing and it might get a little.. verbose. then again, maybe it won't! really, I have no idea since I have never done anything like this before,

 Okay, so before everyone freaks out, I work in construction and have run crews before, I can read prints, and do layout but my experience lies in condo construction and I frame with steel as opposed to wood. I have done wood frame before and though I cant claim to be any good at it, I know enough that I know what I don't know, if that makes sense...

okay the property.

I live on Vancouver Island, in the city of Victoria, but am buying in Nanaimo, which is an hour and a half from where I live.

The property is zoned for a 4plex and currently has a little one bed one bath on it, the listed price was 199,000 with a city assessment of 151,100 (land value 134,000 and the house 17,100) . the lot is 9372 sq/ft and the house is 576sq/ft. super small.

I didn't think the property was worth anything close to what was being asked, but I called the agent anyway, and asked about the property. the agent said that the owner owed 180,000 and wasn't going to go any lower, but as the property had sat vacant for four months he wanted it gone. I know the property is not worth that now, but I think it might be in a year or two because of what is happening next year.

the downtown core in Nanaimo is starting to develop. they have broken ground on a new hotel tower and next spring a new walk on ferry service is starting that will travel between down Nanaimo and downtown Vancouver.

Vancouver is one of, if not the, most expensive place to live in Canada. the prices for a 3 bed 2 bath in Vancouver can easily reach a million dollars.  there is currently a 3/2 listed for 2.9 mil. the average price for the same in Nanaimo is in the 250-300 range. the closest price point on the main land is a two hour drive in heavy traffic. the ferry will be an hour and it goes straight downtown.

I have 50,000 that was borrowed from people who believe in me and I not really willing to risk a large chunk of that to buy a currently overpriced property that the owner refuses to move on, but that isn't to say he wasn't motivated. it had sat vacant for four months, and the same before the last tenant was there. this guy did want it gone,

so I offered a lease with option to purchase. i offered the 180,00 that he owed with 10,000 down on a two year term, with a one year extension for 5000. both would be taken off the purchase price, bringing the price down to 165,000 in three years. I will also be covering all the costs for the property during the term, so the owner can basically wash his hands of it unless something catastrophic happens.  along with the lease, the seller is giving me an appointment of agent for the property so that I can start talking with the city.

During the coming year, I am going to go through the steps and get everything ready in order for me to build.

one of the first things I plan on doing is approaching a private lender to ask where I would need to be or order for them to feel comfortable loaning the construction costs, so that I have a realistic goal I can work toward during the net year. I am also considering taking a GC course in the spring at the local uni. I would love to build this myself, I know that I could and I really think if this goes well I would like to repeat the process.

 I have a few people in my life that I can ask for help or advise. the owner of the company I work for does development and I have made more then a few contacts through my work.

the research I have done has told me that I can expect the cost per foot to range between 95-130. I would like to narrow it down some, but I will get a more true number in time.

so that is where I currently stand. I can honestly say I have never been so excited. I am trying to keep in mind that things can still go south though. the ferry service could fail, and the development plan could fall by the wayside, but that is one of the reasons that I did a lease, if this deal goes in the pooper, I can walk away, slightly poorer in pocket but vastly richer in experience.

I will most likely post a lot of questions as thing start to progress for me, if not here, then in the forums. so stay tuned. im excited.

Joshua

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Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
11y

I like the the fundamental idea that the ferry is going to create unprecedented demand in Nanaimo.  However, I'd want the deal to work even if demand remains the same.  And I'd want outsized margin on the deal since there is a lot of risk, and you are risking other people's money. 

What is your plan for the quad when finished?  Rent it out, sell the units as condos, sell the whole thing, move into a unit?

How long will pre development take?  Construction?

What are the hurdles and timeframe in getting required permits?

How much will construction cost?

What will it be worth upon completion (today's market)?

Do you know of anyone doing (or have done) similar projects in the area?  Have you talked with them about your plans?

Thanks for sharing your journey with us. This is an interesting project in a beautiful area. 

See this reply in the discussion

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  • Developer · Vancouver, British Columbia · Member since 2014 · 122 posts · 26 votes
    11y

    Hi @Joshua Berube interesting series of events and read.

    PJ here and I buy, fix and flip properties in Vancouver BC through our Property Investment Group and profit share with investors also. Yes it is expensive here but returns per project are great! I also have bank financing on projects at 70% so this helps.

    Interesting to see how the Ferry plays out but as some have mentioned go about your project as if it has no impact. There is always demand for good rentals and properties with something unique.

    I'm a bit anal with details and numbers so always go into deals knowing my costs before I dive in and in this case knowing what I can build with the city (fourplex and max FSR), how long their wait is and add on 50%, cost of building it, cost of holdings etc. As you mention speaking and finding a lawyer who has done what you need time and time again is important. I commend you for your bravery and smart with lease option. You mention what if the owner defaults on payments, but couldn't or wouldn't these be with a lawyer in trust? I don't now much about lease options but sounds like a "seller financing" type situation.

    Just remember time is money on your project so no wasting time and if the city appointments are booked up, when you make an appointment make another two in advance at the same time say 10 business days after the next. This way you have time for and drawing or plan amendments and questions you forgot to ask come up. Personally I have found that permit officers are very vague via email and just send you links to stuff that is relevant but not specific to your question.

    Also when pitching investors think what do they care about: They care about you as a GC getting the job done, your reputation - do what you say and say what you do, financial cost and expected return & timeline. I created a PDF portfolio (happy to share it with you for idea) for the bank and investors that gives a lot of info about us, who we are and what we have done. You could add pics of work you have done or managed in the past and what you are doing to educate also.

    Out of curiosity I will be looking into some properties in NA to see if buy and hold makes sense for positive cashflow even for some older places. I like the town and use to travel there for work. Maybe @tom stromer can advise me.

    Look forward to more info...

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    Hello there. thank you all for the interest

    I have registered for a project management course with the local construction association, which I was supposed to take mid January, but I was sicker then.. well. you know. luckily I was able to push it back, so now I'm taking it at the beginning of June. I am really looking forward to it.

    I have been in talks with the city about what I can do with the property. They are frowning on trying to rezone for higher density and the community association has to agree to it, and it seems they tend not to. I am considering trying to use some of my winning personality to maybe sway their opinion, but am not sure the effort would be worth it.

    the officer told me that the previous owners idea of subdividing the property wouldn't fly and also told me that the foot print cant be larger than 65% of the property. if I am to build one building, the exterior has to be built to make obvious the fact there are four dwellings there.

    the officer seemed quite excited about my plans, don't know if that meant anything, but it made me feel good :)

    My plan has evolved to building two side by side, top and bottom , duplexes.  that way I can live in the house currently on the property.

    @Peter Crisp 

    I am glad my thread led you to biggerpockets. its a great site. the pod casts are great.. so good.. anyway

    this project is a definite long term hold for me. I would have no desire to sell. I understand the numbers are tight but this seems it has good potential, and since I am not overly tied to the property, I can still walk away, albeit with an expensive lesson.

    I can cut down on some of the cost because I am going to GC the project and can do some of the jobs myself, like drywall, because its what I do for a living.

    @John D. 

     thank you for your interest.

    @Pawan J. 

    thank you for the advice. I would love to take a look at your PDF'S, I really appreciate the offer.

    I am happy with my decision to do a lease option. I feel it gives me more options.

    my lawyer was worried about me possibly losing the property, but that has all been sorted out. my option is registered on title and I have all the paper work.

    I agree with your bit on reputation. It has been on my mind and focus for awhile now. I definitely want to be a man of my word.

    if any of you are in town, let me know! we can meet for a coffee!

    again, thank you for the interest. I will keep updating

    Joshua

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    Hi Everyone

     I have some updates for my project.

    I have found myself a mentor. he is a GC with close to 40 years experience who is currently developing 8 townhouses for some local investors.  I sat down with him last week and went over my plans and what my next few steps would be. I had some thought on what my first couple of steps were, but I want sure. It is a giant relief to have actual steps. its easier to choose inaction when the steps are vague.

     I have also set an appointment with a surveyor for tomorrow evening. while I have no idea what to ask, I do know that I need to talk to more then one. I asked in another thread about whether or not I should tell the surveyor that I am seeking other bids. J Scott was nice enough to respond, and in seeing his name, I was reminded of a section of his second podcast with BP, where he talked about getting the first contractor to explain his field to you, so that you know what to ask in the following meetings. I went back and listened  to the podcast again. gold.

    That is something that I have been addicted to lately. Podcasts. I work at a place where I am currently able to listen to a device and I have been like a sponge. for the last two months I have been listening on average of 44-48 hours a week. I can actually feel myself changing because of it. Im more focused, I;ve started running, Im eating better... overall just.. better..

    im excited for whats coming up

    joshua  

  • Flipper/Rehabber · Tacoma, WA · Member since 2015 · 40 posts · 5 votes
    11y

    Good luck man! Hope your project succeeds!

  • Indianapolis, IN · Member since 2013 · 77 posts · 5 votes
    11y
    Originally posted by @Joshua Berube:

    Hello there. thank you all for the interest

    I have been in talks with the city about what I can do with the property. They are frowning on trying to rezone for higher density and the community association has to agree to it, and it seems they tend not to. I am considering trying to use some of my winning personality to maybe sway their opinion, but am not sure the effort would be worth it.

    I thought you said that it was already zoned for a 4-plex. Were you entertaining the idea of higher density? 

    Any idea why the previous owner didn't go through with it? How are you going to design the outside? This is probably more costs, but if this going to be the first bit of development in this area, you may want to reach out to an architect to design the facade. It may add some value if it has higher curb appeal. 

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Account Closed.

    yes, it already zoned for a 4plex, and yes I would love to increase the density. The property is easily large enough for a 6plex, possibly and 8plex.

    the previous owner is older and just never got around to the build.

    I'm not yet sure how I am going to work the outside. I have looked through some designs online, and am constantly going through possible layouts in my head. There is much that depends on what the survey says. I have an appointment for next week, so I should know soon enough.

    I am also contacting designers and will be setting appointments post haste.

    thank you for the interest!

  • Real Estate Investor · Gadsden, AL · Member since 2015 · 16 posts · 2 votes
    11y
    Originally posted by @Joshua Berube:

    That is something that I have been addicted to lately. Podcasts. I work at a place where I am currently able to listen to a device and I have been like a sponge. for the last two months I have been listening on average of 44-48 hours a week. I can actually feel myself changing because of it. Im more focused, I;ve started running, Im eating better... overall just.. better..

    Sounds like you're doing great from where you started. I just finished podcast 41 which as of today puts me 1/3 the way through the BP podcasts. It sounds like you're doing a lot better by yourself internally to help like the running and eating better. Crap food makes you feel like crap and steals motivation and energy.

    I do have a question on how you're paying for the building itself. I'm making the assumption you are working currently in a wage job. Are you going to save up and build in parts as you can afford the cash. Such as save for the foundation then pay cash for it. Save up to pay for framing and boxing the structure in then pay for it. Then trades as you can afford them until the building is paid for free and clear?

    Also, if you're considering building 2 duplexes instead of one 4plex, are you considering building 1 duplex first, getting renters, then building the second duplex?

  • Investor · New York, NY · Member since 2014 · 156 posts · 48 votes
    11y

    "He told me that the next step would be registering the option to purchase on title, but it cannot be registered as is and I need to fill out a form 'C'. so Ill be looking at doing that on Monday ore Tuesday"

    @Joshua Berube I'm curious, what's the process for clouding the title where you are (aka registering the option on title)? Do you get your document notorized and bring it to the county clerk or similar office? 

    Secondly, you mentioned you weren't sure how to verify the amount left on the mortgage. Have you tried requesting a copy of a recent bill showing their mortgage amount?

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Paul McDonald

    I was considering all the options available to me. If I had decided to go with the two duplexes, yeah I would have built one, moved into it and rent the other side, then build the second duplex. I have decided on building a single building.

     I was working a hourly wage job, though I've decided to find partners to help me finance and build. I have a friend who owns a foundation company and is semi looking to get into real estate. though nervous, he is open to the idea. he has some money and experience. I am looking at private lenders to finance the rest. I have talked with a few that have shown some interest, and we are planning to get into more detail when i get the prelim design completed.

    @Chris L.

     I'm not really sure what the process is. I had my lawyer handle that. maybe I should know the steps?
    I thought about that when I was making the offer. I asked the realitor about verifying andgetting some sort of confirmation, he gave a half answer and side stepped the question. I, to my shame, didn't press. I was too nervous,and didnt want to seem pushy. I wont make that mistake again.

    the seller is one of the people who are interesting in financing this build, so I'm happy with how the deal turned out.

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    Alright.
      Its been awhile since I have posted, and to be honest, been on the site. but I haven't forgotten BP at all, or this thread. A lot has happened since I last posted, so here it goes..

     I have found a surveyor to get the layout of the property. It turns out that my property is possibly located on top of old mine shafts that run through this area of the city. I have found a map of the old mines and this property is right on the edge of the mine zone. Im told that this shouldn't matter because the foundation wounldnt go that deep, more of a crawl space than a basement. the surveyor cost ~$1500 (Canadian)
      the next step, according to my mentor, was to find an architect, which was harder than I think it should have been. I was told not to skimp when it came to an architect because his/her finished product would make it easier to sell to investor, and while that made sense to me, of the 3 or 4 firms that I called only one returned my call and made an appointment. its possible that I didn't push enough to get a sit down, though I kind of feel that if they didn't bother to return a call, they wouldn't have paid as much attention to my project as would like. The one guy who did return my call, so far, has turned out to be great. fully supportive of what I want to do and seems to think that I have a good viable plan. I am a fan of the way he thinks. he will take an idea and follow the idea path in his head, letting it lead him wherever the idea goes.. its refreshing, similar to the way I like to think.
     we came up with an interesting foot print

    the jut outs are the entrances and the pen lines around the building would be hedges for privacy. 
     I am getting the interior layout tomorrow I think, and then I believe I can start getting actual prices off contractors. both my mentor and the architect believe my ballpark numbers of 120$ sq/ft are fairly accurate, which would put the build at around 125,000-130,000 per unit. the architect, who is more local than my mentor, figures the units would be worth ~150,000 - 160,000 each. I am going to go to a realtor to confirm once I get the prints.

     Financially, this is going to be a challenge. like most contractors in my industry, for the first three or four years I didn't my taxes. My fault, no excuses, pay your taxes kids (write that down. its important..) three years ago I decided to change that and sorted my jazz out. I owed over 25000 in income tax and 7 grand in GST (goods and services tax) I currently owe 4 grand on the income tax @ $290 every two weeks, I took a loan out to pay the government but  I didn't want to take out a loan again for the gst, so the nice lady on the phone kindly accepted a promise to pay of 1000 every two weeks until its paid off.  everything will be paid off by November (ish) I wont have much of a float then because during this time I also have to find 7500$ to pay the architect. I have paid a grand already and have a bank draft for 2500 sitting at home waiting to be handed over. I have looked at my paychecks going forward, and I think I that I can do this.. the numbers work.. barely.

    I also learned a bit about myself this summer. I realized that I have a hard time grinding and I lose focus of my goals really quickly when I get into the rut the grind creates. this is the point I tend to shoot myself in the foot.
      I had a decent a job maybe ten minutes from my house that should have lasted into this spring, but I worked with guys who would rather talk about G.O.T. instead of working, and the work they did I would have to go back and repair. they were getting paid the same as me, or higher and everyone was find with this. I wasn't. I know now to keep my mouth shut, but at this point I had forgotten my goals and let the immediate,, small problems dictate my future.. I 'spoke' up and lost motivation to do my job and I got fired. I live on an island, and this company has ALL the work here... really stupid of me. So, I found a job in Vancouver and spent the summer sleeping in my truck because I couldn't rationalize paying two rents.

     A far more important reason for me to sleep in my truck is that I recognize the pattern of shooting myself in the foot when things are going well for me. This NEEDED to stop. Because I was living in my truck, my parents decided not to come visit me. they are getting up there, and im not sure how much longer they will be around. Them deciding not to visit me and the fact I was living in my truck at my age hit me right in the feels. I was ashamed. I still am. I understand that I shouldn't be. That sometimes in life **** hits the fan. But at the end of the day everything that has happened to me is the results of choices I made. conscious or otherwise. and my choices lead to me sleeping in my truck on the side of the street at Wal-Mart. this has to change. I cant be the person I want to be and have these habits. I cant. I cant....

      I have only told a few people this story ( I have distanced myself from most of my group because no one among them strives for anything ) and everyone has responded with 'you shouldn't be so hard on yourself' ********. ********. I have to be hard on myself. I have to be. no one else will be. If I am not hard on myself I will stop trying to be better. I will be fine with my flaws, and be fine with accepting what life hands to me. If I am not hard on myself I will become comfortable. I hate being comfortable.

    the bright side is that the Vancouver job paid substantially more than the job on the Island, but at the end of june, the owner who fired me called me and offered my job back on the island at the same rate as I was making in Vancouver. It not at the job ten minutes away from the house, and I have to commute 1 1/2 hrs each way, but the job is on the island and I don't have to sleep in my truck. ill take that as a win

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    As I am moving forward with my plans, the people on the sidelines are getting more interested. the friend I have in Alberta told me that if the numbers work, he will put money in and pouch up to help me build it.  others are watching closely waiting on a plan...

    even if everything hits the fan, I will be completely debt free by Christmas,  so having enough for a 25% percent down by the option deadline will be really easy.. unless I get fired again, which isn't going to happen because this job is better than sleeping n my truck

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    I realize that I haven't posed a whole lot, it seems that so much time is needed between the beginning steps.. sorry.. Im hoping that once the ball is fully rolling that things will move more quickly. please don't be afraid to ask questions.. im interested in what you have to say and it will help keep me focused. thanks you

  • Architect · Tacoma, WA · Member since 2015 · 68 posts · 28 votes
    11y

    @Joshua Berube keep going!  You've got this!  No shame in sleeping in your truck to save money.  Absolutely no shame in that. 

    I'll be following too!  And btw - that's a steal of a deal for the price of the architect.  Is he just giving you design drawings for that price or are you getting permit/construction documents? 

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Caroline Hedin

    no, the price is just his to do his work, the permits and what not will be added to this. all in all he figures around 40 grand before I'm allowed to put a shovel in the ground.

  • Architect · Tacoma, WA · Member since 2015 · 68 posts · 28 votes
    11y

    @Joshua Berube right, I'm talking about the drawings. Is he giving you drawings that are just to the level of detail that you need to show investors and get initial estimates (design documents at this stage) or is his final product to you a set of drawings that you can get a permit from and the contractor can use to construct the building from. There is a big difference between these two types of "deliverables."

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Caroline Hedin He is giving me drawing that will go through permitting, though I didn't ask about whether or not they will be construction drawings.. Thank you for pointing this out. I will ask tomorrow.

  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    11y

    @Joshua Berube

    In your sketch, why the staggering along the longitudinal common wall of the two halves?  Is it simply for ascetics?   While undoubtedly more appealing than a square box, it will be a little less energy efficient as you now have more exterior envelope area.

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Roy N. There are two reasons for the set back. First, the city wants someone off the street to be able to tell there are multiple units in the building, and I am going to strata the building for a future sale, and I feel that this building layout would make it easier to sell off individually.

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y

    @Caroline Hedin I asked this morning, and you were right. this price does not include construction prints.  thank you very much for that question. :)

    I have received a few prelim drawings. there are four units,

    1 1-bed/bath open concept

    2 1 bed/bath +den

    1 2bed/2 bath

    the open concept isn't here and I have to choose between the two first sets for the one bed + den.

    the last are obviously the exterior.

    comments welcome

  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y
  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y
  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y
  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y
  • Contractor · victoria, bc · Member since 2014 · 74 posts · 21 votes
    11y
  • Indianapolis, IN · Member since 2013 · 77 posts · 5 votes
    11y

    @Joshua Berube 

    I'm glad you updated! I was starting to think that you've resigned yourself to reading that textbook for the next few years. They can take a long time to get through. I was just asking around about how much a development would take to get off the ground. $40k, huh? Why so much if you don't mind?

    Are 1Beds/1baths in high demand in your area? It strikes me as odd, being from the Midwest.

    Another silly question about our different countries. Are those drawing in Meters and .... Centimeters? Or are those indeed the Foot/Inch marks I am used to?

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