All Forum Posts by: Mitchell Rusten

@Dave E. This is market dependent IMO. I live in the Minneapolis area and everything within 40 minutes of downtown Minneapolis is built up, with little room left for a new development of cheap housing. In an area like Fargo North Dakota, where they have land to build as far as the eye can see, I think it’s a much more pertinent threat.

I may be overthinking things, but I’m preparing to do my first mailing and was wondering what type of paper is best/necessary for my letters. I plan to print a “personalized” letter (interchangeable name and address) and hand-sign the bottom of each letter in blue ink, and then handwrite the info on the envelope. I have the program set and my letter designed, so I’m moving on to ordering materials. I just want to make sure I get a paper that will hold up in the mail and won’t get beat up too bad, so the letter maintains its integrity and looks more legitimate. I also don’t want something that is so thick it isn’t practical. Do you folks have any recommendations for me?

Thanks!

@Vania Castillo thanks for the suggestion! I’ll reading that book next.

You hear the idea of an abundance mindset on the podcast a lot and after taking inventory I've realized I definitely have a scarcity mindset by default. I am wondering if anyone here has read a good book that discusses what it means to have and develop an abundance mindset? 

The feeling that I am going to be wasting everyone’s time. I’m primarily interested in stable commercial real estate. I think a stable asset, like something with a triple net lease and a good tenant, would not only be a good place for me to start, but a good place to start a relationship with investors as well. A deal like this would be less reliant on my ability (or inability) to operate the asset, and more on the underwriting process that will have to go through several checkpoints to actually get the deal done.

Where I become concerned is that I will find something I like and I won’t be able to find someone to finance it. I’ll make agents, sellers, lenders and so on give me their valuable time, and I’ll have trouble finding the funds. It makes me feel at times like an imposter when I’m talking to someone about a deal and I don’t feel 100% confident I will be able to close. I’m kinda trapped at the point of feeling like I need a deal to find investors, and I need investors to find a deal.

@Mike M.

So that is obviously the part I am confused on. So if I made, say. $20k on a flip then went and put $40k in another house, wouldn’t that be $20k in revenue and $40k in expenses if we don’t include financing? So I would show -$20k in profit for the year, but I’d still have to pay taxes on the $20k I made on the one sale?

Simply put, why do real estate investors need to put their profits on something like a flip into a 1031 exchange rather than simply putting the profits into a new property and writing off the acquisition like a normal business would? When McDonald’s makes a profit on a hamburger, they don’t have to enter the framework of something like a 1031 exchange to avoid paying the taxes on the profit and using it to buy more hamburgers, they just write off the acquisition of more hamburgers and don’t pay taxes on it until they eventually decide to step out and stop their continuous acquisition of more profitable hamburgers. Other than when a property can’t be found before the end of the tax year, is there a reason I’m not aware of that says you can’t make $40k on a flip and use buy 2 houses for $20k + hard money and avoid taxes rather than having to abide by the rules of a 1031 exchange?

@Nik Moushon

Thank you. This is very helpful. I will get in contact with the city now.

@Nik Moushon

Hi Nik, thanks for replying,

I have worked with the city planner and the lot is properly zoned R2 residential for a density of 1.15-4 lots/acre. I have it in writing from the planner that as far as city code is concerned, it’s build-able.

Comps are where it gets a little interesting. In the development I mentioned, the smallest homes are 3/2, 2000 sqft on 0.2 acres and selling for a minimum of $430k. Across the street from the development, a plot of land that’s 2.07 acres sold for $240k to a retail buyer who built a single home on it last year. These properties are near Lake Minnetonka, which a lot of people from the Minneapolis metro area want to get to as it’s a half hour drive from downtown Minneapolis. Both my property of interest and that land comp are about 0.3 miles from the lake, which makes it a fairly desirable location.

Interesting part about the developer of larger ~50 home development that’s down to its last few lots is that they are a big national developer. They don’t have local eyes on the market for something like this, so I wouldn’t be surprised if it hasn’t hit their radar.

I’m confident if the deals make sense, one of my partners will want to finance it. I just need to have a clear expectation of what the process will be like before I bring it to them, because I hate to tell them one thing and have it end up being another. Those relationships are much more valuable than any one deal.

Who would be the best person to talk to as far as the wetlands issue is concerned?

If you have any more questions or additional input, please be sure to share.

I’m looking into buying a duplex on 3 acres directly connected to a new development that is almost completed. The way the terrain works, I could be able to split the nothernmost unused 1.5-2 acres of land and sell it to a developer. The home is currently listed for $400k, but has been on the market for 70 days without a price drop going into the down season, so I could probably pick it up for less. Comps in the area suggest the duplex on ~1 acre of land should go for $340-360k. It’s pretty turn-key.

The issue I am running into is whether or not the land is entirely capable of being built on and supporting a home. A portion of the land, maybe ~0.75 acres, shows up as wetlands on the wetlands inventory mapper, but the agent listing the place claims it’s barely a soft spot and should be build-able (not that he has any bias). Part of the difficulty in getting a solid answer on this question is it’s winter in Minnesota and the land is frozen and covered in snow.

How do I go about figuring whether the land is capable of supporting a home or whether there is an option to mitigate the issue? I figured I could call a builder but run the chance of being undercut since the deal is on the MLS and I don't have it under contract. The other issue I've been reading about is that developers can have issues getting bank financing on raw land, and this would certainly be raw land. They wouldn't have to go far to hook up water and sewer and so forth, but that wouldn't matter much to a bank.

What steps do I need to take to figure out if this is worth my time? Should I call an actual builder and see if they are interested, or should I go another route to get the necessary approvals for the land? I’m pretty new to this, so I think my best bet is to split and just sell rather than trying to turn them into proper paper lots.