All Forum Posts by: Mike Wood

@Regina Bellows  Why bother with a partner?  Why not use a construction loan to finance the build, then convert it to permanent financing after its done.  You have owned the land for a while, so you likely have a decent amount of equity that would be required for a construction loan (generally 25% of total costs).  Personally, I think looking for someone to have a minority stake in a long term non-liquid asset that they dont control is like finding a unicorn.

I assume you have already penciled the project out and have a good idea on what rents would be and how much the property would make after completion.  If the property wont cash flow with debt after new construction, then abandon it and sell the land and take the profit.

You may want to check this, but I would imagine that renting via Padsplit would be considered as a STR which have been highly restricted in the city of New Orleans, and the only way you can get a permit recently is to also live in the property.

@Vincent Hawkes  I would recommend you get a local realtor to help.  There are lots of different price points in our city, and some of the best area to live will not work for a rental, and some of the best rental areas may not work for your situation.

@Gerardo Bejarano G. I think in todays market, your construction costs will be higher than $100/ft2 using a builder/CG, so I bet your real construction costs are much higher than $170k.

Generally, no where will allow you to build two single family houses on the same lot. You maybe able to build a duplex (single structure) house if zoning will allow, but not separate houses (excluding ADU's).

Will you city allow you to subdivide the lot into that small of parcels.  At 3,600ft2, the new lot would be something like 30'x120'.  Additionally, with such a small lot, I think it would almost impossible to get a two car garage to work (in my city, 30x120' lots are common, I have have developed several, but never, ever would a two car garage work.  If you think about it, a 1759ft2 house with a two car garage is likely to be 2300-2400ft2 under roof, which leave almost zero yard.

Lastly, when you factor the actual construction costs, I bet your margins get super thin and likely make these deal not work.

@Philip McPherson As an investor that builds 2/1 duplexes, I can tell you that building a house for $65.88/ft2 is not possible.  Normal allowance items (cabinets & countertops, plumbing fixtures, lighting, appliances, flooring, hardware) will run you right around $20/ft2 on duplexes this size.  That would put construction costs at ~$86/ft2, which is just too low now a days.  

I just finished a 2/1, 800ft2 each unit, new construction duplex and it ended up at $121.87/ft2.  3 years ago, I finished a 2/1 895ft2 each unit, new construction duplex and it end up at $102.39/ft2.  There is just no way now a days to finish these duplex small units for less than $100/ft2.

I would guess that they are offering you a shell of a house, with not drywall, insulation, paint, etc.  Likely not even providing plumbing/electrical/HVAC included (likely ~$17-20/ft2).

Lastly, since there would be 4 buildings on one (1) lot, this would have to be a commercial loan, so worse terms on the loan and harder to find insurance.

@Rufus Peoples  1-2 unit building use the International Residential Code (IRC), while 3+ unit use the International Building Code (IBC).  I would agree that most residential builders would shy away from 3+ units due to this.  There are more requirements to build a 3+ unit.  Additionally, once you hit 5 units, normal residential mortgage products are not longer applicable, and you would have to finance using a commercial loan, which is more expensive and less favorable rates and terms.

@Jorge Esteban Vargas Unless your talking about a smaller addition, where it can be founded by a HELOC or second mortgage, its unlikely that you will find a lender willing to do this deal, if you already have a mortgage on the property. For construction loans, I cant image a bank that would not need to be in first position, which would require the original mortgage to be cleared. Banks see construction loans as highly risky, and not being in first position on the deed would likely be a deal killer.

Second, most building codes require duplex houses to be attached to each other. Normally, you can NOT have a completely separate building as the second unit. ADU's are different and typically can be completely separate structures.

Sounds like your running a boarding house, and would likely run into issues with zoning.  If you were able to build another 6 bedrooms, you could potentially have 11 different renters.  My guess is your local zoning would not allow this. Check your city, but my guess is duplex zoning would not allow a boarding house.

@Chidiebere Iwuoha Jr  First, find out what the land will allow to be built.  Most cities have zoning, and will only allow you to build what is currently zoned for.  I will say that building a four (4) plex on 9000ft2 of land my get tight with the building and parking, but not so much if you build two stories.  

Second, get an idea of what you want (size and arrangements of units) i.e. 2/1, 1000ft2 units or 3/2, 1500ft2 units.  Then talk to local builders for some ballpark prices.  I gotta think that construction costs in AK are up there, and $350k wont build much (maybe a duplex).

Third, look around the area and see if similar mutlifamily units are selling for close to the costs or more (compare on a $/ft2 basis).  If you have struggled to sell the land, its likely the area can not support new construction pricing (i.e. existing houses are selling for way under new construction costs)

Finally, with ballpark prices, calculate out if the property will make financial sense, using current market rents for similar units, your expenses and your debt service (assuming the final property is financed).   This will tell you if it make sense to start getting serious with building plans, contractors, lenders, etc.

@Wesley F.  Get local legal representation.  You in a tough spot, and likely have lost all of your money.  No way is a contractor spending 100k on material prior to anything happening on the dirt.  Be prepared to file suit.  

@Diondra Brown I agree with what Justin said. If you cant find the FHA construction loan, you will need a traditional construction loan, which varies between 10-25% down payment/equity requirements. Getting a construction loan will be hard, regardless of loan type.