All Forum Posts by: Rob Harris

If you were in CA or TX I could help you but I have no clue as to pricing of materials and labor in Chicago!  -- Will be curious to see if you get some responses and for pricing in your area..... 

:-) 

Sorry for all the typos!! Big fingers and iPhones are not a good mix!! Hopefully you get the gist of what I was trying to say. 

I personally am no expert but have bailed on CA. I'm in Texas now 100% and my ROI IS SOLID! As in site you are very well aware from your suspicion, I am going to error on the side of caution knowing how CA is one of the most volatile markets. I got my A$$ kicked in the crash and viewed never to get caught with my shorts around my ankles again (sorry for the visual)... 😬 ..., I've made a good recovery after a lot of tears and hard work.

I am def a risk taker but I'm a data freak. I'm constantly reading and assessing market nationally.  BP has helped me a lot alot along with differing folks and associations I follow. 

I my home now in CA but invest every dime I make our of CA. I actually became s resident of TX because the CA St. Franchise Tax Board will try and take every dime they can from you. 

Personally since we are nearing a definite market correction cycle which will of course hour CA hard because that's just the way it is,,,,, in would definitely be looking at a more stable market where you can value add which you've obviously proved you can and buy  cash flow on current property  actuals and enjoy a much less stressful ride when the wave changes directions. 

I'll be glad lag to what others have to say re this great question! 

@Jonathan Orr brings in some excellent added info.  One thing I learned in TX in that "Anybody" can be a contractor for any trade except Plumbing, Electrical and HVAC.  NO other trades need licensing which blew me out of the water coming from CA.. In CA you have to be licensed to do ANYTHING.!

I don't know NC contracting laws but you may want to familiarize yourself with them. 

I was able to get my foot in the door with community banks in TX by showing my CA experience BUT they were still very cautious since I had never built in TX.  Having a significant track history in CA and several licenses including a General Contractors license, I got one bank to give me a shot.  Once I demonstrated that my game was tight and that I knew what I was doing and coming in on budget plus moving properties, they now LOVE ME!  They have extended me the ability to build several homes at a time since building this relationship with them.

5 Big Things banks will look for I learned are according to the 5 C's:

5 - C’s of Bank Underwriting

C - Capacity

C - Capital

C - Conditions

C - Collateral

I got these from listening to a great podcast some time ago and they are a very goooood guideline!  

Sorry if this veered a bit off topic, I am just passionate about helping others succeed! 

Run the numbers and as has been said, do your best to drive price down knowing on the back side you will essentially be able to reposition the properties to be more profitable.  Def do your best to find the owner's motivation to sale and if they are free and clear or if there are any encumbrances.  

Talking up the headache you will rid him/her of and getting together a game plan before you take possession will allow you to accelerate your repositioning moves!

The tenants that are a no-pay that are habitual, build that into your numbers for the offer you will be providing the owner.  You buy on actuals and then do your magic to capitalize on the back end with better tenants in place. 

Squeeze the existing property management company for education concerning what it will take to get them out, without them knowing you plan to self manage.  You may be able to get some help from them initially, then you can take a stab at self-managing if you want to deal with such a feat... 

Just me 2 cents! 

@Dru Bennett - do some research on Killeen. I believe they were ranked high on affordability but also high crime rate wise.  Also I found that the rental pool in Killeen was very flooded even though they have a lot of renters,,, so this pushed me away form Killeen even though you can grab some great deals there.

I did a TON of research talking too a lot of people about that Central TX area.  Lampasas has proven to be a gold mine for opportunities.  Word is getting out and the local market has been expanding like crazy.  If you talk to Brokers in the outlying towns, not just in lampasas, you will hear how hot the market has become.  The running statement in town is that "Austin has discovered Lampasas"....

I have purchased a lot of land to develop in Lampasas.  Most all the in-fill lots have been swooped up by builders (me included) and we are all on the hunt for more land but not really not much available in the city limits.  I bout 18 acres on the edge of town for a future housing development with a partner..... part of the land was already in the city and part in the county.  They just annexed in the entire 18 acres,,, so what do you think that just did for our property value!  

The city is putting a lot of money into infrastructure and just did over a million dollars worth of it on the edge of town that just happens to be adjacent to the acreage we bought! :-)  

Lampasas has a lot of manufacturing jobs and they are routinely through they Economic Development council cutting sweet deals to ben more businesses coming to the area.  The business park where they ran that million dollars worth of utilities to is across the street from the property we purchased and the city is all-but giving the land away free to incoming businesses to bring in more jobs to the area.  

School s are GREAT! 

Anyway, hope some of this helps. 

Lampasas, as @Brien OConnor mentioned is doing very well. I build there and it is booming.  Just over an hour from Austin and 20 mins from Ft. Hood which is one of the biggest military bases in the US.

Many of the officers and higher paid military personnel are trying to move out of the Killeen and Coppers Cove areas.  Killeen has a high crime rate a Coppers Cove has also become less endless desirable.  

I have built multi-units and houses in Lampasas. 

Good luck in your pursuits! 

J. Scott is on point.   I built for a period of years myself prior to having a license.  I had to hire out much of the work to folks whom held the proper licensing for the required trades in my jurisdiction/state.  I got my feet wet (seasoned) in CA which is one of the toughest places to build. I now focus in TX which is MUCH more friendly when it comes to being a home builder,,,, but with that also comes the increased rick of dealing with many people who don't know what they are doing and pawn themselves off on you that they do.  Many don't have insurance and ultimately you (the builder) wind up with higher risk exposure. Interestingly enough, when it comes time to correct any issues, unlicensed trades many times are in the wind and you are left with fixing it out of your pocket. 

Anyway, just food for thought! 

In short....

Run the numbers. Cost of new construction vs buying existing. 

Evaluate location and probability of appreciation and desirability of each location. 

New construction should mean In the  short run you can run a tighter cap-ex account vs buying aged/older properties....

Good luck! 

I am no expert, but looked into them specifically in Texas..... see the bottom 2 paragraphs concerning legal compliance "IN Texas" from this attorney.... (Of course you could NOT notify, but again,,,, that increases risks...) .... 

Just thought I would share.... :-) 

http://drewshirley.com/the-wraparound-mortgage-exp...