All Forum Posts by: Dustin H.

there is no way to do this unfortunately.  

You should make each property an asset account.  Then, enable class tracking and create a class for each expense category.  Then, do a report for the account from the chart of accounts, and group by class, filtered for all dates.  

This will let you know what you have spent so far but you won’t be able to compare against a budget.  To do this, create a budget spreadsheet using the same class names as Quickbooks and manually enter the amount you spent to compare against the budget.  

If you are good at spreadsheets, you should be able to create tab in the sheet that lists all expenses with a “class” column, and then sum all transactions per class in the aggregate tab using formulas with it statements.  

That’s not a bad idea.  Appreciate the thought.  

Hi all.  Wanted some input if anyone has any ideas here.  We flip houses in multiple markets with mid sized volume (67 closings so far this year and around 50 houses in inventory).  We are in the beginning stages of raising outside capital (we are using only our own money + hard money loans for now) and are trying to determine how to cost our fixed overhead costs in terms of LP fund profit.  

We have a decent amount of HQ overhead (operations manager, transaction coordinators, admin assistants, office rent, travel expenses, etc), plus each market/field has another $20k or so of monthly overhead -- sales, project manager, superintendent, admin, office costs, etc.

The three options we have come up with are:

1. each employee keeps time on the amount of time spent on each house and we bill this to each house, like a law firm would work (this is hard and time consuming)

2. we pass through all of the overhead to the fund directly, like the fund is investing in a company.  The con to this is that it is hard to have different deal structures with different LPs

3. we try to come up with some arm's length costs for doing the actual work -- e.g., cost + % for the GC work, acquisition fee, selling commission fee, etc.  These costs would be charged against the house before profit split.

Option #3 is how it is usually done with 'traditional' real estate private equity funds where you can easily arm's length property management fees since there are obvious standard rates when you only own a few assets, etc.

Does anyone have any experience with how to allocate and split these operational costs in a medium sized flip fund ($30-50M of equity)?

Our investor rates are going to be 8% pref, 60/40 split in LP investors' favor.

Probably a case of pricing

I've done CDW house, no big deal.  Depending on the city you're in, but typically it's similar to an asbestos abatement.  If it's not demo'd already, you have to file a demo permit and get someone who has taken an asbestos class be in charge of the demo crew, they were suites.  Then you have to pay for a level 1 landfill (a bit more expensive).  You have to of course demo all of the trim, remove the cabinets (but don't demo them, just unscrew them), backsplash, etc.  No need to replace the wiring.

So the cost should be around $1 per drywall foot for demo (figure $5 per foot for the house), around $5 per heated foot give or take for new drywall install including materials, and then around $1 per heated foot for new trim, plus some odds and ends.  It isn't very expensive if you sub it out yourself but if you hire a GC, they might try to rip you off acting like it's worse than it is.

If it is known that the house has CDW, just video tape some of the demo and the installation, and take lots of pics during demo, after demo to show house down to studs, and new drywall installed.  Take some pictures of the brand names of the drywall going on and save receipts.  You can make good money off CDW houses, but the issue with the buyers is 'where there is smoke, there's fire' so assume you'll still have to take a little hit vs retail, but there is still enough spread to make good money 

Sorry for bumping this thread a long time later, I was just searching online for PM software and ran across this.  I have a question and wanted to know how all of you guys handled it.

For our in-house staff, it is easy to get them to use our PM software.  However, for residential construction, the subs aren't necessarily of the highest quality where they could be expected to use PM systems.  Most don't have email and can barely send text messages.  

Do you just rely on a field superintendent on your staff to be the bridge between corporate office and the subs who don't know how to use a computer or email or whatever?

It would be great to get input from you guys on how this is handled.

@Karen Margrave thanks, I have posted here a few times. I mostly do commercial real estate but was looking into spec building because we've sold a couple of complexes and have some liquidity. There are no good commercial deals available now, pretty much nationwide, caps on quality stuff is sub-5%, no where they can go but higher so stupid to buy long term stuff right now IMO. Since I'm remote, I can't do value add commercial very easily without local partners, and I'm not really a partner type of guy generally.

I was looking at Memphis because that's my home town, I know it really well and have a lot of good contacts who I feel comfortable doing arms length deals with me. I live in Dubai and the market here isn't mature enough to bet on long term and is very costly ($10m's to do any sort of project).

In Memphis, in very solid infill 80 year old neighborhoods, you can buy tear downs for about $300k (0.5 to 1 acre lots) and the sales price on new is $180-$200 once you get in the 6k+ foot range, can go up to $250 or so depending on lot. DOM is around 90-120 right now for something fairly priced, there is very little high end inventory that isn't in the suburbs (which are dying in Memphis).. The X factor of course is your build cost.. I've talked to some people and have done a few rehabs in Memphis just to get an idea of the costs, and I think realistic is circa $100 PF all in hiring a GC for the license and some consulting and subbing everything yourself (plus the lot). This is only 20% margin on a 6k house so I was a bit leery about it.. maybe my build prices are too high, because I don't see why anyone would be doing spec homes with only 20% gross margin, yet a lot are being built, so I must be missing something.

We would be building with our own cash at first so can afford to wait out any down turns. Was just mulling the idea and am glad the community is so willing to give feedback.

this is a bit of a double post but I realized after I posted there is not much activity in the development forum..

Does anyone have any experience with high end spec homes or high end rehabs in infill locations? If so, what are your thoughts and experience on this? Pencilling numbers, it seems that this is a better strategy than smaller houses because the margins are the same but it's simply better to have to build 1 house to make $300k vs building 3 houses to make $100k. Thoughts?

I'm looking to get into rehabs and/or tear downs in very high end infills and was hoping to get feedback from anyone who has done this.

I'm a fairly experienced multi family owner but am looking for something fairly stable, repeatable, and scaleable to juice my returns. I'm in a lucky position to have a lot of cash and after doing some research, I thought this might be good. From what I've gathered, (blanket statement, obviously there are anecdotal exceptions) it isn't really that much more difficult to build an expensive house than a cheap house so if the roi spread is basically the same, why not go big for less aggregate work? With the amount of capital I have to use, it's very hard to make sense on small deals and all of the high quality commercial is trading at 5-6 cap or less, which is ridiculous.

Also, maybe there is less competition at the high end. I started looking around and see there are lots and lots of people chasing low end deals.

Anyway, my questions if anyone has some feedback...

* in my home town, high end half to one acre tear downs in top tier area go for 300k to 500k and new builds go for around 180-200 per foot, super exceptional for maybe 250 pf, usually around 6000-8000 feet... At these numbers is there any money there? Build cost is 100-120. I can do the math and it seems tight, yet lots of tear down specs are happening. Are my quoted build numbers too high? If not, how is this happening?

* anyone know what your average high end rehab would cost per foot.. Including raising ceiling height from 8 to 10, all new kitchen baths floor hardware and maybe extensions? Rehabs in same area go for around 150-180 per foot at about 4000 feet on average..

* any general thoughts on this strategy?

My goal with this would to do maybe 10 houses per year in this price range if i can make the numbers work..

I just sold 10 single family in LV to one individual fund for 4 percent cap on actuals with three year operating history. Surely retail investors aren't stupid enough to buy into a REIT with those sort of numbers. Guessing the fund's valuation modelling assumes rental increase and would have to expect quite a bit of appreciation to justify but I just can't see it.. Too much rental supply for the rent increase and higher interest rates will only lead to expanding yields.. Most of these funds probably have libor margin credit lines though and libor will stay low for at least another couple of years..

But ugh, bottom line is for individuals it's stupid prices and there is no way to compete so better to go somewhere else. .