All Forum Posts by: Armando Payano

Nik - 

Heres whats worked for me.

1. Practice makes experience. I have analyzed so many developments that I can 'see' the numbers on the deal in my head. Mostly that 'seeing' of the deal is knowing how much a product type (SFR, town house, mulitfamily. A,B,or C area) will cost me to build.

2. Dont sweat the small stuff. I have noticed from my mentor and other accomplished developers (Lucky enough I have a mentor who developed 100s of projects worth 100s of millions) that once they know a deal makes money they dont talk very about EXACTLY what everything will cost and RARELY how much they will make. I think they know that there are so many variables with construction that the contingency will cover any of those variables and they will hit the profit target. More important is adhering to the time schedule and budget. In that order also. TIME is  a major daily discussion point. Many of the national home builders build a break neck speeds. I get developer envy.

3. For me if I analyze the deal and I am VERY CONSERVATIVE  and if it makes sense I move to the "if the S!*t hits the fan" back up plan. If I cant sell them, can I rent them and break even. Also if the lender goes under and pulls funding will I be able to get the funds to finish.  If all these check out I will make an offer ON THE SPOT and get it under contract ASAP. Trying to get myself as much time on the contract as possible.   Ive done contracts that do not have to close for 6-12 months. Depending on the deal that may not be an option. The objective is to secure the property.  However the more time the better for you to line up your affairs.

4. Know the market. Know the product type options for that market. Have an idea of what it will cost to build. In my market, for the product types that have broad appeal, I know I can build anything for 80-130/SF.

Hope that helps. Good luck.

Dustin - 

when deploying a value add strategy keep in mind the goal is increasing the NOI. Increasing the income by relatively small increments over many units over time achieves that.

For example: Adding garbage pick up for $10

I am not sure if it would be worth it for you.  

 The good thing about these criteria is that they are mostly static as opposed to often changing.

Population: Look for population to be steadily growing = increasing customers.

Jobs: A stable job market = a stable tenant base.

Supply: Too much product = increase in concessions / decrease in rental income to attract solid, long term tenants.

Demand: Product type. How much would tenants prefer to live in one location vs another. 

This is a 30k foot view. Finding the right cocktail of these components, not sacrificing on jobs is key. Be mindful that, imo, real estate is a 'slow' moving vehicle when analyzing compared to say analyzing other business's.

Good luck. 

You can become a short term lender to a crowd funding operation.

However waiting for prices to level off you may never achieve your goal. I hear this on BP often and think what many fail to account for is that when/if prices do contract will you be prepared mentally to buy something that is percieved to be loosing value? 

Try not to let your beliefs get in the way. If you analyze it and it makes an acceptable return NOW later it most likely will improve due to appreciation and rent growth. If you are able to force appreciation many times you can make up the gap of paying market rates.   

Good luck

Population. Jobs. Supply. Demand.

@Holly Williams Congratulations. I never get tired of hearing this story. Even those that are not fully financially independent should NEVER discount the fact that the hardest part of their journey is already accomplished. By that I mean having a vehicle and a road map proven to work. 

Many people STRUGGLE and waste valuable time because they lack direction, have no plan. Having a PLAN and committing to it, for me is, 70% of the challenge in attaining wealth. There is no better, safer asset, imo, for the attainment of wealth than real estate.

In or about 2013 I reached accredited investor status.  I had my personal residence and 2 rentals, both condos that I purchased for myself, that I rented when I upgraded because my family was growing. Always knowing I wanted to acquire more real estate, I struggled with placing the funds in the market or buying more rentals. I never looked at it as a business that could support me and my family. 

When I purchased my 4th property I still wouldnt have considered myself a real estate professional. Alas on my 5th property a BRRR (I didnt know it at the time) I was searching for something (can remember what) I came across a site that kept popping up in my searches call Bigger Pockets.

BP changed my life. I am now financially independent, but I am a grinder and love "working" I am multifamily owner via syndication own a small multifamily, 20 units that I am re-positioning. Purchased at 1mm I was just approved for agency debt and am refinancing it due to its appraisal coming in at 1.5mm. In less than a year I renovated 9 units and was able to take avg rents from $625 to  $775 which when the dust settles will net me roughly 500k and 25% equity in a cash flowing property. Unbelievable that I will own this asset with NONE of my own money in the deal. Having so much fun searching for my next value add opportunity. 

Good luck everyone.

Epoxy is a solid option. Installation is not difficult VERY similar to painting. I went through something similar and ended up with Vinyl plank floors. They are the best choice for look, durability, maintenance and installation.  Oh and when you add cost in theres really no better option imo

Good luck

Awais glad to see that you where able to reduce the equity requirement. HEADS UP! Be careful and be sure you get a fee schedule and review it carefully. Lenders with low equity requirements tend to have MUCH higher fees. 

I will share a story with you as I think it will help. 

I tested a lender that funds 90% of construction and 95% of acquisition. Here's the rub. They want 10% interest, which is about 4% higher than what I can get with my conventional bank.  As I was inquiring the interest went up 1% they claimed it was a "normal" rise due to the risk. Nothing had changed on my end, in fact my liquidity rose, which normally should reduce your interest if at all.

All in all if it pencils out......GREAT!

BUT as I looked at their fee schedule I realized that I would probably end up coming out of pocket about the same as the 35%.

Point is review those terms and fee schedules and if at all have someone with experience look if over for you as well. Things like appraisals, inspections, draw schedules and insurance requirements can REALLY affect your bottom line. 

I have 3 active developments of a total of 12 town homes with 2 listed for sale and I am in the process of refinancing a multifamily managing the manager and running the unit renovation schedule. I am pretty busy so not on BP as much as I would like. Feel free if you have any questions to reach out.....always happy to help.

\Good luck.

Which reminds me. 2 years ago, there was a BP member from the market I am in. Tampa, specifically South Tampa. He was VERY vocal about an impending crash siting all the usual concerns, debt, interest rates, the duration of the current recovery and even siting BREXIT among other reasons why he was selling about 8 SFRs he had. I considered buying some of them, but I do not invest in SFRs. 

He was condescending  in his reply's to anyone who disagreed as if he knew something no one else knew.  Fear of what MAY happen had taken over the machine. In REALITY the market was healthy an continues to show modest increases in rental rates and low inventory for sales. In general values have risen in South Tampa 8% on average of the last 2 years. Yes, that is not sustainable over the long term, but even a slow down would not have a detrimental effect to property owners.

Ultimately you should do what is best for you and your family and what helps you sleep well at night. 

However in my real estate operations sleeping well at night has ALL to do with having a systematized approach to all phases of my 2 business models and removes outside influences and emotional biases.

A pragmatic view  when considering things that are out of my control are what work for me. lt would be irresponsible of me to take action based on anything less than what IS happening rather than what MAY or MAY not happen.

@Michael H. Michael be mindful that selling your property because of the appreciation may seem good on paper however transacting real estate because of something the MAY happen may be something you look back on and wish you had done differently. Say you get top price for your property 270k. Subtracting commission, 6%, will leave you with 253k. Then subtract taxes and fees. I am not sure what these would cost in you area so lets estimate 3k. You are now looking at a profit of 63k. Now ask yourself if this still makes sense, as you will have to either wait for the 'crash' or buy in at higher multiples. Something to think about.