All Forum Posts by: Ed O.

Hello,

I'm in the process of building a handful of spec homes on the same block. 

I've completed some homes and while I'm newer to building than I'd like to be, but I have been really fortunate to have the guidance of a local mentor to help me answer all of the fluid questions that aren't in any books, etc. 

I'm curious to see if there's any builders that are newer or maybe not as much that would be interested in having a group conference call every month or quarter to exchange ideas and trade tips and information. We could conference call / google hangout / skype / etc. 

Some of my present challenges are: 

1. Needing to hire a full time worker & coming up with the right compensation plan

2. Keeping the job site secure 

3. Increasing margins to closer to those of larger, production builders in my area. 

If you've got any interest, feel free to respond here or send me a pm. 

Thanks!

Hoe good of friends are you? Partnerships kill friendships. I can vouch from experience on this subject. 

Your best bet is either your friend or yourself buy 1 property in their own, individual entity. You both help eachother out, however, the owner is the owner. 

Then the other person completes the same process. Person 2 buys a property, and the first buyer helps them out.

I'd wager that 95% of partnerships among friends fail, and many of them fail the friendship and turn them into adversaries. 

If you think you're one of the rare exceptions, like so many before you that have failed miserably, you must have a solid legal agreement, including, most importantly of all, how you will wind down the operation and distribute assets if one of both of you want out. 

I like the dream and being creative. 

But starting at 220,000 for land and then building a 4 plex for say, 200-250k, you're all in at 420-470k for a four plex. 

What will that money buy in the same area, in terms of options for producing cash flow?  

Your best bet is to look at new homes in your area. That's what I've done. Don't be the biggest house in the subdivision - see the price / SF that the area will support. 

You MUST come up with and stick to a budget. The new build process is extremely vulnerable to cost overruns. If you overshoot in one spot, you've got to be mindful of it and try and make up for it in other areas. 

Good luck!

For a rental - ACV is the only way to go for me. 

If you answer yes to 2 simple questions, Replacement value is the way to go. 

1. If your rental burned down, and you got a check for the policy value, would you want to rebuild a brand new (probably significantly nicer home than the rest of the area) home in the same spot?

2. Do you expect your rentals to burn to the ground in the near future? 

Agents love to force and push replacement cost policies - why? A larger premium price pays them a larger commission. 

Ins companies know the likelihood of a claim. They know it's pretty unlikely you'll have one. 

I have been through a total loss with an acv policy. It worked out quite well. 

If I had replacement, I'd have to rebuild a home in the same spot, which I would never do, to get the full policy benefit. 

It sounds like you may be unsure as to if you'll be knocking it down or fixing what's there. 

If you're knocking it down and building up on the existing foundation, you may be grandfathered in on some items. It you remove the entire foundation and put a new one in, it's a new build. 

Zoning issues sound unlikely, if it's a house in a normal neighborhood. Expect to have permits for everything you touch, similar to a gut rehab. 

Every area is a little different, YMMV.

If I'm in your shoes and can wholesale it for a quick profit, that's what I would do - lots of downside risk based on things you'll learn with time. 

Good luck!

Is this a building that you want to manage? It sounds like managing rentals is a new thing for you. 

If the answer is no: 1. Sell or 2. Diligently look for a management company and vet the heck out of them, You'll part ways with 7-10% of monthly rents, but your apartment could be even more profitable AFTER paying management expenses. They can increase rents and get work done cheaper than you can. 

If the answer is yes: 

You need to find a handful of experienced investors in your market. If in your shoes, I would pay them to coach me on management skills specific to your state and market. There's a lot to learn and you need to learn the info before you're in a tough spot like this. 

Arguing with tenants gets managers and owners nowhere. "I'm not going to argue this with you. If you keep arguing this with me or yelling at me, I'm going to have to end this call (conversation)." 

You will not go to jail for this. 

If I'm you, I hire a great management company and have no headaches. 

All the best!

Can anyone refer me to an experienced, investor friendly realtor in St. Louis, MO? 

Thanks!

I have been using buildium for a little while. Lot's of great features. It's a well designed program - keeps things clean, neat and efficient. For me, it's all about minimizing the time needed to make the management side work. 

The downside is continual fees, but I feel the benefits are there. Why would they sell it to you once if they could collect every month - I'd do the same thing. 

Good luck!

@John Gutman 

Thanks for explaining things further for me. That's an amazing rate, especially for State Farm. I had a couple of awful experiences with them in the past, in part I suspect, to the agent trying drive up prices, premiums and ultimately commissions for himself.