All Forum Posts by: Jim Macedon

Single or multifamily. Anything with cashflow that would justify the investment.

How are you finding deals in the Austin area?  I have not found a single property that would outperform a municipal bond fund in a year of searching.

I'm sort of at a loss as to where to go from here in my investing career.  I don't really have an interest in investing out of state (maybe this is something I need to get over), but the Texas market in general, and Austin in particular, just does not seem like a good place to invest in real estate.  I always read on Bigger Pockets about how people are making 20% returns and getting 2% rule deals... there is nothing here even close to that.  At least nothing I have the resources, time, or skill to find.  I have this money I want to invest, and I can't find a deal to invest in.  It's pretty frustrating.

I see these properties for sale around here sometimes and I'm just like, who buys these?  I'm talking about multifamily properties, so O/O isn't usually the answer.  Are these just clueless people that think a 2% return is good?  Take this property for example: 7307 Bar K Ranch Road, Lago Vista, TX.  New construction duplex for sale.  My first thought is that if it was a good deal, the builder would be keeping it and renting it out.  From my reading of development books, I've learned that developers require a higher rate of return on rentals than sales.  In other words, the back up plan for a bad rental is to sell it.  So essentially the builder has already decided the numbers don't work to rent it out, and that's at his cost which is probably 25% or more lower than the buyer will be paying.  Then I run metrics like the 2% rule and the 50% rule, and it's a terrible deal.  So who is going to buy this?

Good morning.

I am respectfully requesting feedback from the Bigger Pockets community on this deal.  My area is Austin, TX (this particular deal is in a community about 30 minutes from Austin) and my deal involves potentially building a new duplex to hold for rental income.

Expected rent is $1500 per unit for a total of $3000.

I own a multifamily lot, for which I paid $22,500.

I have paid approximately $5,000 for plans and engineering designs.

I have been working with a realtor who I have promised to pay a 3% commission on construction costs.

After talking to what seems like just about every builder in the area, it seems like the best I can do for construction costs is about $325,000.  This is where the deal has become iffy for me and led me here.  My original (obviously overly optimistic) expectation was that I could find an "investor friendly builder" (I put in quotes because this experience has made me seriously question whether this mythical beast actually exists) to do this for $250,000-$275,000.  Now that the real number is $325,000, I'm questioning whether I should even consider going forward anymore.  The sunk costs of the lot and the plans makes me want to get it done, but I know that is throwing good money after bad.  Since this is a growing area, I think I can potentially get by money back by selling the lot in a couple years.

I know the deal doesn't even meet a 1% rule, but that is virtually impossible to find in Austin.  Well, I'll leave it at that and just let you analyze it based on the numbers.  Let me know if I left out any information you need.