All Forum Posts by: Jay Hinrichs

@Jackie Lange

Hey Jackie long time no talk to.. hows things???? Still spending time in one of those warm island nations??? @Karen Margrave

In my mind much of what happens in Real estate or can happen in Real estate in the Mid west south upper mid west can only happen there were you have a huge amount of low value inventory... When the gurus come to town on the west coast.. The schemes and stratiges they tout just don't work in our markets. For instance there is one on the radio and TV right now in Portland come to my free seminar let me show you how to get rich flipping houses with no money down and none of your own money right there in your home town.. Well we know for certain one has less than a 1% chance on the West coast of pulling off those kinds of deals unless they are out in the boonies were there is no big demand for housing and then when there is no demand there is no big flip profit. So I agree with you on your thoughts that one hat does not fit all

@Dev Horn Dev Great point.. my critera when doing hard money and this was from 2003 was and is 680 If in oregon 700 if buying out of state passive cash flow home... 2 years tax returns and cash reserves although WE blew it prior to 08 on the reserve side.. See my post of Turn key demystified we thought the cash out the borrowers would go to reserves but no it went to helping the economy by buying trips cars jets skis anything but were it should have gone.

Plus we required PG's and still do.. At least any HML who wants to stay in business....

In my ever it to be Humble opinion C properties are NOT appropriate investments for out of area investors.. Talk with any local commercial bank they have it right in their underwriting policies they will not lend to anyone who lives more than 100 miles from their rentals... I know plently of locals in the communities that borrow from local banks for C class.. But its guys that live there deep roots.. and can stay right on top of these.. the PM issues are just staggering in almost all cases. Again in my Humble opinion and after forclosing and owning about 200 of them.. then buying another 350 ( not all C class but half C class. over the last 3 years.

Steve when you say no deal making on this forum.. I assume all deal making is done in the Marketplace. and or off line? correct..

@Steve Babiak

I am new here one week , steve I was just trying to give Ben some base lines to see if its even remotely feasible.. kind of back of napkin type thing I would do when looking at a lot.. that's how I attack these. and if it looks decent there I would tie up the lot and then do the due diligence Karen is talking about.. But with an experienced builder developer a lot of what Karen is talking about can be handled in the first drive by... And or we already know our market so know the answer to most of those questions.. Should a newbie take a project on like this one.. Maybe but only with their and family money because I know I would never partner with someone on their first build job or second.. I would want to see 5 successful ones. Same when I lend.. I don't want their learning curves to be my learning curves...

@Account Closed

PS 204 did not include the lot.. we paid 55k for the lot. and sold the house for 330k with no closing cost concessions. and my wife is the realtor on the list side so only 2.25 selling commission .. so looks like a 60 to 70 deal for us on this one.. I paid cash for the lot and financed the 204k.. So its a 100% return in less than 6 months cash on cash. This is a better than average one for us in the PDX market at 350k and under.. 10 to 15% NET margins are more the norm. with builders that have to borrow hard money making 7 to 12% NETs.

@? Lets play with the Numbers.. My wife and I are here doing our draws tonight on our 11 houses we have under construction. We just went through a 2200 Sq ft one we are building in Milwaukee Oregon.. Our budget all in was 204k this house amenities included engineered laminate entire 1st floor better than Home depot cabnits. Slab granite kitchen tile and lino in bathrooms.. bit concrete driveway with extra concrete for boat parking. Vaulted Master and bonus room 4 bd 3 bath.. Gas fireplace. and Landscaping in the front only.. No air conditioning. out of the 204k 37k were building permits. 3 k for plans and other light soft costs 4500 bank fee's and interest.. I pay 1 point and 6% for my construction money from a local bank.. and only pay interest when I draw.

Build time all in 4.5 months. So actual construction of the home is about 160k or 73 a foot.. I know in other markets guys build for 50 to 65.. But we have 9 foot cielings not 8 and full hardy plank and wood wrapped windows. etc etc.

So I guess you could say semi custom.. Oh and appliances are stainless and one up from builder grade.. Now we do get all our materials at builder discount prices of course.

So on your lets say your numbers are higher because your labor is higher. Materials will be the same.. maybe your plumber or electrical could be higher but lumber is lumber and hard goods are hard goods. So lets say you are 100 a foot without permits. And again a level lot no wild foundation work.

Sale price 725k kind of in the middle of what your thinking

200k for the lot

50k permits all in ( just a wag)

220k to build house.

20k cost of capital I did that at 15% apr for 7 months

50k for closing cost and sales commission I would think you could negotiate lower commission I used 6% for commission and 1 % for your closing cost and maybe some seller prepaids.

20k contingency.

$560,000 grand total < 725,000> Net profit 165k This assumes you got 100% financing on the 470 build cost.. so your return on investment cash on cash with no money out of pocket is well pretty good.. Now reality most lenders hard money or not are going to want you to have skin in the game. I know I would. So lets say you cobble 100k together.. well your carrying cost just went down by $8,750.00 So all in all its a deal I would do.. If in deed the market was strong and the sale at that prices was reasonable to expect during the build time.. currently in our market in PDX virtually every new construction is sold during the build phase and will close within a few week so of the CO being received from the county.

I would be interested to hear from builders across the country if they would do a deal like this or if they would think its too tight and or think its a bigger than normal profit.

JLH

good luck on your project

@Ed L.

Do you know Chris Strebeck at Community bank there in Hattiesburg.. I had a commercial loan with them at one time, real good guy. I bet I was their only client from Oregon LOL....

@Account Closed

How much is the lot.. that's what you need to know and how much are the permits all in.. building cost depending on what your doing I would suspect will be in the 100 to 130 bucks a foot range flat lot standard foundation.. What I do on mine is splurge and put in Quartz or Slab granite in the kitchen and master bath.. Building from ground up in a lot of ways is more organized and predictable than a big RENO where you don't know whats behind that 80 year old wall or what the last owner did to the plumbing and electrical. YOu can nail down your budget pretty well before you start and have a good Idea were your going to be at financially.

I am very interested to hear the response's on this one Regarding the Safe act and owner contracts for Owner Occ homes.. As opposed to owner contracts for Non owner occ. I did a bunch of them pre Dodd Frank on my OREO.. in the C class area they are totally hit and miss with many more misses than hits. But they did serve a purpose.. I took a house that I did not want to dump a bunch of money in and let someone in for next to nothing with the hopes they would at least fix it up.. At the very least fix the AC and Exchanger put a water heater in it new power metor and pole and gas hook up.. But in the C areas that was about the extent of their ability.. I still have a few that I collect a payment once a year when they get their tax return. AND oh they pay the property tax.. which was huge because we had 200 or so of these buggers . But when I visit them once a year they still are living in the house half the time with no heat excetra. they own it I deeded it too them.. So I don't have landlord tenant issues. So we just kind of dance around.. I don't want the place back. and If I can get 3 or 4k a year out of it I am good with that.