All Forum Posts by: Dan Thomas

Not enough info here to tell.....

Do you plan to finance this or pay cash?  Can rents be increased or are they at market?  If you finance at 25% down, 25 year amortization and a 7% rate you will not cover mortgage and interest let alone insurance, taxes, vacancy, repair, etc. You may find in this environment you will be asked for 30%, 20 year, higher rate, which makes this deal look worse.

If you pay cash....quick napkin math assuming 50% of NOI for expenses that leaves you with ~$70k which is a 3% return. I doubt you would get even that. There WILL be expenses for a house that is almost 100 years old.

This may be a good deal, IDK, but quick math this is one I would pass and look for something that fits my needs better, but everyone is different.

It really all depends on your investment goals and your circumstance.  Some things I would consider to help make your decision:

1. Vacancy - Are you able to cover expenses for a sfh at 100% vacancy?  Vacancy always seems to last longer than expected.  I budget 2 months for a turnover but usually see it take closer to 3 for various reasons.  Multi Fam can help hedge this risk.

2. Expenses - Again, can the cashflow from a sfh provide the needed savings for all expenses?  Again, Multi Fam can hedge this.  IE roof repair spread over # of units rather than just 1

3. Appreciation - Will Multi Fam appreciate at a similar rate to SFH in your area?

4. Quality of tenant- in some areas multi's don't attract the same quality of tenant as there are an abundance of sfh's available for rent...in some areas it doesn't correlate at all.

5. Cashflow - You mention cashflow year 2 in the single family....Assuming 5% down and a 6.5% rate, your mortgage on a $400k house will be about $2400/mo...add in: taxes, insurance, maint / repair, vacancy, utilities (if any), etc.  There doesn't seem to be alot of meat on the bone.  I'm not a cashflow is everything guy but I don't like taking money out of my pocket to pay bills.  Ideally the property provides enough cashflow to cover ALL expenses with some left over...

As far as tips....

1. Drown out the noise and stay focused - I had alot of people telling me I was crazy 5 years ago when I started.  Those same people are now asking me for help to get them started.

2. Be patient- Identify your investment criteria and stick to it.  Don't "make a deal work", it either does or doesn't based on your criteria.  I found myself to be too eager to get my first property and would have been more successful if I had waited for a better fit.

Read the forums!  A lot of great info on here.  Real Estate investing is not overly complicated and you can figure it out for yourself if you are motivated.  When I was ready to buy my first property I made a flow chart of everything that needed to happen from selecting a market right through collecting my first rent check.  I highlighted anything that I didn't know or understand and started researching it here on this site.  There are also a ton of great books that can help you in your journey.  If you search for previous threads there are a ton of great suggestions.

Good luck!

I have learned to engage the community development office in the towns that I am investing in.  They have a lot of great insight into the specific needs of the community that you may struggle to find on a website.  Set up an apt with them, send some of the questions you have in advance and have a conversation.  If they don't have the info they have resources to get it for you.  If you are in small towns that are growing you will be an ally to the community development office as most are always complaining about available housing for business they are trying to bring into town.

Is the 2% for concessions an AL thing?  Are you under contract?  You can make an offer for anything you want.  An option could be doing some research to ball park what these estimates would come in at and remove that amount from your offer.  You could, or the agent could explain how you arrived at the offer.  Another option could be to submit a conditional offer that each of those items are fixed before closing by a licensed and insured professional (if that is important to you).

After posting I saw in your profile you are a software engineer.....What would be REALLY cool...

If you could develop an easy to use Gantt chart software (Think Microsoft Project, but WAY easier to use) that was designed specifically for Real Estate reno / BRRRR. I'm thinking something that could auto populate industry average estimates on time for certain tasks based on the inputs of the work. For example Drywall living room could have an input for sq ft and you could get a base line estimate. It would require tweaking but I suspect you could get close on a lot of it.......just something I have been thinking about for a while and a guy like you could probably create something pretty cool!! Or maybe it already exists, Idk.

1.  If I understand your question you are asking about tracking cost and timeline for property reno?  I will use a Gantt chart that I make in Excel to track timelines and QuickBooks to track costs.  the Gantt really makes your project visual and you can see what tasks rely on the completion of other tasks.  I used to use Stessa for financials....but it broke with the more properties and more accounts I linked to it.  They don't appear to employ real people in their customer service dept and I don't have the patience for Bots.....

2. I pay an accountant well to make sure I have as little profit as possible :)

For a small operation Google Sheets could work.  I choose to use QuickBooks.  You can assign classes to each of your properties to break them out separately on on your reports.  A concern about Google Sheets is the more hands you have entering data the more chance for errors.  I just get invoices for any expenses and drop in QBO....it works great for me with 5 properties and a business.

Good luck.

@Noah Bacon

Do you have contact info for them? My account was corrupted 6 months ago and can't talk to anyone other than a bot.

Pretty terrible customer service....drove me to quickbooks....any discounts there?

Quote from @Henry Clark:

Our locals will negotiate on sight distance but there has to be a reason.  Example slow down for a stop or a curve.  

Example if the sight distance is 400 feet.  But there is a stop 300 foot away they would allow the 300 since the traffic is slowing down or speeding up, but not at the same speed.  

Do you plant to develop more?  If so I would stick with the same firm.  I prefer the devil I know.  Plus in small town USA you don’t have a lot of choices.  We have two for our size operation.  

If your going to do more develop a checklist.  Use BP to help.. Make 90% of your errors on paper.  Development has both the greatest returns and the worst pit falls.

I don't want to bore you guys with details but.....I will :)

Due to the layout of the road and the small size of my lot the only way we can get 400' in both directions would be to have our sightline fall through an abutters lot (which is what the DOT wants me to do). It would require us to flip our site plan completely. They wanted me to get a site line easement, which my neighbor does not want to give me. We loose almost all of the site line if my neighbor decides to put up a sign, plant shrubs, let their tree overgrow, etc. and this is in the riskier direction from our stand point.

Our argument was that we have 400' in the direction that has a flat straight away (theoretically faster traveling traffic) and have 3xx' in a direction that the traffic is traveling up hill with a shorter stopping distance and time, most traffic will be coming off of an Interstate off ramp which in theory they would be well under the speed limit when as they approach our property.

To answer your question: I am undecided if I will do more development projects. I could see doing a project in this area in the future once this is complete. The town can't recommend engineers but they showed me the list of engineers who have completed projects in town and the company I hired made up ~80% of the list. The check list is a great idea. I came into this being a learning experience for me and it most certainly has not disappointed in that regard.

Thanks for the suggestions!!

Quote from @Scott Mac:

Quote from @Dan Thomas:

@Henry Clark

Thanks for the insight Henry. Their proposal would affect both building and storm water retention which would require going back to planning, which I was hoping to avoid.

Is there a cost effective, including insurance, way to park over the stormwater basin.

Like a one level parking ramp or something (Parking ramps can be beaucoup money though).

  Or can you pick up some additional contiguous land for cheap, and put your retention basin on that land?

Or can you line it with concrete, and make it 30 feet deeper, with a smaller footprint, or put in several smaller ones?

You say you are on a shoreline of some sort, Why does the water just not run into the river or lake or whatever you're on?

There is not a cost effective way...We can do it but when I reviwed it at the beginning of my project it was in the neighborhood of 10x more than a pond.  I have not secured financing at this point so this is all out of pocket and cost is a constraint.  I can improve this later in life and fill in the pond and put the drainage under the parking lot.

Contiguous land isn't an option right now.  The area is developing and both abutting properties are being developed.

I like your idea on being creative with the footprint of the drainage.  My main issue right now is time.  I am not opposed to re-doing the site plan but our towns planning board only meets monthly so I am 45 days out to even go in front of them for a change and that kills this project for the year as Phase I is seasonal.

I am not on a shoreline exactly.  There is a river behind my property and the town / state required a wet land scientist to preform a survey to identify the "high water mark" which was placed at the edge of my property.  From what I understand we can not disturb any land within x feet of the high water mark.  Phase I will not impact that but when I put additional parking in for the Phase 2 building I will break that buffer and need the permit.

Great thoughts.  Thanks for the response!