All Forum Posts by: Kevin Z.

it definitely should be win-win. I think they can do better.

There's no deception or attitude from me. I just don't sugarcoat. Should I have used a euphemism like "poor" to describe that $2.7million rental? Most people here would agree it's a poor investment with barely a 1% return.

Re: taking advantage of people...... if that's how you qualify it, that's exactly what most builders here are doing. Because I am familiar with building materials, I can immediately see the cheapness when I go to these open houses. But buyers in general don't know any better. That's just how it is.

@Bryan Hancock I have built my own house before as an owner builder. What I plan to do is very similar, but I will use a general contractor to do 99% of the work. I'm confident I can get the whole thing organized and completed if I have the money.

Your talk of syndication, debt financing, and SEC stuff seems to be on a way bigger scale than what I want to do. I just want to do 1 house at a time, with 1-4 other investors max. They will all have a vote/say in how we proceed. It's really a loosely structured group with a common goal.

It's already being done around here with people forming 2-member llc's, one partner funding the whole project with his cash or taking out a construction loan.

It doesn't have to be complicated. or does it?

i finished the keller book, but didn't really like it. The individual stories were inspirational, but that's about it.

Mike Ferry's way appeals to me the most- cold knock, cold call, and just go out and talk to people, and don't be afraid of rejection.

Looking for some tips and general advisement, especially on risks and holes in my plan.

I am a realtor who wants to form an LLC with various investors whom I have not found yet. Purpose is to buy old property to demolish and build new to sell. I would serve a management role and be responsible for selling the house. Each property will require about 1.6 to 1.8 million dollars start to finish... 800k-900k purchase, 720k construction cost. Finished house normally sells for 2.4 to 2.6 million. (I know of one house this month that cost 1.6, and sold for 2.7 within 2 weeks! Obvious cheap materials usage, but still sold because buyers didn't know better ) The plan is pretty safe in my opinion, even if you couldn't make a $1 million gross profit.

Finding people with cash is easy. Persuading them to invest in development is going to be much harder.

How would you make a total stranger more likely to agree to invest in this strategy with other total strangers?

Brandon just wrote a blog about security in investment. LLC, builder's risk insurance, nearly guaranteed profit.... is that enough security?

The risk to reward ratio is low. I would be hiring a reputable general contractor. I would charge a small management fee, making most of my money off commission from sale of the home. Profits will be returned proportionally to the investors. As a realtor, obviously I don't have the cash nor can I borrow from banks, but I'd chip in $50k (drop in the bucket) just to have some skin in the game.

I am hoping to make some high-net-worth people into this kind of investor. I have seen some stupid purchases recently made by these people, e.g. buying a $2.7 million old ranch house to rent out for <$4500 per month. After property taxes, they're making almost nothing! I want to convince them that there are bigger profits to be made in development.

Currently, a handful of small developers are building one or two luxury homes at a time. From my mls and title research, these guys are buying old homes under an LLC, then somehow getting construction loans that cover the full cost of construction. They sell at a big profit, pay back the loan, and pocket the difference.

According to the title reports and mls here, people are buying houses soon after listing. Some are able to buy offmarket, but those are very few.

MLS hot sheet is still a good way to find houses for land. You make offers on day 1 and hope the seller will take your offer rather than waiting for more offers to come in. Other than that, cold calling and knocking on doors, and other old school ways would work.

A handful of real estate agents are doing this themselves. Buying land as LLC, taking out construction loans, hiring a general contractor to build new, then selling it for millions. Nice profits are made.

The only obstacles are finding high net worth partners who are willing to work with you, and getting construction loans.

Henry, are you still in Arcadia, or seattle as your profile says?

There are a good handful of small developers here buying up land and building new houses. It's a goldmine especially with the chinese cash buyers snapping them up.

I have called a few general contractors who built luxury homes around here, and they charge from 140-190/sqft. $150 will build a nice enough home with craploads of cheap painted moulding, granite, marble, nice enough cabinets and finishes. Buyers don't care. They just want something that looks nice. Lots of building materials are cheap and being imported from china.

I recently previewed a new $2.7 million home here and I could tell the materials were cheap. They even used SHINGLES on the roof instead of the traditional tiles.

It must have been a $140/sqft house. The only catch is that the general contractor bought and built the home himself, so his cost was a little lower.

He bought the home for $820k, built a 5000 sqft house, sold it for $2700k.

I'd estimate he made $1 million gross profit after 5% real estate commission.

BTW, what is your family's company? are they buying and building, or just building?