All Forum Posts by: Jeff Gattens

If structured properly it could be a great opportunity. Before getting into that I'd be looking at your market and what you could expect to build one of his plans for, and what it should potentially be worth at completion. The best part about new construction is that instant equity (hopefully) and following shortly behind instant appreciation. It all depends on your market though! Those would be my first steps before digging into the partnership structure.

Congratulations on your potential venture and for seeking advice on BP - that's the spirit of a successful real estate investor!

This opportunity holds promise, but it's essential to consider all factors. Start with due diligence on the lots and scrutinize your partner's track record. Consider the project's financial feasibility - remember, only invest what you can afford to lose.

Legal agreements and financing options are other vital aspects. Ensure you have a plan B, an exit strategy. Study market conditions in PA and familiarize yourself with the construction plan. Lastly, understand the refinancing strategy.

Remember, success in real estate is not about avoiding risk but managing it. So, even if you face hurdles, view them as opportunities to learn. Stay proactive, protect your interests, and don't forget to celebrate your progress on this exciting journey. Best of luck!

@Jeff Gattens, I am in a sort of similar position and just spoke with a friend of mine that flips and builds new homes (with a focus on new construction).  Like anything, if you are going to invest/put your credit on the line for someone else, you want to make sure they can execute.

How many homes has he built? Who does the work: does he have his own employees doing framing, drywall, plumbing, foundation, etc, or outsourcing or combo of both? What is the timeline? What is the financial commitment? What is the ARV and profit margin?

From lender perspective, you typically have your local credit unions and banks or hard money.  You are not doing anything special here, this is a very typical construction loan setup that many homeowners take out for their own builds.  The lender will want to know your PM's background, too, and are unlikely to lend to someone that hasn't done some new home construction in the past.

Ask about the title, amount owed on the land, the plan for development(you two should discuss), his experience, current zoning, exit strategy(whether to build and hold/build and sell,etc), permits, timeline, the budget for the project, etc

Regarding lenders, call a few lenders locally and talk to them about the project and ask them for a rate and terms sheet. That is more official than a word of mouth quote. Interest rates change 3+ times a day. Do this part only when you and the property manager have agreed and are ready to proceed.

Also talk to a local mortgage broker who will be able to shop with multiple banks/lenders and get you offers for your deal. The more financing options you get, the better.

If structured properly it could be a great opportunity. Before getting into that I'd be looking at your market and what you could expect to build one of his plans for, and what it should potentially be worth at completion. The best part about new construction is that instant equity (hopefully) and following shortly behind instant appreciation. It all depends on your market though! Those would be my first steps before digging into the partnership structure.

Only two things need to be checked mostly:

If you can afford the house in your area and if after a year, rent can cover the mortgage, house hack will make you more net worth over time.

Someone like me, living in the bay area of California, neither can afford a house near my job, nor rent can cover a mortgage. So, by paying rent, but at the same time, investing savings out of state in a good neighborhood, will give me a higher net worth over time.

( small secret benefit of out-of-state investment no one talks about is; that you leave all headaches on your property manager, your realtor, your advisor, etc. I like passive income, so works for me )

Got it? Let me know if you want to talk to the team that helped me.

--Ruchit