All Forum Posts by: Nicholas Spinazze

I like the numbers. I like that you have a backup plan, and it sounds like you've done your homework. If your numbers are conservative for market fluctuation, I would do the same. The only difference is, it's not really a BRRRR. You're not rehabbing and you're not refinancing. But this sounds like a great investment.

@Nicholas Spinazze yeah, if your loan is a "construction-to-permanent" loan then you already have a permanent loan in place...which is a little strange that they haven't talked over those numbers with you yet.  But get with your lender to know what your refinance numbers look like and we can advise further.

@Nicholas Spinazze

Building from the ground up is absolutely a great strategy in certain situations. As with all acquisitions, you must buy right. In this scenario you must "buy the land right" and "build right" ( Do not over build for your neighborhood,) I always look for value / opportunities that others may have overlooked or may not even know about the possibilities of what they can do with the land via zoning, subdividing, etc. So, you have already hit a home run by finding a lot that you have mentioned you have subdivided into 2 lots and on top of that you can also build an ADU on each lot. So, kudos to you brother!!! Great start to the build!! What unfair advantages do you have at your disposal? Are you friends with any General Contractors or trades that you can get a better deal from? What kind of sweat equity can you contribute? With the main goal of building it as efficiently as possible which will clearly lead to the most equity at time of completion. (Hopefully enough to execute a full BRRRR after completion even if you have to stabilize / season it before a cash put refi) Now on to the pros and cons of building new. The pros to building new are : 1- That you a doing a massive value add and creating a substantial amount of equity. 2- You will have no Cap-ex and repair expenses for many years to come. 3 - You end up with a nicer property which will demand higher rents, both for short term rentals as well as long term. 4 - Building 4 buildings at the same location should lead to some economies of scale if you can buy in bulk certain items. It will also be more efficient time wise having all the subs knock their jobs out while they're there on site. Time savings = Money Savings / Time is money!

The cons of building new are: 1 - Unforeseen expense increases due to supply chain issues, high labor demand resulting in higher costs, Contractor not budgeting correctly, etc. Do everything in your power to stay in touch with them and review budget as frequently as possible so that you're at least aware of the changing expenses and can adjust accordingly. 2 - Holding costs during construction phase and until you have them rented and bringing in income. Make sure you factor in all the holding costs. Interest, Insurances, Property Taxes etc. 3 - Generally speaking, you usually will get a property that you remodel rented and providing income quicker than a new build. 

As a contractor (not a GC yet) I have been able to build in the past where the appraisal came in double what I had in the total build. In which case I was able to refinance and pull out all of the initial capital. Now to be clear, that did in fact include a bunch of sweat equity that I contributed but then again, I'm fine with delayed gratification! 

I wish the very best of luck with your development!! I look forward to seeing how this turns out for you!

Hey Nicholas,

Not exactly a software engineer, but I am a Python / Data guy.

1. I pulled county home sales in my target area, and called an API that converts address to Lat and Long.  From this, I made a map that showed which areas had the highest increase in home prices, to show the "path of progress", ie: which areas are on the edges of the appreciating areas that might appreciate next.  It point out a new neighborhood that wasn't on my radar before, but ultimately two deals fell through there and I bought somewhere else.

2. I built a real estate calculator that works probabilistically. IE: instead of saying maintenance is $200 / month, it uses a distribution, most months it's $0, while some months its $2000. It gives a range of outcomes for each investment: IE: in 10 years the 80% confidence interval for ROI is 2-14%. At some point I'd like to build this into a website, but html is such a pain the butt.

As for automations, I just use Mint, and then export the data and use excel to automatically categorize things - not a very Software Engineer type solution, but it makes my accounting pretty quick.

I find that more and more students want to have pets, so perhaps keep that in mind when you build (fence, LVP flooring instead of carpet, etc).  You can charge extra for pet rent.

Woo Pig Soooie good sir!

As someone who has been on both sides of this equation in the NWA market I can say:  there are some extreme upsides and downsides.

The upside is that unless you build or buy something near campus that would appeal strongly to the staff and various others who are want to live near UofA then you are likely limited on options.  The non-students who tend to live near the university tend to buy and rent different types of homes than university students living near campus.

While some students can be rough on the properties, the cashflow is nice and it's a good way to afford some prime real estate that has an evergreen demand.

If you choose to rent to traditional students you should absolutely have their parents co-sign.    

You may be able to use noise monitoring devices, or you can design the space to be party un-friendly.  Alternatively you can work to build good rapport with the tenants (or hire a PM that does) and work to create a culture there that respects that parties are not allowed.