All Forum Posts by: Emilio Ramirez

The trades market is booming right now. If you are beating down subs on their price or taking the cheapest labor that comes around. They're either going out of business or ditching your work for better paying work. Find good subs, don't beat them up on price and pay them quickly. 

Sounds like a flat fee with payments and possibly incentives (bonuses) per milestones would be a good fit for you. Whether or not that is a good fit for your candidate is hard to say. 

Quality control is a hard one to document, confirm and remunerate.

I've heard contractors hang out at construction sites... I don't know... just what I heard... :D 

Some loans and lenders allow for an extension for a fee. If the rehab is complete you could look into a conventional loan to buy out the hard money guy. They could foreclose on you. Or you could lower your price on the sale just to get the loan paid off and maintain that relationship.  

Hi level analysis would be

(cost of land + cost to build)

With 25% equity requirements and the rest as debt service would allow you to run a cashflow analysis based on market rents.

That being said... hard to envision a new construction duplex property cash flowing unless you are minimally leveraged or all in with cash. Most duplexes, around here anyway, are built for sale. Even during the last boom many folks I knew were rehabbing old duplexes and splitting them into condos for sale. 

Guillermo. If you go to redfin you can search for recent solds in Hesperia with the keyword "new construction." Running this search shows about 20 new builds sold in the past 6 months ranging from about 300k to 450k. One result is as follows.

16050 Spruce St

4bed 2bath 1658 sf sold for 298k on 7/9/2019.

Sales history also shoes a previous sale of

40k in feb of 2017. 

So if we subtract the sales cost from the sales price we get 

277k

From that we subtract the cost of the land.

277k - 40k= 237k

Assuming the builder made a profit let's subtract that guesstimate 

237k - 40k = 197k build cost all in. Or $119/sf. Man... that seems cheap... 

Sometimes the builder is named in the listing. In this case, just the realtor. Give her a call and ask for the builder's name. Then you can tell him your plans and see if he'll price it out for you. 

Arnold. I'm curious. I lived in Milwaukee for most of my life but I can't place Old Town. Where is that? Major crossroads? 

Definitely sounds like a third party audit would be in order. 

What happens after 90 days? Not many people can get through a flip in 90 days let alone new construction. New construction in Denver is currently 10 months if there are no significant delays and with the labor shortage it's easy to get to 12 months on a new build.

6%/month is 7.2% per year. Local banks that lend on new construction are 5.25% or better with 20-25% down. 

What's the age of the building/condition? Does initial rehab capture all repairs that need to be made? 

Bobcat?

Repair maintenance cost seem low. Overall expenses seem low. I guess if you're managing yourself for no fee that's a piece of it. Would be worth factoring that in just to see how the cash flow looks then. 

If your intent when looking for properties was to buy something turnkey or close to turnkey than the inspection you received is 100% grounds for termination. The report reads as a complete gut rehab and if that was not your understanding I would walk away quickly. Big project if this is your first time. 

If the work is properly accounted for in the purchase price than it may make sense but hard to say based on the info given.  Rehabs are tricky because you never know what you will find when you start peeling back layers of the structure. 

Sounds like years of deferred maintenance leading to failure of parts of the structure. 

Probably need to have a discussion with your realtor explaining what you are looking for and why this is or is not a good fit for you. If you're looking for turnkey then this probably shouldn't have been an option. Many posts say look at and analyse 100 properties before you make your first offer. There is a big learning curve that goes into figuring this stuff out. 

And no.. I wouldn't feel guilty at all. End it sooner than later if that is what you want to do.