All Forum Posts by: Nik Moushon

Architect and developer here, so Ill give my POV from both a design standard, development potential, and constructability. 

First, don't do all the tiny homes on one parcel. It complicates so many things. Both in the short and long term. Yes, its more expensive up front, but you get some many more options with separate lots. More investment route options and exits strategy options for either when you want out or are forced out if the worst happens. It will also get through zoning and any special permitting needed a LOT easier. Most cities do not understand or like the concept of a tiny home village. They equate it to a mobile home park. If its separate lots, the only difference is the size of the home. Instead of 3,000 sf homes only the rich can afford, you are providing 1,000sf or less homes that are for the working class, which every town in the US needs right now. 

Second, dont build "tiny homes" unless you are very very close to a high density city where you have the demographics of a LOT of single or young couples that will rent them. 300-400 sf tiny homes are trendy and catchy but are a very niche market in reality. Most people who would rent these don't have kids. Be that young couples or retired people. I know a lot of people that tried living in tiny homes. It worked great for them until they started a family...then they all moved out into a traditional home. My suggestion would be to not build anything less than 600sf (same size  as a typical 1 bedroom apt). If it was me, personally, I would size them all to range from 2-3 bedrooms. So 800-1200 sf. You'll have far less turnover if you make something that is small but still comfortable to live in for the vast majority of people. This also allows you to actually market and sell them if needed.

This size also lends you to going to a pre-fab housing route. Not mobile home type pre-fab but where they panelize the house in a shop and then truck it to site either in panelized walls or even in pre-assembled rooms/floors. If you design the layout of all of them the same, you can get even more savings...potentially. This also allows the entire house to be dried in in a matter of days versus weeks or months. 

Third, whatever you design do it as a traditional house construction. Nothing on the back of a trailer or with wheels. Its easier to build, easier to get past zoning and planning departments, and easier to get construction loans and insurance on. 

Fourth, You technically dont need an architect to do a single family home this small. What you need to consider is what you want it to look like at the end and what your goal is. If you want something doesnt look like a contractor designed and built it then hire an architect. If bottom dollar is all that matters, then get a GC that can do plans for you or maybe a drafter. Buying plans online rarely saves you that much money. You have to buy it multiple times for multiple builds and each will need its on specific site plan and there always something you want to change about the plans anyways. In all my years of designing and helping people with online plans there has NEVER been a single person who brings online plans to be and doesnt want anything changed. So by the time I charge for those changes is almost always a wash on cost if I had done a custom design for them from scratch. 

Fifth, for sequencing, you first need to do zoning research and see what, if any, restriction apply to tiny homes. If you do larger 600sf+ homes I wouldnt consider them tiny homes and would treat them as regular single family homes for zoning purposes. Then find a parcel that meets your needs. Start running numbers on the cash you will need for the land purchase and development costs. You can get a construction loan for the development costs but you have to be careful that you arent creating a mortgage that kills your cash flow, especially since you'll have to pay that while you are building the tiny homes. Once you have rough numbers for land and development costs and knowing how many homes you will need on a parcel (i.e. min. 5 homes on 1.5 acres of land or 12 homes on 3 acres of land) then you can start searching for the professionals you will need. You will, at minimum, need a surveyor and civil engineer to get the parcel divided into lots. Depending on the path you take an architect or drafter. Once you have at least preliminary drawing, then you can take those to a contractor and the bank to get an idea of the construction costs and the loan requirements. All those professional costs will have to be paid in cash up front. Depending on the loan type, you can sometimes get partial or all those professional costs covered under the loan (so you pay yourself back) or they can even count towards the equity in the property and be used towards the down payment requirements. 

Lost to consider and coordinate when doing developments. It has its own set of rules and cost factors that are not typical with most investment strategies that people use on this site. So make sure to do your research, run your numbers (multiple times under multiple scenarios), and most importantly....take your time. This is sounds like your first and the learning curve is steep. The market is especially tricky right now and you could easily and unintentionally shoot your own foot off. The one nice thing about about doing 1000-1200 sf homes....they will always sell. Even in a bad economy because there is always a market for affordable houses. Thats one reason having each on their own lot is worth the extra cost IMO.

Quote from @Chad King:

I am in the process of purchasing a school and converting it into apartments. I have meet with the building department multiple times to discuss my plans and they are on board with what I wish to do. The city has the same vision I have for the location and are excited to move forward. My question is, where is a good place to research to gather rough numbers on demo and renovation cost. It is a 25k+ sqft property with projected units around 25. Any help would be great,

Thanks

Chad

 The very first thing you need to do is hire an Architect to do a feasibility study for you. They know exactly what to look into to make sure the layout takes into consideration all the major building codes and local zoning requirements that you will need for permitting. There are a lot of requirements that could potentially eat away at the square footage you want to allocate for apartments. Depending on the current layout of the building it could be a few hundred sq ft to potentially a thousand. To the point of either loosing apartments or having to shrink apartment sizes. Either way this effects your profits and you need to know this NOW. The architect should be able to find these major issue now. 

Depending on the age and condition of the building you will probably want your architect to bring in a structural engineer into their feasibility study as well. Have them both walk the building. You want to eliminate as many surprises as possible. A "small" structural surprise during construction can cost you tens to hundreds of thousands of dollars in change orders from the contractor. Where as if you had made the contractor aware of it from the beginning, it allows them to plan for it and sequence it into their schedule. Do not go skimpy on the inspections, due diligence, or feasibility study. It will always come back to bite you in the end. If you aren't prepared to drop $50k in doing the proper studies now....just walk away. 

I'm from the west coast so not sure exactly what your costs are, but I would not assume the construction cost on this to be less than $150/sf. I'm guessing your cost of living near the coast is similar to mine. The older the building, which means hirer possibility of more structural repairs, would only make that project go higher. 

Also, a lot of people new to development tend to forget or not know, that your fees you pay for construction documents are considered an improvement to the building. That means you get to count those costs towards the down payment of your construction loan. So if you drop $100k on drawings, thats an $100k that is equity in the building. Banks tend to not bring that up in conversation so you bring even more money to the table but it is common place. If a bank you are talking to wont let you count it as equity....then go find another bank.

I'd buy $500k worth of guns and fortify my house and tell them to come get me. 

500k to 20m is 5 years in nearly impossible unless you have some insane connections and insane amount of luck. 

Though 40-45k is unreasonable don't expect it to be cheap just because its a small ADU. Most of the expenses architects deal with is not from the design side but from having to spend more time fighting the city's building department and design review boards. I've worked on projects where I put in 80 hr in a single month just on one project dealing with a city's design review. They can be notoriously picky about the stupidest of things.

@Ryan Terrell

Based on the picture you've shown and that you are completely gutting most the units, I can tell you that you will need an architect for this. You are now in the realm of commercial architecture and all commercial construction needs a licensed architect to draw the construction documents that the city will want to see. You will have to bring everything up to current code with this level of renovation. Depending on a lot of different factors you could be forced to sprinkler all your units even if it doesnt currently have any. 

Start looking around for an architect and get them on your team. You don't want to do all the work yourself (or via a drafter) and get to the permit counter for them to reject it. Then you'd have to wait another 6-12 months to get on someones schedule and for them to do the work.  

Quote from @Joseph Morales:

I purchased a house in 2008. I spent 3 years renovating it by myself. I had it rented out for the past 7 years give or take. I am in the process of selling right now. I am not an expert in the Real Estate game. However, with all that being stated, I've gone through enough of the process to look to become a serious investor. Which is my plan.

Here are my questions:  Why are architect fees so high? Is it like an insurance thing? If they mess up can they be sued for damages?

Is there a standard that can be used in any situation? For instance: If I pay an architect or engineer to design a room addition for a house. Can I take those same plans to my 2nd? 3rd? and so on? If not, Why?

 Architect fees are based on a lot of different things. This would be a very long, and boring, post if I tried to explain everything as to why our fees seem high. A couple of the big cost items are insurance, computers & software (one software seat can be $5k+/yr or more), employee pay and benefits, mortgage for office building, license fees etc.

Some items that people don't realize is included in our fees (most of the time) is our consultants such as structural engineer, MEP engineers, civil, landscape architect, etc. Now who is included varies based on the job and contract but a lot of time those are included in our fee. Where as most drafters don't include that. So when you get his low number for drafting you will get a surprise bill later for additional costs for those consultants. Another thing that most people don't realize is that we, typically, are involved through the construction phase of a project. We answer questions from the contractor and find solutions to issues in the field. Most drafters, that I'm aware of, wont do that. Once the project leaves their desk, they are done with it. So unless an owner is completely competent with their knowledge of construction and how to deal with contractors, this is an often over looked and under valued service we provide. I can tell you plenty of horror stories of projects going off the rails because one thing or another and that it wouldn't have happened if an architect was involved in the construction phase.  

Now, most people don't get past the complexity of a 2,000 sf single family house. So paying for the full services of an architecture firm is hard to justify. Especially when you are looking at it from the typical investor who just wants something cheap and easy. Smaller projects are often hard to turn a profit on for architects as well, especially once you get to a business size of more than 1 or 2 people. You really are paying for quality at that point and not an investment service. 

To answer your specific question on drawings, typically, you (the owner) does not own the copyright of the drawings themselves. The architect does. You are paying for our service to provide you documents to build that building once on a specific site. Once that once building is built you can not take the drawings to another site and build another. Similar to an artist holding copyright to a painting. You can buy the painting and take it to your house but you can go make copies of it and re-sell them. Now you can negotiate with the architect or drafter to either buy the copyright from them or be allowed to build a certain amount of them. This will obvious cost you more. Again, similar to paying an artist getting paid a royalty fee every time their art is sold as a copy. 

The STR market in Leavenworth is basically frozen out atm. With the new STR laws in Chelan County putting lots of restrictions on STR owners, occupancy limits, and a cap on the number of STRs in certain areas it is very difficult to get into the STR market here right now. The Leavenworth area is already at it cap and wont be excepting new STR applications until the existing count of grandfathered in STRs has dropped off to be lower than the cap....which wont happen for a long time. Assuming no mass sell off of STRs of course.

There are still some areas around Lake Chelan that you could get in but its tough there as well. 

WA state, as a whole, is not a very STR friendly state. Some areas are more friendly than others but its become such a hot topic, as well as popular, that its just difficult to get in if you wernt already in. 

If northern Cal is too expensive you need to be very selective on where you move to in WA or OR. There are some pretty decent extremes in each state when it comes to cost of living. OR is more expensive than WA (as an avg). 

OR is way more tenant friendly than WA. Seattle is way more tenant friendly than the rest of the state. Both states are more tenant friendly than most other states but do tenant to be a little bit more LL friendly than CA. 

Quote from @Eric Anderson:

Quote from @Nik Moushon:

Go to the county or city planning department. Give them the parcel number and they can look up when it was short platted. If it was recent then, yes there should've been an easement, if it was done a long time ago, then you are probably SOL. 

The county said they are going to have to talk with their lawyer because it should have never been sold that way.  Waiting to hear back.  Thank you for your help!

Make sure you find out if they APPROVED a short plat without one....because that makes it the counties fault as well. 

Either way it sounds like you will more than likely will need an lawyer to get this resolved if there isn't one. 

Go to the county or city planning department. Give them the parcel number and they can look up when it was short platted. If it was recent then, yes there should've been an easement, if it was done a long time ago, then you are probably SOL.