All Forum Posts by: Leilah Davis

Thanks! I'm not looking to create a proforma or deal analysis, I'm just looking for some resources on how to interpret them. In other words, if I want to invest in someone else's project or go in as a JV on a project that someone else has already crunched the numbers on, I need to be 100% confident in my comprehension of it. I don't need any templates, I just need some guidance on understanding the content itself.

Single family or even small multi-family is pretty easy and mostly self-explanatory, but the proforma I looked at for this renovation on a large apartment complex with retail space below was WAYYY out of my league. Just trying to step up and learn, that's all! The spreadsheet they sent had 13 tabs all of which were FILLED with info. It had the assumptions of the deal, the development budget, info on the historic tax credits, a proforma for the apartments, a proforma for the commercial space, info on the returns, etc. This is a multi-million dollar deal with many partners and multiple sources of funding.

 Absolutely! Feel free to reach out anytime. 

We were very fortunate to have been able to fun our first project with cash, and we simply rolled the profits from once job to the next until we were able to do two at once. We never used any lenders. Occasionally we did find ourselves in a tight spot, and had to use my husband's HELOC and 401K, but that was after we had already had success and knew that what we were doing could work.

I'm a spec home builder, along with my husband. To this point we've stayed in our lane of doing ground up construction spec homes. That's been our niche. We have never used any lenders, we've never considered doing a JV project, or being a retail investor (I have to be honest, I don't even know what that means!!) We're starting to think that we may want to branch out and potentially get involved in other sorts of RE investments.

I'm looking for some resources where I can learn how to properly analyze deals, especially larger and more complicated deals with multiple sources of financing, multiple tiers of investors, rental income to consider, vacancy rates, etc. My husband and I have relied pretty heavily on "back of the napkin math" for analyzing our own deals, which worked fine when we're just using our own money, we're very familiar with all the costs involved, and nobody else is involved in the deal so there's just been no need to make it more complicated than that. 

My husband has a relationship with a larger commercial developer who sent us the proforma on a building they already own and are planning to renovate / develop into apartments with retail space below. We're just dipping our toes in the water, trying to familiarize ourselves with their processes. When I looked at the proforma I was lost, it was all Greek to me! Any specific resources you can recommend (maybe a YouTube channel or something) that might help me make sense of this? I have seen a few other "deal analysis" spreadsheets from investors looking for a JV or a lender, even on here, and I just don't get what I'm even looking at with some of the terminology and acronyms ... Can someone offer some resources to simplify this a little? I'd even take an online course if it was well organized (and affordable, which they never are).

I'm a GC as well who also focuses on spec home building. We wind up doing a lot of the work ourselves, although we'd really rather not! it's just that certain things are VERY difficult to find anyone who wants to do it. Or the prices are astronomical and it just makes more sense to do it ourselves. But for the major trades it's always been worth it to have tradesmen who specialize in that area. Although we *could* do a lot of this ourselves, neither myself or my husband are quite as skilled in any one area as the subs we hire, and it would take way too much time. Our projects always move at lightning speed because I'm focused on supervising and managing the project rather than getting my hands dirty and doing the work myself. 

Not to say your method is wrong. I'm always curious to know more about how others operate! When you say you do everything yourself except plumbing and electric, what do you mean? You really do the concrete, framing, flooring, cabinets, trim, drywall, paint, landscaping, etc?? How many people are on your crew and where the heck do you find skilled laborer?? And also, just out of curiosity, how long does a single SFH take you to complete?

We're also thinking about doing build-to-rent at some point, but not there at the moment either. We were fortunate to have been able to do all of our spec builds with cash (we had enough to build the first, and then we rolled our profits from one into the next to scale it up). We made quite a profit in just a few years ... then spent pretty much all of it on a 6 month sabbatical traveling around the world (worth it!) and a new home (the biggest and best home we've built to date) for ourselves. So we've got a decent amount of equity and net worth, but not enough cash to do another build right now without taking out a loan, and as long as interest rates are as high as they are it doesn't seem like it makes sense for us to build, whether on spec or build-to-rent. We're kind of just sitting and waiting at the moment, which doesn't feel great! I'm anxious to get building again, but having a hard time seeing a path forward. Are you currently building? If so, what market are you in and how are you making it work with interest rates being so high? 

@Jay Hinrichs Very interesting insights, thanks! I guess I wasn't factoring in that it's probably all builder grade materials when I was talking about cost / sq ft. Like you we also do a step above builder grade ... we're maybe somewhere between builder grade and what you're doing haha. We do engineered wood, granite counters, marble tile in the bathrooms, custom tile backsplash, etc. But we keep our trim carpentry pretty minimal, basic cabinets, no crown molding, no window wraps etc. We do custom carpentry in the master closet though, and usually hall closet, but smaller bedrooms get basic wire shelving. I guess I assumed that anyone building on infill lots is doing a step above builder grade. Occasionally you will see spec homes on infill lots in our market with basic builder grade finishes and they just don't sell well. 

For us, working with whatever infill lots we can find in our market (not quite ready to branch out yet) in up & coming or transitional neighborhoods, we've found the best opportunity maximizing profit is in floorplan efficiency. That's what caught my eye initially about @Robert Ellis project and post. We get told regularly that the houses we build feel much larger than they actually are, and buyers are willing to pay for that. We always price competitively, and when buyers see our houses (especially with the higher end finishes) compared to others in the same neighborhood and size range that's the big selling point - it's priced the same as everything else, but it's nicer and feels bigger. Of course that doesn't work right now because literally NOBODY is buying in our market at the moment. It is dead dead dead. In the last few months I've had every single framer we've ever worked with reach out multiple times asking for work. Subs are getting desperate, and possibly just moving elsewhere (which is no good for us), but nothing we can do about it as long as nobody's buying. Perhaps it is time to branch out soon to other markets ... would love to talk with you more about that sometime!

I'm not just talking about materials. Framing and MEP's are the biggest costs, how are you able to get such low subcontractor pricing? That's my real question. The subcontractors that do work for DR Horton and other large-scale developers simply don't do one-project at a time like you're describing, at least not that I'm aware of. Why would they?? They can pick up 300+ houses in one single contract with Dr Horton, why would they sign a contract for a single house on an infill lot with a developer they've never worked with before? I mean if you've worked with framers and MEP subs who are generally available, reliable, AND able to give you the same price for a single home that a tract builder can get ... then good for you, you seem to have found all the needles in the haystack. 

Your $140 / sq ft price actually sounds realistic to me (that should be development cost, NOT including the land.) and it's pretty close to what we wind up paying. My husband and I just built a house for ourselves actually and we came out just over $140 / sq ft .... EXCEPT we are a very lean operation (minimal overhead costs), we pay cash for everything (no loan fees), we do the house designs ourselves (minimal architect fees), and we GC the projects ourselves (no GC fees). Even at the very low $140 / sq ft construction cost it doesn't pay to build spec in my city right now, because the market is just so slow. It doesn't pay ONE investor, let alone two. 

Just curious ... I see that you're currently trying to get this "Lillian" project off the ground. have you actually completed and sold other spec homes before? If so, why are you looking to partner on this investment, why not just do it yourself? 

I believe it's all of eXp because my sponsor was the one who told me about it and he's not even in my state. Most brokerages allow you to keep 100% commission on a certain amount of "personal deals" per year, but my previous broker only allowed one. (Of course it was after I told them I was switching to eXp and explained why that they said "wait you can do three a year here too! .... to which I said "well why don't you just reimburse me then for the 30% commission you took on the multiple personal deals I've already done with ya'll in the last few years ... because I was told it was ONE when I signed on. That infuriated me even more.)

@Harold Conard well this is a blast from the past, haha. Thank you for the support. I was very new when I was commenting on this. We had only done one spec home at the time and I was actively looking for our next deal (and obviously frustrated at people who assumed things about me because I was ASKING about cold-calling). I did end up getting our second deal lined up from cold-texting, which is interesting! That probably happened right around the time of this thread. 

Of the 9 properties we've now built on here's how we acquired each lot: 1) Listed on MLS, 2) Cold-texting Lead, 3) Listed on FSBO website, 4) Purchased from Wholesaler, 5) Purchased at Auction, 6) Purchased from Wholesaler, 7) Listed on MLS, 8) Listed on FSBO website, 9) Listed on MLS. We also own a lot that we are not building on due to market conditions (unfortunately we purchased at the top of the market, so can't even sell it now and get back what we paid for it) and that one did come from cold-calling. I basically called the guy and he was interested, but not "ready to sell just yet". I kept checking in with him every 3 - 6 months for TWO YEARS, we formed a very friendly relationship and he assure dme he wouldn't saell to anyone else. And finally, at the top of the market after we increased our price a good bit to match the market, he bit and we bought ... and then the market tanked. He genuinely didn't seem like he knew what he was doing, but maybe he was a genius after all lol.

I also hate cold-calling (or just calling people in general!) but I haven't gotten as many negative responses from doing so as people on this thread seem to assume. I know I mentioned this earlier, but I think a few of the key differences in my experience are that I'm local and it's a small city where everyone knows everyone and it's built into the culture to be friendly, although I'm licensed I NEVER try to sell my services as an real estate agent to anyone I am cold-calling, and I only call people with vacant lots. It's very different than calling "distressed landlords" who gets TONS of cold-calls because they have an income-producing property. In my city there are WAYYYY more BRRR investors than there are builders / developers who build on vacant infill lots the way my husband and I do. The people I've cold-called, most of them anyway, don't seem like they get many calls about their properties. A large portion of these people are regular Joe's (not investors) who inherited the property from someone after a house was torn down post-Katrina and literally don't know what to do with it.

I'm a licensed agent, like many others on this site, who only got my license to save on real estate investment transaction. My husband and I are spec home builders and I list all of our properties myself on the MLS. It costs a little over $2k a year to maintain my RE license and I've saved WAYYY more than that on land purchases and by doing all the listings myself. I'm with eXp and they give you 3 free "personal deals" per year, meaning you can keep 100% of the commission (instead of 70%) on whichever transactions you choose.