All Forum Posts by: Nathaniel Schmitt

@Omasirichukwu Udeinya I interviewed quite a few before i decided to go with the one. Some I found by driving through areas I wanted to build in and calling the numbers posted on new construction and some were through lender referrals or past partnerships. Be sure to go see a few home they have done recently before deciding and make sure they are well acquainted with the permit office of the area you are working in. 

@Omasirichukwu Udeinya

Build, refinance, and hold is definitely a viable strategy (I just completed a built in Atlanta last month). We bought a collapsed home, tore down, had an architect draw new plans and got approval from city, and executed the build with my contractor in about 9 months. We held a CP loan during construction and are now in the process of doing a cash out refinance to take advantage of the forced equity and massive appreciation over the last year. When the refinance clears I will be able to walk away with my initial cash investment, 25% in equity, and a pretty nice cash flow. So to answer your question, yes, building can be a "good" idea.

The caveat is that this strategy is much more involved and has a greater number of moving parts than many of the other popular strategies for first time investors. There are a few more loan products you must chose from, planning requires a great deal of care to avoid excessive holding cost (how long will permitting take, build timeline, labor and material price fluctuations, how many other projects is your builder involved with, current shortages in supply chains, etc.). In addition to all of this most banks will want 20%-25% of total project cost (land + construction) as a down payment. So for a modest Atlanta build where [Land =125K | Build Cost at $125/sqft for 1,600 sqft home (a low estimate in the current market) = $200k | Total cost =$325k you would be looking at a $65K down payment that would be locked up in the deal for about 1 year (assuming you refinance at the end to take equity out). 

If you have the capital to lock up and the willingness to learn and manage all the moving parts then go for it. Just know what you're getting into ;) 

Curious to know if someone has any advice on putting together a pro forma for development based on the scenario below.

I have a fellow investor who owns 50+ acers of undeveloped land in the South East. I have him interested in the idea of developing a small community of tiny homes on the land to sell or rent (to be determined). He is at the point now where he would like to be "convinced" with some numbers or a pro forma for the deal. I have done mostly single-family flips or Muilti-familty reposition so this resides a little outside my area of expertise so id love to see if anyone one has any ideas or template they have used to position similar deals.

Just got my first offer accepted on a home that has a current tenant and will cash flow on closing day. The offer is for 65k all cash. I have the funds to pay cash at closing for this property but would rather use leverage so that i can rehab or buy more properties with remaining capital. The problem is that most lenders don't touch loans under 100k due to large up front fees which is going to make using leverage a bit difficult. I work with several people who are eager to invest with me in real estate but I am unsure on how to structure a deal like this with them. Looking for any advice/stories that could help me with this particular deal and allow me to immediately start looking for another.