All Forum Posts by: Krista Patrick

 Thank you John, for your reply. This was actually very helpful information. We were able to get the renovation builders risk policy to move forward with the reno. Thank you again! 

 Sorry for the late reply, the holiday's seemed to bring on a slew of family and weather related emergencies! Yes, we have a site plan, sewer, and water already on site. 

Hopefully I don't get too far into the weeds explaining my dilemma that I lose you, but I'm hoping someone has some expertise they are willing to share.

Long story short, my background is community and economic development. I grew up in a family of RE developers. My husband is in construction and has managed the build of almost 200 units (some currently underway). We've bought, sold, house hacked (mostly cosmetic or adding a room renos), and have been landlords and pm's. All this to say, I'm not completely novice but definitely not an expert and I've never done a massive renovation.

Recently we purchased a parcel (I'll call it land A) to build a SFH but after a lot of unfortunate incidents we pulled the plug and still carried the debt. (The land was crap, which we didn't know in the beginning despite doing "everything right" and hiring geotechnical engineers, getting samples, etc.) Currently the land is listed for sell at a massive loss. But it's ready to go for the next person to have an amazing deal.

This was our first big loss so I'm counting my blessings. However, around the same we also got the opportunity to purchase another 10 acres well under appraisal. Let's call this one land B. The bank we were using for the failed project financed the Land B because there was enough equity to cover Land A, Land B, and the loss. It wasn't an ideal situation but we've never experienced this before so sometimes you do what you gotta do. 

Now we have one loan with both properties tied up. The loan amount is about 485K and the appraised value for the combined properties is around 640K. 

The issue we have now is that Land B included a house needing massive renovations. We haven't been able to get an insurance company to provide insurance on the home because it needs so much work. We recently got a letter from the mortgage company reminding us that they can foreclose on our property (and take both) if we don't carry insurance. They knew the condition when we purchased, but thought Land A would sell faster because we had done so much work to it and were selling it so cheap. Spoiler alert, no one wants to purchase and build with a 9.5% construction loan.

Our thought on this is to get a builders risk policy for Land B and start the reno. Unfortunately all our funds are tied up in other projects and these two properties. Now I have to figure out how to fund the reno for Land B.

Based on recent comps and the reno we have planned, we believe the ARV of Land B will be over 800K. (A home a block away recently sold for 725K on 2 acres. We have 10 acres and will an additional bedroom.) This should be enough to pay back a private money/hard money lender and release Land A from the property in a refinance.

Eventually we plan to build one or two additional SFH's as well as 4 STR cabins on property B as well.

If I can make the reno on Land B work and release Land A, we could potentially resume the build on Land A. At that point the land would be owned with no debt and it would cost approx. $592,250 to finish the project. The homes on either side were recently appraised at over 1M. 

I've never tied properties up together, never experienced a massive project loss, and I've also never had to use private money/hard money to fund a project. 

After reading all this, does anyone have any advice on what I should do next? Does my plan sound achievable? I'll take any advice I can get. This one has my brain spinning. 

Thank you!

Hi Talon,

I'm still very very new to assessing repair costs so hopefully someone else can chime in as well. I know a little more about new construction but am about to dip my toe into my first massive renovation so I've been looking in to this as well. 

Unfortunately what I've come across is that this seems to be something you learn from experience. It's so hard to get firm numbers because the costs change dramatically depending on location, finishes, and timing the cost. If you can get a sub to commit to a bid its likely only good for 30-90 days max. 

Here are some resources you might find helpful: 

The BP Rookie Podcast

The Book on Estimating Rehab Costs (also a BP book)

These episodes of the Rookie Podcast might be particularly helpful for you:

Episode 278

Episode 244

2 parts, Episodes 165-166

Good luck! 

Oh goodness, that is the question! I spent the last five months trying to put together a deal for new construction in downtown Rogers and even with the land being donated and pricing the build low, we still had to look into additional cost share/grant options to make it pencil. And that's assuming they would go for our parking plan and wouldn't require a full lift station. The developer that won the project has a sale price of over $500/sq ft ($545 I believe) and their construction costs were way too low. I'm still not quite sure how they plan to make that work but I'm anxious to watch! 

*I was part of a development team pitching a project to the city. There were 4 development teams pitching. 

I've been looking into some off market deals and opportunities out of state. A lot of the developers I know are pinning projects for now.

I'd also love to meet up with others in NWA!

We recently found Bo Renner (he came highly recommended) and have loved working with him. Here's his website: https://rmp.law/attorney-bo-renner/

I'm doing STR's now but not in the areas you've mentioned. I'll see if I can find your STR post. I'm interested, what made you choose those specific locations? If I were you, I'd definitely try to partner on something since you don't have the experience yet. There are tons of people who have knowledge but lack capital (always need more capital!) and are generally willing to discuss. If you're interested in the self storage, I know a couple projects happening around the country and could possibly connect you for more information if that's the route you'd like to go.

Your plan is ambitious, where are you planning to start?

@William Porterfield, we were considering a VA loan because it's available to us to use but we aren't against other options. Thanks for suggesting. I'll look into that as well.

@Mike JimenezThanks Mike! I'll send you a message later today. 

@Bryan O.The chances are pretty good he could get stationed there. But let's be honest, the only thing I KNOW about the military is that I don't know anything. They tend to change their minds very quickly. We aren't worried about living apart though. We've done multiple 12-15 month deployments during his career and part of the reason we are moving now is because, even stateside, he's never home. So if we are going to be apart regardless, at least in Arkansas, we will be apart with family close by. He actually has over a year on his contract right now anyway. Part of the reason we would like to go ahead and purchase is that if he chooses NOT to re-enlist, it would be great to already be set-up somewhere when he joins us. And if he chooses TO enlist, he would be moving about the same time frame and we could choose to join him at that point or continue in Arkansas. If we choose to join him, we would rent the property at that point. We would have lived in it well over a year so we would meet the occupancy requirement. 

@Paul Thompson, I hadn't really considered a rent-to-own option. That's something I'll look into. Especially if the job requirement gives us trouble. Thanks for the advice! 

You all have been so helpful! Truly, thank you for taking the time to speak to my situation. 

@Daniel Lehman, I actually didn't know that. The bank just told me it needed to be 12 months from now. The only issue with showing "intent" is that we just don't know. That's why we are planning to purchase in NWA. Then if he does in fact get out, we will have a place to live, and if he chooses to stay in, we will have met the occupancy requirement and we could just rent from there and move wherever. 

I guess that does open up another option though. If we wait until the summer when we originally planned to purchase, maybe we will have made some decisions on "intent". 

Thanks Daniel!

I'll try to be as detailed with this questions as possible while still keeping it under 30 pages. ;) 

My husband and I finally had our plan to purchase our first investment property this summer in Northwest Arkansas. (Relocating from Montana.) We were going to house hack a multi-family using a VA loan. However, I just started calling around and it sounds like my husband needs to have 12 months left on his military contract OR have documentation from a new employer in the same field as his prior MOS (job in the military) if it is less than 12 months. Unfortunately we were planning on doing all of this in July but his current contract is up in mid-April 2017 and we haven't made any decisions whether he will re-enlist, extend, or separate.

So, my question is this: What would you do? 

We could drastically move up our timeline but we would have to close on something prior to April 19, 2016. Which means I would need to fly out to Arkansas, asap to find something. Also, I'll be moving there with my kids, withOUT my husband for awhile. We weren't prepared to leave him that early. So, this option would require us to pay two mortgages for a period of time (which, obviously, we prefer not to do). 

We could wait it out until late summer/fall when he applies for jobs to see if he gets something in his current field or extends in the military to POSSIBLY get a mortgage but I don't really want to put my eggs all in this basket. 

If we DON'T pull the trigger now, and he DOES get out of the service, we are looking at a possibility of our 6 month plan turning into a multi-year plan by the time he has 2 years at a new job to qualify for a mortgage.

Obviously we can't tell the future. Maybe we somehow find enough money to buy a house in cash and the point is mute. But for now, we need a loan and a place to live and a time frame to do it. And I would MUCH rather buy than rent.

Suggestions? To jump on it and buy now, even though it means possibly paying two mortgages and moving a few months early? Or wait and chance not being eligible for a loan anymore?