All Forum Posts by: Deonte Hill

Quote from @Deonte Hill:

Hello all,

I am looking for recommendations for a lender who will fund the acquisition of land and the cost to construct a duplex. This would be my primary residence and would also like to use my VA loan.

Thanks!

 Hi Deonte - I use a couple different lenders in the area that likely can help you. Shoot me a direct message and I can share their contact information. 

That is a small kitchen so looking at less than 10k all in, the flooring 7-8k if you are using a life-proof style LVP and drywall/paint about 5k based off your SF. Bathroom depends on if you are swapping out your walk in. But if it’s just a new vanity, TP package and shower door looking 2k or less. I'd say your safe at 30k 

How many SF ?

Quote from @Deonte Hill:

Hello all,

And thank you in advance for your input. When it comes to rehabs, I’ve seen in the forums a good rough estimate is $20-$100/sqft, dependent supply the severity of the rehab. I’m looking to purchase a property and the house seems in pretty decent condition. Just needs to update the kitchen cabinets, appliances, bathrooms, and some paint. Would be too far off to assume a a rehab cost of $40k?

I’ve attached some pictures for reference.

Depending on what you are doing with the unit I don't see $40k in costs there. I see perhaps a new kitchen, paint and maybe a little flooring. 

The only quick number there might be is doubling the cost of materials to add in labor, but that's not guaranteed - some jobs have few materials and a lot of labor and others are opposite.

I usually tell my investor clients that if the building itself will be in a flood zone (not just parts of the lot), it's not worth the investment unless it's a steal and you're able to pay off any mortgage easily if flood rates rise ridiculously (and you can afford to pay for any flood damage, yourself).  There's so much fluctuation in flood insurance policy right now that rates could drastically rise; I think right now they are allowed to raise it 15% per year even in owner-occupied.  You're stuck paying it if you have a mortgage because the lender requires it and can force-place it on you if you cancel the policy.  And others have pointed out that building in flood zones can be much more expensive with special permits, requirements like living area starting above base flood elevation, probably more than the $25K difference in the lot that's not in a flood zone.  

I would avoid the flood zone. As a lender, we require flood insurance if the property is in a flood zone, which can eat into your cash flow if you want to hold the deal. 

@Deonte Hill

I think it matters what part of Houston you do this in. I build in Independence Heights which is usually in the 500 and 100 year flood plain. This area pulls comps. and appreciation from the nearby Heights area. The land is about half the cost of the Heights. All of our structure is well above the flood plain with no garages (I build duplexes).

Couple of thoughts:

- Permitting the project takes longer because it has to go through additional departments with the city. I think our last set of plans took 5-6 months approval time (this may have gone down now). 

- Construction is more expensive. There are more hoops you have to jump through with inspections, building techniques and building materials. This adds cost and time to the project.  

- Resale value may be lower depending on factors regarding the flood zone. 

I would suggest not trying to re-invent the wheel. I build duplexes in areas that have good duplex comps for long term holds (avoid overly saturated areas). I try to copy the type of structure thats working (changing the elevation) and use those as comps when I go to use a DSCR loan on the back end to pull money backend.

Knowing what strategy you are going for would help me direct in a more accurate way. Feel free to shoot me a private message. I and a Houston Re investor, developer and agent. 

- Chris Kersey