All Forum Posts by: Mike Wood

@Falon Sexton Keep in mind that cash out refi's (the construction loan to perm will be considered a refi) will be limited to 70% LTV and have a high rate than a non-cash out. Normal refi would be 75% LTV on a duplex. Do you know what your finished value will be?

I would consider talking to your construction loan bank to setup the construction loan with extra money in the construction loan so that your perm refi is max'd out at 75% LTV. Since the money is taken out during the construction loan, the refi will not be a cashout.

I also like to maximize the amount of cash available to me, so that would mean maximizing the construction/perm loan, increasing my payment (assuming that the income adequately covers the costs and debt service).

Not sure how you are getting your mortgage payments (they must be just P&I) as the $600 would be less then your build cost (stated as $180k).

@Andrea E. I don't do short term rentals nor have any desire to do them. I will say given what our city has done with changing the rules recently, STR is going to be a hot button issue and will not likely be set for any length of time. I would guess that every election cycle the rules will change.

You mentioned that you were looking for $2000/month for a 2/1 in uptown near Leonidas.  That super strong rent prices and likely not very easily achievable.  As @Braden Smith mentioned, rent in the city are close to $1/ft2 per month with nicer areas and nicer properties going upto $1.4/ft2. But given yours is likely a 800-1000ft2 place, you would need north of $2/ft2 per month.

I also think that corporate rentals are going to be in much more demand in high demand area's like downtown or right near a major employer (Think University Medical Center).

I tried renting a condo in a different city as a furnished rental, it was a struggle.  I ended up renting it out for basically the same price as an unfurnished unit.  Just not alot of demand when I tried.  My guess is you would have the same issue.

One option is to put the furniture in storage and long term rent it. When you get your STR license, then end the long term rental lease when it expires and transition over to STR.

@Marzieh Rostami  The property we are converting is a full gut to the studs.  Water service is being completely replaced (existing was original galvanized pipe) and electrical will be split with new service for the second unit.  On this project, we are looking at build cost in the $45/ft2 range (self managing, no GC), not including the cost of the house.  This does include exterior items like new doors/windows, new roof and exterior painting, but no expansion of the existing house footprint.  

For us, its cheaper than building new and the area is strong rental demand.  Additionally, we purchased the house for about 65% more than raw land cost, so the number made sense and the house was laid out pretty well for ding the spilt to two units (front/back).

@Marzieh Rostami First off, the SFR would have to be in need of renovation, as there a going to be a lot of costs associated with legally splitting it up. Second, in most areas, single family houses sell for higher $/ft2 than duplexes, so you will be killing value.

I am not in Houston. I do have a single that we are converting to a duplex now (1600ft 3/2 that we are splitting up to a 2/1 duplex each unit).  The single was purchased in need of alot of work, so it was a good candidate (it was very close to in need of a gut renovation, which is what we are doing, full gut). 

Your property (SFR) would need to be zoned of 2 family housing, but given your in Texas, maybe zoning is not an issue (I recall hearing that Texas does not really have zoning). You will need to legally separate the units, which will include some additional fire separation (to get you a 1 hr rated wall/ceiling between the units). You will need to add another kitchen, new entry for the second unit, possibly another bathroom, etc.

For utilities, if you want them separate, you will need to add new electrical service for the second unit.  This will likely be $5-7/ft2 (of the new unit) just for electrical .  If you have gas, that will likely be another $2-4k.  If you plan on splitting up the water, that will vary on the number of fixtures, but a 2/1 unit will likely be in the $4k range.  These cost do not include any utility impact fees or meter fees that you might have.

 My guess is your looking at lot of costs. For example, A new kitchen is going to cost you $5-10k when all done.

@Braden Smith Thanks.  The requirement to build piers definitely adds decent money to a build over banded pile construction (which is how I do it, except for a front chain wall sometimes).  On my builds, its likely a $8-10k add for a 1000ft foot print house, based on the last house I looked into it for (it was a two story, 1800ft total).  That property was in NOLA but controlled by the HDLC (Historical District Landmarks Commission) and they were trying to force me to use piers (we did a chain wall in the front and fenced the side so they could not see the exposed wood piles for the rest of the house).

Adding $8-10/ft2 to a build is crazy to me for brick/block/concrete piers (less if the house is two or more stories).

@Braden Smith Thanks for the info, I did not know that about St. Bernard Parish. I have no interested in building out there, as they have shown in the past to regulate landlords and property use not in favor to investors.

@Erin Thompson I would agree with those costs.  Unless your doing super cheap finishes, I would not expect that costs to be able to be much lower than than.

@Brian Christensen Unless the land is extremely valuable, your likely better off building a duplex, which will be significantly cheaper per ft2 than a 4-plex, due to different building code and fire protection regulations.  Around me, building 3-4 unit buildings are 25% more per ft2 than duplexes for the build cost.

@David Sisson Unless the units is very low rent, I would suggest and use using 3X for the monthly gross income.  If the property is very low rent, i would possibly increase that to 4x, just because some costs of living are not linear with income (think cell phone bills, they are basically the same for poor and rich people).

@James Johner Curious what you think your total cost for the framing material will be.  On my build that we are just finishing up (1800ft2 total interior, not under roof) it cost me just over $20k.  My house was raised foundation (so there are costs for the wood floor framing system, but you've got fancy trusses that likely cost more).

@Michael Tranzilli  I would recommend the exact opposite.  Lower end. I have one (1) unit with Bosch laundry (one of my old personal residences) and have had to make repairs to them.  Good luck finding anyone to service them.  We almost replaced the entire unit (heck for the cost of the repair, I should have), but found someone to work in it.  The lower end the unit, the better chance you can get someone to work on it, or more importantly, just replace it (alot of times it is cheaper to just replace it).