All Forum Posts by: Diane Menke

Tiara

Don't forget that these brown field developments are specialty projects in that they take poluted property and turn it into safe habitable and useable property. This is not for everyone.

We have a company in the Philly area names O'Niel, this is all they do = brown fields. This is their specialty. They are in fact offered these properties by municipalities up and down the East Coast now, because they are specialists and the town wants to clean itself up.

These developers will site special local, state and federal tax breaks as part of their 'equity' in a particular deal. So maybe they have 10 - 15% equity that is based on these tax breaks. Makes getting into a deal like this easier right? Looks better on the statements. Bank likes to see "instant equity".

Another tax break our area is a property tax break. I is for "new construction" and its transferable for 10 years. This encourages buyers to buy these properties, vs existing houses. So again, the government is assisting the developers here.

These large developers can also go to the local construction unions and they dicker about what they will pay. The unions want to keep people employed, they want a slice. Locally I hear stories about closed door meetings where the builders will promis X number of hours to each union (roofers, plumbers, carpenters....) and then after that, they can hire who they want, who may be cheaper.

I think you can learn more about these areas of development in several publications. One I used to get for free was called Multi Unit Investor. There may be one for "brown field investors". Why not Google that? Professional Remodeler Magazine will cover stories on these from time to time. Check with your local NARI chapter or Remodelers Advantage.

Another thing you can do to learn more, is get a job with one of these specialists. I don't know your personal skill set. But imagine what you might learn being a personal assistant or secretary to someone doing this?

Keep in mind these guys often have to comply with "minority employment laws" to get these government dollars. I own a registered female owned construction company and this is how we get a foot in the door of local non profit projects. I know a large local builder who does government funded jobs, and they set up a woman with a construction management degree, right out of college, as their "woman owned construction business". So this might be another angle you can pursue.

Good luck to you.
Diane Menke

Hassan,

I hope you find your investing pool soon.

I have seen this also in my RE adventures. When the time is ripe the "investors" suddenly are clenching and afraid to pull the trigger.

Other annoying symptoms of a "not ready for prime time" investor is they want to tell you how to do your end of things, they get excited about what color the house will be painted and not the balance sheet....list goes on.

I wonder if you can get them into an agreement with you at the front end? Create that LLC and have them plop the money in their 1st, then go shopping?

I know you would maintain control of that entity.

Good luck. Let us know what kind of networking you are doing. What looks promising for you?

Diane Menke

I think the point I am making is that where you work affects costs.

I think the major cost differences we are talking about are not in the materials but in the labor and overhead costs.

Labor here bills at a higher rate I think, than in areas near the Mexican border.

How you work affects cost.

When we do a flip, we want MU on costs, and we want a profit on the sale = 2 income streams not one.

Some folks flip and only need to see profit on the sale.

I don't know what you mean by "huge profit margins". Our remodeling company wants to see 8% profits minimum. We can't stay competitive at over 10% profits. I don't call that a huge profit margin.

Our remodeling company does have the overhead of an office with 4 staffers and all the equipment like printers and computers, designers, sales people, we have CGL and health insurance, we have workers comp, we market, company vehicles, inventory, etc. Its a real business. Our customers like the level of service and organization our team brings to their projects.

As an investor I want to see a lot more than 8% profit. Ideally I am shopping for 20% or higher ROI. Here my overhead is much smaller. I keep a couple of computers and 2 part time staffers who are me and my business partner/lawyer. I work out of my home office (kitchen counter top). We don't have to carry a lot of insurance to do RE investing.

Its all good so long as everyone captures all their costs and all their income streams.

To me its important to make money, but also to provide a decent living to my staffers. I want them to be able to afford a decent house. I want them to be cared for if they get hurt. I feel too its good business, if they can afford to own a home, since I am in the housing business.

Don't confuse "cost" for "price". Lots of folks do. Walmart stays cheap by skipping health insurance for example. Is that really cheaper in the long run?

Thanks guys.

Diane

Tom your projects and your web site look nice and I hope they sell quickly. You put some very nice features in these homes. I also want to point out that you have good taste. Things really "fit" esthetically when you are done.

Do you have employees? Do your subs? Or are they hiring day labor? Whats the labor rate where you are? Are you paying yourself for your time on the job working? Do you track your own time? Do your employees have health insurance? The subs employees? What happens if they get hurt on your job?

Are you a member of one of the pro remodeling groups?

When you buy, do you look at Sale Price minus COGS and fees to arrive at your profit? Or are you looking at COGS multiplied by mark up, plus all costs/fees, plus profit = sales price?

In our area, I'm pretty sure our pay rates are higher than in your area. A plumber and a helper is going to be about $250 a day here. My electricians labor is a little lower. Both of course are effected by material cost fluctuations.

Another thing we must do in our area is only hire fully insured subs which includes workers comp + CGL. Our own insurers insist on it and will back bill us if we have under insured subs or "sole props".

We do have to wait 4 weeks for permits minimum here. We need permits for dumpsters on the street for example and we pay to park them there every week.

Around here you are going to spend closer to $70 - $80 a sf cost. for any gut rehab using nice products, not high end, nice lighting designs, and having some design help.

To stay on top of costs to rehab here, we are very surgical in the demo so we can't use "neck down guys". We need skilled fast guys who know how to be careful. Then we rehab surgically as well. We pick out particular rooms or areas to focus on and then tie in with the finishes.

Also I rarely buy a shell since the costs to rehab combined with the shell costs can get too high. The owners of shells here all think they are full of money making potential or maybe gold.

I know a remodeler in western California and they had to pay $90 in FICA and similar state and insurance fees for every $100 they paid their employees. Ouch.

All this goes to say there are clearly costs to where you work in the country. "Cost" is never gonna be "price" for any subs, suppliers, or other pros.

Thanks again

Diane

Guys your estimates are a trip.

Are you using licensed contractors with insurance? Workers comp, health insurance?

What are you or GC paying labor per hour?

Is your GC (sounds like you) doing any mark up or making any profit at all?

Totally to code rewiring a house, new HVAC, new plumbing PLUS finishes and cabinets, new roof and new siding (you must mean cheap vinyl), new windows and some landscaping for how much?

Please clarify.

Diane

"There's them that talks and there's them that does"

Have any of you read Malcolm Gladwells Outliers yet? You may find it ineteresting in light of your back and forthing. He examines what creates success and its much more than hard work and natural talent.

Another very good read I am finishing off today I think, is "7 years to 7 figures".

Now get to work, and be mindful = another very good read "Full Catastrophy Living" by J C Zin.

Diane

Thanks John,

I will have to chew on the definitions a bit more to get them logged into the coconut.

But the jist is, if I wanted to purchase a mixed use or commercial property, especially one held by a bank, I would need a realtor who was familiar with these points to walk me through it, get me the finanical data, since I am not qualified to do it myself yet. Also I would need a lawyer or a realtor who can write up the LOI.

It sounds too like you guys might be talking about bulk commercial REO purchases = the topic of "tape".

This is intriguing to me. I have only been doing SFH's and the idea that you can buy a group of non performing properties and make them into something sounds very interesting.

Thanks again for explaining.

Diane

OK so am LOI is a kind of formal request for entre to discussions, and perhaps even a 1st step to a take over kind of move?

Would an LOI also be required for a publicly traded company wishing to buy another? Or do they use something different?

Can you explain these - PN and NPN?

and also "BPO price,strike price and all in price"?

Thanks guys very interesting.
Diane

I noticed in the LOI content that you want to see the books AFTER offer is made? Wouldn't you want to see the books before you make an offer?

I have looked at commercial listings in the past and sometimes they present the financials upfront in the listing, and sometimes they present fiction.

I would always want to see the financials before I considered an offer. Folks seems reluctant to share.

Thanks
Diane

Scott,

I bought 2 replacement doors on line. They were very nice and they cost me about $100 + postage and they took about 5 weeks to get.

Was it worth it for my rental grade cheapo cabinet kitchen I had to replace a broken door on? (I bought 2 so they would at least match) It was OK. I could also have bought a whole new cheapo cabinet to pull the needed doors off of from Lowes.

You will get a better kitchen if you can locate a local retail stock cabinet shop. They will have 2 or 3 lines they sell. Pick a nice wood cabinet in a shaker style. Looks modern and fresh to buyers and easy to touch up if you are renting it.

One guy I used to buy from all the time, he would come out to measure, make a nice simple layout and see things I had not thought to do, sell me decent maple shaker style cabinets plus a pre made counter top and back splash in any Formica I wanted. Nice stuff. I could put a very sweet kitchen in for about $3500 delivered and complete. It would take me a weekend to install by myself.

I would go this route. Its hard to order cabinets at all and the on line sites are very complicated. Find a local retailer of stock cabinets you can work with. Tell him you will be buying more soon. Have him measure and provide all the spacers and kicks you would possibly forget. You wont save money working on line and more than likely you will miss something.

If you PM me I will send you to our prop website so you can see one of the kitchens he sold me.

Good luck
Diane Menke