All Forum Posts by: Michael Koncaba

@Jay Hinrichs Thanks for rearranging and sorry about lack of clarity. I could have been mistaken about the double wide. The contact we have sells single wides. I have seen their inventory and they are not junkers but not exactly high class. He is a friend of my partner's as well so we may get a better deal then normal I'm just not factoring it in to be safe.

@Scott Mac Now that is something we haven't thought about. Opens up the possibilities a bit. Thanks!

Hello BP,

Thought I would gather the masses to help my partner and I bug out a deal that sounds a little too good. I would like to accurately estimate ALL of the costs here because we dont know what we dont know. Then we will package the deal together nicely to sell to another investor with some more capital or other lenders that may lend the funds, since we only have about $40K in cash.

Please pick this apart and estimate all you can. Tell me what we are missing or where we are very wrong. We don't want to take on a project this big yet if its not worth it.

Here is our plan:

We are in Brazoria county, Texas and there is a 3 acre plot of land for sale nearby for $60K. My partner is an agent and was looking at other recent smaller plots in the area with nice mobile homes on them selling for $180K-200K each. I have not seen comps personally, but I know this type of home is at least moderately popular in our area so we may have an opportunity to purchase, subdivide into three 1 acre plots, level them, add a long gravel driveway that splits into three and leads to a nice double-wide mobile home on each lot. We would of course ensure all the necessary public utilities are added to the land and connected accordingly.

Here are our very preliminary estimates on what these lots might sell for and what it all might cost. Trying to be conservative with each as well..

Sale price of each lot - $150,000                   Total Sales = $450,000

Price of Lot = $60,000

Clearing, leveling, prepping land = $30,000

Adding Gravel and road = $16,200   (6ft X1500ft X $1.8/sqft) Guessing here on length/cost.

Mobile Homes $20,000 X 3 = $60,000

MH Transport $5,000? Approx. 30 mile trip

Adding utilities $25,000

Borrowing Costs = $30,030 (15% of total expense assuming borrowing 100% of deal as quick estimate)

Property taxes/other Fixed costs = $4,000 

Total Costs = $230,230

Cost/lot = $76,743

Potential profit at $150K/lot = $219,770

Now that Ive made my risk averse estimate, my partner the awesome agent says he could sell them for $180K each at least, which could put our profit over $300K!

We ran through this together the best we could so far and it seems too good to be true. We aren't aware of many of the costs I am sure, or are overestimating the sale price of each finished home and lot more likely. but either way there is a ton of room to be wrong here so I would love to know what everyone thinks. Are we this naive? or could we sell this deal to an investor? Who could we look to for more guidance locally? 

Looking for tough criticism, but if you agree and may want to talk about lending us funds or coming on as a partner, message me! 

Thanks, BP

Hello @Account Closed, what kind of funding are you talking about? Ballpark minimum?

@Krisdeon Slack Using HML's can be a great way to start so long as you ensure the deal is profitable. If the lenders are just as confident in the deal as you are they should not care about your experience level. They will get their money either way and you will get funding.

The major key is to get a deal good enough to cover lending costs. 

It's not a popular view, but I refuse to contribute to a 401K even if my employer matches. The way I see it, unless they are giving you a mythical 200%+ match its not worth it. Yes we get caught up in the "free money," but its not a great description. The money goes to wall street to be controlled by someone you never will meet to invest in things you will never see and most likely never completely understand. It could be worthless any minute. Most importantly, you can't reclaim the money without a large tax penalty until you are retirement age. So if your in your 20's like me you're going 40 years before you can touch your own money without consequences. I know that's the point of a retirement plan, and if you can afford it and still make your own investments more power to you, but its a long time to spend stashing your income away in something that is not guaranteed to be worth what you put in at retirement. 

I would stack my bank account all I can and make large investments a little further down the line. It arguably has a greater impact than doing very small amounts of investing for 40 years. 

But to each his own.

My opinion here isn't the popular one, but I think you should do all you can and pay as little of it as legally possible right now. You should use every dollar you can to save and invest now, and pay the debt off as you go or later. I say this because investing pays you and student debt only costs you. Your debt isn't going away very soon and I would rather use what I have to begin or boost my investing career than sink my money into debt. 

Just my perspective. Good luck!

Oh and its an option for them to refi at today's much lower rates. Don't cash out refi just refinance the current amount due. This would lower their payment significantly and you could keep your money for more investments. The downside would be it drags the loan back out 15-30 years whatever you choose.  

As a (almost) CPA I have an interesting angle for this. They could give you the house as a gift while they are alive. Depending on the size of their estate when they pass, they will have a lifetime exclusion that will be much more than the market value of the house and they would not have to pay gift taxes on the home. The only problem is that uncle same gets his money from someone, so you would pay more in taxes upon sale of the home in the future due to inheriting their basis in the home.

The other option is to let them pass it to you upon their death. You would get the stepped up basis and a much smaller taxable gain when you sell the home. No estate tax would apply unless their total estate is about $5.5 MM. At least at the current laws. This is probably the best tax scenario for everyone unless they have a large estate.  But definitely consult another licensed experienced CPA in your area about these issues. 

As for paying their mortgage of course that's a personal choice. I would help then pay it off if I had the money and I could have it once they're gone. 

PS Sorry if any if that sounded cold. Good luck with your investing and finance decisions. 

-Michael Koncaba

Call around to every bank you can find. Many don't require seasoning. I found one in my hometown that will refi as soon as it is in living condition. 

Yes obviously very situational. I personally would refinance and pull equity out of my home as cash. Then use it for investment. That way its not due back to the bank.