All Forum Posts by: Nathan Hemming

Trying to network here, not sure where else to find someone. We're looking to buy a house in Geneva, currently working with a great real estate agent, but I wouldn't mind seeing if there are any wholesale opportunities out there. Lot of aging housing stock, and we're not afraid of a big renovation. If anyone has a contact, or would like to talk directly, please feel free to reach out. 

Thanks,
Nathan

Thanks all again for the replies - I appreciate the insight. @Brian H. I'll look in to the Chicago meet up for sure. I'd like to get started with things like that, I'm teaching an intro class at a university in addition to my job here, so I've been strapped for time!

@Sean Walton good point, and I think you're right, the benefit is paying yourself with equity rather than cash and getting taxed on that- I agree also that the big liability is with partners that could sue. Segal really stresses getting lenders rather than partners when doing new construction. It sounds like he used them for the down payment on the construction loan, then paid them off when it was finished with the permanent loan. So they get cash in and cash out at a good return, but no ownership stake. I think the sticking point is I know some banks will require someone with less experience to have a person with a higher net worth co-sign the loan. I don't know how great it sounds to an investor to just do cash in cash out on the down payment but yet have a whole lot more on the line, and no offer of any ownership stake in the finished project. 

@Jay Hinrichs I'm wondering, and I still need to look in to it more myself, if the owner-occ model construction to permanent loan would be somewhat simpler. My idea is to build say 4 units and live in one, after having done a house hack on an existing building. 

So the other three units in the new construction project would hopefully cover the mortgage, similar to the ideal house hack situation. Obviously that would give me only minimal real estate experience in a bank's eyes, but with me committing to living in the property I wonder if it makes it any less risky from the bank's perspective. I'm also wondering if I am the architect that signs the drawings and then also plans to live in one of the units if that counts towards anything. In my head it does, but I don't really know as I haven't approached anyone about that idea. 

Thanks again!

Thanks all for the comments, @Sean Walton, @Chris Mason, @James Petty. 

James I got that information as Sean said from the Architect as Developer videos from Segal. He mentions the idea of Johnny bucks quite a bit, but I am unsure of how realistic that is. I think Sean is right, you just have to go to several banks to see what they say. I do think Segal kind of contradicts himself a bit - he recommends not getting licensed due to liability issues, but I don't see how you can get Johnny bucks on drawings if you are not a licensed architect. That to me would mean you'd have to hire a licensed architect to do the drawings, and then pay him the "Johnny bucks", so the whole point of it would be moot. I'm licensed and I think you kind of have to be to attempt this with a bank. 

Thanks Sean and Chris for the 203k loan information - that confirms what I've been reading. I think it is a better idea for me just to be patient now, save cash, and not have to do a 203k loan. If I can do an FHA loan and have a low downpayment, then a significant amount of cash left, that would be a good way to do it.

I'm a little unclear on the rents being seasoned and then not count on your DTI statement. Sean could you explain that a little more? Again my concern is wrapping myself up too much in a house hack, then having to wait years to do new construction. From what I've seen it seems like banks will look much harder at you when applying for a construction loan than when a building is already there, but I don't have enough experience with this.

Thanks again, I appreciate the insight.

Hi BP Community,

I'm fairly new to the site, but have been listening to the podcasts daily. Great info, and packed with lots of information. 

I'm a licensed architect working for a mid-size firm, now looking to get involved myself in real estate. I've been involved from the architect side for several years now, but being fee-based income allows for only so much growth potential. I also have experience working for a contractor in college, framing up wood framed buildings. 

My idea is to start with house hacking, maybe a triplex or quad. I think I have enough information to go on, just need to save some more capital and take the dive. 

Then I'd like to progress to multi-family new construction - with the idea of holding the properties I build. I feel confident given my background that the buildings I build would be solid and good long term investments. Always subject to things going wrong, but somehow if I draw the detail and am on site supervising, I think I'll sleep better at night. 

So with that in mind, I'm wondering about financing. I am not sure if I'll do a 203k loan with the house hack, it depends on the scale of the project, or just have a mortgage and pay the construction cost out of pocket. I understand that would allow me to do more of the work myself than a 203k, and have less paperwork. Does that sound right?

If this all goes well and then I decide to transition to new construction - I'm wondering how banks would see a holder of a multi-family property and collateral for a down payment on a construction loan. I know generally banks will want 20-25% down on a construction loan, which could be a substantial amount of cash depending on project scale. I'm sure I'll need lenders to get me to the down payment amount, but the more of that I can cover with personal capital the better. I've also read the potential of banks to allow for deferred architect/developer fees to count towards the down payment, but that seems to vary by location and I don't want to depend on that. 

Does anyone have insight to how a bank would see an applicant for a construction loan who holds a multifamily property on a mortgage? My debt-to-income ratio would be something to consider, but would they see the multi-family I would own as potential collateral on a down payment? I think it depends on my equity in the multi family, but I wonder if only the equity would count or if there's something else I should think about there. 

Also, understandably this is far in the future - I'll need to start with a house hack to get my feet wet, I don't think it is smart to jump in the deep end with a new construction project - unless if having the mortgage on a house hack would put me out of reach on getting a construction loan. Maybe I would want to sell the house hack to get a construction loan - but again ideally I'd like to be a buy and hold or build and hold investor.

I am in the phase of writing a business plan and this is more or less the long term trajectory I'm interested in. 

Any thoughts would be greatly appreciated, and I'm excited to join and become active in this great community!