All Forum Posts by: John Kwon

Hi,

We recently acquired a duplex. Shortly after, I was contacted my the economic development committee and the mayor of the town about a proposal to develop the area. Most home in the area are very old (90+ years old) except mine (30 yrs). They are proposing to new construction with commercial space on the first floor and possible 4-6 residential units above along with parking. 

My current property has about 2000 sq ft. New proposed building would potentially give me 1800 sq ft of commercial and 4000-6000 sq ft of residential space.

I purchased the property for $215K. Projected CoC is about 18% based on local rental after capex, debt service, vacancy, repair, etc.

There are 4 other owns who are also involved in this project, but their initial investment was much lower and the homes in pretty bad shape.

I have no experience in building a new development. I am buy & hold investor. Also, I am would have to invest (and find capital) to build a new building and have loss of income during the construction. Also, there is huge risk of not getting the property completed and have a total loss.

But the upside of increasing rental units with potentially higher NOI is appealing.

Any investors out there who had a similar experience or any advise is appreciate it. Thanks.

@Mike Reynolds @Grant Rothenburger

AirBnB sounds like a fabulous idea as a niche market for tourism. I like the idea of selling a unique place for short term rental. I live about 1.5 hr north of NYC with lots of hikers and weekenders, perhaps this might be an interesting venture.

@Nathan Gesner I agree that there is a market for people looking for a decent neighborhood with good schools but can't afford a house. I am noting that housing cost is skyrocketing around my area and there is shortage  or lack of affordable homes. Condos are a good option as entry point, but condo fees are very high in our area, too. I am looking into mobile park and tiny homes came up. I think cost of a mobile home vs tiny homes are about the same, but mobile homes are definitely geared towards a family. But tiny homes does not seem to have the connotation associated with a "mobile homes".  As Eric C mentioned, target market seems very narrow...

I am seeing more and more about tiny home communities popping up especially in West coast area. Is this the next mobile park movement for the millennials?

Is this a fad or something worth looking into for investment?

What are your thoughts?

@Robert Shedden congratulations!

We are in a similar situation. We bought our duplex under LLC so we don't qualify for Fannie loans either. We bought in cash and refinanced to pull cash out. We dealt with a local credit union and got a 10yr fix with 25 year amortization and balloon payment at 10 yr. You can always refinance later. So what if you pay extra 0.25-0.5%? I consider that my premium in building a relationship with the local loan officer for a more favorable deal in the future, because I know I will be doing A LOT of deals. In worse case scenario, you learned your lesson and move on. Again, congrats!

@Adam Rapoport I would stay away from condos. I have a few condos as investment. Aside from regular condo fees, they can hit you with special assessment fees that can eat your cash flow. Also, the board can significantly mismanage the condo and bring the value of the property down. Lastly, they can impose leasing rules if they want to reduce non-owner occupied units. One of the condo decided to charge $1000 per year for rental out the unit. Stay away.

This may not be typical, but buyer be aware. Good luck.

@Caleb Heimsoth I had same reactions from friends and family. I tried to educate them and perhaps involve them as private money investor to show them the ropes but I got more negativity than excitement. Most says, "stick to your job".

Some comments are true but it we try to minimize our risk with due diligence.

I am in a contract for a REO duplex with 30 day closing. I just finished inspection and number of repairs need to be address.

Issues such as water drainage around the foundation, repaving the parking lot, and routine interior rehab are on the list.

I already got quotes from contractors for several big repair jobs. We crunched our number for materials, labor, etc.

Also spoke to my bank to refi (this was cash buy) after 4-6 weeks of closing and getting paperwork ready. 

I am currently waiting for title, municipal, lien search, etc to come back for due diligence purpose.

I just wanted to know that others did in before closing.  Do you guys do anything else until closing date? (besides looking for more properties?) 

JK

@Ryan Velilla I would start by reading some books. Get your foundation set up first. In general, I think people are most receptive if you show that you are at least informed of the topic. 

Bigger pockets has a good list of books. Also, check out the guides.

https://www.biggerpockets.com/guides

REI group meeting are good place to learn, but don't expect anything for free (even if they offer it). Bring value to them. Good luck!

p.s. I have no vested interest in BP. I started reading blogs and books from sites like this, too.

@Mike P. Land bank is step forward to get rid of vacant land. Philly had a similar problem and the city started to sell off (i think 2500) vacant land and abandoned homes. This created a boom in the area... also a lot of gentrification which got some push back from long term owners due to tax increase. Ironic thing was that developers got 10 year tax abatement.  Anyway, this could be a good thing of POK.