All Forum Posts by: Chad Clark

@Mark Kenney Well, that's disappointing to know I'll need a higher net worth then. I'm only around a mil or so. Most of these places tend to be above that. Guess I'm stuck in SFH's for a bit. Good info either way. I expected a reserve (if they still call it that in commercial) of some sort. Thanks for mentioning "recourse". Honestly, I had never heard the term up until now. I had to look that one up. Surprised me. I guess they get a little more aggressive in these types of loans. Made me wonder if that goes into being able to track down land trusts and similar "anonymous" type set ups.

So I'm guessing I'll just have to get a lot more SFH's under the belt and build up.   I'd love to talk to your contact though.  I'm always up for information if they're willing to talk.  At least I'll know what I'm working towards.  

I'm in an odd spot. I have a few SFH's that make good money and have a good amount of equity in them. I can tap around 200k if I needed it, without hurting myself too much. Im to that point where I'm realizing that multi family apartments are where the real money is. Being able to rely on the NOI instead of comparables to gauge value is really appealing. I have near perfect credit (over 800) and a ton of history of running them myself with no issues.

So how do you get funding for these?   Do people actually use SBA loans for it?   Grants?   Am I in a good enough position to build one?   I'm thinking of building a smaller one to test out the idea, but open to bigger.    I figured with a couple hundred k in cash to plop down I should be able to get into something.   I'm just not sure where to start since I can't use my normal mortgage brokers as they don't deal with large commercial level stuff.   Anyone who's done this like to lay out a basic skeleton of where I should be headed?   The area has a ton of demand for it so vacancy isn't going to be an issue.  

Thanks, I just needed to make sure that's really how it worked.    I'll probably have to price the home to sell quick, but it's worth my trouble so no real loss considering the tax gain.  

I am thinking of making the move form single family home to apartment complex (10 unit), but I would need the equity from one of my rental properties to make the down payment.   Luckily, I have one with enough equity to do so.   

Ok, the single family is not my personal residence and has been used as a LTR for the past 6 years. It only has a small HELOC for a loan on it.

The new property I'd like to make an offer on is 600k and would pretty much take all of my equity in that rental with about 20k left over. I know it all has to go towards the new property so I guess I'll just have a larger down payment than needed which is fine. I'm guessing the HELOC gets paid off during this.

So my question is, I'm reading that you need to find the new property within a time frame.  Can I go ahead and make an offer now so I don't miss out?  Do I need to get the intermediary involved before I make the offer?   It seems like I'll be holding up the sale of this seller of the apartment building by needing to sell mine in the middle of things, is that really how it works?   It just seems like a clunky way to do it.  

If I'm reading this stuff right it goes like this.  

1.  Hire intermediary

2.  Place offer on new property and get under contract

3.  Place old property up for sale

4.  Close old property

5. funds go to new property and close.  

Is that really it? I know that's the skeletal version, but I'm just trying to figure this out. I made a ton off that little SFH by BRRR'ing it. 60k into 250k so I really don't want to see the capitol gains on it. I remember I missed out on a 1031 exchange once because I entered into a land contract and didn't realize that would exclude me from doing it so I'm checking ahead of time this go around.

Kind of depends on what you want to do with it.   I'd call an excavator and see how much they'd charge to fill it in and bust up the concrete into the hole.   It might be less than you think.   It is kind of just hitting the concrete with a jackhammer and pushing all the dirt in.  Might need some fill, but that's it.   I'm up in Michigan, everything is super expensive here so I wouldn't begin to know what they would charge. 

I'm in Michigan, but I was looking to eventually move down to the Gatlinburg area as I'm quite the fan of the weather as compared to Michigan's freezing hell for 8 months of the year.   

Exactly what's going on there? Did STR's get a legal hurdle or something? When I move, it will be for myself so I'll just be buying, not investing. Just curious.

Ok, I found this little apartment triplex thing. It's nice. It ends up being a 23% ROI, 1.33 Debt service ratio, and a 53% total ROI including appreciation and amortization. It's soooo boring. I mean, yeah, the numbers work and it makes me like an extra $651 a month. Not too shabby really, but I really see no way to do a forced sweat equity of any sort. There's no real improvement I can make. I usually BRRR things. It's got new kitchens, baths, AC, and even a new septic from what I heard (haven't checked it myself yet). Heck, it's even got long term renters on month to month leases. It's decent, but that's it. I really hate dumping 20% down (40k) into a deal that doesn't have some sort of "wow" factor later. Am I just being super greedy or should I hunt for that "holy crap" deal?

Oh and typically, contractors pull their own permits, usually under a building permit.  If there is a builder involved, they'll pull it.   In the case of smaller jobs, they tend to pull them themselves.   Most contractors duck out of actually pulling a permit since they really don't do things to code so it's worth checking if you want it to be recorded by the county.  Reason why you'd want the record is for sales purposes.  Reason you wouldn't want it pulled is for tax purposes.  Yes, they raise property tax when you officially renovate something.  

 Permits are a necessary thing, I wouldn't argue against them.   What I do argue against it how they are applied.   For instance, there are no differences between a code for a simple thing that's just considered a standard industry practice vs a real safety concern.  Like caulking around a toilet base is a code.  I can't think of a single possible reason how that could be a safety problem.   Now I totally understand most of the electrical ones since your average "Uncle joe or Granpa Bob" has made some seriously interesting electrical jobs burn a few houses down.  

What really should happen is they should divide them up into categories of safety concern - Required code, Industry standard - recommended, but not required, and advanced-"It would be great if you went this far" type things.  There's entirely too many "stupid" codes that are required, but far from any safety concern.  It causes way too much extra cost just needing them.  

That and I don't see a point in charging a mass amount of money just to allow people to do a job correctly.  That's just punishing the good people.   It cost several thousand dollars for all of them.   That's seriously asinine.  

There's also a bridging point where it becomes an entire renovation vs a simple set of repairs.  There's no way to know where that point is.  

In your case of wanting to pull them as you go, you won't be able to, at least in Michigan, you'd have to pull a demolition permit to even take down the drywall or paneling first.  then you need the General Building permit and they will make you get an Electrical, HVAC, and Plumbing one from there and you might as well get them all at once.   Then you have to close each one out with inspections to make sure it meets current codes.   You won't be able to get the certificate of occupancy until it's all done.  Remember, if you're going this route, you'll run into a few things you might not expect, like meeting the code for insulation.  Not a tough one, but unexpected in my case.   Insulation is pretty pricey and I ran into the problem of having old 2x4 walls that didn't allow enough room to put in the required amount.   I had to add insulation to the outside of the house in the form of foam boards and put the siding back up.  The worst part is they make you get an architect to check the framing to make sure it doesn't need any more "upgrading" for the frame.  Ugh...  That's a few thousand bucks.   Handy hint, if it's an older (pre-70's) house, you'll end up doing some framing to reinforce it.   1800's houses will take a lot more.  They used a totally different way called Balloon frames to build them which aren't real fire friendly.   

If it's a duplex, there's no way to avoid using contractors since they consider it commercial.   (You can do your own if it's your own home).  I was able to do a bunch myself, but I had to have the contractors sign off on the HVAC, plumbing and electrical.  It seems framing, insulation, drywall, and carpentry don't matter.   That was my big whine, I was best at those three they required the contractors for and lousy at the rest.  So I ended up doing the jobs I wasn't that great at because my budget got screwed up because I was counting on doing the expensive stuff like electrical myself. 

There's a few other little things like a dryer vent and washer hoses were required, exhaust fans in the baths, and a couple windows were below the current code height to call the bedrooms a "bedroom".   I'd suggest just dishing out the few hundred bucks and get the books and read them if you plan to do any yourself.  Save your money on the HVAC one, it's seriously confusing and full of stuff you'll never need.  Hire someone.

Hope that helps. 

I ended up being ahead in the long run. Maybe about 120% ROI. Appraised for $260k so that's not terrible, just not what I'm used to. I kept it as a cash flow property since it now can rent out for around 2k a month. I refi'd out 100k to play with something else.

I don't think I'll go down the permit route again and stick to cosmetics.   It's a lot easier.   Way too many unexpected costs.   If I didn't have a huge profit margin, there's no way I would have came out ahead.  I can see how the flippers make money at it, but they must be cutting it really close once you consider capitol gains and all the selling fees.