All Forum Posts by: Danny Kay

What exterior materials are you using?

If your interested in driving  around, door knocking, and finding off market properties I can point you to some neighborhoods that I would love land in, so long as you give me first right of refusal. As Andrew  suggested, this takes serious dedication, but can be lucrative.

If you are getting closer to 18% IRR, that is a more appropriate private money number in my mind. 3 houses may be tough depending on local weather and market.

While the fact the a contractor wants a partner isn't necessarily a red flag, 6-7% is too low. For comparison I am a member of an investment group that pays 7-8% flat, and  they are diversified across multiple holdings, loans, and regions; and requires zero input from me.

I am not a flipper. But that margin seems amazing. Nice work 

I have presold during construction in the luxury market. My career in architecture got me used to working with picky clients, its an art in of it self, just be warned that preselling homes tends to lead to lots of change orders and tweaks. Down payment on something under construction would be 30-60k for luxury, cant speak to entry/mid level but i would imagine they would be considerably less. I also get 100% of change orders. Deposits ideally are held as non-refundable builder deposits, not escrow. This allows you to use the capital.

If your goal is to truly presale in the precon stages, from what I have seen locally that seems to take much longer. Finding a client with 10+ months before they want to move can be limiting. Payment structure for this scenario I have seen would be to sell the raw lot to the buyer (at  maybe a 50k premium, on a 300k lot), then have either a flat fee or percentage fee based on cost of construction. Buyers can pull a construction loan in their name, and you can make draws direct with the bank. I haven't done this strategy, but know people who have.

Start talking with lenders now, I am finding its relationship based and nothing like the mortgage industry. Hope this helps in some way.

In your original post you said you could not think of a single reason heat could cause problems with concrete foundations, I am simply saying there are many documented effects of heat on concrete. While I agree concrete is good at resisting heat, and even better if buried and away from the heat source, but it is far from perfect. Lets not forget many areas of the country it is very common for foundations to extend well above grade, especially in SFR, which as you have implied would likely increase its susceptibility to fire damage.

You also mentioned that investigating would be a waste of money. I just can't imagine the plan review accepting your argument on good faith, same goes with an educated buyer (at which point it may be too late to hire a structural engineer for review).

I know this is generic, but may help develop a mindset when negotiating.

I have always found it best that at the end of the day there is only one boss (typically no 50/50), and there is a clear governing document (operating agreement for some entities) that outlines each members roles and responsibilities. It would also outline how to end the partnership amicably, and for non performance.

If i understand your current situation correctly. I would push to have the new investor as simply that, an investor and not a member of the company. I would likely want the investor as silent as possible (maybe you don't). I would think a promissory note, investors agreement, or some other legal document could be structured to meet you needs.

With that said I have seen big investment groups create separate companies for project specific investment. They then sell shares to investors. Everyone shares in the profit or loss, the group I have in mind does a single exit at the end where everyone gets paid. They limit this to qualified investors only, not sure if that is an SEC requirement, or an internal requirement.

Talk with an attorney. 

Hope this small brain dump makes at least a little sense.

The many negative impacts of heat on concrete, and most common building materials, is very well documented.  The heat would be the first of my concerns, I mentioned few basic others.

It can be done, and have seen it first hand. I would start with a call to a structural engineer, some firms have engineers on staff good at the forensic side of engineering. They should be able to investigate and provide a report. This will not be a cheap service.

A good architect can create a completely different feel utilizing the same foundation (or large parts of it). But this is assuming this is not a standard economy home.

For whatever its worth, I doubt the effort will be worth it unless the foundation is a very large and expensive one; especially if the concrete shows any visible problems from the fire, heat, water, and demo equipment. Good luck and check back when you find out more, interested to see how it goes.