All Forum Posts by: Payton Chung

https://www.biggerpockets.com/forums/12/topics/386159-whats-the-1-percent-rule

In this case, aim for achievable monthly rent of 1% of total development cost, not acquisition cost ("purchase price").

Use the 1% rule to see if rents justify new construction. Neighboring houses selling in the $100s doesn't sound like an area where things are trading above replacement cost, especially given that CT is not a low-cost area to build.

Most QOFs are private equity, which means they want to write seven-figure checks--a single lot probably isn't going to cut it.

Opportunity funds (QOFs) want to invest in shovel-ready projects in OZs. Some developers with QOF backing are looking for shovel-ready situations, so if you can quickly assemble land, there could well be demand.

The clock is ticking fast, though, since a lot of funds close on 12/31 (tax benefits dim after this year) and will have to place their capital by early 2020. Plus, the land would have to be truly shovel-ready; the law requires that cash be spent down within 2.5 years, though that can be fudged if there are regulatory delays.

The whole point of the legislation is NOT to flip buildings: you have to hold for 10 years to get maximum tax benefit.

A lot of cities' zoning codes have been updated in recent years to permit residential in retail/office zones, which is great because most places have too much retail/office and not enough apartments. I've been keeping an eye out for smaller sites at the edges of secondary business districts where live/work might make sense.

How tiny of a lot? One concern is that parking requirements, not the headline density limit, may ultimately be what limits your project's scope.

I've recommended this elsewhere, but page 20 of this book has a clever design for a 4-unit + live/work, whose construction can be financed with a single-close conforming residential mortgage. http://www.cneinc.org/missingmiddle

Note that there's residential on the back of the ground floor; some zoning codes don't like this, but without it you'll have to build an elevator, which raises costs substantially.

If I were in Riverside County, I'd do likewise. Southern California overall will do fine in the long run, especially having accumulated quite a deficit of housing units over the past several decades. However, its edges are especially prone to wild price swings--and you don't want to be left holding the bag. (My uncle and aunt had quite an apartment portfolio in LA, but they happened to die suddenly, without adequate estate planning, in the early 1990s--so everything was lost.)

I've built a recession into my development business plan: line up cash and credit lines now, deploy in 1-2 years when construction prices are hopefully better, plan for a long hold period and be flexible about when to recapitalize, and choose markets that are more recession resistant.

The updated selling guide chapter from Freddie:

https://guide.freddiemac.com/a...

Fannie says that HomeStyle can't be used to add units, but can be used to add an ADU. Freddie doesn't have that restriction, so it might be useful for a 1->3/4 unit house hack (where allowed by zoning).

Is your intention to sell your existing house in Chesapeake?

There's a very thin inventory of existing 2-4 units in the Triangle. Instead, I'd look into using a Freddie ChoiceReno mortgage (available for 2nd houses/investment properties) and house hack a SFH into two units. Cary and Durham have pretty lenient rules about adding second units onto/within existing houses. Raleigh, OTOH, makes it difficult to add units on to existing houses, even when zoning would permit additional units, and makes it nearly impossible to build ADUs.

Like Ron, I have a place one block from the Wharf. The most succinct history I've found (there's a lot to unpack) is the walking tour from Cultural Tourism DC https://www.culturaltourismdc.org/portal/dc-neighborhood-heritage-trails

Prices jumped up just as the Wharf was being completed, but haven't really gone anywhere since then. Audi Field opened about a year afterwards. I'd attribute 95% of any price changes to the Wharf, which brought a lot of restaurants and entertainment venues to an area that was downright sleepy, and was planned many years before the soccer stadium was announced. (I've been to two DCU games in the past year, but I dined at the Wharf at least thrice just in the last week.)

I wouldn't use Southwest as an analogue to Chester. For one, there's nothing new immediately adjacent to the stadium, which has been open for a year. A few projects further downBuzzard Point have even fizzled in the last couple of years. Economic momentum here was already strong, with the rest of downtown increasingly built out and lots of capital already invested in large projects like the Wharf, the Yards, and Nationals Park (which is two blocks away, and brings 5X as many visitors to the area). Location-wise, it's not like Chester, it's more like Northern Liberties--i.e., just a little past downtown.

How about Harrison, NJ as a comparison?

Yeah, I'm finding $1.50/ft/month is about where projects in Raleigh pencil, even with higher construction costs than CHA. Even if the neighbors aren't charging quite that much, you may be able to find a market niche that will support those rents.

A quick look at Charlotte's zoning districts shows a "quadraplex" is allowed in many districts, not just R-MF but also larger (>0.25 acre) R-8 lots and most UR, MX, O, and B zones. Finding a non-overpriced lot that's zoned for a quadplex might still be tough, though; a lot of commercial land, even if it's empty, sells at too high of a price to make a quad profitable. http://ww.charmeck.org/Plannin...

A good place to start is this book written for Chattanooga about developing small multifamily (emphasizing fourplexes):

http://www.cneinc.org/missingmiddle

The first thing I'd look into (granted, my background is in planning) is whether you can find a site with appropriate zoning at the right price. Fourplex zoned lots are generally scarce in most Sunbelt cities. Charlotte is in the midst of rewriting its zoning ordinance, and it's anyone's guess how that'll end up.