BP Podcast 168: Building Hundreds of Homes to Sell or Rent with Cameron Skinner

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Today we’re excited to bring you an interview with a savvy investor who’s done over 500 deals — Cameron Skinner. Cameron got his start with new construction spec builds in the late 1990s and due to the changing economy created an interesting twist that we know you guys are going to just love. This episode is packed with incredible, actionable advice that will leave you shouting, “I’m totally going to do that strategy!

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In This Episode We Cover:

  • How Cameron got started by partnering with someone
  • Why he started with new construction
  • Can anyone build to rent?
  • How to calculate capex and why it’s important
  • What exactly cost segregation is
  • How to get tax benefits now
  • How many deals Cameron has done so far
  • His experience during the crash
  • What you should know about how lease options work
  • When to seek professional advice regarding the laws in your area
  • How to know your market
  • Downsides of the build-rent strategy
  • Tricks for finding the best contractor
  • How he completed so many deals without picking up a hammer
  • How to keep an “investor mindset” to find the best deals
  • The importance of finding out your skill set
  • Why Cameron has no employees
  • The cost of tearing down a property
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “I’m not worried about 20 years from now because I might be dead — so I want to take the tax benefits now.” (Tweet This!)

Connect with Cameron

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

30 Comments

  1. Elijah Tomlinson

    This is exactly the podcast that I needed to hear. I have been thinking about this a lot recently since deals seem to be very few and far between in my area. Land is pretty cheap out here and I’m thinking of building duplex and then house hacking for a year to save for the next build. This podcast is gold!

    Also, I listened to the episode with Hal Elrod yesterday and started my morning rituals today. Pretty awesome and so stoked for what is to come. Thanks BP, you rock.

  2. David Krulac

    Cameron and Brandon are right on. Under Dodd Frank which is Federal law applying to all states, no rent credit can be given on lease options unless:
    1. The buyer is NOT an owner occupant
    2. The property is 5 units or more.
    3. The tenant buyer is pre-qualified by a licensed mortgage broker.
    4. The deal is written through a licensed mortgage broker.
    5. The loan can not have a balloon payment and must be self amortizing.

    The penalties are onerous, the TB can get back all they paid for the first 3 years, and the owner can be subject to fines and jail.

  3. Cameron Skinner

    Thanks David, yes it’s my understanding if any money goes towards a down payment, equity, ect and its owner occupied it’s considered a loan under Dod Frank. It’s also my understanding there are ways to structure so it doesn’t trigger Dod Frank

  4. Mark Graffagnino

    Really enjoyed the podcast Cameron. I’ve been trying to make a plan for scaling without having W-2 employees and it was good to hear of your success doing that.

    “Some people sign the front of checks and some people sign the back of checks.” That is a classic!

  5. Cameron Skinner

    Thanks Mark, This is just my experience but I found with employees I ended up trading one problem for an even bigger problem. While some people are natural employers and love building a huge empire, I found it enormously stressful, because I couldn’t focus on what I was good at, as I was constantly dealing with employee problems.

    I have to give credit to the “checks” saying to my Dad a sucessful business owner. I hope it came across in the pod cast that I meant nothing negative by those who sign the back of checks, and in many cases I think they may have a much better quality of life than those of us who deal with the pressure and stress of running a business. My point was we are all different and some of us are designed better to do one or the other and we are the most successful when we are doing what best fits our natural skills, talent, and intellect.

  6. Todd Willhoite

    Really enjoyed the podcast. Great content as always. Cameron, what do you do different in your builds when you are building specifically for a rental as opposed to building to try and sell, but renting it if it doesn’t sell?

    • Cameron Skinner

      If I’m building one I know I’m going to rent I put tile plank or 18″ tile in great room vs engineer hardwood. I will also put laminate tops instead of granite. Pluse no micro hoods or garbage disposals since they are prone to break. I also paint all my rental interiors exact same double antique white, so never any issue matching paint. If we are selling we will use a little color.

  7. Vilson Nikollaj

    Cameron,

    In the podcast you mentioned the cost comparison of build new to rent vs. buy/rehab/rent were about the same long-term. Funny since a day prior, one of my mentor’s said the same thing. I’d be curious to see that comparison on paper (excel). Does this work for you since you are the one building and your initial costs are much cheaper?

    I’m looking it through the perspective of someone that, as a crude example, can either:
    1) Buy new duplex for $300k, have minimal maintenance
    2) Buy 20-30 year old $200k duplex. put $80k into rehab, and for the most part also have no maintenance

    In theory, if you do a full rehab on a property, shouldn’t the maintenance costs be the same? Granted one property is 0 years old vs. 20-30 years old.

  8. Cameron Skinner

    Remember every market is different, but with my data, over longer periods of time my new homes have out performed older rental properties in my portfolio. Even with me building at wholesale it is still much more per square foot all in purchase price for new construction than an older home. I think there are several factors why they do better, insurance less, vacacey rates lower, slightly higher rents, much less maintenance. Also the average home in the US last about 120 years. If I buy a house built in the 50s I might get a great deal but she’s half way done, so she will appreciate at a slower rate than new construction.

    In your case don’t forget even with a complete rehab your sewer lines, water lines, electrical, ect. are still 30 years old. Also floor plans and layouts that are in demand today are much different than what they were 30 years ago.

    Hope this helps, Good Luck!

  9. Pat Birkeland

    Really enjoyed this podcast – I have thought about this as a strategy and will research even further after hearing your story.

    I was curious . . . hoping that I don’t sound off the wall on this but how do you feel about some of technologies on the horizon with 3D printing and some of the very low cost housing options like the one being developed at the University of Auburn (‘This House Costs Just $20,000 – But It’s Nicer Than Yours’)?

    Thank you!

    • Cameron Skinner

      There are allot of component, modular or kit type homes on the market. Most are just a glorified mobile homes which have been around for almost a century. Currently nothing comes close to the value and longevity of site built home with convectional construction. Don’t get me wrong the materials and building techniques are far better than even 10 years ago which make homes more fire, weather, and termite resistant and much more energy efficient with less need for ongoing maintenance. But I don’t see any new current technology on the horizon that will drastically displace the average stick framed or block construction site built single family home in the US.

      Hope this is helpful, Good luck

  10. John Carr

    Hi Cameron, thanks for taking the time to tell the BP community about your business!

    This might be a fairly obvious question, but I assume that when you were talking about partnering with a contractor (and your comment above re: “building at wholesale”), the contractor is building at cost (materials & his employees’ /subs’ labor) and taking his cut solely from the profits on the back end… am I understanding that correctly?

    Thanks again!

    • Cameron Skinner

      I don’t want to over complicate but if I keep a rental home, even if I am acting as general contractor, I would have overhead, insurance, travel expense, superintend or my own labor. I usually have an agreement that if I keep a home as a rental and the builder does not want to go in 50/50 with me on the rental, then I can buy him out at a predetermined amount. That amount would cover his over head cost and give him a reasonable compensation for his time. But even if I was doing it I would have to add an amount in order to get a clear picture of my true “wholesale” cost.

  11. mike h.

    I don’t think I’ve missed a podcast yet but this one was really a favorite.

    But the one thing that really caught my ear is when you mentioned you were getting construction to perm loans with only 10 percent down. Is that the norm for local banks?

    Do you think you may be getting that low down payment product because of your track record and/or your reserves? I don’t know that any of the local banks have construction loans for spec and/or non-owner occupied homes with that low of a down payment.

    Could that be area specific? If not, does the model work if you’re having to put down 20% of the construction costs?

  12. Tarek Soliman

    Great Podcast @ Cameron Skinner I never thought about having a rental property as new building construction, your approach will tweak the equation a little bet.
    These are questions around your podcast BP Podcast 168: Building Hundreds of Homes to Sell or Rent with @ Cameron Skinner.
    A discussion for all the questions that I think that would benefit a lot of investors including me primarily, and any additional information will be appreciated.
    Cash flow from build to rent strategy
    1- Are the cash flow from building to rent generally are less? Why? Is it about 1%? How the overall investment in the long term?

    Cost segregation tax benefit:

    1- How exactly I should be qualified for cost Seg ?
    2- What if I hired builder? How can benefit from cost Seg in this case?
    3- As mentioned, what if I did as advised and bought builder partner share? Am I still benefited from cost Seg tax benefit?
    4- What exactly needs to do and not do to help me qualified for cost Seg?
    5- What is Cost segregation analyses for single and multifamily construction?

    New construction Building finance
    1- What are the difference types of option to finance a new construction building?
    Key words: portfolio loan, 5 years balloon

    Being investor vs full time job Home builder

    1- How to become an investor in new construction building without an employee’s? is it just find the deal and partnering with home builders?
    2- Can I just hire any builder who gives me a good deal? Why the builder would give me a better deal?
    3- How the structure of the deal with home builder would look like?
    4- What are the consequences for hiring builder vs partnering with a builder?

    this discussion will be at
    https://www.biggerpockets.com/forums/48/topics/296456-questions-and-answers-for-building-for-rent-vs-buying-out

  13. Christopher Davis

    Wow, I loved this episode. I’m following you on BP now, Cameron. A friend with a company licensed for commercial and residential construction is looking to partner up on some projects and this seems like a concept worth exploring in some depth for me, my wife and associate. Thanks for taking the time to share your experience.

  14. Milan Mehta

    Great podcast Cameron. I have recently done my first build to rent and/or sell project building 8 townhomes. I am an architect and designed the homes myself, but it was great hearing some of the same strategies that I went through. It’s inspiring to hear your story and proof for me that my goal is possible.

  15. Scott Rushing

    Cameron

    I just found BP today. I have 8 SF rentals in my portfolio (obtained as short sales during crash). There are not any houses currently in my market that pencil out to cash flow. I am considering building multi family to rent. You mentioned you have done both build to rent with SF as well as MF. I assume my costs to build are less with MF. Granted headaches are more likely with the tenants with MF, but it seems like it is a no brainer for CF to build MF instead of SF. WHat are your thoughts and experience on building on SF vs MF to rent. Thanks you so much for sharing your success story.

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