All Forum Posts by: Charley C.

@Frank Maratta lot of that shocking return is from me building a multimillion $ project for free. Construction management is a lot time and work. If I offered my serivces as an employee, that value is worth anywhere from $100,000 to 250,000 a year so dont loose site of that. That does give me an edge but more important than that, I pick deals carefully and look for over looked nitches (like your small tear down) deals too small for the big nut to crack on a big private equity corporations 

Do want to mention that Greg and Barry are giving you some solid advice too.. start talking to a good local GC now early on. Pick his/her brain. There can be some land mines like what Barry mentioned lurking deep in your deal you don't know about yet. You don't know for sure what you will be allowed to build there.

What is the size configuration of your lot you are looking at? and what is the street frontage? 

@Frank Maratta reason I say find developed land? Civil engineering (easily hit $50,000(20,000 just for the plans)) can eat you alive. Now days we have to put in retention ponds, divert drainage and stuff like that. Its a royal pain. Its a lot time and uncertainty in what its going to all cost.  If I can avoid that, I will absolutely avoid it.

cash on cash? I got 2 mill in to a job that generates 25,000 a month but a lot of that 2 mill is land development for more a lot more apartments to be built. Even still, take 20% of 2 mill makes $400,000, work your numbers from there. New construction has very little to fix so expenses are mostly mortgage, taxes, insurance, mowing the grass, some common lighting, watering the grass etc.. I am my own manager but do have a some employees for various interest to help me out. Some months its reflecting 20% others its reflecting over 30%

Paragraph 2, thats the ticket, good play, look at the area rents and what is right next to you. Avoid things like RR tracks, noise and smells. Good going!

Paragraph 3 is hard to answer but perhaps the 32 units is starting to attract a more commercial type of contractors (not so hand to mouth like  what custom home builders have to use) its least important thing to consider with an urban play like yours

$250k will get you one mill total (25% down)  15 units may be .. And I will say this again, go to a very small small bank. Teaming up with the right GC will mean a lot to who ever is financing it. A good GC could advise you on where to apply. 

I cant think of a better way to invest that $250,000

Spend a lot of time doing your rent study and find your niche. Small complexes seem to do really well in high density nicer types of closer in urban types of locations.

Good luck

@Frank Maratta I am 99.9% ground up investor, I am my own GC. 

$250 cash? you need to build on land that is already developed ready to go. Unfortunately for me, I can never find that. However, in older cites, you can find where you tear down something where the rent market is hot. 

I dont know about New Britain Ct.  but here in Texas, I would expect to pay a GC about $120- to $130 a foot for really nice construction and about 75-80 for lower end affordable type of construction 

To get in to the next tier where I m using more commercial type of sub-contractors? I usually need to be building about 40,000 sf so per-foot the price difference for 4 and 20 units is not all that much for construction but it may be quite different with the financing. 

What banks? stay away from big national brands, the smaller the better for the construction. Try to find a one time close and get your rate fixed for at least 5 years. Once you get a loan amount over 1.5 mill, you can find a Fanniemae lender to refi with to fix your rate for 30 years.  

Smaller complexes mean less rent loss on the front end. That's one of the best parts.

Cash on cash? if I am only counting the mortgage, taxes and insurance plus water trash etc.. (basically the known expenses) I would expect about 30% or I won't do the deal. 

@Nathan Williams its been a few years but I used to lend money. HELOCs and Cash-outs are not the same. I never knew of a HELOC on investment property post 2009. However, I did lots of cash outs on investment properties at very good rates. Reason why? The cash outs can be sold to the secondary with fannie or freddie so there is lots funds and lots of people lending like that

Also I never found a fixed rate HELOC. Cash-outs can be a fixed rate. I would approach a local mortgage company, banks and credit unions have over lays. The money for your loan will come out of the same well (fannie or freddie) 

I can come up with a price of building one but I am not sure what people pay for them full and operational. When you buy them full and earning rent, you got money coming in from day one.  Hopefully some body will chime in and tell us some comps

The mom and pops personal circumstances seem to motivate them more than anything else. That's something you just can not control.They will all sell one day. You just got to be the relevant name that pops in their head when they are ready. That's why everybody keeps echoing "follow up" 

I would send them anything that compels them to read it and remember you in a positive light. @Scott Schultz Give them a reason to open your mail and like seeing it when it comes and when they sell, you will not be forgotten. 

When its absolute the tenant has got to go.. I started just putting hold over price increases to $10,000 a month extra (its good to be in Texas) that way they can fund damages of not moving out.. 

@J Scott Very well written. And I do concur. Would of edited what I wrote I still could 

In short, if demand out paces supply on all things, including the # 1 factor labor.  that will = inflation. When the labor market is too thin, I guess the Fed has few choices but to raise the rates. Can't argue about that. With just a few months of higher rates- then recession starts raising its ugly head

Lets say we increase the efficiency of our national labor like with a better suburban-to-urban road systems to get to work (Houston commutes about 2-3 hours a day, cut that down to 30 minutes to a hour). Then add more effective automation in our own factories. Just with 2 examples alone, the GNP would heat up with out really pressuring inflation but our Federal Reserve? I think they don't account for that. they will politically (or foolishly) raise the rates no matter what if they see any kind of growth what so ever. 

Can we pick and choose section 8 tenants? Can we run their credit? look at the criminal history etc?? can we restrict and prohibit additional occupants? 

I can see it working better with a tenant that is grateful to have a SFH. 

AND could we do rent to own with that section 8 money?  Can we have any side agreements with the tenants so they fix their own home? 

can we use mobile homes as a section 8?