All Forum Posts by: Lesley Resnick

 I did not know BOE did construction loans for invesmtent propety.  The web site looks like it is owner occupied.

Jacksonville is like any other American City.  There are A-F neighborhoods here.  To try to create a monolithic view of the city would be a mistake, it is the largest city by landmass.  There is great variability even among streets in the same neighborhood.  I have tenants in PP that have legitimately decorated their rentals, on a budget.  I had a tenant in the same neighborhood, well use your imagination, they were not fit to live with pigs.

While I can not quantify, the overall vibe of the city is positive, excited and growing.  Sadly, we are losing the sleepy little town feel.  There is new construction everywhere and companies are moving here with jobs.  The Jacksonville of my childhood is almost unrecognizable.  

 I like the area.  I own 4 properties in PP and Buffalo Gardens.  I am building 4 new construction homes in the area as well.  The crime is low in the area.  It is definitely improved a lot in the 5 years I have owned properties in there.  

That sounds like a great deal for both parties.  The lender gets a superior return and the builder can scale.  All builders and investors eventually run out of cash for their next project.  Banks can be tough to work with.  I find myself in that situation.  I have 23 builds in the pipeline and will either take on investors or just borrow money from a bank.  I was recently approached to buy a piece of land that I could build 60 townhouses on.  I plan to build the townhouses.  I need to decide how I will fund the project.  It is going to take a year until I can put a shovel in the ground.

Is this someone you know or how did you find them?   

I generally only raise rents when I have a turn.  This is not a hard and fast rule.  If you are a pain or if you are so far under market, I will raise the rent.  If your house is not the best value, then your product is at risk.  After all, tenants are consumers and turns are bad for business.  Every time I turn a property it costs me 2 weeks to a month.  I have my own crews and I can generally do it quickly.  There is loss of rent and the cost of the turn.  If your property in property management there is a cost of 1 month rent.  All this to make another $2,400 a year.  It will take 2+ years of rent increase to make up the time. 100 increase on a 1000 place and 3,800 turn plus management placement fees.  If anything goes wrong, vandalism, labor or materials delays, then you are significantly higher.  I will take a good tenant below market than a bad one at market.  Tenants that just pay rent and do not take up a lot of my time are at a premium.  My next deal is more important than potently chasing a few pennies, time is my most valuable commodity.  This is a long game, Bob and Betty bad *** is not a business strategy.  Just putting bigger numbers for rent in XLS, does not guaranty you will be better off.    

There are a lot of turnkey providers that will deliver a completed building with a tenant.  You will pay market price or above.  It is low risk.  If you are looking to lower the cost, you need to move upstream in the process.  Risk reward takes over.  You can actually build it yourself, hire the contractors and supervise the project.  If you don't have a background in construction and do it full time, you are in trouble.  Alternatively, you can hire someone else someone to build it, they will want 15-20% fee and the investor will own all the risk.  It is a builders / sellers market.    Demand is through the roof in all areas of construcion and contractors attention is at a premium.  You are going to face challenges either way. Material availability and cost are variable beyond sensibly.  If the builder has any experience and skill, they can borrow the money for less than 20% (2 points funding and 1% a month).  The  builder would need to fund horizontal construction including the land.  Unless we are talking about 10+ builds 2m+, In this market I am not seeing a reason a builder would make a deal under a 50/50 split.  Plenty of people will take jobs with no sense of urgency.  They will finish the most profitable jobs first and if it is not your build...  

Has anyone actually done a JV new build for under 50/50 in the last year?

So what would be an a example of a fair dea? 

If you are looking for the builder to put in a token amount that is reasonable.  Anything beyond that and it no longer makes sense for the builder.  The market is hot and you can borrow money to do the build.  However, even with a loan, they will need land acquisition & working capital.  The only reason a builder would partner is to reduce or eliminate the need for capital.  Builder loans are expensive and take work to gain an approval.  I build for cash, I borrow money and I have partnered.  They each have their challenges.  If both parties are not enriched for making a deal, then is is bound to fail.   

It think it is a fair deal, given the market. In fact I have done the same deal as the builder in Jacksonville. Whether the build is profitable or not is another question. There is an idea that is circulating around BP, that only one party should make money on a JV. No one works for free. There should be advantages to both sides. The investor gets a superior return on their investment. It is complexly passive and should be lower risk than if they just hired someone to build the house. The builder has skin in the game.

All builders have liquidity and cashflow issues. To solve this problem they borrow money. Build money is more expensive and harder to obtain than fix and flip money. Further, lenders will not loan on land or land prep. Even with a loan, the builder needs working capital. Thus making a JV valuable.

“Good is the Enemy of Great.” 

The concept is that too many people and too many organizations “settle” and take short cuts accepting that “good” is good enough and that they don't need to do the really hard work to be great

Jim Colins

I would suggest that he has it backwards in Real Estate.  Good enough is my approach.  I would like to have a lot of good rather than a little great.  I have found the 80/20 rule is true in RE.   

Should you wait for the perfect deal, tenant, loan, a home run?  A deal that meets every metric you can imagine?

Or

Take a good deal and move on to the next one?

How far do you go when renovating a house you will never live in?

If I am going to rent it, I am in the 80% business.  This should get me top of market

If I am flipping it, I am in the 85%-90% business.  This should get me close to top of market.  There are a lot of extremes in flipping.  I will paint over the termite holes or I will buy $1k vanity faucets.  

I never chase the last dollar.  I have been the agent on a number of deals that owners have been instant on the last dollar and ended up holding the property for another 3 months to clear a few dollars more or end up in the same place.

My business model is simple: Velocity.  I want to turn my money as quickly and often as I can.  Give me base hits all day long.