All Forum Posts by: Douglas Gratz

@Bruce Woodruff well thats because money only takes away one stressor of life, bills, might allow to buy things that make you happy for a week, but its not sustainable....Question, do you know of any comparable sidings to plac clad acm panel that is cheaper in price but looks just as good and just as durable?

@Bruce Woodruff forgive me the refi is 1% more, one point in and out.

@Mike Smith I hear ya, and I hope having my builder as a partner takes away the factor of I dont know what I dont know and he picks up where I need him to. He was not a partner in the beginning, so its a little different now. and yeah, going over the budget is one of my main concerns and reasons aside from not have a loan closed, well lets say the reason I want to wait, and thankfully now have the ability to do. At the budget of $1,144,000 and sale target of 2.2M theres some room there. I have factored in 15% above that budget number, but not 50% . But the take offs were done when prices were at their highest, going over seems to happen, which is another reason we are going to work on getting the budget down.

What do you mean by this exactly "I feel building the home is going to have similar amounts of vast underestimation"?

And @Bruce Woodruff your right about that, you need to know when to quit bc its not always good to keep going, when if that day comes, ill sell the land, depending on the "when" holding costs and all will decide how much profit I make from it. The way I see it, if i quit, worst case I have to sell them what I bought them for and I am out all my soft costs, I can recover from that...I still have offers for over 900k and they havnt waivered, if they havnt waiver now, I think they will be there if the time comes. Theres larger people who can get this done 15% cheaper for whatever reason (volume, stock pile of supplies, etc etc) and the interest on the refi is 2% more. If I wasnt getting a cash out of 125K I wouldnt be doing it, since Im using that money to pay the interest for at most a year and change , though gas prices are back down, china is coming out of lock down, time to wait for the supply chain to recover.

@Caroline Gerardo whats Parkway Central? and I dont have a day job, but ever since I hired a property manager to devote my time to this, I have too much time , so I actually have been applying for jobs, but theres a reason I dont have a day job, I am a felon, just about makes my degree useless :/ but I am humble, I might not be able to get the 60-80k salary job and might have to take a lower level job, Ive never had a job job like that, so I think it will be a fun experience, have co workers, work friends, maybe find a good woman. Everything happens for a reason, who knows i dont get out much, maybe I will meet my future wife at this job I am looking for :)

Dec 6, 2022

I received the closing HUD on the REFI of the land out of the hard money. I cash out 125k which I plan to use on the interest and 30k on a downpayment on a triplex. The whole point of the refi was to get more time to figure out which direction to take it. Right now the plan is to wait, revisit the consruction set, see if we can get the budget down. While doing that, keep an eye on material and home prices. If in 2-3 months we start to see a drop in material prices, and a trend that it will continue, the plan will be to build 6-8 months out. I am also going ot be keeping an eye on interest rates. I hope to see them level out, but if they keep rising fast, then 6 months from now my loan will go from 11-12% to 14, if I see that, we may start the build alot sooner. My proforma factored in 12% so there will be no point to wait and build if material is not going down much. But either way in the mean time, I am going to try to find a cheaper but still luxurious siding since right now thats the largest line item in price 180k. Right now the plan has PAC-CLAD ACM PANEL all over, which I think is overkill, the facade definitely, its beautiful, but I think the architect used way to much. So I hope to find something the will go well with the PAC-CLAD ACM PANEL that will be on the facade. The plan also calls for like 5 wet bars, there are places in the house they dont need to be, also the spot designated for the kids beds has 2 bathrooms, I dont see why its cant be one shared by two doors...Things like that are what me and my builder are going to try and change to get the budget down, raise money to not have to take that large of a loan out, maybe sell 2 rentals since I dont want to give much equity away,,,,These are all pieces of the puzzle I am working to figure out. Keep you guys posted, but in a nutshell plan is Refi, cut budget, wait to see where rates and materials are going, raise capital, and revisit when to build. Having hte luxury of time has taken a huge weight off my shoulders (dont use hard money unless your plan is clear and ready to go or you have a plan to refi out of it)

until next time!

11/18/22

So it seems I have received a blessing in disguise and proof that everything happens for a reason. Had my first construction loan closed, my home would be finished in April, or May of next year and most likely in the middle of bad times. As you can see from this journal, things have been changing constantly due to the difficulty of getting the construction loan, so for being all over the place, one day I am close to closing and the next I am not , one day I am doing this and then I am doing that, for that I apologize, I am just updating and writing as the changes occur

I still feel like I have a leg up being that the demographic I am catering to could afford 25% down for a jumbo loan to keep their rate down like @Caroline Gerardo pointed out; however, I am not putting much stake in that. To me, it seems best to wait out the storm, and if I am lucky enough, and I believe I did hit such luck, I am able to refinance the current land loan out of hard money to avoid an expiration date or paying fees to extend it, which is allowing me to hold and wait.

With the current refi plan in place, closing in 14 days, (current loan 499k) the refi is giving me 625k after LTV so I will end up with around 100k in my pocket which I will use to pay the interest for the next 6 months to a year so I can get a better idea of what the economy is going to look like in the future before I start the build. On top of that, now that I am not getting a construction loan, I am able to refi rentals if I so choose. Not something I would do at these rates since I am locked in at 3.5%, but the option is always there.

The opportunity cost may be worth the 8-10% interest refi on two rentals. I would get 175k that I could use on some no-doc loans and purchase 2-3 more duplexes, in which case the 10% rate wouldn't be so bad, and then refi again when rates go down in a few years. 

I am not completely sure where I am going just yet, but I do feel better. There is one scenario I am planning for that I really like and it goes like this:

1. refi land loan +100k

2. refi two rentals +175k

3. Have my partner contribute +200k

4. see if my father would like to invest to make up that +150 I am short

This leaves me about 150k short of being able to own the land outright which is worth approx $1,000,000. If I can achieve this, I could use that equity to get a large LOC to use for even more rentals....This is just one of many scenarios in my head.

This is why I love real estate! OPTIONS! If you want to be a good investor or good at anything, you need to become an amazing problem solver and use these skills to figure out ways to pivot. So far this has been a wild ride, to say the least. But as of now, I do not think I am going to take up my lender on the construction loan, and wow does it feel like the world is off my shoulders and I have breathing room and peace of mind I have not had in a while.

Either way, so far it has been difficult like @Bruce Woodruff and @Mike Smith  @Jay Hinrichs @Eric James @Jay Pateland anyone else I am leaving out had said it would be and I have not even started the build. I feel I have gotten all the hard leg work out of the way through, getting the construction loan with no experience has been the hardest piece of this puzzle thus far, but whether I take this lender up on his loan now or later, at least I now know that I will be able to get it when the time comes.

It's been hard, but it's also been fun. The amount I have learned so far, you can't put a price on and I am so grateful. I might not be building just yet, but I feel that I have figured out how to do many difficult things/processes of the new construction process. Most importantly I am grateful for BP and all the people that have been following and commenting on this forum post. It's cool to see people rooting for you (me) on, this is a very good community and I am glad I started this journal. I have received a lot of private messages thanking me for it and I hope to keep the journal going and help as many people as I can in their journey by reading this journal and seeing what I have been doing to get where I am. As I continue writing in this journal, I don't hope to make mistakes, but if I do, I can't wait to write about it so the next person can avoid it.

To everyone reading this, I promise I won't leave anything out due to shame or fear, I am going to keep keeping it 100. Thanks for the support everyone.....Until the next update, have a good thanksgiving, and feel free to message me with any questions about anything you feel that I can give some insight on. The biggest thing and most important is to plan for all scenarios so that if you have to pivot, you are ready and not wasting time figuring out because you have already figured it out that if plan A doesn't work, move to plan B, then to C and so on. Preparation especially when taking on something you have not done before is of the utmost importance and has been key in helping me stay ahead and keeping me alive in the game sort of speak. All that said I WILL SUCCEED MARK MY WORDS! it is just a matter of time. I was hoping for sooner rather than later, but there are forces out of all of our control, so you need to just roll with it.

@Joaquin Camarasa where can you get information on mortgage applications?

Hello friends,

What are good metrics to research what future housing market may look like 6 months to a year down the road?

 You are probably right. Had I start building 6 months ago I would be in good position. I just ran some comps and homes in Northern Liberties are still selling above market price in under 30 days, most under 15....A home for 1.4M sold the same day it was listed 10/27/22...I suppose people trying to lock in the 8% rate we are at now... You also might have a good idea, what metrics can I start looking at to try and get a grasp on what things might look like 6 months to a year from now aside from what you have already mentioned?

@Bruce Woodruff Quick question, what are some good metrics to use to attempt to get a good idea what things might look like 6 months from now? I want to do some research, but I am not sure what to use as my basis for my predictions.

@Mike Smith @Bruce Woodruff

If you had a choice to build now or hold, would you both hold for a better time, maybe a year from now?  I think I am able to refi these lots out of the hard money lenders' hands and into a regular mortgage.  If I did this, this is what it would look like

1. Current loan 499k 10%, expires jan 31

2. I am able to refi and actually get 100k out of it , however same % but can use the 100k to pay the interest since when I Do build and sell, it'll just end up making 60k less

3. at the same time  I have to free and clear rentals I want to finance and refi when rates go down

With number three I would gain 174k

4. I close on a flip in two weeks and will make 115k

5. My partner will be putting up his 200k contribution

6. use 11k of my 100k credit line

So here is what I am thinking, refi the land. If I add up all the above numbers that's 600k. I pay off the land loan and own it free and clear. Both lots together with homes on it have been appraised at 2M each, without homes 1.1M...So if I own them free and clear I will have 1.1M in equity to which I could do a lot from getting a LOC to buy rentals to doing nothing. My net worth will rise significantly and when the time is right I build, what do you think about that plan/scenario ? If I can achieve this, would you say its better to hold then to sell the lots?

So build or hold? I ran comps today, homes in Northern Liberties where my lots are, are only on the market 15 days or less, one sold for 1.4M the day it was listed. This area has no land left or supply of empty homes, I believe this dynamic helps in stay insulated to a point from the overall market. The obvious answer seems to be "hold" to much uncertainty now, but at the same time, a year from now, we could be out of the woods or things since they arent that bad yet, could get bad then....