All Forum Posts by: Marcela Correa

Dear BPers,

Our third project has been on the market for 70+ days and hasn't sold. DC is a pretty hot market so this is a bad sign. (...Don't want to get into a discussion of that deal on this post though.)

As a result, I am doubting my comps analysis for a potential fourth project. I'd greatly appreciate input--from those familiar with the DC market--on a projected ARV on the following deal:

House is on the 1000 block of 3rd St. NE, less than 5 blocks to NOMA metro, Giant supermarket, and at the heart of the H St. corridor.

Seller is asking (off market): $475k

Rehab costs: Approx $200k

House is a regular wardman-style, 3 level, 1400 sf with a front porch a little above grade. It will be a high quality renovation resulting in 3 bdrm/2.5 baths, open floor plan, gourmet kitchen, parking space in rear with overhead deck and a small one bedroom rental in the basement. No yard. 

I see a wide range of comps. What do you think?

Hi Mathew,

Here's a little more detail in case it helps...

Contractors do not get paid for work completed based on receipts. They are paid based on percentage of the scope of work that's completed. Without any intervention from A or B, the bank will send checks totaling the full $20k once the final draw inspection is conducted and passed because that means 100% of the SOW is completed. However, if the work is completed with $15k and A and B agree that that is all A will get paid, then B can request a change order from their HUD consultant that both A and B will sign. The $5k would not be disbursed and would go to pay down the loan.

Hi Gabrielle,

Congrats on being forward thinking! One of the best ways to know how much to save is to study the market and see what's available in your target areas. NoVA is a hot and expensive market. With an FHA loan, you'll need $17,500 for a down payment on a $500k house...that's nearly 20% of your annual income! :)

The market won't be the same a year from now but by studying it now, you'll have a better sense and can then keep tracking it so you won't be surprised by changes. You can look for investor friendly realtors here that may spend time with you or you can do your own research on sites like Redfin. Look for a number of properties that you like and then track them to see how long they take to sell and how much they sell for vs. the listing price. Use this year to continue your REI education as well as your understanding of your markets.

Hi Hector,

Please clarify whether the lender wants to start lending to various individuals and this is a general question or whether you're asking what a foreign family member needs to lend money to you in particular.

I'm not an expert in private lending so other BPers can chime in on the former but I believe it is a regulated activity that is best done with legal advice. On the latter, you can consult with your tax accountant and they can advise you how best to structure and declare the loan. The lender should check the laws of their country on lending capital abroad.

Hi Zachary,

Remember to include closing costs in your calculations! They're a factor in the purchase and a significant expense on the resale!  Even if you have a real estate license, you're still paying commission to the buyer's agent, taxes, and fees. All of these can eat into what seem like thin margins to me. 

We're experienced contractors and because of it, we always include a 10% contingency budget in our rehab costs. There are always things we cannot control and we prefer to have budgeted for them. 

If you haven't already, you should read J. Scott's book on estimating rehab costs.

These are just tips so you can make the best analysis of the deal and a solid presentation to potential partners. 

As for your 203k question, the lender will still run your credit, work history, etc. Only way to know for sure is to apply. Ask the loan officer to give you the max amount for which you qualify so you can use that as a limit in your shopping. If you decide to go with a 203k, be sure to find a contractor that has solid experience with 203ks.

Best of luck

Hi Pavlos,

Congratulations for having completed multiple deals! It's even more impressive as it sounds like you are relatively new to the U.S. Cheers to making a new life for yourself!

Now for your question. To get better advice, you should provide: the acquisition and rehab costs, if any, of the new deal and the current value of your first investment property. This way BPers can opine on alternatives. On the surface, the Quicken loan sounds like a sweeter deal than any rates I've seen for hard money lenders and probably most private lenders. Maybe a portfolio lender will allow you to aggregate the equity of your existing properties to use as collateral for future deals. Thru this type of bank you may be able to get a loan comparable to the Quicken one but you'd be building a relationship with a bank that can help you expand in the future. You can do searches on BP to learn about portfolio lenders (also referred o as community banks).

In Washington, DC, the Office of Tax & Revenue has a website with access to the "Real Property Assessment Database" where you can search by address and see the owner name(s), payment history, and current tax bill among other information for any residential property in the city (haven't tried commercial). I did a google search of NJ and "Real Property Assessment Database" and found multiple options that may result in the info that you're seeking.

Good luck!

Congratulations! Would love to see some before pics. Also, would you mind sharing where you purchased the kitchen cabinets?

Keep us posted on your future deals.

Hi Vincent,

In addition to level of responsibility, your distributions should consider level of risk for each partner. The financial investor may not do much in the day to day but may have much more on the line than the other partners. One factor we've considered when crafting our partnerships is whether one of the partners could be doing this without the others. In cases where we've felt that we wouldn't have been able to pursue the opportunity without the participation of the other, then we've been fine to do equal distributions no matter what the levels of responsibility, inputs, risk, etc. 

It's tough to get/give advice on this because it's all specific to the situation. No matter what you decide, make sure that the Operating Agreement lays out the specifics and that you've had an attorney review. You have a lot of people involved and it's better to agree on what you'll do should the business not pan out as you expect, now before anyone is invested.

Good luck!

Hi Jacob,

Architects, local contractors, and the local building department will be your best sources. Ask an architect if you can shadow him/her on a day in the field and ask questions about construction code. Check to see if there are any relevant courses at the community college (one of my architects teaches such a course). Check to see what publications the city has that summarize portions of the building code. The code itself is lengthy, continuously being updated and it's difficult to discern what's being enforced and what's been on the books for the last 70 years.

...Then triangulate the information you receive. I'm still amazed at what information gets passed on as "building code" and isn't.