All Forum Posts by: David Sisson

Let's imagine:

100K for the lot

4 units at 1000 sf each, 2 beds, 2 baths each. These would be small units. 4000 SF total. 

I don't know what your cost of construction is, but up here we are looking at roughly $175/sf. That means $700K of construction cost. I'd say NO in your case, unless you can magically cut the cost in half. Even more challenging if you want to have larger / more lux units. This is the reason that so many of our clients - even in hot markets like Boston - are renovating existing buildings rather than building new. 

I can't tell you exactly how it'd work out for you. However, a lot of our clients WANT to turn their SFH's into SFH + MIL suite homes - exactly so they can have the MIL at home. I think there's a market for these properties. Honestly, there's also a market for folks who want to live in a SFH and rent out a small apartment too.

If you are in Houston, you know that there's TONS of SFH's with garage apartments, these are super common, and make a lot of sense down there. Good for buy and hold too.

Say you have a string of 4' strip fixtures going down a hallway, spaced every 10 feet. You can have 2/3's of these fixtures turn off if no one is there, and the other 1/3 dim to 10 percent of use. If they are 40 watt fixtures, that means the dimmed ones are only using 4 watts when in standby mode. Then, they'll all brighten up / turn on, when someone comes by, then dim down/turn off after 10 min, 30 min, whatever you choose. 

You are going to want to get led fixtures that can dim. These days, you can get a 35-40 watt fixture that puts out as much light as a T8, but the T8 will be 100 plus watts. The LED will be able to dim to 10%, or even turn off, when no one is there. The fixture might cost $30-$50, the sensor about the same, and you can gang a bunch of LEDs to a single sensor. The install cost is the same or less than re-using your old fixtures. Even if the utility doesn't pay you back, you'll save the cost pretty quick. I bought LEDs from https://www.lightup.com/  But their sensors are crap, they don't mount to US junction boxes, so look elsewhere for sensors. Some LED strip lights have sensors built in. I had planned on re-using old fixtures too, but the electricians just laughed at me "we haven't installed a new fluorescent in years...". Now I have a basement full of 8 foot T-12s, in case anyone wants a bunch of them. Believe me, once you start paying those utility bills, you'll be glad you did the LED. For self storage, you won't need very many lights. 

A couple of tips - you may have thought of this already...

1) An architect can help you with both the fire wall issue, and the efficiency ratio (IE: how much is actually rentable vs how much goes to corridors, etc) Totally worth it if you can increase your efficiency ratio.

2) Contact your local utility company to see about engineering assistance and/or $ assistance for installing new lighting and/or HVAC. Here in MA/RI, National Grid will give significant assistance with both. I was able to get "almost free" LED lighting retrofitted to an entire floor of one of my buildings. 

3) We do a lot of mill building conversion projects - which are essentially converting old warehouses to small commercial rentals. We will design the whole thing, but the building owners will essentially build out only the corridors and sample units, then complete units as they become rented. This allows the owners to work with tenants as to how many square feet they need. The tenant can take 1, 2, 3, 4, ++ units as they need, and the owner saves on the rehab costs up front. 

I've had a lot of luck drawing my own plans. I use Autodesk REVIT. I also make a lot of money each year drawing plans for people who tried to DIY it the first time. 

Honestly, if you want to DIY your plans, just draw on paper. The learning curve is much less and if you can't draw it on paper, you won't be able to do it on any sort of software either. 

But my recommendation is to hire a local architect who works with small projects and investors. They will know the tricks of working with the city and also what the plan reviewer will be looking for. It 's a cost, but will save you in time and also you won't have to deal with building something incorrectly and having to remove it. 

"If you think architecture is expensive, just try construction". 

Some terms you should become familiar with:

• HUD
• Section 8

Well, there's a lot in there. 

On the personal finance side, you should work to reduce your debt. Car and student loan. Stay away from credit cards, and don't take on any consumer debt. I've had credit cards twice in my life - once for $1000 and once for $300. I regretted it. I haven't had a credit card for over 20 years and it's been bliss.  Loans for properties is good, as long as you are making money, not losing it. 

For the investment property, obviously, if you can get a $230K property for $120K you'd have about 50% equity immediately, so you wouldn't need to worry about having 20% down. In other words, it's a VERY good price and you should go for it. 

However, I'd be worried about:

1) you say it's "half of a building". How does this work? Is it a condo? You need to own something free and clear, either as a stand alone property, or as a condo. If it's a condo, are there condo fees? You'd need to figure this into your equation. 

2) How do you know it's worth $230K? You need more than google. Try checking what the tax assessor thinks it's worth, and also what zillow thinks it's worth. 

3) Will the cash flow from the 2 apartments cover the cost of the loan, taxes, insurance, repairs, and some on top for you? It's OK if you live in one of the units, but you can't lose money if it's rented out. 

4) What's the condition of the apartments/exterior/etc? Does it need repair? This can reduce what it's worth. 

Then, in terms of your Ph.D - be careful, sometimes this does not work out financially. My wife has her Ph.D, and she makes good money, just took years to get there. Many of her cohorts didn't fare so well. Even my wife would say "don't take loans for a Ph.D, they should be paying you". 

Try Bank Newport

OH! a question I can answer!

Honestly - it depends on your local building code AND your local building dept/inspectors.

However, the code in my area has a 50% rule - if you are doing remodeling work that is more than 50% of the floor area, you need to deal with code issues throughout the building. In practice, this is difficult to ascertain - for example, if you gut the kitchen and bath, then do paint, patch, and flooring in the rest of the home, did you do 100% work, or 25%? 

Then, there are a few areas that they can always require you to "bring it up to code". In my area, 3+ families always require hardwired smoke and CO detectors every time the property is sold. 

What we are generally doing:

1) Anything that's new needs to be to code

2) Anything else needs to be "to code" on the outside, but not the inside. IE: no leaky faucet, but the old plumbing can remain behind the wall. 

3) Lots of things get "grandfathered" on older properties regardless. In my case, this is usually the stairs and windows - which often don't meet current codes, but would be very difficult to replace. 

In terms of your electrical and plumbing, I'd want to replace if the walls are opened up and the wiring/pipes are accessible. Your local inspector may require it. Example: some cities in our area allow you to reuse old wiring, others require it to be completely changed. 

Remember - if you aren't planning on changing anything, you don't need to fix it, with a few exceptions (like the smoke detectors). Usually decorating (paint, carpet) is fine, and kitchen/bath the new stuff needs to meet code. If you have a serious safety violation you need to fix it. 

When in doubt, talk to the building dept about what you want to do, and ask lots of questions.