All Forum Posts by: Peter Ricca

@Matt Devincenzo Yes I believe 20% of the units have to be affordable housing

Hi all -- I was at a networking event and I met a guy that is a broker for Muni Bond real estate project funding. 

Curious if anyone has done this or has any knowledge on it? Apparently it' not well known, but effective. 

The way he explained it, you get a municipality to issue a bond to fund your commercial deal (either building or improving apartment complexes for example). You supposedly get tax advantages and lower than market interest rates. He puts the deal together and lines up private equity that will immediately purchase the bond after it closes. 

The cons I could think of were: 

- Slow/no "pre-apporval" so you'd have to have the deal tied up long enough to get the funding and close it

- Seems like there are heavy fee structures built in

Anyone every do this or have any experience? 

- Peter




 

Hi BP -- quirky story and interesting/potentially lucrative opportunity. 

My lender introduced me to a semi-retired local builder, who 70 years old and has built/sold over 3,000 homes in my state. 

I took him to lunch yesterday to pick his brain and we got along really well (super nice guy), so much so that he wants to do a deal with me. We drove around his town and viewed an empty buildable lot for sale. His idea is that I purchase the lot contingent on a building permit, while we get the permit approved, we market his pre-made home drawing/plans on Zillow, find a buyer and execute a contract for sale on the new home build before I even close on the land. He would then GC's the build funded by a construction loan I take out, we close once finished, split the profit 50/50 (he's trusting me to pay him his cut, even though the whole deal is in my name). 

Deal Breakdown:

Lot Cost = $110,000 (cash, we split this cost)

Estimated all-in build cost for 3,600 sq ft SF home  = $350,000

After construction value = $585,000-650,000 depending (our market is really hot right now in NJ so it's fairly likely we get it under contract quickly) 

Potential Profit = $125-190K (less taxes and lender fees of course)

Sounds too go to be true -- here are my concerns: 

1. The builder is in poor health, he's not very mobile and has in home medical care (he can still drive and go to job sites, but is he is very physically limited). His mind is very sharp though. 

2. Division of labor -- I am relying 100% on his health staying good enough to GC this job start to finish. I work a regular W2 job and cannot be on the job site daily (plus I have no experience home building). My job here is to market the property to buyers and then manage the tranche payments from the construction lender to his subs. 

3. I will have access to his subs, and will be involved in the job as much as I can (marketing the home, finding prospective buyers), but if his health fails I'll be left without someone to overwatch and get this house built to completion.

I'm sure I could find a Project Manager in a pinch and offer to split some profit with him. 

Would you guys do this deal? What sort of safety measures would you undergo to make sure I can execute if things go south?

Thanks!

- Peter





 

@Matt Devincenzo great stuff, thank you for the guidance man. 

@Matt Devincenzo seems so obvious when you put it like that, thanks Matt!

You put quotes around “escrow” do I actually have to open an escrow account in this circumstance?

Peter

Hi BP Landlords!

I own a SFH rental property. Two female friends applied together, a Nursing Student and a Grocery Store Manager. Student has pretty good credit (650), Grocery Gal has no credit history and is building (zero debt, just out of a long term relationship where she did not even have a bank account).

The rent is $1,500 a month, the student wants to pay her half of the year in full once her student grant clears next week just to get it out of the way and not worry about a rental payment.  

The Grocery Store manager will be paying her $750 share monthly from her full time gig (she makes $2,150/mo)

How do I write up this lease so both tenants are on the hook if Grocery Gal stops paying? I was thinking of putting the grant money into an escrow account and drawing from it monthly maybe? 

Part of me wants to ask her to just pay me monthly, but $9,000 up front seems foolish to pass up. I'm slightly stumped here. 

Thoughts?

- Peter

Update for anyone following: 

Tenant said "we are bringing my Mother in law's pets back to her next week, however we would like to get a friend for our dog." Basically my interpretation is, they got a 2nd dog and got caught. I offered an addendum to the lease for an extra $50/mo, but no cats under any circumstances. 

They also offered to pay for and have a new fence built for their dog (old one is chain link and not in good shape). 

I think overall this is a fair compromise, I get some free improvement to the property, more monthly rent and they get to have 2 dogs. 

I'll update you on their response to the $50/mo. 

Thanks Jaquetta, that's exactly what I did. Basically let them know that they have a one time exception for "watching their mother in-law's pets," but they have one week to get them back to their Mom. Also gave them the option to pay additional rent for permanent pets. I didn't want to call them liars, so I basically told them "you can watch your mom's pet for the next 7 days, but any other pet visits over 24 hours need to approved in writing first." Appreciate the support advice!  

UPDATE:

Spoke with the tenant. He claims he is watching his Mother in-law's dog and cat while she is out of town until next week. Plan is to give him the benefit of the doubt and have someone drive by to check on the place (maybe see if both dogs are still in the yard). I reiterated that there's only 1 animal allowed per the lease. I don't have a good way of proving if they are keeping the cat(s) and dog long term or not. Either way, rent is on time so at least there's that...

Charles this is SUPER helpful and exactly what I was thinking. Yes, the lease states they can have a single dog and no other animals. I have 1.5 mo's security deposit I could easily keep and I also do plan on renovating the house after they leave. My gut here says to confront them professionally, have them come clean and force them to either get rid of the excess animals or pay a higher rent (or be evicted).