All Forum Posts by: Christie Gahan

You are asking good questions.

The lender is not going to just send you a check for the construction costs.  Banks will require that you hire a licensed contractor.  The contract will specify when the money gets paid out.  It is not paid out on a calendar deadline but on when certain goal posts on the building are met.  There may be regional differences.  Something like: when the foundation is finished, the framing, electric and plumbing are in, roofing and siding, etc   They will usually hold back 20% or so until the house actually has cleared all permits including the final permit of occupancy.  

Generally, hard money is expensive you want to borrow as little as possible and pay it back as soon as possible. You have to switch to long term loan and pay off the HML. It is possible to set up the final end financing before you start building. Folks who did not do this and saw rates double are hating life. It is possible, to do something like a cash out refi at this point if your numbers work. For example: Your hard money loan could be 15% - 20%. Your long term rate could be 7% or 8%. Hard money term is 12 to 18 mos and long term is 30 years. So you would have to pay the HML in 18 mos. To do anything like a refi you would pay all of their fees again and start a new loan at 15% - 20%. The math isn't gonna work. You would do that with the new loan at the much lower rate.

Hope that helps.  A lot to explain.

Any gotchas or red flags I need to consider?

At least 100!   

Varies on the laws of the state you are doing business in, demand, and local zoning laws.

1. Financing: Not very many ways to borrow money to buy a lot.  The lot doesn't generate cash flow so it does not throw off any money to make a payment with.  If you pay cash, that money could be stuck there for years until you sale but you will have some costs of property tax, brush clearing and insurance.

2. Best way to know what builders want is to get on the phone with some and see what they are looking for.

3. Is this lot in an older neighborhood that is getting popular again?  Or in the path of progress?

4. Go to the website for the city that the lot is in.  Learn how to read the zoning maps.  Can you build a house there?  What is the min lot size?  

5. Learn the geology of the area.  Is there a creek?  Is the soil to sandy or swampy to build on?  The zoning maps may show that you can build but the geology would make it to expensive for someone to actually build with out losing money.  Ex: a sloped lot could require a basement where a flat lot would not.  

6. Look at aerial maps.  This can show some creeks etc.  Depending on the area, there can be restrictions on cutting down trees.  If there is a 100 year old oak on site, maybe it isn't buildable any more.  

7.  Infrastructure.  Where are the local public water lines?  Power lines?  The cost of bringing a waterline to a property can be crazy.  Does this site need a well?  How much is that?  Is there any water to be found?  A lot in town with a paved road that has water/power hook ups in the street may be $100k more then a lot out side of the city limits but that doesn't make it a good deal.   You have to know the cost of getting water and septic installed before you know if it is a good deal.  

8. House on a large lot.  Another version of this is to buy a house on a really large lot and split the lot to create a house on a smaller lot and a seperate lot that somebody could build a second house on.   In some parts of the U.S.  that would be a 60 day project and in some parts that would take over a year.  In some areas, the city would require professional reports on geology, water run off, traffic and street improvements.  Just the geology report can run you $20k.   

9.  Yes, you can make money but it is easy to lose money.  Plan on a year of study and learning before you spend any money.

Hey, Steven!  Congrats on all of your hard work so far.  As this is your first deal, I wanted to share a few things.

1. It is OK to back out of a deal.  Nothing to feel awkward about.  

2. Do not fall in love with a deal, there will be another one.

3. Always have more then one source looking for financing. It's good to be able to call someone else and say, "Can you beat this?".

4. When you are looking to buy, there are a lot of people around you that get a pay doy.  The mortgage broker gets paid when you buy.  The realtor gets paid when you buy.  The title company gets paid when you buy.  A contractor or property manager may get work / a pay day when you buy.  You need to stop and remember that all of these people that you are talking to are getting a pay day regardless if you make any money.  ( Hopefully you are with high integrity people, but there is always a bias because they get a pay day if you buy.)  Steven, there is no guaranteed pay day for you.  

I don't know enough details on your loan situation to say if it is good or bad.  It is really weird.  I don't get the part about the underwriter saying it looked like predatory lending.  I hope your mortgage broker is a person of outstanding character but the fact is, he or she would be getting a double pay day in this scenario.

Any updates?  Things still going smoothly?

YES !!!  Thank you Robert!  

New parks would have infrastructure issues in many areas.  

Hi guys:  What is the classic / bible of mobile home investing?  I read a book like 15 years ago, and it was more then 15 years old then.  It went all in on the crazy math of owner finance on used mobiles.  I think it was the first time I heard the phrase, "mailbox money".   If this rings a bell with anybody I would love to know the title.  If you have no idea what I'm talking about, what is a good book?

I pay more then double that and it is worth every dime.  My accountants office does my tax returns and we meet at least once a year to get his feedback on investments I am looking at.  

Being tax efficient is very important.  Good tax stratedy is really important.

 It's a nuisance law suit.  They just keep at it till the insurance gives up and pays them to go away.  I think we're having a Breaking Bad moment.  What was that quote, " You need a criminal lawyer.  No you need a CRIMINAL lawyer.  "

 Was the inflation really  a suprise?  Every time a new round of Stimulus Checks went out, the media was full of warnings about inflation.