All Forum Posts by: Shane H.

@Kenneth Arnason

Welcome. I've been doing some additional homework on HELOC's offered by the local banks. Fidelity Bank seemed to offer the most flexible. Might start there. You'll also likely want a relationship with another smaller local bank who can help fund the deals quickly.

Carson Bank, Vintage Bank, Rose Hill Bank, Union State Bank, Stock Exchange Bank (Ark City) are a few of the smaller local ones I know would be able to act quickly and wont screw you on closing costs.

I've personally used Carson and Union State Bank (formerly Relianz)  - Have spoken to Rose Hill and Vintage about their programs however have not ruled out using them in the future.

I'm sure there's a few other smaller banks I've left off, but going off the cuff those are the ones I remember.

@Justin Chamness

Welcome Justin.

@Jim Horton Do you ever have anything come up in the Wichita, KS area?

@Mike Wood

There's a good # of comps to support the rent close by.  A billionaires conglomerate is HQ'd close by as well along with 3 or 4 new schools built in the past 3-4 years.  

I agree on the lawn - I like a nice one most tenants do not care about the yard frankly along with a lot of home owners in some areas.  The top end of the spectrum $1700-1800 there are certain features you need in the house.  So it would depend on our layout and final finishes.

I dont check all the time, but you wont find many newer 4bd rentals available, especially new ones. 

@Mike Wood

Prelim #'s I'm running show cap near 8% - however I'm fudging high on water (irrigation) if we tied into the city water - I'd like to have a well drilled and put in a warm season grass so the mowing season is shorter and it requires less water.

Putting in vacancy of 5% though what I've noticed is the new developments stay full - also figuring Cap Ex as well, which honestly if we build right and dont own more than 10 years or so the only thing we should look at having to replace is carpet or a water heater which is minimal unless a hail storm or tornado goes through.  So I'm probably going overboard figuring a percentage on that. I would just take a flat $100 mgmt fee per mo to compensate me for my time.  Either way when running the #'s - having one unit rented would make the mortgage payment which is most important.  I've seen enough things fail I've got a good idea on how to put things together for longevity sake down to the wax seals on the toilets.

Rents for 3bdrm 3 bath are 1375 ea w no lawn care.  If we provided lawn care and built 4bd/3ba depending on level of finish should be able to get 1450-1700 per unit.   Wide range I know but would have to test the market.  If I'm kicking in lawn care which I prefer they'll pay for it by collectively paying a $100 premium a mo in rent which will take care of the lawn bill over the course of 12 mos.  Warm season grass you only mow from May to Sept - maybe oct depending on how soon it gets cold here.  Fescue here is my preference but it requires too much hands on to look good.  I only have that at my personal residence.  

This isnt a create millions overnight thing, something I've always wanted to do though.  The other construction groups in town (the smart now wealthy ones) have done this through partnerships and I want to emulate that model.  They're getting older so it's time for new blood to move in, start with one and scale up while the opportunity is there.

@Mike Wood

Lot is $12600 - lots are cheaper here since the developer does not have to pay for the infrastructure improvements. out of pocket. They are passed on to the new owners in the form of "Special Taxes" that have a sunset once they are paid off.  The developer is of course responsible for these taxes once the infrastructure goes in until the lots are sold to the next owner - either a builder or end user.

Specials are $1100 a year per lot.  

@Mike Wood

More of the details - I would provide all of the capital for the down payment...purchase of the lot and any other equity initially required.  When we sign the construction loan I could get it by myself, however I would request he be on the loan as well so there is skin in the game on his end.  Between my credit lines and other property etc it will be funding the payments while the property is built.

I'm 99% certain that once it's built and occupied it will appraise to the point we could pull out the capital invested in a refi into more permanent financing.

I know I wasn't real clear before - hope that made sense.    IE it should appraise for $275-290 or so when done depending on level of finish, size and what I end up renting them for depending on if it were a 3 bd or 4bd model.

Hoping to have no more than $225-250 invested so if property completed/rented out is worth $275k, then financing at 80% should be able to take out permanent financing for $220 - leaving maybe 5-15k or so of our own money in the deal after it's completed depending on exact construction cost, then move on to the next one.  

The goal would be to get 4-5 or more built on contiguous lots, have them going for a year or two then finance into a HUD multi family non recourse loan - either keep the property for the duration of the rate term or keep another year or two after that and hopefully spin off to a retail investor as the note would be assumable at that point.

Thats how I have it drawn up in my mind. The problem would be meeting the UW guidelines on the HUD loan of having a networth equal to the loan amount across all properties. I am not there yet. He is not there yet, though he might be much higher than he thinks depending on how the goodwill in his business would be valued.

@Mike Wood

So you're thinking I might be selling myself a bit short or vice versa?

When you say splitting the rent I'm not sure how you mean?  My plan would be to have a mortgage out for about 100% of the money invested in the project when it's completed which we'd both be on, however my connections/credit lines are what will allow the build to start out hypothetically.

So yes, he is not putting a ton of cash in the deal, however he would be using his company/employees to do things they are capable of.  So he would have a capital contribution, it's just not as cut and dry as him writing a check.  Am I thinking about this wrong?  

The way I'm looking at it is without him, I cant do this, as of right now he doesnt have the time, financing in place or other knowledge I have to make it happen.  

Was thinking 50/50 would be fair and give everyone a stake in the game.  I'd take a management fee when the property is rented out and the rents would obviously pay the mortgage, expenses, tax prep etc.

Thanks for the input so far.  Enjoying the discussion.  We will be meeting some more this weekend to discuss.

Welcome @Jonathan Heather

You came to the right place to learn.