Advice- potential Investment opportunity-New construction rentals

[Michael Richardson]

Hi everyone,

I'm fairly new to BP (still haven't put a picture up :) ) and have been scanning through the forums over the past couple of months, as well as listening to the podcasts. I am looking for some advice on a potential investment opportunity that has come up. I was talking to my best friend about wanting to invest in real estate and he mentions that he has been trying to figure out what to do for a few years now, about a residential lot his family owns in Chico, CA. He recently talked with a contractor to get some ideas on what to do with it and the contractor told him that the lot is zoned for 3 homes and that he could put three, three story triplexes (9 total units) each with 2 beds and 1 bath, and a designated parking area. He gave him an estimate of between $500K - $600K. We believe we could get between $900-$1000 a month for each unit. The lot is right in the middle of residential areas near Chico State and just a few blocks from popular college bars and hang outs. I would definitely like to partner with him on this as I think it would be a great investment and we would have no problem keeping it rented out. I have a good chunk of capital to contribute equal to the value of the land to essentially become equal partners in the deal. Not sure he has much capital to invest so the rest of the funds would have to be through loans.

I would like to hear some advice on this investment as well as other ideas on what to do with this lot. How should we go about getting the rest of the funds needed? What are other things I should take into consideration before deciding to partner up in this deal?  This would be the first real estate investment for both of us.

Thank you for any help.

-Mike