All Forum Posts by: Ian McKeown

I get good results from Thumbtack.  You get a lot of bidders to negotiate your price down.  You will only find reputable contractors by meeting many of them and interacting with them to see if you can trust them.  It's best to start engaging contractors when you have a project to negotiate.  Ask hard questions; challenge them.  See if they lie or deceive you.  Better to know before you hire them if possible.  Test your arguments and disagreements early before there's tons of money on the line.

@George Bittar You can't game the appraisers.  Too many FIRREA guidelines and they're not going to put their neck on the line and risk being fired by the bank.  You either cut and run or wait for a buyer to pay your price.  How long have you been on the market?

@Justin Seng

Realtors are useful but they look after themselves more than they will look after you.  Even "your" realtor.  You always represent you so don't get lulled into false security with "your" realtor.

You will save money with just one realtor in a deal.  You can have the selling agent take both side of the deal but ask for a designated agent.  "Jim" the selling agent  works for his boss "Tom" the broker of record.  "Tom" brings in "Becky" (another agent in the office) to represent you on the buy side.  

Get a discount on the commission for this; it's still an in-house deal for "Tom's" office.  If they don't play ball, then get "your" agent to represent you and tell "Tom" you want a higher split to "your" agent.  "There's a cost to being a greedy jerk, Tom".

When you get close on price with the seller; go to all agents in the deal and ask them to take a little off their commissions to close the gap.  This is when you find out "your" agent's true loyalties.  His own.

Realtors are good for helping you communicate with sellers.  Title companies and attorneys are great for closing deals.  Your best investment is finding a reasonably priced attorney to help  you do deals.  Look for a real estate attorney who does title work.  You should negotiate a lower hourly fee or flat fee with the attorney in exchange for getting all your title work.

Get a good attorney who you can rely on.  Continually shop for realtors who find you great deals and and don't rip you off.

Happy hunting.

Interview 10 PM's.  Check all their references (this is an absolute must).  Interview 5 attorneys.  Hire 3 PM's and manage 1 house yourself.  Stop paying your current PM and demand he deliver all of his files to you.  You want to see applications, invoices, canceled checks, etc.  Tell him you want to see every piece of evidence related to how he ran this part of your business.  You don't have to say why; he knows.  But if he asks; tell him you clearly gave him more than he can chew.  If he gets smart with you; tell him you're hiring a lawyer to recover your losses.  Hire a lawyer to recover your losses.  Lost fees to the PM, lost rent from the evicted, vacancy loss, your time and effort to manage the whole mess, etc.  You're a reasonably big player with 11 rentals.  The people you do business with need to know you are in business to make profit and you will recover your losses from vendors who are incompetent or cheating you.  

@Winston Parks What is the commercial use?  I'm sure there's a complementary use for the extra land.  You're going to have a tough time rezoning a small extra parcel to residential and building to your budget.  If you get residential zoning you are definitely doing low end housing and will need to build under $50/SF which is feasible but do you really want to put in a ton of effort for under $0.80/SF rent?  What about a self-serve carwash or other low-input commercial use?

Clearly, you're not doing this deal.  Your 4.8% return on capital should be 12%-15% for the size and risk of this deal.  Your debt service will probably be in the 8-10% range.  Your $85/SF construction cost is sky high for a project that brings $0.79/SF rents.  

If you want to own something like this; find a property that rents at $0.79/SF and buy it at a cap rate that fits your IRR expectations. Or buy a value-add project that lets you increase rents and occupancy so you can build equity.

If you want to build; design 2 or 3 apartment floor plans that fit your target market.  Configure them into 2 or 3 building layouts and get an accurate construction cost.  Find an affordable architect and civil engineer who can provide some concept plans and help you with land planning.

Then go find sites that are big enough for your project and add the land costs into your proforma to see if you hit your target IRR.

You should get your ducks in a row before you chase sites.  You need a good story to share with investors and bankers.  This will make your "go / no-go" much easier.

@Stephen Kiser I built 10' ceilings and 9' ceilings, wood frame, wood floors 1st floor, carpet 2nd, granite tops, shaker cabinets, hardiboard siding, shingle roof, GE appliances.  I suggest you find a neighborhood that you like then drive it to find new construction.  You can stop and meet the subs and the GC.  The GC should give you plenty of feedback and you can hire him for your project if he seems competent.  Soft costs will vary based on impact fees, professional fees, RE taxes, carry costs and mistakes covered in your contingency.

The unanswered problem was the inspection contingency.  He probably didn't want you to see the property.

This will vary depending if you include only hard costs or add soft costs, land and financing.  It also varies whether you're building $100k or $1M homes or commercial buildings.

I'm at $72/SF in Raleigh/Durham and will do better in Charlotte.  

I lived in Jax for 20 years and know the area well.  Springfield was a very wealthy area in the early 20th century and then fell into decline.  All the old estate homes were either abandoned or partitioned into multi-units by slum lords through and until the mid-90's when the area bottomed out.  

Young investors came in to revitalize the area.  Some flipped for profit but many stayed to live.  Values rose quickly in the late 90's from $10k houses to $500k houses.  The market stabilized over the past 10 years.  

Now a lot of commercial use is coming  into the neighborhood.  Main St was expanded to a 4 lane boulevard a few years back.  

U.S. Rep Corrine Brown and her corruption were recently removed from the political landscape.  

You still have to be careful.  The sub  market will still vary from block to block until all the blight is gone.  Find some local people to help you.  It's a long putt from CA.