All Forum Posts by: David Jacques

Among many, particularly if you're using debt for your project, you'll want a phase 1 environmental report, a geotechnical report to ensure the soils are stable, possibly wetlands report and endangered species if you really want to get into it, an ALTA survey and an extensive title search. Permit, water/sewer tap and impact fees will run you about $29,000.

PG County is fun to get architecture approved through the MNCPPC. If you can find something to tear down and build the same footprint, you'll save some sanity on your first new home deal.

This plan would sell very well in Maryland if you are looking to expand operations.

You're referring to the seller holding a deferred purchase money note. We do this very frequently in home building. The flaw is it assumes the seller owns the property outright or your initial payment covers their outstanding debt.

These "rules" are BS. Learn how to use excel and do a proper proforma. =XNPV is your friend.

Not meant as a dig at the OP. Just tired of reading about these rules and people blindly following them.

You would need to see if the zoning allows for this use or petition to rezone it. It's impossible to give you a cost estimate without at least a general description of what you want to do.

doesn't seem worth the time to own these properties

Originally posted by @Terry Hegarty:

NOI/ Yearly Mortgage Debt: 1.72

Two things I've never heard of NOI/ Yearly Mortgage Debt. Also she said she did not plug in a cap rate or GRM because on 2 units these numbers are not the best to use for comparing 2 unit properties one to another, as they can very so widely from property to property. I thought cap rate and GRM were important to evaluating 2-4 unit properties. Any thoughts would be appreciated.

This is what the lender will use as a quick gut check. It's otherwise referred to as a debt service coverage ratio. A ratio of 1 would entail that your NOI equals your mortgage payment (bad). A ratio of 2 would entail that your NOI is twice that of your mortgage payment (good). I would imagine that a lender would want to see a DSCR of at least 2 but I've never needed to show that metric before.

Cap rates are basically useless in residential real estate other than a quick NOI check if it's not listed. There is no way to quantify the credit rating of the mass of tenants because there is no consistency. A cap rate is useful in rating a deal with a credit tenant (like Starbucks, Walgreens, etc) where there is a reasonable expectation that they won't shut down and break your lease.

I did two in Baltimore. The first we bought for 87k and invested 50k into it and sold for $195k. The second was bought for 48k and invested 20k and sold for $127k

27.5 is the number of years you can depreciate the property, per the IRS>

I put this together tonight to help shed some light on home construction proformas. This is setup as an all cash transaction but if there is interest, I can retool it for bank debt and/or joint venture. I kept it pretty simple and straightforward. Anything in yellow can be changed, everything else is locked.

This assumes purchasing raw lots, performing some entitlement work, developing the ground and then building homes. There are a number of ways to build these in excel- I prefer my method using dates so I can visually see when cash flows are going out and coming in. I haven't given it a thorough shakedown but everything should be automated if you increase or decrease lots.

https://drive.google.com/file/d/0BxA2MyzJgUt5a0R5R2RmbmItR0U/edit?usp=sharing