All Forum Posts by: Juan Diaz

One of the reasons this deal is so good is because it's in Oakland...they have a pretty good building department, probably the most efficient one in the Bay Area. To clarify, the flip itself probably won't sell in that 6-7 month timeframe, but from purchase to open house it should be within that time, and then perhaps another 30-60 days to close. That said, if we went full steam ahead, we could probably build an SFR from scratch in about three months. One month for permits, three months for construction (but likely four to five), and then sold within another two months.

Comparing the building department in Oakland to Berkeley: We acquired a lot in Berkeley, and that one is going to take a nightmare-ishly long time to get through the building department, but the profit is fat enough to be worth it.

 Sorry, $400/sq ft for sales price. That's fairly standard for fully-fixed-up houses in west Oakland.

That $250/sq ft includes everything. The number shades a bit higher if you're building on a slope, building in a place with excessive permitting, etc.

If you're owner-occupying, government-backed loans (Ellie Mae, Freddie Mac, FHA) are great ways to go for first-time homebuyers. Great rates, and you're guaranteed to get one of them.

I'd recommend working with a knowledgeable loan broker, they should be able to find something for you

Just thought I’d share some of my experiences with you all in the San Francisco market. The big, HUGE take-away that I’m getting from my experience over the last year and a half is that there is absolutely no money in flipping around here. Zip, zero, zilch. The market is so competitive that practically all the inventory is going at prices where we’d likely lose money. Now, before you say to yourself: “This doesn’t matter to me, I don’t operate near San Francisco!”, I have strong reasons to think that if you’re ever facing a similar market, that it will be very, very useful.

This was not something that I discovered solely because I was doing a deep dig on market inefficiencies, it’s something that happened because of the crazy situation we’re in here in the Bay Area. I’ve been a full-time flipper since about 2009-2010, so I missed the bubble when it happened. That meant that when the prices were rising like crazy in west Oakland, I was doing everything that I could to try and find ways to make money.

I was looking at tiny houses in west Oakland on a decent-sized lot, and wondering if there was room to expand. I crunched the numbers, and at the time 350-360 per square foot was about the top of the market. I did some quick math for new construction, and realized that I could build a brand new addition for about $200/square foot. Boom! Easy money.

Since that revelation what I’ve done is looked for small houses, on lots with room to build. If I can add on at $200/square foot in areas where the price per square foot is much more than that, it’s money in the bank. This has been incredibly helpful in helping me buy properties—the numbers don’t pencil for anyone else, but they do for me because I’m adding on.

With this success adding on, I’ve started developing, and have had some pretty fantastic results. The cost per square foot is a bit higher now with brand new development, usually around $250/square foot, but if you’re building 2000 square feet from scratch at a sale price of $400,000, you’ve got a potentially great deal.

The other part of this equation that I’ve left out so far is this: land prices haven’t caught up with the crazy housing prices. Commercial lots, yes. Large lots for housing developments, yes. But these smaller lots that can only host one to four houses/townhouses/units are much less in demand. I bought a lot in North Oakland for under $150K, and I’ll sell for $900K, with rehab costs of around $350K. That’s an insane return! It’ll take six or seven months, sure, but that’s a pretty great investment. It’s pretty crazy to me that these lot prices haven’t caught up with everything else yet.

I know that there are some downsides to the approach, including the time it takes to develop and the steep learning curve for those who don’t have a lot of experience with construction. But if you’ve got the gumption to take it, it’s a great opportunity in a super-hot market.

It depends on how the guest bathroom functionality is affected. Some houses have loads of excess space in bathrooms. That's a great candidate to shrink if you need to. Others don't, and wouldn't work.

Basically, whatever approach maximizes the functional amount of space available is the one you should take.

With such low fixed costs, why not build your experience? You're young, you've got food and housing and a free apprenticeship, go for it!

You can likely find another low-paying job if you need to.

Modular housing will be the wave of the future...so much cheaper, so much quicker. Our industry is going to look so different in twenty years.

Related: 3D printing

https://www.youtube.com/watch?v=OYqBxEAtXZA

People tend to spend the same % of their money on a house within a metro over time, so housing prices are set by a) interest rates and b) the economy. In the Bay, prices are higher than they were before the crash, adjusting for inflation. That's almost definitely because of the sustained tech boom that never really went away. LA-area still has a ways to go, because the economy is in such bad shape (third worst of all major metros). If the economy improves, I imagine house prices will rise a bit.

Of course, this is all contingent upon interest rates staying low. The Fed's likely to raise rates sometime this year, so those two factors might muddle each other up, with the result that housing prices stagnate. If you're interested in following someone who's got a great track record of predicting the SoCal housing market, check out the Calculated Risk blog.

Congrats on getting started! Good luck as you progress towards your goals

@BreAnn Stephenson is absolutely right. There a wide variety of property insurance companies, and some will be extremely anal retentive about anything and everything. They're under no obligation to issue the insurance, so they want to make sure they're only insuring a property that they like.

In California there's a "Cal Fair Plan" that will ensure any property, regardless of condition. Insurance companies like these can be much less of a hassle, and much more investor-friendly.