All Forum Posts by: Christian Requejo

@Christian Requejo It's hard to say at this point in the process. These are questions that you should probably ask your local architect. Again, the numbers I gave you are just a very rough estimate so you can figure out if building is even economically feasible. Your actual build cost will vary.

There isn't a simple answer to the questions you're asking. I'll do my best to give you a summary below, but first, I'll make a recommendation:

Take the numbers @Jeff Copeland and I gave you ($150-$200/SF) and do the calculations to figure out a rough estimate how much it will cost to build this house. I'd recommend using the higher end of that range since it sounds like you want to do some upgrades and you always want to leave yourself a healthy margin for error in construction. Don't forget to add in an additional costs for demolition, plans, and permitting. Do the numbers make sense? Will it be profitable? Is doing a tear-down/new-build cheaper than remodeling what's already there? If the answers are yes, then your next step is to find a local architect and explain your needs and budget to them. They will be able to draft plans for your house (for a fee, of course). Once the plans are complete, get bids from multiple GCs and pick the one you like best. That's basically the construction process in a nutshell.

Now, your questions:

1) Can I be more specific on materials? No, not without writing an entire novel. Windows, doors, paint, cabinets, flooring, trim, countertops, sinks, showers, etc. etc. There are hundreds of options for each. Some are good, some are bad. Do your research before choosing.

2) Do all contractors use the same materials for foundation, structure, framing, etc.? These materials are usually more or less the same and will be dictated more by your design, climate, and local building codes than anything else. More advanced options do exist (Zip Sheathing, engineered lumber, etc.), but unless you're doing a high end custom home you should probably just stick to the basics.

3) How do I translate this to a contractor so that I get what I want and they DON'T charge me an extra $50.00 sqft. and takes advantage? Don't... Translate it to your architect so they design a house that can feasibly be built within your budget, then let the contractors bid on that design. Understand that if you ask for an upgrade, the contractor is going to charge you more money so they can cover the additional labor, materials, and overhead. Kitchens and baths tend to be the most expensive upgrades, too. Remember, contractors are running a business. We're not just here to rip people off.

4) If you were me how can I structure a deal where the contractor does the construction and I hire someone else to do the finishes? Is there a way and is it worth it in your opinion? I've responded to a forum post about this question before. Take this with a grain of salt, but I don't recommend transferring responsibility from GC to owner half way through the build. If you do want to act as owner-builder, make sure you have experience with construction and a network of reliable subcontractors at your disposal. Keep in mind some cities only allow you to be owner-builder for your primary residence.

A bit late to the game, so some of this is likely answered, but here's my 2 cents. 

First, understanding a syndication is important. A syndication is simply pooling money in order to purchase an asset. This is typically done on multi-million dollar assets, because the general partner doesn't have the capital to purchase that asset alone. Buying a $20mm piece of real estate could take $5-10mm, so the general partner (deal sponsor), raises that money from friends and family and shares in the upside with them. 

What is a deal sponsor? The deal sponsor is the person/company that brings the deal. This is also referred to as the general partner and syndicator. A deal sponsor could just have the role of bringing in the deal, but usually runs the deal and makes all the decisions. 

"I want to be on top and in charge..." Then you need to get some experience and education. 

"But I prefer not to partner up financially with them." If you're not willing to partner financially with others, don't expect anyone to partner financially with you. You can still own real estate, but you'll need to do it the boot strap way. There are plenty of articles on BP and elsewhere that discuss methods like BRRRR, seller financing, house hacking, etc. My early days started like that, until I finally realized bringing on private money not only benefit my business, but also greatly benefited my investors.

"Because I am understanding syndication like a get quick rich type of deal." Anyone telling you this is either a crook or misinformed. Nothing in business is get rich quick. Most syndicators and real estate investors take 5+ years before they really start making big money and growing their net worth to a substantial amount. 

"Can you still be successful doing it the hard and long way?" Yes. House hack, flip/wholesale houses and use those profits to grow your rental portfolio, BRRRR, seller financing, etc.

"How can we get deals funded?" Well, that the trick. You're usually using other peoples money. Bank money, seller money, equity in your personal home, etc. Getting deals funded is easy and hard depending on your capital and relationships. This is a big topic though, so not enough time to give all the details. 

Yes, "builder grade" is construction lingo for very basic and cheap materials/finishes. It's what production home builders use when they're banging out rows upon rows of houses in a subdivision. That's where the term comes from.

@Christian Requejo

I started buying rentals 7 years ago at 44 years old and bought about 2 a year. Instead of putting 20% down every time, I used creative financing. I’ve bought 10 properties with cash out refis so they didn’t cost me anything out of pocket. Once you have some properties under your belt, the cash flow snow balls. I’ve bought some with 20% down since it’s easy to save up for down payments with the passive cash flow.

Regardless of the footprint, it's still new construction. You will likely still have plenty of red tape to deal with between the architect and the City permitting process, etc. And I do not think you will be grandfathered into your property taxes (you'd possibly get to retain the save our homes cap if it's a homesteaded primary residence, but no such thing for an investment property). 

I'd say costs are around $150 per sq ft and rising, just like everything else. 

@Christian Requejo how about trying a house hack

This is very accurate - you are likely to have >20% down payment options for your next couple of properties, but if you want to scale at the pace you mentioned, you will need to move to "DSCR loan" financing with generally 20% minimum down to scale