All Forum Posts by: Scott Choppin

@Mark Robinson Sending you an email with information by tomorrow EOB. Thanks!!

@Nicolas Saavedra 

Agree with @Christine Kankowski, HOA approval is critical (if HOA). Be aware of HOA design standards, in addition to allowing SFR vs. Triplex or not. HOA boards love to spend lots of time picking paint colors and reviewing plans for adherence to design pallets, and they tend to be slow, which is always the enemy of builders/developers.

Also:

1. check city/municipality zoning for your parcels and the surrounding parcels, make sure triplex (attached residential) is allowed. 

2. research should include investigation of front, rear, and side setback, units per area of land (i.e. one unit for every xxxx s.f. of land), and how many units per parcel (sometimes zones only allow x units per legal parcel), and parking requirements (with multiple units you may need to provide guest spaces). 

3. keep in mind when you go to sell how attractive the units are to potential buyers. Generally, our experience is that detached is always preferable to attached when buyers are surveyed. Everyone likes to NOT have a neighbor with a common wall if they have a choice. 

I am an offer of help if needed. Thanks.

Hi @Mark Robinson, nice to find and meet you here on BP. 

Would you be interested in investing in new construction rental townhomes in Southern California? We are developing a ground up triplex and are seeking investors to round out our equity investment in the deal. Capital would come in upon completion of the plan check and permitting process, about 120 days from now, construction loan commitments in place. Let me know if this triggers anything for you and if so we can talk on the phone. Thanks so much.

@Evan Bell Curious where you landed with this request? Let me know and I can help with your process. Thanks.

@Wes Harrington Try the Blue Book Construction Network. It's a marketplace for developers, GC's and subcontractors. We have used it successfully as a developer finding both GC's and subcontractors, and we have used it as a GC (for our own development projects) to find subcontractors. 

I did a search for Chattanooga GC's, here's the link:

Blue Book GC's - Chattanooga

I am an offer of help as you move through your process. 

Thanks.

@Carolyn Morales, sounds like triplex is the right choice from a zoning standpoint. 

Yes, you could sell to CVS to expand their parking lot. Have you spoken to CVS? If not, try talking with the manager of the location and ask if they need to expand their parking lot, watch his reaction to see if that gets a positive reaction from him. If he reacts neutrally or positively, then ask for their "corporate real estate" contact, call them and ask them to give you an offer to buy you out of the parking lot. 

Once you speak with that person, just give them the basics, lot size, address, etc. Let them do the work of investigating the zoning questions, they do that all the time. 

I'll end by saying this, the best profits I've ever generated on our projects, was when we entitled (rezoned) land and sold it to others at a profit without building anything. Designing, building, and financing a triplex will be a challenge compared to a straight sale. 

The sale of the land will be less profits, but it could be fast. 

And in the real estate development business, speed/velocity is king. 

Good luck and we wish you success.

We would approach it like this, underwrite the income and expense model for:

1. Parking lot 

revenue (rents) - (minus) operating expenses (opex) = Net operating income divided by cap rate for parking lots in market = value - (minus) cost to build parking lot (pave, fence, light) = profit generated 

2. Triplex - 

revenue (rents) - operating expenses (opex) = Net operating income divided by cap rate for comparable apartments = value - cost to build (hard/construction costs + soft costs + development impact fees + misc (less credit for fee per above) = profit generated 

Two ways to compare (really three but we'll leave out IRR for now)

A. NOI/Cost = development cap rate, or the amount of NOI generated given costs of the project, compare the two ratios

or 

B. NOI/Market Cap Rate = value - less cost to build = development profit, compare the two profit amounts generated from the development of each projects

Easy to compare the two ratios or profit amounts and see what works better. You do need to take into account the following:

- How much capital you will need to do either scenario, the parking lot will take a lot less capital

- How much time you will need to do either, the parking lot will take a lot less time to build and start generating revenue.

- Zoning - does the zoning allow use as a parking lot? Obviously it used to be residential, but when torn down did it revert to some other zoning? In other words, did it used to be a legal non-conforming use? Maybe triplex is allowable, maybe not, need to check the present zoning for allowable uses.

General observation: 

Parking lot = low cost/low investment, lower cash flow, less stable source of cash flow, less available buyers for a parking lot (less buyers = less potential value). 

Apartments = higher cost/larger investment, larger cash flow, more stable source of cash flow, more buyers if you ever want to sell (more buyers = more potential value.

I am an offer of help if needed for further thinking and design for your projects.

Thanks.

@Terrence W. Just be cautious with those national numbers, because they're just that - national averages. You want to focus your research on local data related to operating  expenses. 

As an example, the property tax structures between California and Colorado are very different, and so would influence the operating expense numbers for the same exact apartments in those different respective markets. That wouldn't show up in national averages. Utility costs would be another local and regionally influenced opex number, as well as, being influenced by the actual building type. 

Another good source of opex data would be small and midsize property management firms in the Denver market. You might also try local investor/RE clubs, that include owners of smaller apartment projects. I'm sure those folks would be glad to share their actual expense data.

Scott

@Terrence W. IREM has an annual income/expense survey of all major metro areas (IREM Annual Survey), it costs, but we have found it to be very valuable. The link is for 2015, but you can use the website to find the latest version. You can research by product type: garden style, podium, etc. We have found it to be very useful, as it is very specific to metro and product type, a good base. Then you can assess unusual characteristics of the property to adjust as needed. Thanks. 

Thanks @Sean Walton. My ambition here is to be an offer of help to folks like yourself and the BP community at large. Glad you like it so far!