All Forum Posts by: Roberto Gutierrez

I'll echo what many have touched on already. Job growth and population growth are what fuel the demand for many of these areas. You have your major employers downtown and as the population grows the employees want to be close to the city to help with their commute. They are willing to pay X amount to live in one of these gentrifying neighborhoods. Developers and flippers are just solving a problem which is lack of inventory for the people that have a need for the product. Gentrification is a result, but it wouldn't be possible if there wasn't a demand. The old homeowners in these areas are paid life changing amounts of money to move and no one is forcing them out. Some people don't like change i guess. If there weren't as many investors revitalizing these neighborhoods and less inventory as a result - can you imagine how high the prices would be then?

 Thanks! We used a local bank for the financing. 18 month IO product at prime plus 100 BPS

Update 05192019

Houses were wrapped up a couple weeks back. Professional pics taken. We listed Friday, 5/17 and had both under contract for full price (365k) by Saturday evening. Closing in 1 month on both! This project took about 6 months longer than our typical deals, but it was a good learning experience and we sold for even higher than we initially projected.

Keywords: Nashville, Development, Residential, New Construction, New Builds

Update 04012019

I've been bad about updating this but i'm going to see it through to the finish. The houses are about 1 week from completion. Taking care of miscellaneous punch list items. From rebuild to now we are at 6 months almost exactly. We applied for our COs and expect to have them in 10-15 business days from the city. We are planning to list around 360k per house and will likely stage them, get a full set of photos, and a drone video that i'll be happy to share. Once we sell i will release final numbers.

Keywords: Nashville, Development, Residential, New Construction, New Builds

If you own the land free and clear just contribute it as equity to the deal. It will probably be enough to qualify you for the loan if it's a good deal. Just show the bank you have interest reserves set aside for the project. If you don't have cash for interest reserves then i would advise you partner with a builder that can help make the project successful and share in the equity on the back end. If you do have to borrow money i would go for a bridge loan instead of hard money. Hard money is typically very high interest and bridge is less. That's all semantics though. I really don't think you will need as much money as you think if you own the land free and clear.

 A good rule of thumb for the core of Nashville where houses are selling for 190-210/SF is to get your land at around 20% of your anticipated sales price. That 20% means that the land is ready to go at 20% though. If there is land development that needs to occur to make the land buildable then I would ask to discount the price based on the land development cost. The due diligence can be fairly quick with most lots by visiting the codes dept and talking to zoning, public works, stormwater, metro water, etc. We go in with a pre-set list of questions that we may tweak based on the land and if we get favorable answers then we order a land survey. Our surveyor takes a look at his maps within a couple days of our request and gives us his opinion too. That obviously doesn't eliminate all risk but it hasn't steered us wrong yet and it only takes a few days to do. I wouldn't buy land if that wasn't done even if it was pretty heavily discounted. As long as we can get our due diligence complete and have the surveyor lay eyes on the lot then we are typically ok with closing even if we are still waiting a few days to get a survey back. 20% is really just a rule of thumb though. If i had a nice flat lot presented to me in an area of town like The Nations for ex. I'm probably ok paying a little more and operating on smaller margins because of how hot the area is. If I look at land out in Bordeaux i would probably want to be around 15% since it's much less developed. It really comes down to knowing the different pockets very well.

Another thing i'll say is that this approach really only applies to land that is already zoned for the use that you intend to use it for. it's a whole different game if you are buying tracts of land with the intent to rezone and create more density or different uses. Those really have to assessed on a case by case basis based on costs to rezone with the city, time spent to rezone, cost to develop land (Easily $300k per acre or more in some cases). There's a lot more risk involved so those types of parcels need to be sold at more of a discount since they aren't entitled for the intended use yet.

That's a good question that I haven't really thought about before. All in with land and construction we are 80% LTV. I'd say when you're dealing with most renovations that there is a lot more uncertainty involved in terms of construction costs. Ground up construction definitely has it's own set of risks so don't get me wrong. In this case we already had a completed survey and had identified there were not any easements, water features, overlays, etc that would stop us from building what we wanted. So a lot of the uncertainty was removed and the main variable that remained was our construction cost. We have a really good handle on that, so it's easier to forecast the outcome. If we can put in 60-70k on a project like this and make 20-25k a house then that's a good return for a house priced under 350k in our opinion.

Update 1-30-19

Long overdue for an update! Time got away from me. We are making good progress. Working on our electrical trenches this week and hope to have power on in the houses within the next few weeks. Once electrical trenches are covered we will move on to final grading, landscaping, gutters, concrete, and fencing. Pretty cold here currently, so we are waiting on final paint touch ups on exterior. HVAC is done and electrical trim out is wrapping up. All we lack is plumbing trim out, mirrors/shower doors, door hardware, and a final polish of the concrete floors. Hoping to have it wrapped up in 6-8 weeks.

Keywords: Nashville, Development, Residential, New Construction, New Builds

 Thanks Peter! Happy to share security measures. These have helped us out a ton.

1. Become friends with the neighbors and ask them to keep an eye out for you. We've even started giving people $40-50 gift cards to incentivize them. We have had neighbors call us and tell us about suspicious people hanging around our properties because of this.
2. Trail cameras - set a couple of these up so you can monitor. AT&T has a data plan we pay for that allows us to watch in real time. 
3. Flood lights - we have a few of the dusk to dawn flood lights that stay on while dark out
4. Lock all doors and windows as soon as they are in and be sure to give the subcontractors a hard time if they don't lock up when leaving. They will get the picture after a few conversations.

Thanks! I think it made myself and my partners more cognizant of the fact that uncertainties exist even when you think you've got it all covered! We are setting more aside for contingencies on our projects now and pointing to this as an example of why it's needed when talking to other partners/investors. If you're local let me know if you want to grab coffee and/or walk some of the properties.