All Forum Posts by: Jacob Y.

 Yah, you're right, it is a pretty rare opportunity. I am going back and forth on it honestly. Part of it is how I present it to my parents as well and that would be a much more expensive development project than one house for myself and them. What do you think about the possibility of doing it in stages - splitting it into 8 but building one or two with the possibility of finishing the build out down the road while figuring out how to actually fund the project. The increased cost would be  planning and engineering the project to take 8 which would be a wasted cost if we don't end up going that direction, but it may be worth it to keep the door open for that possibility. Thanks for your help. 

Teton Valley, East Idaho

This doesn't make sense to me - they based their listing on the value of clear land comps...here is a piece of land that has costs associated with it that a clear piece of land does not. I have a buddy who got an amazing deal on a piece of land that was absolutely covered in junk - he got the deal because nobody wanted to deal with the junk and it cost him a substantial amount of money and effort to clear it - he didn't pay what it would have cost if it was a clear lot. If the land is worth 130k based on land comps, and it costs me 20k to remove the junk thats on it (i.e. the house and potentially two decrepit trailers on it), its going to cost me 150k to get to a clean slate - I think its overvalued at that - I really don't understand how its asking the owner to fund my project. Please explain. 

I am in the process of making my first real estate purchase with my parents and its not a simple one - it is a lot in the town I want to live in with a house on it that's a demo. Despite the condition of the house, there are tenants living in it (they have been given 30 day notice), and also there are two trailers on the property in which there are also tenants (they have been given 90 days notice per idaho law for people renting space to park their trailers). We are in a dual agency representation with the real estate agent and she was pretty forthright about how she valued the property - it is basically based on one lot comp in the same town from april, she multiplied that x2 (the lot is a bit over twice the size of the other lot that sold recently) - there have been no sales of land since then and the closest one before that was a full year ago. Lots rarely go up in town and there are even very few houses on the market - it is also one of the original sized .5 acre in city limits lots which are rare now. Additionally, the lot is splittable into 2, 3, OR a "cottage court", which allow up to 8 buildings on the property (this is all confirmed with the city and I consulted with a friend of mine who is an engineer and has drawn up several of these cottage courts and says its feasible). 

The intention for the property is a primary residence for myself and my parents first - so we will at least be splitting the lot in 2  (which will allow a house and guest house on each lot), but also carefully considering splitting into 3 or the cottage court possibility. My goal is reduce my living expenses with a rental/airbnb eventually (after house is built for my parents) and several rentals would be pretty great also I think. I was a carpenter for several years and enjoy getting my hands dirty - the plan is to be the owner/builder, sub out a fair amount of the construction, but add value by doing a fair amount of the planning and some of the building myself. I have a friend who is an engineer who will do the work affordably and another friend who is an architect who says he will help also. I also have a few friends with building skills and unemployed and up to help. 

Here are some of the questions I have: I am concerned about the house and how to value it in the negotiations - in our offer we cut the value put on the house (10k) completely off and we are now under contract. What i'm wondering is if it makes sense to try to negotiate the cost of DEMO against the value of the property - my plan is to sink a few thousand bucks and a few weeks of work into the house and live in it while working on the site plan and building out the second house for my parents. My living standards aren't that high and i'm fine living in a POS for a while to get this off the ground. I am concerned about the cost of DEMO and whether I will even be granted a permit to do that myself as the house is from 1940 and more than likely has lead in it. The trailers and tenants have also been a bit of an issue - the seller has now put 8k in escrow that says they are responsible for the removal of the trailers by the end of the 90 days (60 days of which we will be the owners as we close early next month) or we get the money. The trailer tenants are really not paying much, so to us it's not really a benefit to have them as we'd like to take control of all the land sooner rather than later. 

Thoughts? Questions? Hopefully that wasn't too convoluted, I never go the easy way :)

Hey,
Thanks for your response guys, definitely some things to consider. Ben Skove - interesting point about universities facing competition. In Santa Cruz, however, the university has been planning and fighting to expand for the past several years. Curious to see what that does to housing around here.

Hey Everybody,
I was curious to hear people's thoughts on the following: I live in a town with a strong college influence - Santa Cruz, California. About 17k students here, 60k or so residents in Santa Cruz City. This creates an interesting sub-market of rentals, and there are a few distinct problems that I see, and was curious to hear what people have to say about this, anything to add, etc.

Since the University houses 750-1500 students on campus, many of the rest rent houses. A SFR market emerges that looks like this: crappy houses that can command a high rental price by packing students in, often in illegal structures, basements, converted garages, trailers, vans, tents, whatever. Now, not all of the landlords are slumlords, but many certainly are. Some houses are quite nice, but many are decrepit, and command the same or more than a much nicer SFR next door rents for. Now, obviously I can see that students are problematic renters, but I have heard some amazing landlord stories and seen some incredible living situations. Basically, there are a lot of people being taken advantage of, spurred on by market conditions.

Another aspect to it is that students are dispersed through-out all neighborhoods, and are often hated by neighbors (understandably of course, but it is a situation created by the university presence). Santa Cruz has a unique noise ordinance in that police do not have to provide a warning before writing a hefty fine for a noise complaint. Those houses can then be red tagged, and future (unaware) renters can be fined at the second level without any notice. This is a fascinating dynamic and creates an unpleasant tension between students and residents in many neighborhoods.

I see big problems with these things on many levels. Not only this, but the University of planning expansion. Comments? Possible solutions? Anybody else living in University towns? Very curious to hear your thoughts. Thanks!
Jacob

Thanks guys, lots to think about. All this stuff is really sinking in slowly, and I am still trying to wrap my head around how people even make money (especially people who may not have a lot to start) doing this - all of the strategies seem like quite a bit of work (which is fine, just weighing the potential returns in comparison to other possible ventures). I'm not in a rush, and Randy F., in just the week or so that I started using the site, i'm seriously grateful and impressed. Thanks for your response.

I have been spending time reading and understanding different strategies and just getting some sort of grasp on real estate generally before proceeding. J Scott, I don't want to be a contractor, and I would like to eventually get out of carpentry as well, actually sooner would be better. I do enjoy some aspects of carpentry and building (I like working with people, and I work with a great company), but its tough work for low pay. I would like to eventually have a passive income stream and not have to rely on having a w-2 job for expenses. I am considering a real estate investment business as a possibility, and it seems like something achievable to me. I definitely see what you're saying about building a business as an investor if thats what I want to do. I just realized that I listened to the BP podcast with you as a guest and was very impressed with it. Thanks for your help.

J Scott Thanks J,

Thanks for that, it makes much more sense that way. I guess the question was really in regards to putting a price on time. Since I have no investments currently and work a 20/hr job, it would seem that my time isn't really worth that much, hence I was thinking that work that I could perform just as well as someone who would cost 3 times as much (plumbing, electrical for example) would be a cost saver in the beginning. I guess the falseness of this thinking is that I don't increase the value of my time by doing the work myself, I actually keep it the same, and decrease costs on a deal that wouldn't make sense without my low hourly wage. Therefore, it would be a better use of my time and money to instead search for deals where I would make a decent profit while contracting any rehab out (and preferably having very little or none). Am I understanding that correctly? Thanks!

David Niles
Thanks David! Yes I do know what you mean, I have been trying to figure out how to include that in my calculations. So if i'm flipping a property for example, I should estimate my personal time involved, and the amount that I want to walk away with per hour to make it worth it to me, then try to find deals that satisfy that limit? Is that a good approach? How do you approach this in terms of your time involved? Is there a minimum take home you want for your time, and if you wouldn't mind sharing, how much do you look for? Thanks!
Jacob

Marco Santarelli
Thanks Marco, yes it is all very helpful, as many answers are, by raising many more questions for me lol! Why don't you recommend that investors try to manage or repair properties? For a carpenter, for example, couldn't this be a big cost saver in the early stages? Obviously if the plan is to scale, or build a company, the investor eventually won't have time to do that anyways.

Lets say that my strategy is to get the highest return on my dollar, build a portfolio, and transition to real estate investing full time. My first steps would be to start looking at other markets, doing the math and making contacts with property managers in those markets? Thanks again,
Jacob