All Forum Posts by: Rich P.

Looking to get started and I want to start small in smaller B or C towns within neighboring states on West Coast. Not interested to invest in my home state of California. A maximum $200k price point provides an easy/attainable downpayment to just get in the game. 

I am specifically interested in Phoenix submarkets, Boise, Idaho Falls, SLC. Any other recommendations welcome. 

Can you still buy $100-200k investments in these markets and get $500-600/door a month at a minimum? If not these Cities, where do you recommend? I am looking for lower end. Not complete slumlord/meth houses, just something on the lower price point. 

@Bryan Hancock Great, this is what I was looking for. Thank you!

Typical syndication offerings that fall under the Reg D exemption include raising of equity for initial acquisition of an asset or lot for potential development. If an owner who already owns a lot wishes to JV with contractor/developer to build an asset, would this fall under same typical legal structure?

I am assuming easiest structure is a GP/LP LLC set up where title for land is owned by the LLC. There is no initial 'equity' placed into fund because LP brings lot to deal as equity value. The value of the land will be LP's equity in the deal for example. Debt will be placed to fund development/construction (GP's role). Then suppose GP/LP agree on pref rate up front (based on land value already agreed on) and profit split upon sale......how would you structure this deal? I will obviously seek RE attorney to implement structure but wanted thoughts here. One question I would have is how the LP is protected if say all goes to hell. They should still get that equity and lot ownership back. I was not sure how title would be carried in the venture. I thought the GP/LP structure is good because GP must retain managerial role (LP should not be involved in that) to keep it clean.

@Karen Margrave @Mike Wood Thank you for your input, I appreciate it! This is helpful. 

@Karen Margrave Do you self perform on construction side some of the trades or do you sub contract out to trades for all divisions of work? I suspect that this type of product on a non production base scale (higher end one off homes) yield better when you self perform more of the work, especially on major line items such as framing and foundations. 

@Andrew Fielder Are you saying to basically work backwards from potential retail sale, to get to lot price, all in lieu of forecasting a commercial NOI I assume?

Coming from commercial side, so no clue in resi. This question is more specific to my area, so would love feedback from people locally, but am also interested in your own communities too with higher price points. Looking at my market, the Bay Area...heck lets narrow it down to the East Bay even, lets say around the 24 corridor Lafayette/Walnut Creek, Danville, Alamo where you can retail a house for $1.2 - $1.6 pretty easily [ example] for an average 3000 sf home. 

For a new home development project in these markets,  I am wondering what kind of land basis builders of one or two home developments are seeing (not the larger builders but smaller guys like us) for these urban infill lots. 

If you are in this market, what are you paying for your lots right now or what have you paid within the past few years? How much appreciation have you seen in dirt? What are you building a typical SFH for in this market ($/sf)? Does this look similar to what you are underwriting?

For a 3000 sf new home:

5,000-8,000 sf Lot $500k 

$400k build hard cost (no clue..$150/sf - $180/sf??)

$50k soft costs (no clue here. This is for connections, permits)

$10k a/e

Targeting a Cost of work ~$900k - $1m then retail off for $1.3+ or $420 - $460 /sf 

One FINAL key question. Is there a land basis you guys are trying to stay under, and if your basis goes over this threshold, you do not go forward with purchasing the lot? i.e. You know you can retail for $1.3m for 3000 sf. Whats you max lot price you would pay for, since construction is pretty similar no matter what or where you build it (in CA at least..not talking about nationwide). 

Thoughts?

@Jeff Pollack amazing to see a higher price point fix and flip here in WC. This is awesome. Was this through a wholesaler or how did you find it? 

What in 'commercial' are you trying to do? i.e. sales, property management, analysis, acquisitions, development etc?

Start with basic accounting fundamentals. What are rents, what are operating expenses, what is the cash flow, what is the occupancy, is there room to drive value through rent increases or reducing expenses? The beauty of commercial is that its all about the numbers and not emotion

@David Jiang What do you mean 'The city want $50k...". Are you referring to fees or something? And I guess this is not in the Bay Area if you are talking about $350/sf ?? Just wondering..