All Forum Posts by: Sean McKelvey

Hi community. Over the years I have heard that it is possible to used retirement products towards real estate investments. Regrettably, I must confess that I did not pay much attention at the time. Now that I have a deal that is stretching my equity limits I wish I had stopped chewing gum and paid attention.

Looking for any intel on possibilities of using equity in a Profit Sharing KEOGH toward money down on a conventional bank loan.

Thank you in advance for your time.

Karen, thanks for you feedback. Yes you are underlying all mw reservations - I may just need to go to therapy now!!!

"As for financing, finding money from a bank or anyone, for spec construction right now is extremely difficult, and the fact you aren't a contractor and don't have any experience adds to that."

I would need to partner with a well known contractor. I have one in mind nut he is risk averse. Great thing is he builds the same house over and over and is well known with the city - thus permitting is sped up.

"You mention buying the land and using it as a down payment. Are you planning on having the land free and clear?"

Yes, free and clear was the plan. Best case may be, structure on land that can be leveled at the right time-Helps with city services, could be rented during delays, permit expedition due to existing structure, cookie cutter house plans that the city has seen many times can cut the permit process to a few weeks is what I have learned.

I may have to find a new strategy - numbers in this market are just not fitting all the REI goto rules for cash flow, hence my interest in development to scrape the numbers together.

Thank you for your time.

In my limited experience, it is extraordinarily difficult to find deals thru conventional methods in primary markets that fit the REI guid lines.(the 50% rule and the 1 or 2% rule.) Generally speaking these rules are easier to attain in secondary markets and blu collar neighborhoods. Nothing I have tried in LA has come close, if you find a magic formuler for LA please share. :-)

Rege.

Nothing has moved on my front. Too hard, being remote and having a non RE job.. I need to be there. Starting to think conventional turn key purchases are only possible remotely.

The Key to what I am trying to understand with building spec. is making sure one is able to appraise the development for the actual costs plus margins so the bank will distribute final payments. If your margins are tight and your market changes or if your development is too unique for you neighborhood that there are no comparables, you could stand to get into trouble.

Goo luck.

Michele Fischer I only have a basic understanding of North of Seattle, I by no means claim to be an expert but I share my experience with my duplex - 3/2.5-double garage, washer dryer, modern appliances included, separate metering, large garden. My duplex is identical to about 20 other comps, and neighborhood dependent - people are paying on the hi end $2.1 per side, low end $1500. My place rents somewhere in the middle and in all cases tenants are under contract pay all utilities & gardening in addition to rent. Every area is unique for sure. Sorry no real help. Kinda like going to a therapist for answers, and all they can say is "so tell me how you feel" ;-)

Frustrated in expanding my small portfolio of investments in my remote investor market. The more educated I become on REI, the more apparent it is that my market is anemic for the conventional REI approach. Before looking for a new market with better numbers, I wanna give this market my best shot as I am already invested there in many ways.
My latest idea is not compete where its most competitive and get more creative. Rather than the convention of hunting for a deal out there, creating the deal for myself with the purchase of raw land and build multiple duplexes on the land. Yes this is nothing new to the big boys & girls out there, but new to me as I have only purchase new completed places.
This is the current bus. model that worked on my building
1-build/buy new & hold(unique duplex like SFR - thus hi quality tenants)
2-cash flow-not great but good
3-exit by selling as condos (30% higher value than the whole duplex structure)

These are the rough number on one current duplex:
-150K 0.4 acres land purchase for ONE duplex (an average - extremely hard to find)
-300K Build and contractors fee
-20K City utilities (can save here w/ tear down-Utililitie in place & easy to permit)
-Appraised at 470K
With these numbers there is no deal/money to be made upfront unless the appraisal rises or the land price drops. Looked at tear downs for existing utilities & easy permitting to save but no luck so far.

If I can build 3 duplexes on one larger lot, economic multipliers help out a lot
-I can get the land down to 75K (HALF)
-Utilities 7.330K per duplex.
-Roughly 80K immediate equity per duplex, 80K less than current appraisals.

Thats the idea, but the financing is where I get banged around a bit and I would love some experienced input from you guys. My concerns are the financing and the following is confusing to me.
-I have a good fit piece of land, Buy it @ 200K cash. Use that land purchase as the deposit on a construction loan….? Possible?
-I am not a contractor, but would need a construction loan? Doable or do I have to partner w/ a contractor???
-I could probably only afford to do duplex at a time, Land to build ratio cost would be off with only one duplex.???
-Are construction loans not base on comps??? If my cost are higher because of the large initial land purchase, than the comps/ or appraisal. If the math doesn't work for the bank won't get the loan?
On average it takes 2 yrs to get permitted, ^months to build- 30 months of rates & tax's on a non performing investment?
I am sure I am missing the devil in the details please help point out potential pit falls.

I am self appointed Robert Kawasaki disciple. Read the famous book Rich Dad, Poor Dad.(not paid to endorse)
In very general terms, for wealth accumulation, one needs to have money work for you. So, to the best of your ability, every dollar spent out of your pocket, should be towards an asset that puts dollars back in your pocket. "bigger pockets" in the end right?
A single family home, owner occupant is almost always a liability in a primary market, as it takes more dollars out of your pocket than is it can put back, ...no matter what tax and accounting magic can be pulled. IF home ownership exponentially increases your overhead, like it can in a primary market, you loose that cash investment opportunity for asset acquisition. The power of time is on your side, exponential growth with increasing assets that are paying for themselves & cash flowing passive revenue streams is, in MY opinion a better outlook than loosing time & opportunity by stretching your budget for your own home in a primary market.(ALL eggs in one basket - single prospect) Home ownership is an emotional decision, for some the only decision, its not necessarily a financial one.
It goes without saying everyones situation is unique and their market is unique, only you could decide whats best for you. Run the numbers and the numbers with tell you emphatically what to do. Jeeess, I gotta learn to get to my point quicker. Good luck

All very interesting comments. Yes, for years now, Memphis has been promoted, 'guru'ed', work shopped, investor summited, and a ton companies are selling turn key real estate to out of town investors. One does wonder about saturation. I am curious about the exit strategy in Memphis. I want to have my cake and eat it too, as I am trying to balance stable, reliable cash flow with equity appreciation. Anybody know the stats on appreciation in Memphis, ... I have heard a lot of anecdotal reports that for many generations Memphis has been the same.

All good notes. In my humble opinion, the 4 bedroom situation is fraught with potential issues. There is a very specific demographic looking at 4 room unit in a 'multi'-plex environment. I think a limitation rather than an asset.

Good luck.

Sean