All Forum Posts by: Nik Moushon

@Aaron Ingram

$5000-10,000 for a design, construction documents, structural work, permitting and dealing with any city comments is pretty typical for any size project. Remember you are hiring an architect not a drafter. You also have to remember that there is huge demand for architecture services right now because of the construction boom. So that "expedited permitting" is not that you get to go through the cities review faster. Its so they push your project to the front of the line in their own que. 

If you are wondering what you are paying for you need to just read the proposal. They should have that broken down already. 

The requirement for an architects stamp has nothing to do with the building height. Single family homes under a certain square footage (varies with every city) do not need an architects stamp. If you keep the design simple and know how to size your structure correctly then you dont need a structural engineer either. Architects are aloud to do their own structural design for most things. This is why you didnt have to get one for your small SFH.

Once you step into large custom homes or anything more than a single family you will need a professional architects stamp. Anything commercial, regardless the size, will require a professional stamp as well. 

Also, permitting doesnt cost anything. Rarely does an architecture firm add extra cost for permitting. Rarely will they reduce their cost to take that little bit of work out too. Its literally a couple piece of paper that are mostly copy/paste to fill out. Most cities are now taking submittals electronically and so there is no permit running like their use to be.  Also, architects have all the connections with the city personnel. This goes a long way to making sure things go smoothly.  

@David Weskamp

A lot of first time 1031'ers tend to forget that you have to spend what you gained in the sale. So basically you have to purchase a property, or multiple property, that their total purchase price equal the sales price of your property you just sold. So you are selling for $208k, so you have to buy $208k worth of property. Now there are some expenses you get to take off that, like realtor fees, but its not much. 

Now you can still purchase the $70k property with a 1031 but you will just have to still pay taxes on the difference in gains. 

You really have only two options.

1 - You have public sewer that you can connect to. If you have this, then you will have to call the utility provider (usually a city or county PUD) and ask what they size of the main line is and what the limits are. Then you will have to figure out how many connections are possible per lot and whats the maximum size a connection can be and then based on that connection size how many toilets are aloud. You may be limited to one connection per lot or multiple. That varies everywhere.

2 - You have no public sewer and you have to use a septic system. The septic system is designed by number of bedrooms, not toilets. There is also a max size to them and it is usually based on the available size of a drain field you can install and the type of soil you have. You will have to hire someone to come to perk tests for your soil. Then you take that perk test to a government agency that then tells you how large a septic tank you can have. You could be aloud multiple on a single lot or not. The process and the number varies with every city/county. So you will have to call and talk with them. 

You also need to check the zoning to make sure that what you want to do is even aloud. Thats your first priority. 

@Meghan Hunter

What ever you do, do not sell before you develop your lots at to a certain point. I would start that process ight now. Here's the reasons why:

1. You wont have a better market than you have now for this. Low interest rates and sky high prices. 
2. Sky high prices are great for you right now because you will get way better appraisals on your land, which in turn gets you larger loan amounts.
3. Yes, materials are high right now, but they are coming down and you aren't buying materials now. You wont be buying materials for at least a year or more. So there is time for them to come down. Just look at lumber...it has already wiped out its entire 2021 gains in two weeks.

Here is how I would proceed if I were you. I would first found out if you have 3 parcels or is the parcel large enough to split into 3 parcels (how you wrote it above isnt quiet clear). If you already have 3 parcels then I would do a BLA (Boundary Line Adjustment) to move all the boundary lines in a way that would give you 3 useable and buildable lots (maybe they already are). This would cost about $5k (may vary in your market) for a civil engineer to do plus what ever your city permit fees are. This would give you more leverage when/if you do decide to sell. You might even be able to get more lots depending on your current zoning.

So if you dont have 3 parcels or can get more parcels then your next step would be going through the short plat process. This is a much more costly process as most cities will require all utilities to be installed and stubbed on each new parcel. Though this costs more money up front, you have now increased the value of the lots even more as well. Even more than if you just did the BLA. So run the numbers and weight the trade offs. 

At this point is where you will want to decide what to do. I would not sell anything until you at least get here. This is the point that gets you the most potential in returns for as little work as possible. You are basically at the point of a developer selling off building lots in a subdivision. Just a much smaller scale. So that can give you a since of the potential ROI increase over just selling the house as is. It also give you the most options for a combo of selling some and keeping some to develop. i.e. sell the two lots and keep the house which keeps your cash flow but also gives you cash. Or sell the house and keep the two lots and the money from the house can fund you building on the two lots. Sell the house and one lot to have the fund to completely build on the third lot with no loan. etc etc. Lots of potential options here.

If you decide to keep everything and develop (which is my suggestion) this is what you can do (in a VERY brief summary). Use the equity in the house and the equity in the two lots (yes there would be 3 equity pools here) and use that as the down payment on the construction loan and build on the two lots. At the end you can then decide to keep all the houses and you would have multiple cash flowing properties all in one location or sell off any number of them and pay off the remaining loans to a point where you have a higher cash flow that gets you what you want per month and on less properties and be less leveraged than having more properties for the same amount of cash flow.  It just gives you a tremendous amount of potential options that you get to pick what is best for you. 

I did basically what you are doing this past year. Bought a house (used it as my primary residence) and subdivided the lot and built a duplex. I was able to get the new lot free and clear off the main house and not lose any value on the house either. This gave my the 20% down payment I needed for a loan to cover the duplex. So no additional out of pocket costs to me. I have written a thread here about it: https://www.biggerpockets.com/... I havent updated it in a while....I've just been WAY too busy (80+ hr weeks for months). So I am actually almost finished building and will update the post sometime soon. But feel free to PM me if you want to discuss more in depth details. 

@Laura Guy

With labeling it Housing Provider, I have to agree with most here that it would cause more harm than good in the long wrong. I support what you are trying to do but Housing Provider sounds the same as Health Care Provider and look whats happening with that. The major push for government run health care and that its should all be free and paid for by the government. If you don't want to see whats happening in Portland happen elsewhere....then don't open a door that allows them to gain a foothold like this.

Words have an extremely powerful effect on how people interpret the meaning and connotation of its purpose. You can use 10 different single words that mean the same thing and you will have 100 different interpretations of it at the end of the day. So its not just enough to get rid of Landlord and replace it with anything. Especially in todays society you really have to think about all the different perspectives...of pretty much everything. Its sad that its come to that but its the truth. 

Personally I think Owner and Renter are clear enough that define the given role of the two parties no matter if its residential or commercial. But you could also a bit more descriptive and say Residential Owner/Renter and Commercial Owner/Renter. Similar to how you have residential/commercial architect or contractor. I think keeping it simple and reducing the amount of available options to interpret it differently is the key. I'm not saying my suggests would be the perfect one either. I just feel that Housing Provider would do more harm than good in the long run. 

You also dont want to go down the path that renaming Master Bedroom to Owner's Suite did. It was a big push about 5-8 years ago and almost every major developer changed the name on your sales drawings because someone thought Master Bedroom had too much connotation with slavery. Well now no seems to really care about it that much and no one views that bedroom any differently than they did before. 

Best of luck with your lobbying. 

@Trevor Davis If I had that kind of money coming in but knew I didnt have the time to invest along with it (since they are playing full time in the NFL) I would do one of two thing. 

1 - Buy several longer term rentals that could cash-flor decently enough to pay for themselves, pay for repairs, pay for the management company and still pull in a couple hundred dollars per door per month. This would help hedge against inflation and would be a better return than sitting in the bank. Maybe less money than the stock market but way less risk. After the career is done (be that 3 or 13 years) then I would look to cash out. There are plenty of ways you can cash out and minimize taxes too on the capital gains. Just between the appreciation of property values and inflation over the years you would have probably you best bet at having a safe a very good return on your money. 

There is always the option of keeping some and selling others to further expand the rental portfolio. This just take more time on their end. So this allows for a lot of options on how involved they want to be just depending on what their schedule and time commitment can be. 

2 - Buy raw land wherever you can find it. This is by far the simplest option, the safest option and the option with the most possibilities at the end. This is also the option that gets you the least (and could be zero) cash-flow option. This raw land could be in-fill lots in a big city. It could be corn fields in farm country. It could be single lots in a subdivision. Could be forests out in the mountains. Grass lands for cattle grazing. There are very few raw land options that are a total waste of money. Obviously there are some, so you cant just buy blindly, but rarely does land lose value and rarely is there no potential for it in the future. 

If you buy empty fields, you can lease to farmers for some cash-flow. Then, depending on location, could be turned into sub-division developments in the future. And some cases stay agriculture and become very lucrative. Just look at how much farmland Bill Gates owns... You can my lots in a subdivision or  in-fills in the city. Sit on them and wait for the appreciation return after a while or build and sell. Forests are great for lumber harvests. This would allow for potential cash-flow or a one time buy-out of the lumber. At the end you still keep the land and then sell it for a nice return after the harvest. Or develop the land too. 

Option 2 is my personal favorite as raw land gives you so many options and is a great way to keep your investment up with at least inflation if not above. Especially for someone that can wait a couple years to see a return. Be that money is not an issue and they dont need the cash-flow or they dont have the time or desire to stay actively involved in making sure the investment turn a profit the entire time its being held. There will always be a need fore more land (its the only thing we cant make more of). And buying cheap land that doesnt make a good return now but will in 5-10 years once the city has pushed out to where you purchased is always a good long term strategy. Maybe its just the architect in me that likes the options and potential for designing and creating so many things but I just like raw land for long term holds. Its definitely not the get rich quick road but the the road thats almost guaranteed to get you to a safe place at the end of it.

@Scott Lewis

Odds are it wont be possible. You'd have to be pretty lucky with just zoning for you to convert it. Not to mention the huge amount of costs that would come with converting it. 

Main points:

• Zoning would have to allow for townhomes. Townhomes are different than a MF.
• The design and construction of the building would have to allow for easy conversion without a complete gut and re-build of interior. Think 2-hr fire walls between units and/or adding sprinkler systems in every unit.
• Let's assume you can convert it, then you have to hope the zoning has lot width requirements that are the same width as your townhomes. 

Odds are the most you could do is convert it to condos. And even then there would be a lot of cost involved. fire walls and sprinkler systems. 

 Its hard enough to predict 1 month out let alone 24 months. Lumber prices alone have gone up 100% in just the last 3-4 months. 300% in a year. Everything is still too volatile to really try to predict out that far. Even in a normal market you are lucky to predict 12 months out. 

This new administration had too many possible "solutions" they are proposing that could either help or seriously hurt the economy in the next 6 months. It all depends on what comes out the end of the cluster F that is congress. And no one know whats going to happen. And then there are all this issues that everyone in washington just keep kicking down the road...so when those problems finally explode...they could up end anything and everything. 

As for the construction industry, continue to see extreme problems in material pricing and delays as well as labor shortages for easily the next 6-12 months. Unless the feds start taking drastic measures, boarder line illegal, then just expect the current status quo to continue. My development project has had the substantial completion date pushed back by 2 months because subs arent showing up. That might not seem a lot but its a 33% increase in the construction time at $1000/wk loss on my end. 

If you really want to try and get some, somewhat, sound predictions go see what all the REI gurus are saying. Ken McElroy has to say on his Youtube page. Then go listen to the Real Estate Guys, then go listen too.... etc etc. You'll get a slightly different perspective in each one. They are all sound guesses with number and data to back them up but at the end of the day...its just their educated guess. Anything could happen. But what you'll notice the most is that they usually are only forecasting about 6m out, maybe 12. Never 24. Things just change too fast to do something like that.

If it does pass, or some version of limiting the 1031 amount, it will cause two big things IMO: 

1 - Less selling of MF and commercial property. 

2 - More new construction through Opportunity Zone Funds. Even though investors only have the option of keeping their capital gains in for 10 years now...its a way better option for them than paying 40% capital gains tax. Especially since ANY TYPE of capital gains tax can go into a OZF (vs only like-kind transactions of a 1031) and come out with zero taxes after 10 years. Though sales will stall out a bit, it would bring a lot of new real estate on the market at the same time. Which is a good thing in the long run. 

I'm torn on the proposal. The developer side in me say this is a great catalyst to push people into OZF for developing. The other side of me says this would be horrible and stall out and crash the commercial market. Plus this is a huge problem for those wanting to cash out and retire. I can ride out this wave....but most retirees dont want to wait 10 more years to see their money or be limited in any cash flow because they cant get rid of properties without taking a huge hit. There are also changes to estate & death taxes as well....those will more than likely happen IMO.