All Forum Posts by: Kelly R.

Ned hit the nail on the head!  

I have been in this a very short period of time and so far most agent I have dealt with don't seem to grasp the numbers, I even had one tell me i was being greedy because I wanted more then a 6% cap rate!

 Thank you Aaron! 

 Thank you Steve

Can I edit the title, LOL... It looks like I forgot the "you" in "How did you get started as a hard money lender"

After building custom homes for 15 years in Maryland I can tell you first hand that the combination of taxes, impact fee's, energy codes, septic regulations and regulatory oversight has driven the cost of new construction through the roof (no pun intended).  

I am sure the weather has played a role here in the east, but I firmly believe heavy handed regulations have negative impacted smaller builders.  When you factor in the long list above, add in the long term liability of a 2-10 year warranty, the profit margin's no longer justify the risk.

Building is in my blood, I am very good at it and I used to love it, but the game has changed.

I was hoping some of the hard money lenders on Bigger Pockets would share with us how they got started in the business.  

The only problem with the above scenario... those single man or small contractors can be unreliable. If your entire project is budgeted on a price 50% lower then the average you have left yourself exposed.  It is a risk we all take and as long as you have calculated that risk, or have a backup contractor that will step in at the same price it is fine.  

FYI

Don't forget cellar computations and height restrictions on the infill lots in Montgomery County.  R60 only allows for 2.5 stories so your basement has to be in (or is it out) of the ground a certain percentage to be considered a cellar (1/2 story) instead of a basement (full story)...  shaking my head.

With a tear down you still need the connection fees... You have to pay a plumber to disconnect water and sewer service, then pay to upgrade the service when you reconnect.

 Most existing small homes have 5/8 or 3/4" water lines.  The sprinkler systems require 1-1/2 or 1-1/4" water service.  WSSC will charge a fee for the extra toilets so you have to order a toilet count before the demo to get credit if you have more then 1 toilet.  Gas from Washington Gas is usually free if you promise to install the gas appliances on your load list.

If you are on Septic in Howard County the new BAT (best available technology) laws have increased the septic system from about 15,000 to 20,000 plus.

That said it is expensive!!!

Impact fees in Montgomery county are 25,000 for schools and 13,000 for transportation, anything over about 5200 square feet is an extra 2 bucks a foot. Take a look at the MLIS for lots in Montgomery county and check out the days on market!

Check out this thread:

http://www.biggerpockets.com/forums/88/topics/176523-if-you-were-just-starting-out-and-had-150-000-to-invest-in-real-estate-where-would-you-begin