All Forum Posts by: Scott Choppin

Thanks @Account Closed!!

Hi @Tom V.

Great question.

Exit caps vary in each particular micro market as you would expect. Generally, with the exit caps we are seeing on new construction sales between 4 and 4.5, we are regularly producing 200 to 240 bps spreads at time of sale of the asset. 

Hope that helps! Appreciate the question.

~ Scott

Hey @Mevlud Cukovic - I wrote an article that may be useful in your process:

https://www.biggerpockets.com/blogs/9960/63926-6-w...

The main question about switching to CM from Arch: how long do you have left to complete Arch? Does switching to CM delay your entry into the intern/job market for development? If I was hiring, I would value Arch, more than CM, just my own observation.

As well, in my article, I am against going into const. as a career start to then move into development later. CM is diff, as it is truly management, but still const. oriented. You can get boxed into const. if you ultimately want to move to RED.

Because you have no development experience, you're going to need to go the intern route, to get some experience built. I would start looking for the internship right now, do it while your in school. Ask your school if they can help you with this, do they have internship programs? If not, need to make it happen yourself. I would offer your help FOR FREE,  in trade for 10-20 hours per week of learning/training/experience. Mind you: you will get all the **** work, but so be it, it's experience and you can tell people you have worked for a development company. It gets your foot in the door. 

Find a mentor at the same time, make them the same offer, free help for what they need help with. Too many people make mentor requests and forget that the person on the receiving end of their weak request needs help too. 

Finally, some on BP will say: go do a deal yourself. This is fine as long as it doesn't take too long or cost too much to do it this way. Working for others will give you exposure to their deal inventory, which will likely expose you to more TOTAL deals, which is the best way to learn. One deal at a time, your own, is a slow learning process.

~ Scott

Hey @Chris H. I can be of help. Send me a DM and let's get on the phone, I can walk you through the process.

Also, see my thread about one of our active development deals, which outlines almost the entire process (not done yet, but soon): 

https://www.biggerpockets.com/forums/44/topics/427...

@Michael Ray Aglibot

We build our projects this way, we call it Owner CM with prime subcontractors. This can work if:

1. You have good subs that can complete the work without lots of babysitting. 

2. You have subs that have someone with both construction experience and that can speak decent English. This is not meant to be biased, but you will find it surprisingly hard to discuss fine project details and give important direction over cell phone with someone whose English is not good. If you or your partners speak Spanish, that's valuable. 

2. All subs are correctly licensed and insured.

3. You know the build process and your plans so well that you can explain the plans over the phone without visuals to subs who need guidance from the field. It's much harder to answer questions and give direction remotely over the phone than standing onsite explaining in person. No sub will be effective via email in the field, it's just too hard to be out on site and answer emails from you iPhone. Text can work OK if the subs are checking their phone often, most don't often enough. Generally, you are left with calling them and talking with them via cell phone to coordinate.

4. You and your partner are available to answer questions from subs and inspectors during working hours.

5. You and your partner can keep up with the paperwork part: permits, contracts, inspection requests, inspection changes, invoices, lien releases, insurance certificates, draw requests, accounting, monthly general conditions invoices and payments, etc.

6. You have a great bookkeeper

 ~ Scott

Here we go to the next stage of our CA Multi-Family project:

https://youtu.be/liFR9dXTQVw

Completion of the concrete foundation formwork and underslab plumbing

Installation of rebar, visqueen, sand, and framing hardware

Pour and finish concrete

Ready for framing

@Ross Sib

On unit mix, are you proposing to hold long term or sell it when complete? This make a difference in how you approach best unit programming. 

If you are going to sell it, then call a couple of local brokers who sell new completed apartment projects, ask them what the preferred unit mix for BUYERS. I will say most developers today in the LA urban markets are building for millennials, which suggests more studios and one bedroom units. While the demand is high in that demographic, competition from other project in development is also high. You don't want to be the last guy into the market leasing when the market downturn comes. As well, our internal assessment of the millennial demographic is two main things: 1. they are very mobile, and can move whenever they want, no kids, low job attachment etc, , 2. They are early in careers and not making high salary, so price sensitivity generally is an issue, rents go up too much they can and do leave for other buildings or other markets.

Our projects are now entirely out of the millennial markets, serving a totally different population.

If you are seeking to hold long term, or are attempting to build to a different demographic, then that should inform your unit mix. 

Overarching all this, is what you can fit on the site in regards to zoning. So you must balance zoning/parking/build cost requirements with your assessment of what unit type the market demands. This is a key component of being a seasoned developer, and many times missed by less seasoned folks.

~ Scott

@Michael Magbalon Tag, see above.

Making an offer as you did is not an issue, this is why we have due diligence periods. In this case, given competition, you were warranted to make a quick offer, evidenced by multiple offer situation. Once you get it into contract, THEN you dig deep and hard. Obviously, no buyer can truly know the property until they get trailing 12 with leases, make sure to review the leases for hidden deducts, rent concessions, etc.

You did good here generally, once you made an offer, even before going into escrow, you found out all these fun things the owner was doing. You can bet that there's more than what you found out initially. Time to walk away. When you buy from a professional owner with a property manager, you'll know it, clean books and records, good systems, etc. You'll recognize it.

Make sure to go see any out-of-market property, so many times people don't visit out of market properties, which to me is a mistake. So worth the price of a plane ticket and hotel night. Have the broker pick you up at the airport(!).

Once you make multiple offers in your target market, and go through one or more due diligence efforts, you will learn the market fast. 

~ Scott

Value it that same as any apartment project:

1. check rent comps for similar units

2. call property managers to give comps for operating expenses

3. call brokers for cap rates of similar sales of apartments

4. run numbers: Rent - vacancy allowance - op ex = NOI/cap rate = value

5. deduct the closing costs, broker fees, and the costs to complete = your offer price

Make sure to vet the completion costs, this is ripe for lowball on the completion costs. Also, make sure you are very clear as to why they are selling incomplete, why would they not do it themselves, i.e. complete and max the value for sale? My questions, what's wrong with this deal that they are not telling you.

~ Scott