All Forum Posts by: Brian Chase

I have a lead on an off-market deal in downtown Tucson. It is a duplex in really bad shape about a mile outside of downtown (but still in 85701). It's about a 0.23-acre lot zoned R-2. I previously looked at the property with a contractor whose advice was to just knock down the structure and start over. There were roof leaks, mold, needs all new appliances, flooring, etc. I didn't purchase at the time and the owner put the property on the market, but no one bought it and he took it off the market. He just reached out to me again to see if I was interested. 

I am very interested in this property for a number of reasons, but I'm not sure how to evaluate it. I don't know how to estimate construction costs if we were to do a complete teardown and start over. I also don't have any connections to contractors. The guy I had worked with before switch jobs. This would be my first investment, so it is a bit daunting to start with such a big project. On the other hand, I think there is some great potential. 

I'd love to hear what you all think. What questions should I be asking? Is there a good way to go about figuring out construction costs? 

I saw the other house, the contractor did not. It's in the same shape. 
We are basing the purchase price off of the value of the land, not the properties. So, in that respect, it is a lot like buying a lot and doing a new build. 

I'm running numbers on what could be my first deal. The property would be a private sale using the BRRR strategy. I'm in talks with the owner of the property next door to mine.

The property has two structures on it - a 2 bed/1.5 bath (about 600 sq ft), and a 1 bed/1 bath (450 sq ft). Both units are in terrible shape and not up to code. There are roof leaks, mold, exposed electric, etc.  I had a contractor do a walkthrough with me of the 450 sq ft unit. His opinion was it would be best to nock it down and rebuilt using the existing slab. He gave me an estimate for cost (below). 

We think if we completely gutted each unit and then expanded to make them both 2 bed/2bath, we could generate gross rent of $2,000/month. The lot is plenty large enough to have two 600-800 sqft units on it. It could even have a third, but current zoning doesn't allow more than two units. 

So, the numbers are as follows:

ARV: $250,000

Rent: $2,000

Repair costs: $130,000

While we haven't agreed to a purchase price, we estimated $115,000. 
Cash to close and repair: $158,000

With these numbers, I get an 8% cash on cash return. 
There is also the added benefit of owning the lot next door and controlling what happens with it. (Original owners wanted to build an apartment complex - we really don't want that to happen). 

The problem - we don't have $160k and the refinance amount wouldn't be enough to pay off first loan and loan need to pay construction costs. So, I'm not sure how to make this work. 

We do want to find a way to make these property work. So, I'm hoping the community can help me think of creative ways. Maybe a way to generate additional income? Maybe creative financing? Maybe I'm just missing something completely. 

All suggestions would be helpful. I'd love to get my first deal done, but I don't want to make poor choices doing it. 

Thanks, @Nicholas Aiola. That is great information! 

I'm in the process of finding a good accountant in my area, but I was hoping the community could help me with a question while I search. 

I bought a property as my primary residence. I'm exploring building a guest house/duplex on an empty part of our lot to rent. I have to have a survey done first and have initial plans drawn up by an architect. 

Can I deduct these even though I do not yet have any property I am renting and I may never end up building? We needed the survey to comply with zoning regulations and the contracts I talked to need initial plans before they will give me a quote. So, these are all needed to decide if it will even be feasible to build a guest house/duplex to rent. 

Try Spectra Kitchen and Bath. Their owner is a former realtor and they do quality work. 

May not be the cheapest around, but they will do it right. 

I am interested as well. 
I used RAL Construction, run by Richard Leon. Really liked Richard and his crew. The only problem is that because they are good, they are overworked. 

I am looking for a general contractor to give me a quote for a new build. 

As a lawyer, my mind immediately goes to liability. In my state, a landlord is not liable for dog bites - UNLESS the landlord has reason to know the dog is dangerous. You now have reason to know and could make you liable for any future bites. So, be very careful here. 

From the liability standpoint, give notice to remove the dog. Also tell the tenant she must keep the dog inside or on a leash at all times. Maybe inform her of local laws that could make her both civilly and criminally liable if her dog gets out or if her dog bites someone. 

I would be careful about reporting to animal control. It could result in the dog being put down and that could result in some problems for you as well. It could also result in criminal charges, depending on your local laws. While that might be useful if you want to evict the tenant, it could also result in damage to your property. 

I have been listening to the podcast for months and just recently bought a new house for myself. My house sits on .2 acres (fairly large for the area), and the back half of the lot is empty. I am considering starting my real estate investing journey by building a duplex on the empty lot. I'm hoping the community can share with me some advice, guidance, tips, etc. Any information is useful. 

I'm meeting with a local investor soon to get some help, but I'm hoping to go that meeting armed with knowledge to answer his questions. 

Here is the situation:

My house sits on the border of one of the most expensive parts of the town and one of the worst. I'm two to three blocks south of homes with that are selling for $270-$300/sqft. I'm one block north of homes that are selling for under $100/sqft. This is the downtown area, which has been rapidly expanding for the last 3-4 years. There is a major street just to south of my house that is really a divider line between the two areas. We are betting that downtown prices will expand to that major street.
My home was purchased this year at $118/sqft for $240,000. I put 5% down, so I have virtually no equity in the home right now.

Contractors have quoted me about $100,000 to build a duplex. I do not yet have official quotes, just informally talked to get a rough idea. 

We feel confident we could rent each unit out for $600-$700/month. We also think we could AirBnB the units and average $750-$800/month over the course of the year. I've based these numbers on looking at what other properties are going to within the surrounding mile of our property. This gives us a conservative annual revenue of $14,400 -$19,000. Other nearby properties are renting for far more, I'm just trying to stay on the low end to keep the estimates conservative.

My thought is get a loan for the new build, putting 20% down. 

I'm not sure what the property value will be after we add the duplex. We feel confident that within 5 years the property value will drastically increase, but I don't know what will happen in the next 1-2 years.

My lot is already zoned to have a duplex and there are other lots in the area with duplexes on the back, so I don't think we will see any trouble from a zoning or permitting standpoint.


At this point, I'm wondering what should I be looking at to determine if I should move forward? What other information do I need? What questions should I be asking?

I am currently a self-employed lawyer and I want to get into buy and hold investing. I like the idea of the BRRR strategy. However, I've been told repeatedly that I do not qualify for a traditional 15 or 30-year mortgage due to my debt-to-income ratio. My current mortgage puts me fairly close to the 40% ratio that seems to be the cutoff for getting a traditional loan.

I've been told that bank lenders will not add in rental income to your overall income until you have 2 years worth of it. So, I'd have to have a renter in the house for two years before the rent income for the house would be taken into account.

So, I'm a little worried about moving forward on purchasing a house with the plan of rehabbing and refinancing, if I can't get that refinance loan at the end.

Anyone experience this? Anyone have any suggestions on how I can try to minimize my risk of not being able to refinance? I haven't yet found a property where I can make the numbers work with the high interest on private money.

My other issue is that I'm currently selling my home with plans to buy another one (need more space for my family). I think I want to wait to start investing until I purchase my own home so I don't end up in a position where I can't qualify for a mortgage for my own house.
I will be looking to buy a property where I can house hack, I'm just hoping to also pick up a rental property this year.