All Forum Posts by: Nick Marrs

I would go back to school, even just part time, and finish your degree. Major in whatever you are PASSIONATE about, TALENTED at, and what society NEEDS more of (if you haven't figured that out yet, keep taking a broad range of courses and try things out until you do).  

You can still build your real estate business up while you are finishing school part time.  

Other than staying in school, I would say tear up your credit cards, stay out of debt to the greatest extent possible (other than real estate investments that cash-flow), don't try to time the market (especially stock market), and study abroad while you are in college (it will probably be the best experience of your life). And save up for a down-payment on a house asap -- paying money to a landlord is throwing your money away.  Rent out the other rooms in your first house to roommates when you get it and you could not only be living mortgage free but cash-flowing. Lastly, hard work really does pay off -- bust your *** in school / your business to learn the skills asap that everyone else is too lazy to acquire. Best of luck!

https://www.youtube.com/watch?v=QIFGm2bxJYo

Sol,

I would recommend either adding square footage or investing in a new multi-family  development in the Inglewood / Torrance area (my office is located in Torrance and I worked at the stadium, so I know the area well).

In general trying to get an existing multi-family at a deal and have it return a nice cash-flow without any work being done to it is difficult these days given the expensive prices.

The building code has recently given affordable housing density bonuses, allowing you to add more square footage and units to an existing multi-family property (up to 50% more total units if you have 15% affordable housing units). The Opportunity Zones from the recent tax overhaul are also allowing investors to pay no capital gains tax if you own the property for 10 years (for new multi-family developments).  New construction isn't difficult -- your architect/engineer will handle all the plan review process and get you your permit, and construction costs for multi-family are much less than what you can sell it for (roughly $200-$250/SF to build vs $400/SF to sell for instance). I'm happy to fill you in on the new-construction process so you can wrap your head around it -- there's huge opportunity for developers. A ball-park figure I've seen for rent vs value is $1/SF increase in rent will being about $13/SF in appraised value.

I agree $125-$150/SF is more reasonable.  $85 per SF is way too low unless you are building a garage with no finishes or the contractor isn't going to make a profit (GCs usually make about 25% of the total construction cost, design team makes about 15% of the total construction cost).  Most of the cost is due to your interior and exterior finishes (not the structure itself) so the price range really depends on how fancy you want to get with you finishes/windows/floorin etc. If you have a tight budget and want to put in low end finishes you can probably get $125/SF to work.

Construction Loan.

For existing homes and earthquakes in so-cal, and as a structural engineer, I can tell you that nothing is fool-proof or guaranteed. We typically design for a earthquake strength level that has a 10% chance of being exceeded every 50 years - called the "Design Basis Earthquake" level.  In otherwords, there is no-such thing as an earthquake-proof building.

But we can greatly reduce the chances of damage, injury, or death in existing buildings by retrofitting them (we know a lot more about proper construction than we did even 30 years ago. The Northridge earthquake taught us a lot about how to build safer buildings).  That's one reason why LA has the Soft Story Mandate and some cities give incentives/rebates for retrofitting the connections between the floor joists and the concrete foundation.

A simple retrofit could greatly increase the odds and help protect home owners / real-estate investors to preserve most of their investment versus having a greatly damaged structure that is too expensive to repair.

Boris,  the best way to invest in Southern California is to partner up with a contractor or designer and build new construction.  Contractors typically make about a 25% profit on the total construction cost, and the designers make up to 15% of the total construction cost (so that's potentially 40% just going to the contractor and design team).  Small single family homes are pretty close to break-even to the construction price.  Larger developments like multifamilies (10,000 SF plus) tend to be very profittable.  If you can find a property that is zoned for multifamily and can find the financing to do the development, and especially partner up with a structural engineer or contractor, you will be able to get a much larger profit margin.

Kwon, I am a strutural engineer in Los Angeles so I can give you an idea on new construction costs.

You can expect to pay $150/SF (square foot) on the low end and upwards of $400/SF+ on the high end.  Most of the cost is in your interior and exterior finishes, so it really depends on you budget and what you want to do with the finishes (standard home with cheap finishes vs custom home with high end finishes). In general, the bigger you build it the bigger the return on your investment.  Every development starts with the location, so you need to research what the property is zoned for, figure out the lot size, floor-area-ratio (ratio of buildable floor area vs lot area), and figure out how big you can build. The price per square foot mentioned above will also vary based on how big you build the home.  Overall there is a smaller profit ratio on homes than larger developments like multi-family. Good luck to you and your investor with the development!

Ian, some thinngs to consider: LA has a housing shortage, and we are in a multi-family building boom in part to address this problem. The city has given developers incentives to build ADU's for existing single family homes and increased the number of units you can build on a multi-family lot (re-zoning / updating the code) with multi family bonus densities. If you are going to buy an existing home, the price you will pay per SF will be expensive. Therefore, the best way to make a profit is to either increase the square footage via and ADU for a single family residence, or add an addition for a multifamily, or even better find a rare vacant lot and build a new multi-family. Since you are just starting out, the most important thing you'll need to find is capital and someone who has done it before to help guide you along the process. Best of luck with your first investment!

You could always develop your own multi-family if there's a market for it in your area. I'm a structural engineer in Los Angeles and have designed many multi-familes. Out here you can expect to pay $200-$250/SF to build it and sell it for  $400/SF + for a medium size, medium furnished development.(say 10,000 SF  10 unit development, which might cost ($2 - $2.5 Million to build and sell for $4 million).  In general the bigger you build it, the higher your return on investment. I think the main thing holding investors back who've never developed a multi-family is finding the financing and having someone knowledgeable on your team to take you from conceptual stage to completed construction.