All Forum Posts by: Andrew Taylor

This is a spectacular way to lose your shirt.  I don't engineer things, because I am not an engineer. If you are not a home builder, you should not build homes for people. 

How will you get it financed? Getting a construction loan can be hard for someone who does this for a living. For someone with no experience, it may be impossible.

 Is there other new construction in the area you're considering? If so, those homes are being built by professionals, who are going to have better economies of scale than you, get better pricing from their vendors and contractors, and be able to build their homes in far less time. 

If you want to learn the trade, I suggest you start out by building a house for yourself. You want to make mistakes on your own property, not make mistakes that your customers are forced to live with.  If it turns out great, and you are able to sell it for a little profit, then so be it. But you should go into it prepared to move in and live there. 

@Kevin Itima we don't find a lot of deals that are actually at 70% - typically the ARV is estimated too high, the rehab is comically underestimated, and the wholesale fee attached shows little or no regard for the "he who takes the risk, receives the reward" maxim. I'd say about 80% of the wholesalers I've dealt with expect to be paid like a flipper or a realtor, instead of expecting a reasonable fee for their deal.

In other words, it could be that your "$350,000+ 70% deals" are actually 80% (or higher) deals, which would explain why you're having a hard time moving them.

[Solicitation Remived by Moderator]

Rick Villani

@Manuel DelaLlata glad I could help.

I don't think I'm allowed to call myself an investor until I've done my first deal :). Call me a "prospector" for now; just started my first yellow-letter campaign last week and my partners and I are looking hard for our first deal.

@Nick S., you do need to adjust a little bit. I recently completed a rehab estimate for a fellow BP member over in the west Houston / Katy area. It was about 1,800sf, and my rehab estimate came to about $45k. I spoke with the investor earlier today, and he received another estimate from a large, well-known rehab outfit here in town, that was $48k.

If you're unfamiliar with FLIP, they suggest breaking your ballpark estimates down via two rules of thumb. First, rate the "niceness" level - i.e. Basic, Standard, Designer, Custom. Then, rate the amount of rehab to be done, from "clean & paint" to "move walls & rebuild". They provide a chart, based on their experience, that gives you per-square-foot costs for each combination (except anything to do with "Custom," since, by definition, it's custom and can't be ballparked).

Based on their chart and my (admittedly subjective) ratings of "Standard" finish level and "Remodel" scope-of-work, costs should be roughly $25/sf. At 1,800sf, that's $45k. (BTW, I completed my estimate BEFORE reading the book, lest anyone accuse me of cheating.) I actually do think my estimate was 10-15% low, and I'd suggest adjusting the FLIP chart accordingly (if you're in the Houston area, that is).

I've read the J. Scott books, because everyone on BP recommends them. For me, though, FLIP was the bee's knees and I cannot recommend it highly enough.

@Manuel DelaLlata check out FLIP by Rick Villani. He and his co-author are based out of Austin, so the numbers given are going to be pretty similar to what we have in Houston. They do an outstanding job of breaking down how to estimate rehab costs based on both the extent of the rehab and the "niceness" level of the area. I've been doing construction work in Houston for 17 years, and I can tell you their numbers are a good starting point, particularly for quick, back-of-the-napkin figuring.

Anybody have any luck getting a hold of Nick's guy? I've contacted them twice and still nothing. I know we're coming up on tax day but a return phone call or email doesn't seem like too much to ask for.

@Danny N. search Google for apartment plans. You can buy them online and then have a local engineer design the foundation. You'll also have to have someone put together a site plan. 

Then local GCs can bid the project.

Kind of depends on your areas of focus, but in rough order...

The Millionaire Real Estate Investor by Gary Keller

FLIP by Rick Villani

The Business of Flipping Homes by William Bronchick

Crushing it in Apartments and Commercial Real Estate by Brian Murray

HOLD by Linda McKissack

The ABCs of Real Estate, Loopholes of Real Estate, etc. in Rich Dad series

Nice work, @Kami S. Where'd you get the lead? What made you decide to pull the trigger on this particular deal? Some quick math using the 70% rule would tell most investors to pass on this one, but clearly you made it work.

I'm not second-guessing you at all, so please don't take it that way. I've been trying to find a deal for a few months - I'm a contractor in Houston, and I do rehab for a living, but I'm having a hell of a time finding a deal that fits that 70% rule. The wholesalers I've dealt with all either have never heard of the 70% rule, or they assume I've never heard of it...:)

If you don't mind my asking, what did you end up netting after your holding costs and cost of money?