All Forum Posts by: Arjun S.

Yes always good to run your numbers and do your DD. Visiting in person is the best thing to do if you can. I recently visited the location myself a week back and definitely the area has a lot of potential but is yet to be developed (Mostly empty lots as of today). So considering the comps are already higher, it definitely is a good investment over the long run when the place actually develops and we start seeing more inflow.

Hello Don,

It was lower originally and I believe every 30-45 days prices went up on the site. In my case it was 266K (vs 238K that it should have been based on original discussions and contracts). So far still waiting on permits and ETA for completion was around Nov/Dec i.e about now. But new date is sometime mid next year. However there is no firm date since it depends on when permitting is approved (which I see is the case in several states and even locally on a few other properties that I am pursuing)
 

@Account Closed: Thank you for the very detailed post. Yes absolutely agree on the logistics and justification behind these price hikes and agree overall market is trending upward which might hopefully like you mentioned also mean higher appraisal cost at the end of the day. But as a first time out of state buyer and not having experienced these price hikes on other new builds I bought in the local market around the same timeline, definitely cannot say I am pleased with the price hikes I guess. But hoping prices continue to go up and at the end of the day this might take a complete U-turn making it a very pleasant experience to justify these price fluctuations. And thank you for all your proactive responses/help for all questions/concerns I had every step down the road! Makes the journey better with every step forward

@Sam Sala: Hello Sam! 1st was a 100yr old property and 2nd a new build. Both SFR.

Sure I can send you the details offline

@Anita Anand: Hello Anita! Yes new build was in Cape Coral. I am guessing mine was a one off and since market swung a lot during this time frame, I got caught up in the price hike. One other person in family I referred also bought this property a month later and my new pricing is same as theirs. So in general just add 8-10% to the build cost, land(may be 20%) but this at least will be before you sign any contract so you can decide early on, capex/vacancy and other costs around 5-10% range instead of 0-3% and make sure it still makes sense. Since this is a new build lower % isn't too bad here for starters. Also add a 12-15k for private lender interest for 6months at 10% (assuming this won't continue to jump) now that the overall prices are up unless you plan to pay cash.

@Colleen F. : Yes agree! I am told rents are up 5% but appraisals should come way higher than previous numbers. I still expect it to cash flow 300-400$ around. Equally curious to see how this pans out overall.

@Michael Dumler: My 1st property was in Illinois and probably I was just a little lucky since this is not common from what I have heard in that market. Illinois insurance and taxes are significantly higher than other markets with 100yr old homes. Yes absolutely important to set the right expectation since if the price increase was communicated, I wouldn't bother much even if later I was quoted a 15% hike in price as far as it was justified and overall market was in an upward trend

@Josh Caldwell: Absolutely agree and this is what I will probably stick to going forward. However since most of these are significantly older properties, one bad experience is all it takes to ruin it for someone starting out. Newer builds you have a peace of mind when it comes to maintenance and in general way lesser things to worry about combined with a significant appreciation potential if you are early in the game. In my local market I have new construction and my experience was very pleasant. Note: This was just 1-2 months before signing RTR contract and prices didn't fluctuate a single $ and was as promised (was assured they will bear any unpredictable price hikes which they did) . Note: This is the time when all costs were significantly shooting up

Hello BP!

Here is my frank 2 cents! I recently closed on my 1st out of state property and in the currently in the process of closing on a 2nd one after learning about turnkey rentals and coming across rent to retirement on BP. 

Setting right expectations and communication is very important to me since I usually refer my friends/family who are very much into rental investing to someone that I have had a pleasant experience with.

1st out of state property - I worked with Eric who is very knowledgeable, highly responsive and frankly went above and beyond to address all my questions/concerns. Property had a tenant right from day one and I was put in touch with lenders, title, property management, insurance providers who were all great. Property pricing/ROI aligned with the original expectations on website. Appraisal came in 22K over purchase and I had an excellent start to my out of state investment/passive income journey and so far have a good cash flow on this property in the past 3 months. Overall a very pleasant experience for a 1st out of state rental investment. Do your own DD to take into account a higher risk than what is mentioned i.e vacancy/capex items/insurance rates and other costs since somewhere down the road you might be up for surprises if this is not factored in and you just go based on the numbers on the site (which is generally true for any turnkey investment and not just RTR)

2nd property - This is a new build and again Eric has helped me with every step in the process to educate me on how the overall process works and put me in touch with private lenders, builders etc. Land permit takes 2months followed by a 6months of build cycle.

To start off I went based on my previous (set) expectation on the numbers that were on the site. 

Land cost - Turned out to be 44% higher than what was on the site since overall prices started shooting up. This also might mean resale value will be higher. But I was thrown off by this large jump which probably as a buyer anyone would!

Private loan cost - 8% rate (signed a contract/promissory note). Now that the land permit is back 2 months later as expected, this rate is not being honored and is going up to 10%

Build cost - Signed a contract based on the price on website as of Apr 24th which said price is valid till May 1st. Signed a contract for the price mentioned on the website. Today I am being told the price was only valid till the day mentioned on the website and now overall costs have gone up my build cost is up 10%.

Though I understand this is a very common scenario for new builds where original price can change significantly for any reason including the recent lumber pricing (which B TW has gone down 3X since the time I signed contract), I did not factor such drastic price changes. I would have preferred if the right expectations were set right from day one in which case I would really have cared even if price went up 20%! . However to note this also does mean resale value for these including the rents can now be significantly higher but as a buyer hasn't been a pleasant experience. Which might change in a few months as we move through the process. But a lesson for me was to not go based on the numbers on any website and not just RTR for new builds. 

I will continue to update my overall experience as I move forward with my passive investment journey

Thank you all for your insights! More I read, looks like this is very common with all new construction homes. Though in the contract I don't see anything else relevant to "in accordance with the procedures of the contract documents" mentioned under the price escalation clause. I have reached out to them for clarification. And yes like several of you mentioned it just can't be lumber and there might be something more to this. I will ask them for additional supporting documentation to justify the pricing. 

@Michael Guzik: Good to know you are from San Antonio! Yes prices in the area have been skyrocketing lately and I see no end to it! I will reach out to them to see if they can provide any documentation to support this.