All Forum Posts by: Shahriar Khan

@Kikuye Llamaguchi might want to think about buying a tri plex and quadplex with double of more then double of available 540K that you have to invest

Assuming you buy a quadplex to live in one unit and rent the rest for 1.6 mil (400K each unit)

1) You will buy 1 unit for your personal use for 400K . Take loan

2) You will buy 3 units using 1031 funds and loan 

3) Buying a larger unit will help you leverage which will in turn increase rental income 

4) You get live in one unit and tax/interest portion is a write off and when you sell gain is tax free upto 250K 

Your accountant should be able to split this type of transaction.  Best of luck 

@Mike Easton the key is the mindset during conversation 

typical realtor conversation -- market price blah blah ... i can list 

wholeselling conversation -- i saw your house and can pay you $XXK with $XK earnest money

Given you are a realtor , you really need to polarize (two extreme) your customers to see if they are retail seller (have time and not in need of capital immediately) vs someone really needs to get out with cash on hand yesterday.  Hopefully that way, if you cant buy it then at least you will get a listing contract .  Try that with you next lead ... Happy hunting :) 

@Mark Sewell in the same boat with you. I try to value 2 ways 1) land value only and then value of house and then cross check with MLS comps . For MLS comps i use proximity and frequency of listing/sale to adjust price. At the end, availability of information will have a reverse correlation to offer.

Pricing becomes an art rather within city where you would have hard data to create/outline a trend.  Feel free to reach out and we can work through examples. 

@Scott Kelley you will be fine since you lived in that house for 2+ years as @Austin Hendrickson said. Its tax exempt up to 250K and then 15% on long term gain . 

@Kent McDaniel it all depends how you view your house:  

Scenario A ( Its an asset)

Lets assume your home is your castle and it needs to be protected at all cost independent to what happen outside (i.e. loss of job, bad investments etc) 

Scenario B (Liability):

You are loosing it outside your fort and only way out is be using the bricks from your fort OR your winning it and you wanted to make sure you can expiate the process if you use the bricks of your fort. In both cases you dont mind being fortless king :) 

Hint: 

1) Everyone here are trying to have supplementary income to replace and/or add to existing income source which is beyond covering monthly expense. In your case you have lower monthly expense (i.e. No monthly payment) 

2) To cover 50% loss you need gain 100% .. 

@Tab Teehee  what you are feeling is what typically every land owner feels. Land is always money draining exercise since no cash flow and only cash out.  Even if its a gold mine, land cost is usually very small compare to overall project thus profit margin is low as well. In other words, gold mine is mostly for builder since they are taking the biggest risk and land owner get the least since they have least skin in the game. 

If you believe that holding cost will supersede cost increase then hold and if marginal or lower then sell.   

New construction price 

(-) selling cost (set by market)

(-) Construction Cost (set by market)

(-) Financing Cost (set by market)

-------------------------

(=) Builder Profit Margin 

(-) Cost of development (i.e replat, civil, architecture, city permit , utility, roads etc)   (set by market)

(-) Cost of financing  (set by market)

---------------------------------

(=) Developer Profit Margin 

(-) Acquisition Cost for land owner (variable) 

------------------------------

(=) Profit for Land owner  (==< this is where you are in the value chain ) 

Look like you know construction cost for new dev and you can plug that in to get a ball park range of price and negotiate off that. Good luck

@Kimi Ho similar to 1031 exchange name change where everything tied with buyer/seller SSN/EIN and you cant mix funds for 2 separate EINs/SSNs , properties needs to have separate account as tax paying entity to county office (i.e. 2 separate tax bills aka 2 addresses).  Splitting your property into allocation methodology will not hold up for any audit. 

To make thing clean, you should separate the address . Call up your city planning team and ask them what you need to do to add another address , may not cost you much and this was you will have 2 tax paying accounts where you buy 1 and use exchange fund for 2nd one. 

@davefoster i understand that splitting can be done but wouldnt that be overkill in this scenario ?

@Mohammed S. i would pay very close attention to you learning curve and price associated with it. 

Typical new build will have primarily 3 segments for value creation 

1. Land Development - If you buy from retail market (i.e. MLS) then probably no value can be added

2. Construction process- If this is your first time then chances of value creation for small project is highly unlikely 

3. Once its fully rented  - once you go through #1 and #2 and then wait till you rent out everything and then sell 

What i have seen is that contractor cannot provide you a +/- 10% estimate unless you have construction drawings on hand.  You cant have construction drawings unless you have a civil engineering company with you and you cant have a engineering company with you unless you have a property under contract ..

So, i would put that property under contract and then start engaging an architect to get a layout/construction drawings and once that is completed .. close on the land .. 

Not trying to negate your project but just saying that you need check your assumptions and their stress test those in your forecast before you get started. 

Good luck 

@Joseph Dimaria agree with what @Ned Carey said. Expected rate to return will depend on Investors Strategy independent to project. If someone says i want to protect my money from inflation then you offer them 4% and they would love you ... typically they are large ones. On the other extreme, investors to make high return to make living (i.e. BP investors) ... would expect  more than 15%-20% return.  At the end , its a negotiating position among syndicator and investors. 

@Bruce M. if you have purchased a title insurance then it should cover it since title insurance provides you the protection from anything that may have happened before.  Also call up the BBB and file a complaint about buyer attorney and that should do it.  On that note, at the end taxes need to be paid and given its your property