All Forum Posts by: Ross Wade

Investment Info:

Small multi-family (2-4 units) commercial investment investment.

Purchase price: $8,000
Cash invested: $241,000
Sale price: $309,000

Bought an old apartment structure, tore it down, built a 4 plex on the property. Sold the property for a 53k profit.

What made you interested in investing in this type of deal?

We are a turn key building company that specializes in building investment properties for ourselves and others

How did you find this deal and how did you negotiate it?

Condemnation list by the city

How did you finance this deal?

conventional commercial

How did you add value to the deal?

my company built the entire development

What was the outcome?

Sold on completion

Investment Info:

Small multi-family (2-4 units) commercial investment investment.

Purchase price: $8,000
Cash invested: $241,000
Sale price: $309,000

Bought an old apartment structure, tore it down, built a 4 plex on the property. Sold the property for a 53k profit.

What made you interested in investing in this type of deal?

I am a developer who specializes in building apartments for investors and myself. This property fit that model

How did you find this deal and how did you negotiate it?

City condemnation property

How did you finance this deal?

Conventional commercial loan

fixed contract to be sold when completed

How did you add value to the deal?

My business built the entire project

What was the outcome?

Sale price of about 50k profit

Lessons learned? Challenges?

I learned to continue to look for these either vacant, cheap lots or condemnation list houses. We found another one and are starting in one month.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Jeff Mason in Washington, IN

First Federal Savings Bank

From a contractor's perspective, there are other challenges that pop up when building more than 2 units here in Indiana (under 1 roof). Often times you break the overall CUBIC foot limit of 30,000 ft^3  (including attic space) when designing 3 or 4 units for new construction. This causes a flag to notify the state and request Fire Marshall construction design release.  

You have to wait weeks for approval of design and also subject to full inspection after each portion. The cost also goes up because of sprinklers, parking spaces, ADA compliance, etc. That all jacks of cost per sqft. 

Duplexes are really hot here. We've built several here and all of ours have had lease agreements before  we were finished constructing. We build our duplexes at top quality and abide with proper firewalls and all the necessities for safety but its pretty simple requirements when dealing with 2-family.

The electrical can easily be inspected with a simple voltmeter to test continuities, voltage, etc. Also size of wire can easily be determined and inspected to see if proper amperage:gauge is sufficient... As long as boxes aren't overloaded due cubic inch maximums and if everything is grounded properly, should be easy to inspect. 

Problem is finding a licensed contractor who won't nit pick and/or bad mouth the previous contractor because you didn't use a licensed guy in the first place. There's always something to criticize, but as long as it meets code you are good. 

Plumbing should be easy as well, considering the inspector should be able to see vent stacks and also see proper traps and pipe sizes... 

I'm a builder, not a licensed electrician nor plumber. But it should be easy to check out. just fyi

@David Thompson

Hey David!

I'm interested in learning more from Scott... I searched on BP and can't seem to identify the right one. Could you clarify some info on him? Thank you!

Zack,

I'm currently closing on a deal similar to yours except my ground is near a developing interstate district. if you want to see the details, I posted yesterday about it. I also am considering storage units.

Now, I build homes and have had some commercial experience, but nonetheless, I do know building costs pretty well. That being said, my research is pointing me in the direction of finding a specialty builder or a crew familiar with storage rental construction. Most cost-effective.

And also I am currently trying to find price on automated system. But having a hands free operation seems to be the best way to go.

But I do have my own costs estimated at 50 10x20 units for around 200k (construction only)

Good info guys! Joel, are those 4 factors you mentioned the basis of appraisal? If so I feel really good about the choices of storage units and apartments, because although it is really close to both intersecting highways, it is off on a new developed road leading to more developing land. It sits in between a multi million dollar heavy equipment sales company and a UPS store.

Kyle , I looked at the strongtowns.org site and it looks very interesting. I'm going to read into it a little more this evening.

Hello everyone! I'm new to the site. Actually just signed up a few days ago, but I have been listening to the BP podcast for a few months. Fairly green to the real estate game as far as purchasing goes, but have been working with real estate owners and investors for 5 years and have owned a property management company prior to currently, owning a construction company.

Recently, in the past few weeks, I've been working on my first purchase in real estate other than my own home. The ground I'm currently closing on is 2.9 acres of commercial zoned property in a newly developing area of my city. This new district has a dozen or so lots developed and divided for purchase that sit right next to a new interstate highway exit. Our local Economic Development has worked for several years on bringing new commerce to the area and have had some success. There is reliable sources of information circling about a major car manufacturing company buying and building in this district, which would bring in thousands of jobs. I'm currently searching for factual answers on what is coming and when. We've already seen a couple local commercial lots in the area sell for 250k-310k per acre when we normally see an average of 30k to 60k per acre here. My purchase was agreed on 2.9 acres with a 6000 sqft building already on the property with an office and storage/shop options for a total cost 230k.

I'm excited to see the appraisal come in on the ground and hoping to work a deal of no cash down by using the instant equity to fund construction of new self storage units on half of the lot. I've heard and researched some huge appreciations and equities on newly built storage units in the right area. If we do get enough appreciation/equity out of the storage units, we plan on building apartments on the other half of the lot to aid in the housing shortage here.

I would greatly appreciate any advice from anyone whom has experience in commercial development or has seen a similar situation blossom. Also, would like to hear some insight from storage unit owners about the do's and don'ts of that industry. Currently we are running numbers to find possible cash flow but would like to see more info on appreciation potential.

Thank you in advance!

Ross