All Forum Posts by: Nik Moushon

 I can personally attest to starting small. You will learn 90% of what you need to know to do any huge project with a lot less risk. Not to mention the need for less money up front. 

The biggest thing that can help you is getting the land in cash or find a way to have it completely clear by the time you want to build. There are other options where you don't have to have the land clear of loans but its very very hard to do when you are first starting out...near impossible actually. It also makes the ROI a lot smaller and reduce your over all margins for success at the end.

I would start with a duplex. Technically you can get up to a 4-plex with a residential loan BUT the cost is just significantly higher than a duplex to build. So its just how much money you have at the beginning that really determines what you can do. Also your risk tolerance. Same applies here too, once you build a duplex you know 90% of what you need for a 4-plex. This were with your next project you can scale up fast. 

It called a utility easement. You can't build anything on a utility easement. Maybe a tiny shed or something similar but no full size buildings. 

Even if you could, I doubt you would get the parking requirements. This is a hard pass on being worth the development cost.

Tiny homes do not meet code and zoning regulations in about 99% of the country. So do some serious research on if you can even put those up to begin with. 

STR are getting more and more restricted in more and more cities/counties. Many are considering code regulations so they have moratoriums in place. So again, do some serious research before jumping in to this as well.

Both evictions and foreclosures will take 1-2 years to get through. And thats if both happen at a mass scale. Which I dont think will happen. My guess is that 60-70% of people going to be evicted will just leave before anything gets filed. Banks will do pretty much anything to make sure someone doesnt go into foreclosure. So I don't  think there will be a flood of those either. Even if theres 500k foreclosures, just because of the amount of time it take for them to process, they will trickle in over the next couple years.  

The Fed has already laid the ground work for rising interest rates. They have to. Otherwise inflation will get to 10-15% and that will surely cause a crash. They would rather cause a big correction than a crash. So I think we will see interest rates in the 4-5% by winter, at the latest spring 22. This will be the tipping point in the housing market that will see a hard softening of prices dropping to more normal levels, so probably a 5-10% drop in price. What could spook the housing market to fall further than that, to the 10-15% range (maybe 20%), is if the stock market starts a major dip at the same time. Not because one controls the other, but because of humans being human and forcing a correlation between the two because thats what happened in '08. But I think that would be short lived with a quick rebound once everyone realizes it was an over reaction. Disclaimer - I don't have stocks (outside my 401k) and know very little about the stock market. So the stock market correlation is truly a guess on my part and not backed on experience or numbers.

What actually concerns me the most is the banks. They are already tightening up their lending requirements LIKE CRAZY!!! To the extent that a lot of people that bought a house 6-12 months ago would struggle to get approved today. I've been seeing a good chunk of the houses that come back on market because the buyer couldn't get approved. Not because they were way out of their lane and trying to buy a house they truly couldnt afford but because banks have raised the bar really high for buying standards now. My take on this is that they think another major crash is coming and are hedging against it since they see so many houses going for 10-20% above asking, even in this high peak market. I think they are wrong on a major crash but what I see as a potential consequence of this is that they are tightening up now bracing for a crash and when any dip in the market actually does happen (even if its only 5% dip) they will tighten up even further. Restricting the market to only top tier buyers with either lots of cash for a 30%+ down payment and/or those with very high credit scores (750+). This will get even more restrictive for non-owner occupied SF and MF 1-4 units. I'ver personally seen this already. 

I also see rental demand spiking while, whatever ends up happening, happens. The next 1-2 years will see 10-20% increase in rental price yoy. Between a small dip in home prices, banks tightening lending requirements, tenants leaving before being evicted, and eviction and foreclosures eventually rolling out after year 1. It will drop back down around year 3-4 if everything takes a normal course back to "normal" price as if we had gain the average 3-5% yoy. So if anyone is going to buy in the next couple year make sure to run numbers on a "normal" rent price and make sure thing work at that price because I don't see these high rents staying with us past the next couple years. 

Of course, I could be completely wrong. A famous politician once said "Don't under estimate a politicians ability to screw things up!" (I paraphrased of course)

Make sure you have caffeine if you are reading that stuff at 5am haha. Depending on how much you are doing will depend on if you are triggering additional permits or not. If you are not hiring a GC to do the work I suggest going into the city (or calling) and having a chat with what you are going to need to do. From what you've described, it kind of sounds like a complete gut remodel, just in phases since you are living there a tthe same time. So at that point you are required a full permit set which is basically what is required of a new construction build. Just be prepared for that. 

As for the STR code, I don't want to go into to many specifics because I'm not set on whats going to work or not. But really it looks like you have to do a whole development of STR or just find a different are that is not above the cap. This code is about as restrictive as you can get and still allow STR in some fashion.

@Jay Hinrichs @Steve Vaughan Thanks for the mention. Chelan sure is a gem of a place. Both to live and invest. Though the STR market sure did take a big hit this month with the new code now in place. But I got some ideas to work around those.

@Joseph Reardon Your house hack intention is a great way to start. Be that a live-in flip or keep it as a rental and move to another house. Just keep in mind, when you are working on your long term scheduling, that if you live in it less than 2 years you will have to pay capital gains tax when you sell it. So make sure not to forget that in your final numbers. I can go into more detail if you want. 

Egress requirements are pretty simple for a single family. Pretty much you need an egress window in every bedroom. So if its the basement you are adding bedrooms too, you will need to plan the location of the bedrooms arounds where you can cut in new windows and window wells on the exterior. It sounds like you are going to be doing enough work that you will need to bring the entire house up to current code. One of the things that could be an issue are your stairs. Making sure they are at least 36" clear width and have 6'-8" min. head clearance. A lot of older houses don't meet those requirements. So you will need to check. That could mean widening and moving the stairs (in a worst case scenario). If you like some light reading (lol), all the codes you will be forced to follow are from the 2018 IRC. Its free online. 

You will also have to meet the new energy code requirements. There are exceptions for existing older houses but I'm not sure off the top of my head what those are. 

So I sold a rental during this crazy market to take advantage of it. Failed putting the cash into another property via a 1031 (bidding against insanely rich people offering all cash is incredibly annoying). I have some of my own ideas on what to do with this cash but want to pick other people brains as to what to do with it.

Part of me wants to just sit on the cash until the market cools a bit (not waiting for the next 08, just drop back to a more normal market). The other part me says don't wait and just keep hunting for the next property even if you over pay (one because the cash isnt doing anything and two because inflation is actually a serious issue right). 

So, what would you do? Sit on the cash for a little while (6-12m) or over pay for a property now? 

 Right now, you are SOL. You wont get an eviction right now for any reason. Even if you were going to sell it. No judge and no cops are enforcing evictions atm. Until the USSC finally make a ruling, instead of just an opinion, the current administration (and our governor) is going to keep the moratorium in place forever.  

 I'm not sure how many more duplexes I would do either. All the management companies in my town are horrible (for both tenants and landlords). So I dont want to get too many that it takes more time than I can spare to manage. 

 Thanks for the support. 

Minimal maint. for at least 5 years (hopefully 7-10). Obviously that depends on the tenants too haha. I was originally going to do one side as a furnished rental that was targeting traveling nurses. Well cost over runs took that option out. So we are going to try that when one of the tenants moves out. But furnishing a unit to the standards for nurses is a bit more than a typical vacation rental so I'm expecting to spend about $5-10k (depending on what inflation does to everything).

Definitely going to be doing this again. Though it will be different as I doubt I will be buying another house to live in and subdivide. The wife (and I) are getting tired of moving. Moved 7 times and 9 years...need to settle down. Moving is hard enough without 2 kids. Biggest problem is I can't compete with the stupid amount of money that is coming from the west side (and elsewhere). I dont understand how people can pay 10-20% over asking and still turn a profit. They just must not care about their ROI and just want to park cash somewhere. Its getting beyond insane. The market is also causing people to be too bullish with their prices. Everyone that has land automatically thinks its the perfect piece to develop and they want top developer prices for it. Its beyond frustrating trying to deal with someone that doesnt understand that not every piece of land can be developed to the max potential the zoning allows or worth developing at all. So I will probably have to wait until the market cools down, find investors, or get really lucky with a steal. I will probably do something next year. I also need to get back to studying and get licensed. That will also open a lot of doors for me.