All Forum Posts by: Lauren Thomas

Hi Laura!

Sorry for the slow response. Yes we have and we are using Sides and Ferkovich Accountancy Corporation in Gold River. 916-631-1730 Hope that helps.

Take care,

Lauren

@Mike Smith thank you for your response. I did look into splitting the parcel a while back and according to the county it would take multiple levels of approval including a panel and would be a minimum of 7 months with no guarantee so I stopped that pursuit. But thank you for the insight on underwriters, I may need to try a few more companies. 

Hello Randall and thank you for your reply.  I have a few questions for you if you don't mind? We actually briefly looked into this option, (two duplex's) but one of our insurance agents was saying it was very hard to insure and is usually 3X the price because very few companies will take it on? Do you mind if I ask who insures yours and did you find that it was a lot more pricey for this type of policy or was it equal to what you would pay for each duplex individually if they were on separate lots?

Also, I think I had heard in the past that we would not be able to refinance out of our building loan to a 30 year fixed because this would be considered commercial? Curious if this is true as well based on your experience?

Thank you again and have a great day!

Lauren

Hello Bigger Pockets Community!

We would appreciate your advice….

Background: our intent is to build a multi-family triplex with a long term buy and hold mindset. The current state…

• * We own a multi-family zoned plot of land in Hernando County, FL
• * We’ve secured a multi-family (Tri-Plex) construction loan with a local bank
• * We’ve signed a construction contract with a local builder
• * The project has advanced…site prep has begun and the permit package has been submitted to the county (Hernando County, FL)
• * Last week the county has informed us all multi-family construction projects larger than a duplex will be considered commercial. Commercial projects require sprinklers in all units, ADA (in 1-unit), a civil survey, DRA, etc., etc. All items which were not planned in our project.
• * Initial project cost increases for construction alone are estimated to be $50K-$70K (i.e., due to the need for sprinklers, DRA, ADA, etc.). In addition to the increase in construction costs, we’ll likely have to restructure our construction loan with the local bank which may equate to lost closing costs (e.g., $8K - $10K).
• * Initial proforma excited us, with CoC and long-term IRR exceeding past multi-family purchases we've made over the past 2+ years. With increased costs due to commercial designation by the county (e.g., sprinklers, DRA, ADS, etc.) CoC and IRR are still favorable however not as exciting (e.g., likely running par with current inflation numbers)
• * Since this project is likely getting ‘blown up’ due to the commercial designation by the county, we’re now considering alternative designs to maximize the project. The lot is zoned multi-family up to 4-units and we’re now considering a 2-story Quadplex (the lot will not accommodate a one story quad due to setbacks). Initial proforma for a 2-story quad looks intriguing.

My Question:

Do you have experience managing / operating a 2-story Quad or similar 2-story small multi-family property? If so, any insight you have on how a 2-story unit may / may not impact vacancy and turnover due to variables such as:

• Complaints from downstairs tenants related to upstairs noise
• Lack of a garage
• Walking stairs
• Living in an ADA unit, if not needed (1-unit has to be ADA per the county)
• Other?

Thank you in advance for taking the time to consider this case.

Thanks,

Chad and Lauren Thomas

Hello Bigger Pockets Community!

We would appreciate your advice….

Background: our intent is to build a multi-family triplex with a long term buy and hold mindset. The current state…

• * We own a multi-family zoned plot of land in Hernando County, FL
• * We’ve secured a multi-family (Tri-Plex) construction loan with a local bank
• * We’ve signed a construction contract with a local builder
• * The project has advanced…site prep has begun and the permit package has been submitted to the county (Hernando County, FL)
• * Last week the county has informed us all multi-family construction projects larger than a duplex will be considered commercial. Commercial projects require sprinklers in all units, ADA (in 1-unit), a civil survey, DRA, etc., etc. All items which were not planned in our project.
• * Initial project cost increases for construction alone are estimated to be $50K-$70K (i.e., due to the need for sprinklers, DRA, ADA, etc.). In addition to the increase in construction costs, we’ll likely have to restructure our construction loan with the local bank which may equate to lost closing costs (e.g., $8K - $10K).
• * Initial proforma excited us, with CoC and long-term IRR exceeding past multi-family purchases we've made over the past 2+ years. With increased costs due to commercial designation by the county (e.g., sprinklers, DRA, ADS, etc.) CoC and IRR are still favorable however not as exciting (e.g., likely running par with current inflation numbers)
• * Since this project is likely getting ‘blown up’ due to the commercial designation by the county, we’re now considering alternative designs to maximize the project. The lot is zoned multi-family up to 4-units and we’re now considering a 2-story Quadplex (the lot will not accommodate a one story quad due to setbacks). Initial proforma for a 2-story quad looks intriguing.

My Question:

Do you have experience managing / operating a 2-story Quad or similar 2-story small multi-family property? If so, any insight you have on how a 2-story unit may / may not impact vacancy and turnover due to variables such as:

• Complaints from downstairs tenants related to upstairs noise
• Lack of a garage
• Walking stairs
• Living in an ADA unit, if not needed (1-unit has to be ADA per the county)
• Other?

Thank you in advance for taking the time to consider this case.

Thanks,

Chad and Lauren Thomas

Hello BP Community!

We’re seeking your expertise to critique a new construction deal we’re considering. If you’re open to it, take your gloves off and let us have it….’no holds barred’….PLEASE.

About Us:

We’re remote investors with a great team in place in the market we’re investing. We’re still relatively new buy and hold investors (i.e., ~1.5 years) with a 4-plex, a duplex, and two multi-family zoned lots. We’re actively looking to grow our portfolio in our targeted market focusing on buy and hold small multi-family. One project we’re strongly considering is building a tri-plex on one of the multi-family lots we currently own. We’re a bit apprehensive due to what some are calling “transitory inflation’ and we’re asking ourselves….”is now the time to build?”…among other pertinent questions. Here is an overview of the deal….

100K View of THE DEAL:

We own a multi-family lot valued at ~$45K

We’ve completed a tri-plex design and current day construction cost is ~$373K

I’ve studied and am comfortable with the economic outlook of the market we’re investing (e.g., population YoY growth, unemployment, median income growth, business anchors, etc.)

Our intent is to be long term buy and hold investors

Phase 1: Construction

Construction time is ~12-13 months

We’ll fund construction with a commercial loan @ 4.99 fixed for 20-yrs w/ 25% down (~67K after closing costs / 3-4 draws during construction at interest only)

Additional carrying costs include insurance, property tax, etc. (~$200 - $400 monthly)

Current net cash flow from existing REI will cover construction time related carrying costs

Phase 2: Post Construction / Tennant Occupied

Rent the three units for $1200 each unit / $3600 total (our team feels we could yield ~$1300 – $1400 per unit present day. (we’re being conservative @ $1200 for analysis purposes)

Refinance to 30-year conventional after 6-months of tenant occupation (our conventional lender tells us they require the 6-month duration)

- Pending fed action / outlook, we're using for analysis purposes 1-point and 4.5% for a ~18-month out forecast on conventional refinance investment property rates. Our current 30-year REI conventional loans are between 3.625 – 3.875.

Aside from traditional debt coverage (i.e., PITI), we will save each month for CAPEX / MAINT. / VAC. as recommended in the BP calculator.

Long term buy / hold strategy

After Refinance Analysis: (includes CAPEX/MAINT/VAC)

NOI = $29,592 COC = 15.9% Cap Rate = 8.03%

Gross Rent = $3600 month    Expenses = $2710  (includes reserves)

Monthly Net Cash Flow = $889   5-YR Annualized = 22.53%

BP Community Questions:

Is there a more appropriate analysis tool I can use for long term buy / hold new construction? Currently using the BP rental calculator. I looked at the BRRR calculator however was unsuccessful fitting this scenario in. (i.e., to more accurately account for construction carrying costs)

For after construction analysis, do you agree / disagree with my assumptions on refinance rates? (what’s your crystal ball say?)

What is your thought about building now despite the inflationary costs impacting new construction present day? (e.g., lumber, garage doors, labor, etc.) Do you believe these increases are in fact ‘transitory’ given the present-day supply chain bottlenecks? Would you wait for inflation to normalize? (e.g., our builder estimates this project would have been ~$37K - ~$55K less 2H 2020)

Any other critiques / advise?

A sincere THANK YOU for taking the time to read and potentially reply. THANK YOU!!!!

Thanks,

Chad and Lauren Thomas

Hello,

Does anyone have an investor-friendly bank you’d recommend in Hernando County, Florida for a new construction project (tri-plex)? Thank you in advance.

We have a couple of rentals under our belts and are now looking for the BRRRR experience. Do you know of any good wholesalers you can recommend in the area? Thank you in advance.

@Bill Hampton thank you for the feedback. Very helpful!

Thank you @Sean Smith!