All Forum Posts by: Rhett Kelton

I would prefer to use a bookkeeper and Quickbooks.  I hate paperwork though, so I am a bit jaded.  It usually would take them less than an hour a month, and then $15 or so for Quickbooks online.  Makes doing the taxes at the end of the year a ton easier.

You do need to be careful of the mechanics lien.    I haven't had to deal with it personally, but have heard stories and the headaches from the title company I use. 

Making sure the GC is paying them is hard- I hate to micromanage.  But you do have to remember that "the buck stops here".  I have had the GC just pass the bill along to me before, and then paid the sub directly.  I don't know how many GC's would like this though.  And I didn't really like it either.  Marc is right, just make sure you have a strong contract.

I'm looking to see what positives and negatives you can see in this project.
(From the lawyer: This is NOT a solicitation for funds. We are set up as a 506(b) corporation)

I purchased a FSBO in a up and coming neighborhood close to downtown Murfreesboro (TN) , and called to inquire. I had the intention to do a fix/flip. After talking to several people about the project, a couple recommended doing a teardown and building townhouses. (It had been a meth house before. It did get remediated, but....) After talking to more people, the idea of building a mixed use building started gaining traction. We went through the process of rezoning, getting approval from the city, getting the architect, builder and engineers on board, and getting the lawyers to get the correct paperwork. This is my first mixed-use build and syndication, so I have tried to get the best people around me. I know I either have or will make some mistakes.

We are planning on doing a 3 story building, about 13,800 total sq/ft, with the 1st floor commercial and the top 2 floors being 1/1 condo's. It should be about a 2.9m deal, with 2.1m financed through a local bank. I feel like the numbers in the model are fairly conservative- I have included a 7% hard cost contingency, and then $100k set aside in for unknown soft cost reserves. The way the numbers in the model work out, after selling the residential units, we should have little to no bank debt, thus leaving the corporation in sole ownership of the commercial floor. This ends up with about a 18% IRR and a cash multiple of 2.1, with the hold time being 7 years. We have it split up as a 70/30 split, LP/GP.

I do have 3 main thoughts.
A.  Do you thing the commercial will be able to thrive in this economy?  The planning commission is limiting the commercial we could put in- no vape shops, adult bookstores, etc...  We are in Murfreesboro, within the strong greater Nashville market, so I am not concerned at all about the residential selling.  I might not even pre-sell because of the local appreciation (thoughts though?).

B.  Should I plan on refinancing into longer term debt after construction to pull money out for the investors, if possible?

C.  For those that have done these before, do you have any recommendations about getting a cosigner for the loan?  The bank says I don't have strong enough personal finances, and I have found it fairly hard to get someone to cosign a loan for that amount of money.  Right now I am offering about 3.5% of the total loan amount for cosigning the 18 month construction loan.

Thanks for your thoughts.

I am building a mixed use building in middle Tennessee area. Obviously it is different building from the ground up vs remodeling, but here are my numbers.

The building is about 13,800 sq ft total.  I got estimates from $155-$250 per sq ft from 3 different builders. I'm trying to build a class A building.  A ton of variation just like what Greg said.

I am doing 1 bed, 1 bath condo's that are about 575-600 sq ft.  I am able to fit 6 on a footprint of 4600 sq ft, including the stairs/hallways/maintenance room.  

I would recommend Mauricio Rauld's video's as well. 

I have been in the process of setting my first syndication as well over the past 6 months.  I scheduled calls with 2 different syndication lawyers and the both provided me with lots of very similar information.  I ended up going with Crowdfunding Lawyers, and have been very happy with them.  They recommended plenty of things to do and not do.  

Cory,
I would recommend looking into the commercial loan/ owner financing route.  I am building a mixed-use building and it seems like they are much more interested in numbers, wherever they are coming from.  Especially if you are living there.  The biggest issue I have run across is trying to get FHA loans- but if the residential units are owner occupied, that passes a big hurdle.
If the owner is in a good enough position to do so, the owner financing could work out well, since they actually know the property and you wouldn't have to go through standard bank underwriting.

Late reply- but you are 100% right!  A ton of money flowing into there it seems like.  I think much of it is people looking for the long term appreciation.  Not a lot of cashflow.  But your deal sounds great!
I am doing a project on the south side of Main Street on S. Maney Ave.  It isn't the best area, but is definitely getting better.

Can't speak to it as an investment town - although the university is there. I think it is pretty stable.

Jessica,
My two cents about Middle TN.  Most of these posts have been about Eastern TN.  I live/invest in Rutherford County (Murfreesboro), just south of Nashville.  Like the others above, if you take a call, show up, and are honest, you will get as much work as you want.  Construction is still booming here.  There are plenty of stats and articles out there that show that Nashville is still having about 100 people a day moving here.  I think the job market is especially diverse and by extension, strong. Like Mark said above, almost all of those job areas are stable (short of the tourism, which just got hit by Covid- two of my tenants work in the Nashville service industry and the only reason I had a tenant that couldn't pay fully this past 2 months)
That being said, investing in the downtown Nashville market is going to be harder.  You can still find cash flowing flips, but many of those will be word of mouth.  It would really depend on how much you want to make on a flip.  I doubt you could make more than 15% profit, and that is knowing the right people on the buying and construction sides.  If you can find multifamily though, you are gold.  Investors are eating them up.
I think it will be easier to find the deals a little further out- Lebanon, Murfreesboro, Spring Hill, Hendersonville, etc.  I don't know much about Clarksville, but have heard that can be a good place as well.  I know you can find flips for 25%+ around here.
Living in Rutherford County- my family just bought a mini-farm about 12 minutes from downtown Murfreesboro for about 20,000/acre (just the land).  Depending on the size of the property (bigger it is, the less per acre), you can expect to pay about 10-35k, depending on how far away you are.  I see 5 acre lots 7-8 minutes from downtown (Murfreesboro) sell for about 30-35/acre.  Just slightly further out, there was a 20 acre lot that sold for about 10/acre.  The easiest way to find out some of that information would be to look at the auction sites here.  A lot of land (and investment properties I guess) is sold via auction in Rutherford County.  At the auctions, land you can often find a good deal on.  As far as builders to get on with, the easiest way is probably just to ask a couple of the mortgage bankers at the local banks who they would recommend (and not!)
For investment properties, auctions are dependent on who show up if it is a good deal or not.  Sometimes people are paying retail, sometimes not.  But it is definitely getting a little crazier every year.
Also, it is very hard to find a nicely fixed up house under 200k in Murfreesboro, so there is a good starting point.  

@Matt Fore

What is the address?