All Forum Posts by: Rich Kniss

Brandon, good jumping in on the forums and telling us a little about your yourself.

Getting knowledge through the podcasts is great, but don't limit yourself to that. Read some books (a cheap investment), like The Millionaire Real Estate Investor by Gary Keller, The Real Estate Rehabbing Bible by Than Merrill, Think and Grow Rich by Napoleon Hill and any other than you can put your hands on. Go through all the resources on the BP website.

Be specific about how much money you need, how much you will save each month and a timeframe to complete your goal. This way you can be deliberate about your actions.

Your home equity loan is a good conceptual idea, provided you get some equity in a year. My guess is it will not be enough if you are buying retail. Think only a 2-4% increase in your homes value per year ($100K home x 2% = $2,000). If you buy a fixer, your chances increase.

I might consider getting a duplex, living in one side and renting out the other to get you on your way. Whatever your purchase, think of it as a real estate investment first, home second.

Good luck!

Rich

@Jenni Moore, I'm speaking from a theoretical perspective, as I have not done this type of renovation, but here's what I understand. Improvements should be paid off by about 2 years worth of increased rents, based on what I've read. If it takes too much longer, its probably not worth doing. 

That would put you at $7,200 to $9,600 to spend on this conversion. If the garage space is 22' x 10" (typical size), this would be about $38/s.f.  A typical basic new build home is around $110/s.f and you are not building a roof or foundations, so you should be in range, depending on the specifics of your home.

One question is if your existing heating and cooling systems are capable of handling the increase load, or if you need to do a dedicated unit in the attic for this room. HVAC should run around $10-$15/s.f. as an average placeholder.

I'd make sure to have the floor levels are the same as the other bedrooms if possible, meaning you will have to frame a wood floor over the garage floor. Also make sure you plan for extra layers of sheet rock to keep a fire rated wall between the garage and the new bedroom.

Here's my rough estimate (keep in mind I'm not a contractor):

1. HVAC system new or upgrades ($3,500)

2. Raised floor structure ($2,000)

3. Gypsum board walls - about $5/s.f. of wall area ($2000)

4. Closet doors and bedroom door ($500)

5. Lighting and electrical ($600)

6. Removal and infill of garage door, new siding ($1,000)

7. New window where garage door was located ($500)

8. Carpeting ($650)

9. Paint ($750)

Subtotal $11,500

10% contingency ($1,150)

Total $12,650

Reduction to only adapt existing HVAC system ($2,500)

Revised Total $10,150

I think the HVAC system is a big determining factor of this decision. Hopefully there is enough existing tonnage to make this work. My opinion on this is that it is worth doing if you have some level of confidence of the increased rental numbers. Have you checked Craigslist or Rentometer.com to confirm your understanding of the difference of an extra bedroom?

On the basement renovation, I would not pursue that as I don't think you will get the returns unless you do a serious renovation to add a bedroom and bath with an egress window.

I hope that is helpful. Maybe other BP'ers can give some feedback on my numbers. Congratulations on your first big deal!

Rich

@Tonio Bianca if it is the lots I'm thinking of, they are zoned R-6, which will only permit a 2 unit house on the corner lot, in exchange for more open space via open space development or conservation development (which I would pursue, because the increase in setbacks is not that much more).

It does comes down to how many s.f. you can build after setbacks and open space. I think you can get about 1,200 s.f. floor plates at first glance. The 2 unit lot would require one entrance on each street.

There is also a lot of foot traffic past the lots I am thinking about (From Main Street west to Broadway), so consider that in your design. I work less than a mile from that intersection and know quite a bit about that area.

It's my goal to do the same type of new-build projects, so I wish you the best of luck on this property.  If I can help further from a boots on the ground perspective or answer any architectural questions, please feel free to PM me.

Congratulations on your first property. If you join MAREI (MAREI.org), one of their benefits of membership is discounts/rebates at Home Depot and others. It might be worth checking out. I'd go to a plumbing supply house for fixtures of better quality and lower prices.

@Brian Wilson, if I were in your position, I'd find out what is affecting my credit score (or what I need to do to positively impact it) and work to get it to at least a 720, which appears to be a threshold for some lenders.

You mention you are hoping to finance the purchase of the property and the cost of rehabbing. It sounds like a 203K loan may be what you are looking for, in addition to the hard money lenders. I'd have a conversation with one of the HML's before you apply. I spoke to several in KC and they were very candid about what they were looking for, and they each have different criteria and terms. I'm happy to share their contacts if you are interested.

I'd focus on building your team (insurance companies, attorneys, subcontractors, etc) by continuing to network at Real Estate Investing Meetings when you get here. There are several in KC (MAREI, Winvestors, and one going on in the Northland led by @Jonathan Schneider, but I don't recall the name).

For wholesaling reading, I'd recommend The Real Estate Wholesaling Bible by Than Merrill and The Ultimate Beginner’s Guide to Real Estate Wholesaling  by Brandon Turner. I'd also search for every BP podcast that has to do with wholesaling and listen/watch them. There is one by a guy named Joel (?) that is very motivating (He rings a cow bell a lot). Wholesaling takes a monthly marketing investment to do it well, so be prepared for that.

I have spent quite a bit of time researching the Kansas City real estate market and have compiled a zip code map of what I have learned from BP investors and by driving the areas. It shows the best/worst areas for flips, rentals, areas to avoid, and universities. I'm happy to share that to help jump start your knowledge of KC.

by Brandon Turner

Good luck and let me know if I can be of assistance.

Rich Kniss

@Taylor Brooks, I very much enjoyed reading (listening to the audio book) The Real Estate Wholesaling Bible, by Than Merrill. In fact, it is one of my favorites out of the books I have read recently.  I found it quite useful for the marketing strategies, even though I don't currently plan to wholesale. There is a lot of crossover information that apply to a buy and hold or flip approach. You can find it on YouTube.

I agree with @Account Closed. I have listened to all of the BP podcasts and from a few other players in this space.  I recently started to do audio books to see what I was missing out on, because people are always talking about their favorite books. I'm currently listening to Real Estate Rehab Investing Bible from FB. What I can tell you is it is simply a refresher course to what I have already learned on BP. The bottom line is that there are enough free sources that you can get the information you are seeking on any topic.

I love BP, but I also find it best to get information from a variety of sources and formulate my own plan of attack. Everyone in real estate does it a little differently and there is really no one right path. Go to a REIA meeting. Read some books and listen to as many podcasts as you can. Take notes. Then determine if flipping is the way you want to go. Buy and hold rentals or wholesaling might be up your alley. Learn which makes sense for your situation.

Work on a business plan because in that process, you'll find out what you don't know (selection criteria, insurance, assembling a team, property management, marketing strategies, etc), then you can seek out that specific knowledge.

I'm happy to help in any way I can.

@Deepika Tandon Previous forum posts indicate you should avoid zip codes 64126, 64127, 64128, 64129 and 64130.

@Steve Johnson I have lived in the Hyde Park Area for 15 years and find it great that there is continued interest in the Troost corridor. It used to be part of my daily morning walk. Waldo is a great area because there is a lot of flexibility in the project types you can offer and a wide range of price points. I have been driving it and several other zip codes each weekend.

Best of luck in your continuing endeavor.

@Andrew Quinn, I have been told by a hard money lender that you should budget $25/s.f. as a general rule for flips. If you are getting a property ready for a buy and hold rental, it is my understanding you should budget $10-$15K for a 1,000 s.f. SFR. I hope that helps.