All Forum Posts by: Chris Adams

If you could spin these for 19k per then your looking at $513k. If you build out I would expect you to profit another 15% on the construction, or 27k per = $729k. 

The question is whats your estimated time to build out the subdivision. 3yrs? ( I don't know the demand in your area) 

How is the bank structuring your payoffs, are they loading the front end ? 

I just purchased 22 duplex lots in a development that has BK'd the 2 companies that owned it prior to me. If I could have flipped it for a $300k profit I'd be hard pressed not to take it. But my area is starting to get saturated by the national builders as well. This makes it hard for small builders like myself to obtain lots to build on. 

Best of luck to you ! 

Its 2014, not 2005. There are so many new rules and restrictions in the mortgage industry that can cause your deal to fall apart that I don't see the risk being worth such a small reward. 

So your putting down up to $3k in earnest money, and if the deal closes you will have a total out of pocket of nearly $21k, to make $1,768 in profit. I could find better returns with less risk.

And if the home does not sell, then what is your exit strategy? I have to assume you can not rent it out profitably with such a small down payment.

As a home builder there is no way I would build a pre sold for such a small amount of earnest money. And just walking away from your earnest money if the home does not appreciate by the time it closes seems morally wrong imho. And could be considered fraud since this post is evidence that you never intended to close on the deal if the value does not rise.

If your trying this strategy in a new community why would a buyer come to you rather than the builder himself? 

I realize there was insane appreciation in the CA market back in 2005, but again its not 2005 and the rules of the game have changed considerably.

Im going to second what @Aaron Montague said, the quick math suggests this deal is worth looking into. But if I was in a position to take down a 1.6MM deal I would be looking at apartments buildings rather than 14 duplexes. 48 apartments will be easier to manage that 28 duplex addresses. 

Anyhow back to your duplexes, if you can get us the cost for the expenses that Aaron listed I can run this deal thru my spreadsheet in 5 mins and give you a pretty good idea of the performance of this deal.

Todd do you have any experience as a LL/PM in the past?

IF the sewer/water are lien-able, then i include that in my cost over ownership and adjust the rent I chafe accordingly, then pay the bills myself.

The more I think about this, besides filling the sink hole how do they repair this problem? Is there seismic testing that is done to the earth? In all my years of construction bad ground is bad ground and you have to keep excavating until you hit solid earth then backfill in compacted layers. I would love to hear how having a toilet bowl under your dining room can be "repaired"

 This! LOL

My first question would be is the market so bad that I have to start looking at a property like this to find good cash flowing rentals. I just don't see a reason to buy a house like this.

Zillow's value is usually way off, but I use the sold filter to find comps. Without access to the MLS its hard to get solid sold information. Maybe someone will chime in with more info,

@Colin Simpson  So I ran this thru my spreadsheet using your numbers and assuming your going to self manage, and you will not have landscape maintenance cost.

What about utilities? I figured none since you didn't mention them, but know that in most cities sewers and water can be lien-able if not paid.

What about garbage? I have none included again.

If you rent out both sides as $750/month then you profit $288/month. Assuming there isn't much differed maintenance and its in a good area most investors would say this is a buy since they like to see a minimum of $100/door 

We have to look at this duplex as if you where not living in it, even tho you will. Because eventually you won't and it needs to be cash flowing well at that point.

I use a formula called DSCR, and I normally like to see a bare minimum of 1.20 and prefer 1.30. This deal as stated by your numbers runs at a 1.08, without PM and with 2 tenants paying 750 each.

That being said, your getting in with very little money down, and its offsetting your cost of living now, plus your entering the REI game young giving you a good head start.

My main concern is that you have funds to absorb any disasters that happen early on, like AC/water heater/roof repairs. These can be thousands and hurt you if your not ready.

With all of that out there your idea is exactly what I am teaching my 19 yo nephew right now.

Please let me know how it goes.

There is nothing better than having a track record that show positive results. I heard on the last podcast that J Scott has a website showing the results of almost every on of his deals.

I have even heard of people starting off by giving the bulk of the profits to investors to get partnerships started.