All Forum Posts by: Michael Guzik

@David Crews That is a loaded question my friend! This is definitely a good model but there are a TON of things that need to happen. First you need to make sure that they are zoned for this use, secondly will the city and it's board members approve this type of new construction? Is there a neighborhood association that could come into play? Assuming that you get the green light on all these, who will build it? This is a HUGE FACTOR that is often overlooked. DO NOT GO THE CHEAP ROUTE with a chuck in the truck builder or you will pay for it with your time, stress and energy. 

Once you find someone to build it, what is their build cost and timeline on the project? Once you know this you can run numbers and do research on whether the deal makes sense! You might want to do this before city approval etc so you can have these numbers before hand to evaluate a deal before jumping through a bunch of hoops!

Lastly the financial aspect. Do you have the $$? Most people don't which means you will have to get a construction loan which isn't a very common thing and is a very niche loan on my opinion. This is an area where you will want to ask around in your local market and get a good referral. 

I wish you the best of luck my friend, my personal opinion is to find a partner who has done this or who is doing this. These "small" projects are very daunting and can go south fast if you don't know what you are doing!

@Alicia Shen I don't want to be a dream killer but I agree with @Account Closed out of state as a newbie is not the wisest decision. My answer for the best place to invest would be WHERE YOU HAVE THE BEST TEAM. You need a good property manager, agent, and contractor/handyman. You can have a "great" market/deal and have the deal completely killed because you don't have a good team/boots on the ground. I would work on building up capital, networking and doing research on places close to you first personally.

@Artur A. I can't speak for all the cities but I can speak towards San Antonio. It is getting harder and harder to find "good deals" because of this hot market here! You definitely need to either be calling home owner's directly or know about off market sources via an agent, investor or wholesaler.

Right now from what I've seen the deals that cashflow the most are in C- to B- areas of San Antonio. This brings up an issue sometimes with newer investors because they aren't comfortable in areas that aren't as nice. I personally believe deals are in every one of those cities just depends on your comfort level and who you know there. 

Once you narrow down 1-3 I think you should definitely fly or drive out to meet your PM, Leasing Agent, Repair/Contractor or whoever will be a part of your team. Drive through the areas and neighborhoods and get a good feel for the area and who lives there. This will hopefully either solidify that city or cross it off your list. Cities are very different on paper than they are in person!

@Anna Marie Holland I don't like to throw everyone in the same bucket, but usually from MY experience the paid groups are not worth it. It isn't because you don't meet great people, and there isn't value provided though. This is because they are always trying to pitch some course, program or plan that costs thousands of dollars! It gets really old really fast and they use all kinds of tactics to pressure you to sign up. I would search for free ones personally and see how those are!

@Arjun S. This is a great question man, unfortunately that is the market we are in right now. It's the Wild West out here! I'm a bit south of you here in San Antonio and I work with a builder regularly on new construction homes, duplex's and condo's. The lumber FUTURE's have decreased but that direct price decrease is just now hitting the market and I can tell you it certainly isn't going down by 3x. Copper, metals, and OSB all continue to increase in cost, so just because lumber goes down doesn't mean everything else does. We get bids and 30 days later they are no longer valid and the price of the product or service has increased by 5-10%. I'm currently dealing with this on garage doors and paint for a house and man is it frustrating!

These clauses are there to protect the builder and the trades from losing money. There is no limit to what they can charge because it is dependent on current market prices which are out of their control. I would absolutely ask to see the bids or documentation to prove what they are saying to confirm this! These clauses are usually pretty straight forward, you either pay up, or the contract is terminated, and they turn around and sell the finished product for even more.

@Luke Zagrodny Welcome to BP and I applaud you for wanting to take action right away. While action is super important I second what @Sasha Fukuda says you need to learn first. You are still rebuilding your credit which probably means you don't have a lot of excess money to spend/lose. Typically if you don't have the money you either have to partner with someone who does, or get creative on the deal. Not having a ton of liquid capital is not always a bad thing, this will mean you will have to learn to be resourceful!

It seems like you have two wants/goals. #1 Being a realtor and #2 being an investor and buying an investment property.

I would firstly start or continue to read and learn about investing and being a realtor. Being a successful realtor is not easy whatsoever so I would focus on that first and foremost if you truly want to do that. Something like 80% of realtors quit in the first year, so I would find a good mentor or resource to make sure you aren't a part of that 80%. During this learning time NETWORK! Join Real Estate/Investing FB groups and meet ups in your areas, see who is purchasing deals around you and call them!

Ideally once you start getting some deals closed and have liquid capital and some experience you are ready/confident enough to take one down! Wish you the best of luck and if you are ever in San Antonio I'm happy to connect!

@Jeff Brown What are you building the building for per sqft? I can tell you right now that for us (I work with a builder) to build a new construction duplex it starts at $150 a sqft on a flat lot. This is with VERY basic finish out and nothing fancy.

Let's assume that construction costs don't continue to increase (unrealistic and I would plan on them increasing) and you want to build two 1200 sqft 3 bed /2 bathroom units. That construction cost total would be $360,000 (2400 sqft x $150 a sqft build cost). If you can rent out each side for $1500 that is $3000 in gross rents monthly. Do those numbers work for you?

None of this includes land cost and a million other factor's that depend on you, the loan and how you go about things. I can tell you that typically if you want a construction loan you need to bring 20% down to the table for local lenders around me. I would always assume worst case scenario and plan your numbers based on that man! Contractors will screw you over, there will be delays, you won't pass inspections, the city will complain about something. Be prepared and make sure you have an experience builder or GC in your corner!

@Paneez Kosarian How did that investment go? Do you mind sharing the numbers or experience thus far? I deal with new development condo's in downtown San Antonio and it is a very unique and interesting real estate model. Curious to see the similarities between here and San Francisco! 

@Amanda Thompson Great question! Property management is tough which is why most people don't want to do it and hire that out. As everyone has said because it's 110% true screening your tenants is super important. I can count on one hand from my PM days when my gut feeling was wrong about a possible future tenant. If something feels off, or fishy DIG DEEP.

My old boss ( commercial property manager ) would ALWAYS have his wife in the meeting and ask for her opinion on the possible commercial tenants. He said women's sense of character and honesty was unmatched. I don't know what it is, but women pick up on stuff that us men miss and his wife saved our butt's multiple times by pointing things out! If for some reason you don't feel right ask for a colleague, friend or your husband to look things over and give their input. 

@Zoran M. What you mean this amazing deal didn't just come from a secret marketing strategy that you can learn by buying someone's 2,000 course?!?! All jokes aside that's awesome man, I'm involved in a 19 unit deal here in San Antonio and it definitely has been like drinking through a fire hose! I'm learning a lot and I'm sure you will too! I don't think people (including myself) realize how much time and effort goes into making deals happen. It was a big wake up call for me when it took us 6 months to get the land and everything purchased and organized. Then we have to get approval from the city and then go build the project which is the hard part!