All Forum Posts by: Henry LiChi

I am no sure about the LA area but we do a lot of development in Silicon Valley which typically involve union prices. Never done anything as small as a 2 level 10 unit project but have done from 40 units to 1600 unit projects. All my projects have been either podium or wrap projects so I wouldn’t know what it would cost structures without a concrete garage. Prices vary from Type V construction for 275 to 350, Type III for 300 to 375, and Type I for 350 and up. Each project varies depending on the complexity and site conditions. Entitlement process in California is getting tougher for large complexes so expect higher soft cost fees. Once again this is in the Bay Area, LA may be a bit less but I don’t imagine much less.

Like the few locals have mentioned it depends on the area.  I have several properties spread through Ohio and it ranges.  Shaker Heights and Lakewood are the highest in the state but if you drive to those neighborhoods, you'll quickly understand why.  There's a reason why those areas are highly desirable to live in and are high quality.  Yes, it gouges property owner of their returns but this should all be fixed into your proforma from the start.  

@Brittany D.

If you're talking about under 450k just for the down payment, that opens up more opportunity.  There are several duplexes more inland (Pittsburg and Antioch area) or up north in Vallejo that may be feasible.

@Andrea Minnillo

I'm not sure if I am getting you right.  If the landlord isn't paying the water bill, why care if the bill is high?  The tenant is responsible for it.  

Versus, if you are responsible for the water bill, I would do everything to minimize that cost.  Low-flow fixtures are the answer to water usage and sewer bills.  

@Lane Kawaoka

Company has a few equity positions (mainly retail) but nothing I solely own... yet.  I am looking for personal acquisition and will be more aggressive at obtaining a few when 2018 hits.  Anything from multifamily 5+ units, flips, and new construction developments.

@Nhi Nguyen

Thank you for the taking time from your day to show us your process and how to think outside the box.  Learned a tremendous amount and look forward to taking you up on your offer of seeing the progress of how you flip properties. 

@Donceletta Bellamy

Anything less than 5 units is not considered commercial unless you are talking about an actual commercial property and not for residential use.  There is plenty of information through the forums on here along with Podcast that discuss apartment complex purchases.  First thing first is to have your finances in order.  Definitely understand exactly how much funds you have to put down (account for 25% for commercial properties) and use that as a determination for how much you can afford.  Get familiar with crunching numbers over and over again to know what makes a good deal.  

@Jackson Long

What meters are you submetering?  Water? Electric?  Gas?  There are gauges that you can attach to the meter that feeds into individual units that read how much water usage is being used for each unit.  This would be the fairest way and cheaper than having the utility company come sub-meter it.  Downside is that you will still be responsible for the initial payments and depend on your tenants to pay you their share.  Alternatively, build the utility payments at a flat rate into their rent.  Figure out how much the total utilities cost you monthly/annual and build it into their rent.  Tenants would rather pay the same every month than to worry about additional bills each month.

Then think about low-flow fixtures.  If you have older faucets, toilets, and shower heads, you may want to think about upgrading to low-flow fixtures.  It would dramatically help.

@Pat Peri It's up to you.  I would definitely present more than one way of paying for to your tenants.  Some tenants are not as tech savvy as others to use apps or online deposits.  My PM accepts online collection and checks.  Not sure what you mean by directly drafting from an account, but I am assuming you mean the tenant does a reoccurring ACH transfer.  Some of my colleagues are even starting to accept via Venmo.  I honestly won't go that route, but to each their own.  I absolutely would never accept cash though.  Had many issues with this previously.

My view:

Your offer of 140k versus a 155k LP.  

Call it 155k to see if numbers even work on the higher end.

50k rehab cost, add 10% reserve minimal= 55k

You're now in at 210k

List it at 245k and say it sells for that

= 35k Gross Profit

- 6% commission ($14,700)

- ±2% closing cost ($4,900)

= ±$15,400 Net

15,400/210,000 = 7.3% return.

I know I am missing several operations and fee items, but that's unique to each individual.

This can be viewed as a terrible return by some people, but if you do 4-5 of these a year, it starts to replace your income.  On a 50k rehab, I have never ran into it holding a house longer than 2-3 months.  I understand you want to be conservative and say 6 months, but as long as your stay on top of your contractor and he completes work to an agreed deadline (which I hope isn't spread across half a year, any GC that will be spending half a year on a 50k job, is more than likely running a dozen+ other jobs meaning less attention on yours).  Most GCs want to get in and get out quick.  More time = more money and doesn't always mean better quality.  There's a balance.