All Forum Posts by: Keith Miller

Good question! I'd start by calling general contractors and builders and ask them for a rough idea of cost per sq ft. You will need a local contractor to be able to tell you that. I can tell you that in Missoula, the costs of building are around $170-230 per sq ft, if you have a cost conscious builder. But that doesn't include any of the significant costs that go into building new apartments, including permits, architects, civil engineers, surveys, etc. I can't give you very specific ideas about what to do with the site, or what other options you have, without additional details. But I can tell you that it would be a 2-4 year-long process to redevelop the site, and you should incorporate demolition costs if you plan on scraping it. A ballpark guess for that would be between $50-100K. 

Hi Tyler! 

Excellent question, I've been debating this myself lately, and literally talking to my wife about this last night. I'll give you my strategy, but I'd love to hear from others about what they're doing. 

I've recently increased the number of my rental units to 6, and have gone back and forth about whether I need 6 months of reserves for every single property. At this point, I personally have just decided to keep a $50K reserve/emergency fund for both my properties and my family. It works out to almost exactly 6 months of reserves for all of my mortgages combined, and is also a nice round number. I personally don't have properties separated out into LLCs, so I don't have specific reserve funds for each. This feels sufficient to me, as I'm also pretty handy and self-manage, and if a bunch of simultaneous repairs were needed, I would like dig in and try to do some of them myself. 

So to answer your question, $100K does seem like a lot for reserves. But at the same time, the wealthier I get, the more important financial stability and security is rather than a simple ROI, so the larger I'll want my reserves to be.

What does everyone else do for reserves? 

I'm personally a buy and hold guy, so my advice would be to hang onto both, and just enjoy the cashflow, debt paydown, and appreciation. Paying off mortgages is nice, don't get me wrong, but by paying off a mortgage you're essentially making an investment with a 4% ROI, which is pretty poor. If you explained you goals I could give you better advice, but the greatest benefits of real estate come from a long-term buy and hold strategy, that's what many investors end up doing in the long run.

If you want you house paid off, you could always direct all of your real estate profit towards that mortgage and slowly pay it off. 

I'd highly recommend the newest BP episode. They finally got around to featuring ADUs and their potential. There were some really good takeaways about what to be looking for to add an ADU. https://www.biggerpockets.com/blog/real-estate-581

Our speaker this month is Josh Plum. Josh is the experienced Broker / Owner of Point 6 Real Estate and Business Development Director for Plum Property Management, which is owned by Jennifer Plum. He will speak to us about the current Missoula market, the strategies he's seeing that are successful, and the pitfalls to avoid that can wipe out your profitability as an investor.

The Missoula Real Estate Meetup has three main goals:

1. Learn more about the Missoula Market

2. Make authentic connections

3. Share strategies and information

As always, there will be no selling of any products or services, and it's always free to attend.

We meet the third Tuesday of every month at the Highlander, at 6:00 PM. We usually have 20-30 attendees.

Megan Robson gave an amazing presentation last night at the Missoula Real Estate Meetup, and dug deep into the details of how to maximize the value of a property. I took a bunch of notes and typed them up, so anyone that missed the meeting can get filled in. Let me know if anyone has clarifying questions.

Megan Robson’s Presentation Notes (Notes taken by Keith Miller, any mistakes, errors, or omissions are my fault)

• The Missoula Market has an extremely low supply right now, only five houses on the market that are under $400K
• Reasonably priced houses are getting a ton of offers, between 8-18 offers for some of her recent listings.
• When adding density, ideally you are looking for a larger lot and a smaller house
• Surprisingly, backyards don’t matter anymore when determining value. When you infill the backyard, only a few potential buyers care, and the selling value is almost unaffected
• Few buyers actually want a big yard, and many do not want the maintenance
• When splitting a lot and selling off the backyard, the original house is usually worth the same amount
• You can then either develop the lot, or sell it off by itself.
• If your parcel is not quite large enough to split, sometimes you can convince a neighbor to sell you a small slice of their lot
• But you have to put some money into improving the original house for this plan to work. Buyers will pushback if you try to sell the same house for the same price that it was bought for six months ago, if it’s now missing it’s backyard.
• Megan stresses to always know the zoning, use the “What’s my Zoning”, linked here: http://www.ci.missoula.mt.us/1529/Whats-My-Zoning
• Look at the permitted uses for that zoning, and keep an eye on setbacks and density maximums.
• Look at adjacent zoning. If there is higher density zoning directly next to your parcel, you have a solid argument for rezoning your parcel. But it will be a long and arduous process.
• When a parcel has two different types of zoning on one lot, you can usually use the less restrictive zoning.
• When looking for off-market properties, do a walkthrough of the neighborhood, and look at what types of development are already happening. Ask people “Do you know anyone who would be interested in selling?”
• When driving for dollars, if you see a sign of distress, offer to buy their backyard, they could probably use the money. A lot of people don’t want to maintain their yard anymore, and you can honestly say that developing their backyard doesn’t significantly affect the value of their house
• If you’re making a commercial purchase, a one year lease back makes your offer way more competitive. But make sure the lease back is professionally set up, this strategy can devolve into a lawsuit if it’s done poorly.
• Staging and professional photos make a really big difference on the selling price.
• Megan owns a staging company, and only charges around $500 per house, a very reasonable price.
• Her one piece of advice for negotiating a purchase is to ask what the seller’s goals are, because their biggest sticking point might not be price, even though people assume it is.
• R5.4 is the most restrictive residential zoning, Megan typically doesn’t touch it.
• Megan predicts that in 2022, Missoula’s housing market will continue to be a wild ride. There’s just not nearly enough units to meet the demand. It will take a ton of building for the supply to catch up, and that won’t happen this year. It will be a long time before the city implements any major zoning changes, which would be one way to alieve this housing shortage.
• Some of the additional resources that she mentioned are below:

Searchable Municode

https://library.municode.com/mt/missoula/codes/municipal_code

Missoula Zoning Map

https://www.ci.missoula.mt.us/1529/Whats-My-Zoning

Missoula County GIS Map (I love this for property research, clicking on the little globe on the left allows you to add layers to the map which is also quite helpful.)

https://gis.missoulacounty.us/propertyinformation/

Montana Cadastral Map

http://svc.mt.gov/msl/mtcadastral/

Accela Citizen Access (this is the old version of BuildingEye but is searchable - no login needed, just search by property address, I use this a ton)

https://ebiz.ci.missoula.mt.us/CitizenAccess/welcome.aspx

and my new favorite is this one - Public Utilities (shows location of water and sewer mains)

https://cityofmissoula.maps.arcgis.com/apps/instant/sidebar/index.html?appid=22b7d99814454e2990e49b7879f64090

Hmmm, this is not the typical BP post, but it's an interesting situation. Sounds like you may be able to own a couple of great assets, although that my assumption. I'd make sure to run the numbers for the monthly payments you'd have to pay, and ensure you have a healthy cushion of cash flow. If I were in your shoes, I'd do one of the two things:

1. Negotiate for a smaller down payment. He may say that he's firm on the plan, but I'd propose an alternate plan and see what he thinks. I'd present a plan for a smaller down payment, then funneling him the majority of the profits for the first 2-5 years, or whatever it takes to get to that $700K number. 

2. I'd create a plan of the numbers, and what sort of return an outside investor could get. Then pitch it to friends, family, and anyone else to see if they're interested. Make sure you have a solid business plan, the number one rule in this situation is to not lose your investor's money. I'm not really sure what sort of interest rates would be typical for a situation like this.

There are probably more options, I'd love to hear from more people on this. 

Hello All,

I'm looking to diversify my wholesaling into bare land, but I'm not sure what type of lists and criteria I should be focused on. Ideally I'd like land that is zoned for density, but I'm unsure how to get started. We already have a Salesforce system built, with a text to cold call to direct mail process. But ListSource doesn't even offer lists in Montana, and I haven't found the right type of list in Melissa.

Any other general feedback or advice is appreciated. Thanks!

Keith

Welcome Cole! Short term rentals can be a great way to maximize cash flow. They're a lot of work, which is why my strategy moved away from them. But as long as you can do the cleanings yourself, or have a reliable cleaner, it can be a great strategy. 

Missoula is definitely an expensive market, and competitive right now. But the Bitterroot isn't much better, there's a ton of demand right now. I think you're going to have a hard time finding a lot for $20-60K, but an agent would be able to help you figure that out, I would talk to one asap to refine your strategy, because you want to make sure your strategy is realistic. Let me know if you want a recommendation for a realtor. Once you do get a lot, if you're looking for the ability to drop in a structure, I'd consider a company like Foothold: https://www.buildfoothold.com/

If short term rentals are not allowed in your HOA, I don't think there's any way around that. Those documents are pretty cut and dry. I personally wouldn't try to do it without approval, as people will find out relatively quickly. But maybe you can put in a long-term renter on your property to give you another stream of income, 23 acres is a lot of land. Can you subdivide?

I think you'd be a great fit for the Missoula Real Estate Meetup, shoot me a message if you're interested. 

Best of luck!

Hey Nathan,

Congrats on your multifamily, that's awesome! How many units is it?

I have two recommendations, Nicole Rieker, and Mr. Shanon Hicks at 721-3555. They're both in Missoula, but they'd be able to do great work for you. Feel free to use my name as an introduction. 

Let me know if there's anything you need, I run the meetup down in Missoula so have built up a big network. 

Keith