All Forum Posts by: David Sisson

I was chatting with a fellow this weekend. He's a successful small businessman. He owns 3 or 4 small properties outright. He's getting very close to retirement and is very excited about the cash flow from these properties. Because he doesn't owe anything on them, the cash flow is excellent. There's nothing wrong with owning something and getting the cash flow, especially as your needs change later in life. I'm not quite that old, but I'm already looking down the road a bit, and I don't want to be heavily leveraged as I get older. If you are younger, have a longer time frame, it might be better to be a bit more leveraged. Sale or HELOC, both could free up some cash for you to get into larger or more properties. I'm a big fan of commercial properties, especially because of the flexibility of commercial zoning. They are a different animal than residential rentals, and my outlook is different than most (IE: I'm looking at weird properties that have interesting zoning, that I can rehab and get good increases in value because other people have overlooked the opportunity). In our area, I've got my eye on PVD because of the flexibility of it's zoning, but also EP because I'm such a fan of the area. I'm hoping to rightsize my portfolio in the next 5ish years, and then use that investment to fund a bunch of flexibility in life (IE: taking a step back from the grind of everyday, call it a partial early retirement). Honestly, the goal is "get the kid through college, then hit the beach except when I have to manage the properties". 1031 exchange is nice, but not mandatory, the other option is just buy and hold whatever you've got. I personally don't see it going away, Biden is very middle of the road.

Money from the bank will always be cheaper than hard money. Equity loans are cheaper than hard money. The advantage to hard money is to finance when the bank won't do it, or faster than the bank will do it. If your husband is risk-averse, he really won't like the idea of hard money. I don't like it myself, mainly because I don't trust myself to complete my projects fast enough. 

Amanda, my wife is very debt adverse too. We have a couple of properties that are not paid off. Don't worry too much about the fact that you own these outright - that's really the goal right? And an awsome achievement. I've done well by doing my research, then explaining the deal to my wife, taking her criticism seriously, and working to mitigate risk. It's slower growth, but also less risk, so it's a good thing in my mind, to make everyone happy and comfortable. 

With that said, you might consider getting HELOC's on both properties. This gives you some money to invest elsewhere (essentially, you can be your own hard money lender on a BRRRR). If your husband is worried about the risk, talk about doing a smaller project initially, and keep the books and communication open during the process. My wife is not super interested in the minutiae, so I generally show her yearly that our net worth is growing, and talk frequently about the cash flow on properties, both good and bad.

You might also discuss how much of your net worth you are willing to invest. For example, it's much easier to swallow if you are talking about investing 5% or 10% of your net worth into a deal, and that you can show that the maximum downside would be say 1% of your net worth, and the upside can add 20% to your net worth. 

I don't think appealing to logic helps in these cases - the worry about debt is more emotional. You have to recognize this concern and show you care about it. In my case, I've been married long enough that my wife trusts me, but it's because I listen to her concerns and work to mitigate them. 

Frequently, you'll need some or all of these people:

- Architect - to design the building and decide how it lays out on the land

- Surveyor - to measure the existing property, existing building, and make a survey. Once the architect is done with his/her drawing, the surveyor will put in the new outline of the building and make a site plan

- Possible: depending on the size and complexity - and what the city requires - a civil engineer to design other things on the site. Sometimes the civil engineer and the surveyor are the same people. They will design pavement, stormwater control, grading of the site.

- Possible: a landscape architect. In smaller projects, a landscape arch and a civil engineer might be interchangeable. They will do site design, including pavement, plants, stormwater control. 

- Possible: a lawyer experienced in zoning cases. Small projects don't require a lawyer, but you can use one if you want. I use them on complex and/or larger cases, or if it's required by the city. 

You won't always need any or all of these people. In some cases you can do it yourself, in others, you'll need some or all of these. For most of mine, it's just me, and sometimes a surveyor too. Once you've done a few, you'll probably be able to take on more of the legwork yourself. 

Don't be afraid of variances, they are how you get things done and how you can make more money. With that said, the standard for a variance is "Is this the LEAST amount of relief necessary?" and also "should we even grant any relief in this case?"

I've got a 100% record on getting variances and special permits - part of the reason is that I work hard to determine if they'll grant it before we even start - I don't take cases that I think will fail. 

In other words, just because you want it, it doesn't mean that they'll allow it. Look for properties where a small request can get you big returns. Some examples:

1) A property is slightly (say 300 or 500 SF) undersized to do a 2 family. All the properties around it are the same size, and all have 2 families. They'll probably give it to you.

2) You want to add a 3rd bedroom to a 1 bedroom home. The only place to add it goes slightly over the setback line - say 1 or 2 feet over. This really does not change the relationship of the home to the neighbors. They'll probably give it to you.

3) It's a single-family home with 2 parking spaces on the lot. The zone is single family. You want to turn it into a 4 family, which requires 8 parking spaces, and furthermore, you want to go 2 stories above the allowed height, and you want to cut down the setbacks from 20 feet to 5 feet. It's highly unlikely they'll give it to you.

They will be able to set you straight. 

One set of questions I always ask is:

1) Here's what we want to do.

2) Can we do it? 

3) If not, is there a process for doing it anyway? (IE: a variance)

4) If there is a process, what is the process? (What are the steps and what information do I need to provide at each step?)

5) What are the chances of getting permission to do it? (IE: do you actually ever grant variances? Is this something that might get a variance?)

6) Is there anything else I need to know, or any questions I've forgotten?

I've realized over the years that it's a really good idea to get on the good side of the staff. When the project goes to the zoning (or planning) board, the staff writes up a recommendation for the project. If the staff supports the project, then they'll write a recommendation in support of the project, and the board will probably vote with them / agree with them. It always helps to:

1) Be nice / friendly to the staff

2) Tell them honestly what you want to do

3) Try to provide them the information clearly and concisely

4) Get their feedback on the project before you actually submit it for the variance/special permit

I have to work with the same staff over and over again, and I try to treat them really well. They are used to getting yelled at by community members who treat it as an antagonistic relationship, so a bit of kindness goes a long way.

MOST zones don't allow more than one "principal" building on the site. It's not unheard of, but it is rare in my experience. Usually having two or more buildings on a site is reserved for commercially zoned sites. 

Here's a couple of scenarios:

1) The site is 15,000 SF. Only 5000 SF is required for a single-family. Multifamily isn't allowed in the zone. You MIGHT be able to split the land into 3 sites - this is called a "minor subdivision". Can you actually do this? It would depend on more than just the lot area - you'd also need to meet the frontage requirements, width requirements, and depth requirements. (And other requirements). 

2) The site is 7,500 SF. The zone requires 5000 SF for a single-family, and 9,000 SF for a two-family. You don't have enough SF for a two-family, but you go for a variance for lot area to do a two-family anyway. 

3) Your site is zoned single-family. You want to do multi-family. You go for a re-zone of the property. This is usually impossible, but they might consider it if your site is on the edge of a zone change (IE: you are right next to a different zone, the zone you want...) and there are a lot of multi-families or even more intense uses nearby. Honestly, this does not happen very often, because the standard for a rezone is really high. 

In the case of your nearby lot that's approved for multi even though it's in a single-family zone - it's possible that it is "grandfathered" as a multi-family, or maybe they received a variance. The only way to know is to go downtown and talk to the planning/zoning/building dept and find out if it's really true and why. 

I'm an architect in RI and MA, so take my advice with a grain of salt & then research your area.

Zoning is LOCAL law that applies to property, it regulates the USE of the property (IE: single family, multi-family, commercial, etc) and the DIMENSIONS of the property (IE: how big does the property need to be for a particular use)

Every scenario and property are different, but here's a couple of examples:

An owner calls me. They have an existing two-family home. They want to convert it to a three-family home. I look at the underlying zoning and realize it's in a one-family zone. It's highly unlikely they'll be able to do the conversion, but if they did, they'd be required to get a variance. 

(Note: a variance is a process whereby you can get "relief" from one or more parts of the zoning ordinace. A typical variance would be to build closer to a setback than is allowed "by-right" in the zoning ordinance. Another typical variance would be to build on a property that is too small than allowed "by-right" in the zoning ordinance.)

Another example:

A client calls. They have a residential property that they live in. They want to have a small business in this property - say, a lawyer's office. It'll be just the resident working as a lawyer, and occasionally she will have clients come by for in-person consults. I look at the ordinance and discover that commercial use isn't allowed in the zone, but a "home occupation" is allowed by special permit. We help the client get the special permit, and then they can use part of their home as an office.

(Note: a special permit is a different type of process, very similar to a variance, where you can get special permission to do something under the ordinance.)

Generally, as investors, we want to discover new ways to make money on our properties - either adding units or building more units than allowed. This almost always involves a variance. The more you work with a zoning ordinance the more you'll understand. It's also very dependant on the local people - both the "staff" (IE: people who work for the town in the planning, building, zoning depts, etc) and on the members of the board (zoning board, planning board, etc). Some communities are very easy going with their variances, and others never grant them. Likewise, some zoning ordinances are more easy going than others. 

For example, in my area, Providence RI has NO minimum property size for single-family homes. Newton MA requires something like 15,000 SF for a single-family home. Both can be excellent investment locations, but the rules are different. 

I hope this helps. You can always have a discussion with the local staff, and they can help you understand their ordinances and the process. 

Group, 

As an architect, I come across a LOT of development possibilities. I don't have the funding to take all of these on - some I'd like to do, others I'd like to just do the architectural work. Can someone point me in the right direction on Bigger Pockets to advertise these - or how to network with local developers? For example, right now I have a line on a 70,000 SF school building that is an easy multifamily renovation, but my normal developer partners are already overloaded with everything I throw their way. This isn't an advertisement for this project specifically, but I could use help with the "how to find partners/developers on BP" question. 

I have family in Barbados and travel there frequently. My wife and I plan on retiring there someday and are thinking about purchasing property there at some point, yes, we'd do short term rentals w/it too. So, I'm in the same market. 

I'm not a huge fan of long-distance investing, which makes this harder.

In my mind, the best type of Barbados purchase would be a condo - in a development that already has built-in property maintenance and short term rental assistance. I believe that the Villages at Cloverly and also the Rockley Golf club both work this way.  Of course, we'd prefer a single family, or multi, but I'm not interested in the challenges of that type of long-distance ownership.

Barbados ownership is complex mainly due to dishonest lawyers / real estate agents, (rumored also legal system) and an inefficient system of deed recording. I've heard horror stories of getting and retaining ownership - either the money or property is stolen during the purchase, or it's challenging to obtain title due to an unclear chain of title. Yet, it does get done, and I will do it someday. 

Regarding property ownership, I do believe it is fee simple - much like the united states. Barbados does now have a building code (a fairly recent change) and a zoning ordinance, but I don't know the specifics about either. Pretty much any type of building is available, from tiny homes (Chattel Houses), multi-family apartments, single families, and many types of mixed-use and commercial buildings. Construction standards are very lax, but modern homes are concrete and stucco with wood roofs. Some wood frame homes exist, these are usually the cheaper/smaller homes. Neighborhoods vary in quality and safety. Everything moves more slowly there for sure. I've found it a fun and laid back place to be. All beaches are public (no private ownership) but some private owners have made beach access more challenging. The west coast is good for beach and swimming, the east coast has beautiful beaches, but the undertow makes swimming extremely dangerous. Some coastline has tall cliffs and isn't suitable for getting anywhere near the water. My favorite areas are Bathsheba (beautiful east coast beach) and also near Oistins (west coast fish market). Affordable property is probably inland (harder to reach, rural). Coastal/waterfront property will be very expensive. Most locals live in developments (subdivisions) in single-family homes (or multis that appear to be singles but have a couple of small rental apartments). There is a bus system on the island, as well as minibusses, but I've found that it's really nice to have a car. A tiny car is perfect for there, gas is expensive and the roads aren't great, so bigger vehicles are challenging.