All Forum Posts by: Drew B.

Ok fair enough - Forget the counterfactual.  What would think of the deal on its own?

Hi all - 

I'm struggling with what the best type of analysis to use to come up with to compare investment options and wondering if anyone could help me focus on the right metrics.

I am trying to make a decision on build on an existing piece of land that I have or to buy a completely different deal.

Details:

- Currently own/operate a triplex that cash flows very well.

-Have enough room in the back of the lot to add a new duplex (zoned appropriately, etc).

-New construction costs of $200/sf @ 1,500 SF total, (750 per door) = $300k.  Leaving aside the equity built into the property which would likely be net $200k added to parcel.

- Assume - second position HELOAN on primary for full $300k (lots of equity) for 15 years at 9% = $3,050 payment per month.

-Create $3,400/month in cash flow from two new units. Net $4,200 annually.  Set aside vacancies, etc.  Essentially break even annual.

- What's the best way to think of this deal as it would be no cash out of pocket but also essentially break even?

-My idea would be to use the triplex cash flow to pay down the HELOAN in about 4 years.  Pros - quickly pay off high interest loan and begin to cashflow $40k per year after year 4 with no inputs from my W2 job.  Cons - directing tri plex cash flow away from other investments for 4 years but also not impacting my W2 lifestyle.  Basically the who parcel is paying for itself to grow.

How would you analyze or make sense of a make vs buy for this type of opportunity?  Vs say, buying another small multi with the triplex cash flow?

Thank you,

Hi all -

I have a triplex that I purchased in 2017 near downtown Phoenix, AZ. It is located in a very popular historic district where SFR has shot up 30-40% in the last few years. Rents are also increasing in the Phoenix Metro area due to dramatic population growth. After some sweat equity, my units are performing very well compared to the relatively cheap 2017 note I hold. However, I can't get out of my head what could be if I built more units on the land. The land had the highest density zoning allowed in the City, so it in theory can hold more units that can realistically fit (after parking spaces), but If I scraped the whole site I think 8-10 infill units could fit comfortably.

Obviously, construction prices have risen dramatically this past year, but so have rents in the City..  Multifamily investors are purchasing units for $225K-$275k per door based on recent comps.  It's getting to the point where the potential cost to build is less than what small multi-family is going for these days.

I am looking for any feedback or advice people may have who are local to Phoenix.  Any help would be much appreciated.

Thank you.