All Forum Posts by: Muju Hussain

Thank you @Eric Teran, @Mark Cruse, @Russell Brazil and @Arthur C.

Great discussion! I can see both sides of the argument. As a new developer in DC, I guess I have to err on the side of Eric and Arthur until I start building relationships and try to bring costs down, but I absolutely see Russell's and Mark's point of keeping the costs low to increase the profit margins, but I feel like that will come with more rehabs and relationships. I've built my own financial model that I run these scenarios with, and the killer is the cost of capital. The hard money loans are killing my deals. I have raised some private equity money, but I feel like there are not that many options available for financing a rehab except for hard money (at least for a first-time developer). I've built a comprehensive model that includes the costs of capital, holding costs, etc. I have not included the condo conversion costs to my model, but it was good to learn about this cost here, which I will add to my model.

Anyway, lesson learned here is to try to keep the construction cost to no more than $120k to $150k for a single-family redevelopment, and this gives me a good starting point. Hopefully, I can successfully do a redevelopment and make some money.

Also, if any of you are working on a project, I'd love to shadow you and help you out with anything to learn. Also, I am open to partnering up with someone. Let me know.

Thank you all again for your feedback and input! Great discussion!

@Mark Cruse - Thank you!

@Eric Teran - Thank you for your detailed response and breakdown! That is really helpful! $300k to $400k for creating a multiunit sounds about right. I definitely want to start out with just keeping it a single-family residence, and once I gain enough experience and make some profit, I'd like to advance to redeveloping into a multiunit property. One baby step at a time. Also, hopefully, I will have enough investors lined up for a bigger project by then.

I definitely appreciate all the responses here. Thank you all!

Thank you @Russell Brazil and @Jack Seiden! Appreciate the responses!

Any DC developers here who have flipped DC rowhouses in NE DC or Petworth DC, who'd be willing to share how much they've spent on a decent flip. Most of the rowhouses in Petworth are in the high $500k range with the ARV of $800k to $900k. Even though wholesalers say the construction cost to be $120k to $150k range, they don't sound about right. I've got one estimate from a GC, and to my surprise, the estimate came in at roughly $260k for a roughly 1400SF rowhouse (above-grade and below-grade SF) ($185/SF). Obviously, the rowhouse needed a full gut job, and they were asking $550k for the property, but at that construction price, the deal wasn't making any sense especially when there was a hard money lender involved. So, I just wanted to see how much money the developers in DC are spending on redeveloping rowhouses, so I can use this estimate to run my analysis. Any insight is much appreciated. Thanks!

Thanks Blair! That is a very good point! I will definitely let you guys know how it went.

Thanks for all the help!

@Tarl Yarber@Blair Poelman

One more question - Do you think it is a good idea to add our terms as the following:

"The sellers want to net a total of $297,000, and in the event if the appraised value of the house is below the listed price, the Buyer assumes the responsibility of the difference in price."

Or, something to that effect.

thanks!

Thanks Tarl and Blair for your advice!

@Blair Poelman - The only reason for my concern is that area has a lot of ramblers that have not been updated, and they range from anywhere between low 200s to fully rehabbed properties in the high 200s ($290k).

Also, yes, I have been letting all the agents know that we are dealing with multiple offers and all our counteroffers are being submitted to a set of prospective buyers and none of our offers are binding until the buyer signs the contract and the sellers countersign it.

I agree that asking for a specific dollar amount is better than a certain % for a subsidy.

I appreciate both of your help!

Thank you!

Muju

Hello BP Community,

I need your advice on a situation I am dealing with currently, and I am trying to figure out the best possible solution or leverage to handle this, and I would greatly appreciate your advice. Thank you in advance!

The Situation is:

We bought a property in Maryland (wholesale) 4 months ago, and we fixed it up nicely, and we listed on the MLS with flat fee listing, so we are selling on our own and just paying the Buyer's Agent commission of 2.5%. We listed the house at $299,995, and the houses in that neighborhood (completely rehabbed properties) sold for $290k in the last 6 months, but obviously they don't have all the bells and whistles our house does (I know that's what most of the sellers think and say, but trust me, we checked out the properties around, and our property has all the things you can think of). Anyway, we listed the property about 4 days ago, and it generated a lot of interest, and we already got a couple of offers, here is my question:

All the offers from the agents are the same:

Full Asking Price with 3% Seller Subsidy

50/50 split of taxes

30 days closing

We countered back with 1% seller subsidy and all the other terms remaining the same.

Now, they countered back (and it's funny they all used the same strategy here):

They raised the full asking price to $305,000 but still keeping the 3% seller subsidy. (All agents are saying that their clients need the closing help)

My concern is what if we accept this offer, and the appraisal comes lower than our listed price.

I know we have a choice to either accept the low appraisal price or stick to our listing price, but what is the benefit to the Buyer's Agents raising the price and keeping the seller subsidy at 3%. I don't want to commit to 3% because that term will apply to the low appraisal offer as well.

What is my best strategy to handle this? Or, what leverage do I have? or, any negotiation strategy will be helpful.

Any advice will be much appreciated!

Thank you!

Muju

AMZ Investment Group, LLC is looking for a licensed, bonded and insured General Contractor for a potential property in Randallstown, MD. We need a contractor, who is available this Friday, August 1, to go with us and check out this property and give us an estimate. Please let us know if you are interested and your availability. We can be reached at (410) 921-6692 or at [email protected]. Thanks and looking forward to doing business with you.

Thanks,

Muju Hussain

Thanks @Lance Johnson! The property I am looking at is in the Washington DC area, and it is a 2 BR/1BA condo. I know this building very well and the market very well. I pulled out the comps for this area, and it is in the $520k range. The rental market is really awesome for this area, and I pulled out the rentals for 2 BR/1 BA condos, and they are in the $3100-$3500 range. Depending on how much money I put down (provided the lender agrees for less than 20%), I calculated my monthly mortgage, condo fee, taxes, PMI and insurance to be somewhere in the $3100 range, which I could be breaking even. However, if i put 20% down, then I will be making some money.

I agree that the $450k is a lot of money for a condo, but knowing this area, it sounds like a great deal for a 2 BR/1 BA condo where usually most of the 2 BRs are going for more than $500k.

As for me getting a mortgage, I have a great credit score, and I am thinking about going in with another person who doesn't have any mortgage under their name, and their credit score is excellent too.  

What if we buy this property as a primary residence under my partner's name and then rent it out?  Is there a clause in the contract the prevents you from renting your primary residence for certain number of years?  

We are planning on renting this property out for a couple of years, and then probably sell it if the value appreciates.  There is a lot of construction going around this building, and it is centrally located which a few metro stops around.  The building has a lot of amenities including rooftop swimming pool, gym, club room and a parking garage.

Thanks!