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All Forum Posts by: Jonathan Yeh

Jonathan Yeh has started 11 posts and replied 90 times.

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Jaret Walker:

@Jonathan Yeh

Ok that clears up a lot because I build a lot of new construction and that is significantly longer than it ever takes me to build several houses!

 Should've specified that earlier. sorry!

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Terrell Garren:

After buy/repair/hold 19 SFHs, I'm building a couple new 3BR/2BA 1100SF SFHs on a split lot for around $140K each.  About the same as I can buy and repair currently.  I'll GC and PM to keep the cost low. It's an OK deal, not a brilliant deal. But I'd much rather get up in the morning a walk a building site than a golf course. 

Wow, how do you manage to get 19 SFH? BRRRR?

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Jaret Walker:

@Jonathan Yeh

Why are you thinking it will be so long to build?

 That's about the time for Canadian to build a house from scratch. LOL. Plus they can't really work til the Winter's over. That's also why.

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Allan Smith:

We have built several houses to rent. Some notes to add to the convo:

  1. probably best to buy land and hire a builder. That's what we do and average 25% equity (build and land costs 110, appraised 145k)
  2. it does take a while but the interest payments are small, especially at the beginning. 
  3. for best cash return, build small. 1500 sf house doesn't rent for much more than 1100. You miss out on some equity when you sell some day, though. I prefer a little cash flow rather than break even for a sale in the future.
  4. we buy in lower end neighborhoods. Rental neighborhoods basically. Land is cheap and rent is reasonable. Allows cashflow.
  5. gotta stay conservative on finishes to keep costs down.
  6. the ROI is fantastic. Basically no repairs at all first couple years.

Thanks for the tips! I actually upgraded mine from 1400 sf (3 bedrooms) to 1750 (4 bd) + basement suite. so 5 rooms in total. The upgrade is about 30k. Still debating between renting as SFH or duplex. What do you think?

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Michael Ward:

@Jonathan Yeh

If the numbers work then a new build can be fine. From a pro forma perspective, if it pencils then it’s worth looking into. But obviously new build is riskier because of potential time and cost overruns. The general contractor can make or break you so choose wisely. Permitting and city inspections can cause delays or changes. And keep the design simple. But In my market, lots of developers are building new, as long as they can get A class rents.

I know nothing about lending in Calgary, but you will need some equity. Often, if you purchase the lot with cash and you are a solid guarantor (or can bring on a solid guarantor), then a bank will loan the full amount needed for construction. It’s usually based on appraised finish value. When you run the numbers, include the cost of financing (origination fees and interest payments) in the loan budget. Where I am, I can draw from the loan to cover monthly interest payments.

 Great tip!! Thanks a ton for that.

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Jaret Walker:

@Jonathan Yeh

Are you just wanting to build one house?

 My 1st rental, yes. After this one, I will shop around the community some more.

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Cody Hill:

Not The greatest for the velocity of your money. Great to have a worry free house with warranty but your money is now trapped there unless you bought it drastically under market value. 

With that being said I actually did fluke out buying my personal residence as a new build. I went with a smaller builder, with a house that was nearly complete, at a time where house's were not selling last year. I was able to get the place for 400k but I needed to do the landscaping. Being my personal residence I did that myself because it was another reason to enjoy the sun. I had a friend buy a very similar suited house 5 doors down (which was less sq ft) for $475k which had me wonder what I could get mine appraised at. Came out to 500k the way it stands with a brand new school going up walking distance away. 

Kind of a fluke with this one but I did a ton of shopping around prior to buying it. Speaking with my mortgage broker he mentioned he could re-fi this for me at 80% ltv which would get me my down payment back. 

Moral of the story, just like any investment buy it right! 

 Thanks for the share bud!

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Juan Soto:

Hi Jonathan, out of curiosity, where in Calgary is the new build located?

 I say Calgary for the simplicity. But it's in Airdrie.

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Ben Dao:

New construction for a rental sounds too expensive. Hopefully the numbers make sense. I think it is better to buy a lower priced home in a C or B class neighborhood and make a better return. 

I purchased in Calgary, Canada. The new construction is actually a bit cheaper than the other ones. However, it does take 6-8 months to build it.

I also want to look into buying a lower priced home and bring up the value that way. Just want people (your) opinion/thoughts on this as well. 

Post: New Build for Rental?

Jonathan YehPosted
  • Posts 90
  • Votes 40
Originally posted by @Matt K.:
Originally posted by @Jonathan Yeh:
Originally posted by @Matt K.:

Depending on your connections and market.... Good labor is hard to come by and either expensive or you have an existing relationship.

Funding is also more difficult to secure for new construction even more so for investments vs primary.

Funding in terms of from the banks, or just in general? 

 In general, it's way different then the traditional 20-25% down. Takes a lot more cash as it's more risk and that's if you will even find a lender willing to let you borrow.

and once it's done you could have issues with market value if there's not enough comps..not to mention you're about a year out and at the mercy of the market.

get your funding lined up before you put to much effort into it...

 Thanks for the advice Matt!