All Forum Posts by: John Blackman

Remember you are becoming a steward for this guy's credit.  The number 1 thing I see go wrong with sub-2 deals is the buyer doesn't have enough liquidity to carry the note and the property gets foreclosed on.  You would walk away, but the seller will be pooched in the end.

So don't you dare buy this thing unless you can carry it for at least 6 months so you have adequate time to rent it or sell it.

For sanity's sake always keep 6 months of living expenses in the bank.  You may be in a pretty good spot where you are.

Typically when you are out of cash, the next step can be becoming a promoter.  You find a deal, get investors, add some small portion of equity, and take it down with investor money.

This allows you to do more deals, albeit at a higher cost since you are having to pay an investor, but it allows you to keep adding to your portfolio.

Get multiple bids, take the middle one.

The lowest bid has never worked out for me.  I always end up having to pay more to go fix it.  Consider what will happen if the job isn't satisfactory and you have to hire someone else at a modestly higher price to finish or worse fix the work the original contractor did.  Now you're paying double.

I wish I haven't had that experience, but I have.

Ultimately you are going to go through multiple contractors.  Don't rely on any single vendor for your business.  Always have multiple of everything.  It keeps pricing honest and it gives you options.

In getting there, you are going to run into some bad ones, but you have to go through them to get to the good ones.

We use an architect to do all of our designs.  Pricing ranges from $2.50/sqft for very simple draft designs to $7/sqft for custom homes.  We have paid in the range of $2.50/sqft to $4.50/sqft since we do specs and are much less headache (I think) to an architect than a custom home owner.

There is a wide service difference in the pricing too.

Regarding time, it takes anywhere from 1-4 weeks to design the plans.  This depends on the size of the project.  Our less expensive designers are often faster because they make simpler designs.  Once it hits the city there is another 4 weeks with some back and forth with the architect, then another 2 weeks after we get our permit to polish off the final set and make it builder ready.  This can be done while the foundation is being formed and poured.

The key differences with architects are as follows in my experience.

1) Do their fees include working with the permitting office to get your permit.  Some architects are too high on themselves to do this work and don't like going to the city.

2) Will the architect provide a nice rendering?  This is essential for marketing or presales and is often not included in the $/ft amount.

3) Will the architect select finishes?  This is quite a bit of work and is required for any spec build.

4) Is the architect cost conscience?  Most architects don't care about cost, they care about beauty and expensive designs.  This will impact your economics.  If they put a roof on your plans with under a 3-n-12 slope you are going to have to use metal.  Big open spaces on the second floor that are over the living room cost a lot and you can't sell them.  A 36" range is only 6" larger but about 3x the price.  Master balconies are expensive.  Non standard windows are expensive.  Solid doors are expensive.  I could go on here for a lot longer...

In the end, you want your designs to stand out.  Different sells, at least here in Austin it does.  If it looks the same as everyone else's the buyers don't feel like a unique snowflake.  Distance between similar projects helps for sure.

Re-use designs where you can, but be sure to work out any licensing fees with your architect if you cookie cutter one of her plans.  Most architects will be happy to allow you to re-use their designs for a fee that is a much smaller portion of the original design cost.

Microsoft Excel - Can't live without it

Microsoft One Note - Keeping notes across multiple platforms, Evernote is a good option too

Microsoft Power Point - For making pitch decks, Mac has competitive option too, can't remember the name

Dropbox - Can't live without it

Chrome Browser - Most stable, ad free, light weight

Quickbooks - I hate this software, but there is no alternative that accountants will accept without going to a multi-thousand dollar licensed big boy system

Location is everything.  If you are building in an outlying suburb, old houses will not be able to compete with new ones as long as there is more space to build.  Once you're out of space then prices are going to stay pretty stable and start to increase as the population density goes up. 

That's why we have paid $150,000 for a tear down and made 20%+ gross margin on a new build because we are in it for the location.  Keep in mind, you still need positive population pressure to keep those prices going up.

Not necessarily.  The biggest disadvantage would be in the time it takes to perform a member draw that you are going to burn, er I mean spend to keep the lights on and the family fed.

We use different bank accounts based on who is lending us project money. We also have cash reserve requirements for lines of credit.  Otherwise the big deciding factors for me are proximity of the bank to where I do business, and how good their online banking is.  No one really pays interest anymore, so that's not a factor.

Week 11

Overview

This week we were actually rained out most of the time, but this is a bit of a late update so we have last week's framing progress in here too.

We spent this week finishing out the core framing and doing a window review. Next week we should get onto siding and window installation. The sewer yard lines were installed, but have not been inspected yet.

Work Items Complete this week

1. Complete rafters
2. Stairs installed
3. Roof supports and garage walls installed
4. Sewer yard lines complete

To Complete next week

1. Start cornice
2. Windows delivered
3. Start wall sheathing and roof decking
4. [stretch] start siding

Blocking Issues

None

Schedule

8/29 - Foundation complete - COMPLETE

10/10 - Framing complete - COMPLETE

2/31 - Complete construction

4/31 - Units sold

Pictures

Video

http://youtu.be/53253GiCTWE

Let's just hope your seller doesn't know about BP!

It can't hurt to ask.  It's a reasonable request given that you are paying for half.  Worst he can do is say no.