All Forum Posts by: Leah Miller

@Felicia Nitu

In addition if you actually want to realize that value, you need to count another 5% for selling costs, and the taxes from the sale.

Assuming a 20% capital gains tax, your total ROI on the above scenario would be about 12%, even with the numbers you were using.

Real world numbers are nothing near 131% ROI

@Felicia Nitu

Also not sure where you are getting 4.95 valuation on a development like that on one lot. There are very few lots more than 7,000 sq ft in this area, and small townhouse like homes will not sell at 2.4m, the only homes selling at that kind of price are single family luxury homes.

@Felicia Nitu

Considering the land in an area like Sycamore Square can only be bought at a premium, the ROI is not really accurate.

A property in a good location in the Sycamore Square will cost you upwards of 1.5 million. Finding a property that has no tenants to deal with is another challenge. 

The holding costs for the time it takes to get permits and build especially if you are not doing this with cash (which almost nobody is) are enormous. Just taxes will be 20k.

I would run numbers like this:

Property 1.5 million (minimum)

Construction (Cheap end) 2.14 m

Holding Costs (at least 150k)

In my book, even according to your calculation, that means you put in at least (those numbers are on the low end): 3.8m! 

ROI - 25% max

Thank you for your responses.

Decided to try to negotiate with the current lender. 

Turns out the Seller's agent and the escrow agents were really nasty to the bank throughout the whole process. (Apparently a lot of emails back and forth, that for some reason I the buyer was not copied on). So for the past three weeks they have been badgering the bank, going so far as to call the owner of the bank and every member between the underwriter and the owner. The bank was really upset. 

Kind of hard to tell them to match or I go to the other bank when they are getting messages from the seller and escrow daily that we need to close ASAP.

I can't actually push it off for too long since I don't know when the second bank will close and we removed contingencies a month ago.

Signed with the first lender and had to swallow the points.

Learned some interesting lessons along the way.

Lender #1, is completely ready to go.  The 10k is the difference in the points.

With lender 1 will cost 10k more in points.

Lender #2 is kind of unknown. Until we can actually close probably would be early next week earliest.

Forgot one detail the new California based lender committed to funding as long as the property isn't in an evacuation warning area.

So, we found a California based lender that we started working with, and got our initial approval with a few conditions (documents etc.) that they need, no big hurdles. 

Their rate is lower than the original bank. About a 10k points price difference.

Today, after the rain in Los Angeles the first bank sent us ready to close!

I personally would rather just continue with the second bank, why go back to the first one. Loan officer and Realtors understandably want to just close and be done with it.

What say you?

Hey @Kamar G., sounds like this was in Los Angeles County.

Would you mind sharing who you used to do the Lot Split?

 @Jeffrey Blackman what upside could there be in mortgage rules for the buyer? Sounds interesting.

@Justin Landesman

Insurance has been bound for weeks already so that shouldn't be an issue.