All Forum Posts by: Kristi Kandel

Quote from @Timothy Fortin:

Thanks Chris!  The lot was platted in 1967.  There is a separate covenant that basically states "one single family dwelling is permitted per lot", so that case of someone combining multiple lots and building multiple dwellings should be covered under that.  

Assuming your line of reasoning was the intent for the covenant I quoted, I'm not fully understanding how the covenant I quoted would prevent someone from "combining multiple lots for multiple properties", would you be able to elaborate?  

I'm probably making a mountain out of a mole hill here but this is a large investment for me. 

Who recorded the covenant? AKA who is enforcing it? Is this an AHJ issue or a HOA issue? Depending on that will depend on the next steps for vetting the issue and feeling confident in how you'll proceed.

Quote from @John McKee:

I have a property ground lease that is 15 years old and 3 years left on the lease. A Hired broker of the large chain  restaurant wants me to contribute 100k toward improvements and in exchange they will extend the lease. Is this Normal or a shakedown?

Typically the TIs (tenant improvements) are at the beginning of the lease term prior to turning over the space to the tenant and not at the options. 

1. read your lease to see what it says for improvements

2. Think about your cost of getting a new Tenant in 3 years vs the rent that you'd get on the lease option.

3. Consider where/how 100K plays into the option. Is it 5,10, 15 years etc.?  Is whatever amount you'd agree to worth keeping this Tenant vs getting a new one. (what is the cost to improve the building for a new/future Tenant?) 

4. 100K is a starting point and 1. should be negotiated / line items assigned to the requested improvements 2. does it benefit your property and can those improvements help you secure a new Tenant paying higher rates 3. NOTE: the reason the broker is talking to you now is that depending on your response they are likely shopping the market right now to see if there is a better option for them. 3 years gives them time to find a space, complete the TIs, and minimize down time in operations. 

Quote from @Kyna Ngo:

Hi! We need some advice. We have a place in Palm Springs CA which has acquired a lot of equity.  I can’t decide if we should sell, pay off some debts and invest elsewhere or renovate and keep as short term rental. I am also a high income earner so I am trying to see what’s overall the best. It’s currently a long term rental now. 

Should I consult a tax advisor? 

Any advice appreciated! 

1. Yes consult a CPA as the STR tax rules are different than the MTR/LTR and the strategy depends upon your overall portfolio/tax situation. Ideally a spouse could qualify as a real estate professional if you can't.

2. CA property especially in places that are big destinations for CA people and others are going to continue appreciating at a higher rate than most of the country. 

3. Make sure you understand all of the STR rules in Palm Springs and make sure you can even obtain a permit if you're going to change from LTR to STR. Also account for property management in your deal analysis if you're not able to self-manage.

4. Consider trying out MTR to see if you can increase revenue without taking on the full workload of running a STR.

5. Paying off debt vs investing vs renovating really depends upon your personal overall strategy and risk tolerance and where you are at in life. Only you can make that decision ideally with the help of a CPA well versed in RE. A CPA without RE investing experience and without RE clients is not going to provide you the entire picture. 

Quote from @Stephanie Cortez:

Lots of my close friends and family have been approaching me lately to talk about real estate investing. They have shown real interest in going into a deal with me. I have never done anything like that but want to take advantage of the potential opportunities. Any ideas on where to start and how to invest with others to make profit without relationships going sour? 

 Working and investing with friends is 100% ok. HOWEVER, the success of doing that depends upon setting clear expectations up front. 

1. Make sure you're aligned on the goal and strategy

2. Create clear roles and responsibilities - from acquisition, stabilization, and operations 

3. Define the exit/stabilization strategy 

All of that will be turned into the operations agreement and buy / sell agreement within the entity you create. 

REMEMBER: partnerships are long-term so make sure you really want to work with those people for many many years. 

Quote from @Christopher Liu:

I'm looking into this myself right now. I agree with @Allan Smith on all his points which I think are spot on. I'm quickly coming to the conclusion that prefab construction may be the way to go primarily for the following :

1. Much better visibility and control on both time and budget.

2. Pre-fab construction quality will be superior given that construction is happening under controlled conditions and not subject to weather. This will directly affect improved energy-efficiency as this is a function of not just the design and spec but the quality of construction.

Prefab also typically requires full payment prior to construction. So rather than getting a construction loan and paying as it's built you'll have higher out of pocket costs and longer carrying of those costs. It's a toss up on what's better with today's technology right now. We've found prefab makes the most sense when you have short build seasons. However, when taking the prefab lead times into consideration, capital, and shipping costs the overall timing is the same or longer soup to nuts for prefab. With AI and technology I see that changing quite a bit in the next 5-10 years. Especially with 3D printing on the jobsite. 

Quote from @Santos Gloria:

I was recently contacted by a small moving company who wants space to park their trucks. I'm not sure where to start and I havent been able to find much information online. The vacant land im leasing is 1/2 acre, no restrictions. I have a couple questions, should I rent it out by the truck or just lease them the whole 1/2 acre? Would there be a difference on the insurance, on my part? The owner of the moving company also said he would pitch in to pour gravel down as long a I gave him a year lease. Thank you in advance.

You'd want to lease the entire lot if they need the entire space, if they are willing to pay the amount you'd want to have it completely tied up, and to avoid juggling multiple tenants and them potentially not playing nice in the sandbox. 

You'd want a simple ground lease agreement AND include in it terms of what they can and can't do with the property while they are leasing it and the condition they need to return the property to you. 

Outline taxes and insurance clauses and make sure your insurance is updated to account for this change in use. 

You should put it on the biz to verify zoning allows for commercial use/parking on this lot in the lease agreement. AKA they need to do the homework and take on that liability.  

Quote from @Kevin Kohler:

Hey all,

I was curious how the rest of the BP community approaches the options  between investing in active opportunities versus passive opportunities in real estate investing.  

Active Investing - Being the leader of the team to acquire and manage real estate investments.  Actually working in the business of finding the deals and creating the profit or revenue stream.

Passive Investing - Investing money into other active investors' opportunities.  This could include providing financing, real estate syndications, etc.

Do you do one type or the other?  Do you diversify by opportunity?  

I would love to hear from everyone!

Active: Better returns and more control on the process. If you have the time that's the fastest way to scaling up your business and returns. 

Passive: if you don't have the time, have the capital, and want to diversify, then passively investing in RE is a better option. This could include private money lending and syndications. 

Time really is the driving factor. 

Quote from @Robert Ellis:

Quote from @Kristi Kandel:

Quote from @Mark Bringas:

Hi everyone.  I own property with a small house on top of a one-acre land.  The city is close to approving adding two additional buildable lots (residential only) in the back.  I’m running into analysis paralysis on whether it’s worth building homes (or should I just sell the lots)

1) My construction loan is a bit costly at around 8%, so the monthly, interest-only payment is a bit high.  

2) If i decide to build the homes, could i partner with builders or investors, to help fund the project?  What’s the best way to approach this?

 The best approach is the one that "pencils" and works for all parties involved. Right now it's very hard to get new construction deals to pencil. If you're subdividing your land and selling off the new homes you're adding value and will have capital gains to split if you partner with a GC or an investor. If you're not subdividing the land you'd need to consider exit strategy options for all final homes and if you're doing build to rent instead. 

Partnering with a GC and giving them some equity for building at cost could be an option. Same with investors funding a portion or all of the construction loan to consider if they want equity or just the interest. 

You'd want to start by talking to buildings, private and hard money lenders and seeing what scenarios they are open to doing in your area. 

 are you doing any build to rent deals? I have that alert on to talk to other players who are active in the space 

 We have looked at plenty across the country they just haven't penciled in the past 12 months. Nebraska, ID, TX, FL, etc. Still looking but nothing is viable yet even if the dirt was free. 

Quote from @Steven Rosenfeld:

So we all know the story by now that high interest rates and slowed rent growth have made it very difficult for sponsors to put together attractive multi-family deals on existing properties. The value-add or operational efficiency models are not necessarily strong enough to counter the headwinds. So, I'm seeing a few syndicators like BAM Capital getting into new builds and wondering how these will play out for us LPs. 

 Here are some questions that come to mind:

- Are construction costs are getting more manageable now that COVID supply chain issues are getting smoothed out? 

- Cost of capital is still going to be high, but held for a shorter period, as a construction loan. So does this reduce interest rate risk?

- When the time comes to recapitalize (sell or refi) in a few years, will sustained higher interest rates significantly impact the profitability of the deal?

What do you guys think? Time to pivot to new builds, switch to another asset class, or stay on the sidelines?

 1. Construction costs have not deviated much in the markets we are working in: NV, OH, FL, AZ, TX and CT. 

2. When interest rates stabilize (and stop going up or down quickly) that allows syndicators to more effectively guesstimate in the models the options for a deal. It's the volatility of the market that is making deals so difficult to project where rates will be in 3 years post development once it's time to stabilize the new construction project with a permanent loan. Same with the future exit if the model is to build, hold for 3-7 years and then sell. Stabilized rates regardless of where they land is what's going to provide clarity in UW deals and determining which can move forward. 

3. New construction / development is an entirely different animal and any syndication you invest in needs to show a clear track record of being competent at development and show that their GPs on the deal have plenty of experience. 

While being a developer has huge returns it's because there is significantly more risk than just buying an existing underperforming asset and executing a value add strategy. 

Quote from @Mark Bringas:

Hi everyone.  I own property with a small house on top of a one-acre land.  The city is close to approving adding two additional buildable lots (residential only) in the back.  I’m running into analysis paralysis on whether it’s worth building homes (or should I just sell the lots)

1) My construction loan is a bit costly at around 8%, so the monthly, interest-only payment is a bit high.  

2) If i decide to build the homes, could i partner with builders or investors, to help fund the project?  What’s the best way to approach this?

 Also if these are helpful here are links to how to vet/find lenders, brokers, architects & engineers, and GCs. https://drive.google.com/drive/folders/13Z0B7mV--YRtVN3TJhez...