All Forum Posts by: Keith Bloemendaal

Is it just me, or does it seem like a lot of contradicting comments? (forgive me, I am new)

On one hand some are saying pay cash but then refi so you are not leveraged to the hilt in case of a down turn. But if you refi, you are leveraged, no?

My goal is to make enough off my building, I can reinvest at least 50% ($100k or more?) per year into building my rental portfolio. If my partner agrees to match it, I could have potentially $200k to invest..... but to be conservative, let's just call it $100k per year. 

1st year (2016) I take my $100k and buy (2) $40k lots, take out construction loans to build 2 ~1400' homes at a cost of $80k (for construction), after 6mos I have 2 homes worth $160k each. Refi at 75% LTV with tenants in place ($120k), pay off construction loan, get my cash back, and be in a good position on 2 brand new homes for rentals that I can make roughly $300 per mo each CF (haven't verified those numbers, but it's close).

Rinse, Repeat?

I side question I would add to this, is, once you reach a certain level, you will have to go with a commercial lender right? (or other form of funding) so wouldn't paying down principle make you look better for liquidity in the bank's eyes? Therefore making you more likely to continue to get more funding for homes?

Anyway, thanks for all the responses again, hope everyone had a great Thanksgiving!

 I actually am the general contractor. 

I am going through this right now, only with new construction. I JV'd for a 50/50 split to get me started, I had others wanting more than 50% so I took this one.

Heading off to read the link @Karen Margrave posted now....

@Bryan Hancock Thank you so much for chiming in, I have seen your comments and posts in the forums and you are very helpful to many here. 

You are correct about my business plan and it not being known here, didn't think about that, more can be read about my getting started here:

http://www.biggerpockets.com/forums/522/topics/158...

I discuss me just getting started on my own, how I secured funding (part investor/partner, part bank) for my first 3 spec homes, etc.. 

I plan to build 90% spec (I don't want to deal with people as much, let the realtors do that) and my goal is to get to 10-12 specs per year. We are just in the planning stages for this, but I am thinking we want to have between $100-@200k in cash reserves for the building company for working capital before we invest in anything for rentals. 

Something else I just thought of, I wonder if I could get construction funding (like I do for my homes I am selling), buy the lots cash, then refi after it's built based on a 55-60% LTV (I bought the lot), cash out at 70% LTV on the refi to put a little cash back in my pocket and be in good shape on equity for the rental. Something like this:

Lot cost: $40k (pay cash)

Build Cost: $85k (construction loan)

Appraised value completed: $155k (based on comps currently)

Refi for $108,500 (70% LTV) and get $46,500 back at closing (minus closing costs)

Payment would only be $550 I could rent easily for double that, maybe more depending on location. 

Need to talk to some bankers about this.... Thanks again all!

Thanks for all the responses, hope everyone is having a great Thanksgiving!

If I can buy lots in an area that has a good rental market (I actually don't know of many areas around me that don't have a good rental market) and can build for ~20% less than I can buy turn key (as I stated, I have no desire, nor the time, to try to find the really good deals and rehab them), then that makes sense to me. The homes I build to sell are at the beach and would only bring about .50% for long term rental, but I can profit $50k on a sale (15-20% after realtor fees/closing costs). The lots cost 3x as much here as they do on the mainland. 

Anyway, for me, if the right turn key comes along, I'd buy it, but I will also run more detailed numbers on build and hold projects I am thinking about, which I could also do with multi family. I am thinking longer term here, something I can pass on to my daughter after I am gone.... would rather that be a bunch of 30-40yr old homes and not a bunch of 100yr old homes and a headache. 

@Lynn Currie Just my $.02 (take it for what it's worth), I would put all videos on YouTube as well, no matter if you use Wystia, Vimeo, or another platform for your website. YouTube just became the #2 search engine in the world. I get that the object is to get the videos on your site and get people on your site to watch them (or buts in seats like the food biz calls it), but you could be cutting out a large audience by not using YouTube along with whatever platform you decide for your website. 

@Chris Puglisi Thanks for clarifying, I agree with @Mitch Bernstein and would add a couple of other items:

Along with connection fees from utility companies, check for tap or impact fees. If the water/sewer is run by the municipality (like it is here) tap fees can eat into a budget/permit. Because of tap fees permits can cost upwards of $12-$15k where I build. 

Also, is stormwater already in place? Are there regulations that require you to handle it onsite? Check with the planning department where the lot is located, they can help answer all these questions. Here, depending on the lot, we can either pay an impact fee for stormwater or install an engineered infiltration system. 

Bottom line, every municipality will be different, check with the utility companies and planning department, you should be able to get most of your answers. 

Yes, the lots I have been watching are not a part of any HOA or covenants, and I have actually built this particular plan I am speaking of 6 or 8 times in the last several years and watched the numbers closely. Granted, those numbers are all builder grade low end specs, and I might want to add tile etc.. to increase longevity.

I just hate dealing with rehabs personally, just never know what is behind the walls, under the flooring, under the shingles, etc... New home that I build, I know exactly what is there. Also, regardless of how nice you rebuild, it is still a home built 10, 15, 20, 30... years ago on paper right? 

Hi Chris, 

More details would be needed, are you looking at a single home? 10 homes? 20 homes? etc... What does zoning allow units per acre? Are utilities available in the area? Stormwater regulations? 

Not sure about your area, but you can count on $10-$20k per lot for development costs alone here (10+ lots). 

@Lynn Currie I saw your video post they moved to the Marketplace, I can't comment on the post there as a regular free member, but I did subscribe to your YouTube and plan to come back the videos after the weekend.  

I'm new to the forum (thanks to all that are so active and open!), and am just starting my own home building business, I am also looking to build a portfolio over time (no hurry) starting in 2016. 

My goals include me NOT being a property manager, and NOT rehabbing. So I figure I could buy decent retail properties, or just build my own. 

Decent SFR properties in this area start in the low $100's. I could build new on the right lot for around the same thing. My estimations say I could build a 1400' 3/2 for around $85k, lots in the area I am looking range from $30-$50k. So at max, I would have $135k in a brand new rental that I could rent for $1250-$1450 per month.

Assuming those numbers are correct, wouldn't it be better to build and hold instead of buy and hold? My thought process is I would hopefully have less maintenance issues, less vacancy (newer home), and better value when/if I sell.