All Forum Posts by: Dan Yellowsky

Bablu, I am also building a 2000 sqft home now in santa clara and permits and fees and engineering services will be $25k+ so $300k for a 2000 sqft house in the south bay is unrealistic UNLESS you work full time on the project and have a lot of the skills needed to get the job done.  If you want to hire someone else to do all the work and give you a house turnkey then plan on spending $500k for a basic 2000sqft home - and $700k if you want a lot of custom features.  Prices for building have gone up a lot in the last 4 years - there is a sustained building boom in the area and that has driven up prices for labor - somewhat for materials - but labor costs have doubled since the recession. 

Where exactly is the lot? What city and area.  if it is on a hillside you can add $150k to the above numbers...Is there already a house on the lot?  if it is a bare lot with water and electric and gas at the street then add another $100k for the one time hook up fees.

For my fix and flips in Santa Clara Sunnyvale San Jose I have used hard money lenders to fund some of the purchase price - typically in the $700 to $900k range. I am a builder - and i have found the homes that are "tear downs" in good and better areas have resulted in good profits (excluding profit from buy and hold appreciation - which I discount. it is nice to have but i do not consider appreciation when i evaluate a property) after building a "new" 1700 to 2400sqft SFH.

So Vic and others if you find deals on homes that need structural work or are tear downs..Let me know.  It would be great to work with a wholesaler.  I have been doing 1 per year and am ramping up to 4 houses a year with average sale price of $1.4m.  I will consider homes/duplex/triplex that are good rentals but mainly i am looking for homes to flip so they need to be in good areas, nice street, good schools, not next to highway or airport, etc. 

If you like silicon valley - buy a duplex or triplex here -  Santa Clara, nicer areas of San Jose, campbell, cambrian.  you can buy in an OK neighborhood the best you can afford.  Combining your income with the income from rent you can afford quite a lot with the low interest rates.  Yes, it is crazy expensive now but there are deals on fixer uppers and the prices around here have been "crazy" since 1996 when i bought my first house - they are "crazier" now but go up an average of 10% a year for the last 20 years with minimal dips in the recessions.  Rents are "crazy" too so take advantage of that, make some money from rental income, and the relative cheapness of fixers.  If you do not like silicon valley for a place to live there are lots of options in california and elsewhere. 

Where I focus - SFH in West San Jose, Sunnyvale, Santa Clara and nearby the market is down 10%+ from the peak in summer of 2016. In looking at history in the area for the drop in real estate during recessions in the 90's, 2000 and 2009 the drop ranged from 10 to 30% and had a slow decline (!!) of 10% per year. So i am continuing to buy, expand and sell for properties where i make a profit even if ARV drops 10% while i am holding the property. My strategy is make a little if market drops 10%, make a nice profit if market is flat and be very happy if market goes up 10% while i am holding property.

Same experience i am having.  "just one more thing"  My favorite is asking about deposits to my checking account that were reimbursements from work!  Lesson learned..i now have a "simple" checking account and one that is a little more "complex".  Fremont bank has been pretty good..at least they have been asking questions within a day or 2 of getting information versus the others i have had to deal with. 

I thing @Taye N. is right on.  i did 1000sqft house with new stucco for $5k.  I had several people at that price so it wasnt a lowballer, etc.  You can put new stucco over old - chip out the bad areas and re stucco everything and your cost will be $2k instead of $5k. 

as far as motivating contractors -  i like the carrot and stick approach.  Carrot - be nice, understanding, flexible and offer to give them 5 or 10% extra if they finish ON THE date they agreed to at the beginning of the project..  on the flip slide keep after them..if they say they will do something on a specific day demand that they get it done.  Also do not pay the last, per contract, 10% or whatever until everything is done.  and be quick to put them on warning that you will get someone else to finish the work if the project slips.  and most important do not pay for more than the work they have completed..so no deposit, progress payments that are reasonable and the last 10% or so after everything is done. 

Thanks..i appreciate the input. 

about 2 years ago i got 1000 sqft of red oak hardwood for free that matched perfectly with the existing hardwood in a house i was adding on to.  The wood had a few nails so i could not plane it to get consistent thickness so i put it down and then sanded it to get it all level again.  big mistake - waste of time. It took so long to sand it (with big commercial sanders, etc) that it was a money loser.  As much as i hate throwing away materials - for my next project i will buy the prefinished hardwood floor material and install that..it will be cheaper and certainly faster when all is done. 

Good morning.  after a successful flip with a partner I am preparing to go solo on this next one.  (my partner on the last one took his profit and bought a house on Lake Tahoe and is investing up there now)

The plan is to buy a single family home in San Jose California for $750k. It is tiny - 900 sqft - then add 1000 square feet and sell it for $1.3m or so in about 9 months. Last year i did a similar project - a 1000 square foot house for $800k - added 1000sqft and sold for $1.6m. It sold 2 weeks after being listed.    I can do much of the construction and design work myself, and i plan on working 50 hours+ a week to get it done quick and right!

 So here is my plan

1. purchase price is $750k - purchase will be tenants in common between my 401k trust and my new LLC. the 401k trust will put in $200k cash, a hard money lender will loan $550k to the LLC and have a first mortgage on the property for 9% interest and 2 points.

2. i will lend the LLC $275k to finance construction pay interest on hard money loan, permits etc.. I will get permits, etc for all the work. The construction dollars will be paid to a contractor. All the work will be done by licensed contractors and their employees/workers. I know the contractors VERY well and will be their project manager for this project.

3. if all goes well in 9 months I will list the house with a real estate agent and sell it for $1.3m (maybe less maybe more - it just depends on the market)

Proceeds will be as follows;

$550k principal back to lender

$50k sales commission and closing costs etc.

$300k to me for my loan to the llc ($25k profit)

$350k goes back to my 401k - investment plus profit  ($150k profit)

$50k goes to my LLC as short term capital gains ($50k profit)

Any comments would be appreciated. My first two priorities are a simple business structure with reasonable liability protection.  I am less worried about wringing every penny of profit out of this deal...i am happy to have less risk and give up some profit.  

Thanks

Sod will be less than $1 per square foot - without labor to install.  Plus you need to water it daily for weeks.  Bark or gravel will both be less expensive - bark being the least.  Hardscape - if you are talking concrete it will be $10+ per square foot labor included - colored, textured, pavers all will add to this price and easy of getting materials in and out.  price could be $25 or more per square foot.   I think some deck/patio and bark / gravel and maybe a little grass is the way to go in drought stricken california.  Homewyse.com and remodelormove.com have good online cost calculators for projects like this and even have calculators for home additions..the internet is great (sometimes!)