All Forum Posts by: Sam Cain

I bought a single family home with the intent to develop the property into 4 townhomes. Adjacent to my investment is a small retail shop. This shop is owned by a small business that uses it to house inventory for their wholesale business. (Wooden trinkets to gift shops). This shop is critical to the highest and best development of my property. I would love to purchase it. I have started conversations with the owner and have gotten as far as receiving a counter offer.

Other important information includes the tax assessors value the property $103,000. There looks to be a tax Lein on the property. Retail properties have been hit hard by the covid lock downs and finding a renter for such a small shop would be hard.

She stated she would be interested in hearing an offer as she would like to move her inventory closer to home.

The conversation is as follows.

Original offer:

I hope all is well. I appreciate the opportunity to present an offer for your property. Thank you for your patience as well. That being said I would like to pay $75,000 for the property. In addition to that, I will pay for a professional company to move your inventory to where ever you need it. Please let me know if you have any questions and we can discuss. I look forward to to hearing from you.

They replied in a text and stated they couldn’t pay that amount as they received an appraisal for significantly more.

Their response:

Thank you for the offer. As you know, I can't accept 75,000.

I cannot let go of this property for anything less than 150,000. Forgive me for being blunt, it's just not a situation where I am willing to haggle.

If you are interested, let me know and we can discuss moving forward.

My thoughts:

I, nor does my real estate agent believe this property is worth that much. It’s in an awkward location. There are no comps to prove her valuation. I also don’t know if that appraisal is real. She could be bluffing.

If I can acquire this property it will bring an additional $250k in profit to the deal. So if I pay $150,000 for it then I am looking at $100,000 in profit that I didn’t have before. With or without the purchase of the property we are developing the land. With the purchase we do 4 units with alley access. Without, we are doing 3 units with no alley access. Her property taps into the into sewer and water lines which is come from the alley. I would need to access that in order to develop the three units.

Since she doesn’t want to haggle, what should be my next move?

I am the owner of a concrete construction contracting company who’s focus is residential and light commercial foundations and flatwork. We have well over 6 figures in cash reserves that I would like to use to purchase and develop a piece real estate. The business is an LLC. My question is can I avoid income taxes on the use of the profits to purchase the property by self performing the concrete on the foundation, as well as providing supervision during construction. Would that be considered a business expense?

Hey guys! So I wanted to give a follow up from our original post. We decided to go with the short term strategy and let's just say it was the right call. 11 months ago I bought a 1 bed 1 bath SFH for 300k in my name as a primary residence. We added a second bedroom to make it a 2 bed 1 bath. It's expected to bring in $2400 for the month of June in rental income. 2 bed 1 bath SFH in that area are averaging 1600 a month. My fiancée bought her SFH primary residence that we live in currently

Great question @Jessica Stewart!

Matt M. Hey that’s great! Go rams! I see you posting quite often through my keyword alerts. Good to know we are representing! I will definitely contact a few GC’s. I haven’t had the time to analyze enough deals to be confident in my numbers as I run my concrete business. The cost of construction is the driver in all of this and I know we have an advantage in that we can build the foundation and any site work at cost. Plus we work with several GC’s in the Denver area who have stables of subs. The architect I contacted is Sean Witkin. He is an established multi family architect AND GC. We contracted to perform all his concrete on 40 units 9th and Kalamath art district row homes. He was the architect, gc and owner of the project. His $/sf is based off of projects he has done in the last couple years including the one I just mentioned. He showed me a few side by sides that were high end @$200-250/sf back in 2007-08. As far as the purchase of the adjacent property goes I’m ready to move on buying it but there are a number of different “what ifs” that are running through my head. I know there is a solution and i can’t tell if I have paralysis by analysis. I don’t have adequate cash currently for a DP but I will in the next year or so. I do know people with cash and could ask them for help on this opportunity. I’m thinking seller financing, if they own it. It has tenants that I would hopefully keep in place and just have them pay the loan down. But, when I scrape it, that rent goes away and I need to continue that payment. How do I convince them I’m good for it? Can I wrap it into the construction loan? If they have a mortgage the strategy might change as now we are involving banks and my cash position isn’t that great (but it is improving) and I assume my plan to bulldoze the property will have an effect on the lending. Do I partner with someone who has enough cash to buy it outright and then they are partners moving forward with the development? Or maybe just use the cash buyer for the DP? What are some common ways that this type of cash investor would get their money back? Thanks for in advance.

What's up BP?!

My fiance and I are writing to you from Denver, CO. We are researching potential strategies to GROW our portfolio. Right now we have 2 SFH, primary residence, each in our own names. Both have equity/appreciation through 1 years worth mortgages along with forced appreciation through renovations and additions.

Here's the details of her deal...It's a short-term rental strategy. 

Home purchased in City Park area for $350k. 3bd 1bth 4% DP. 30 year 4.125% rate. Primary Residence

$2,000/month PITI.

We have $336k remaining

We did a 'rate and term' refinance at month 10.

No longer paying PMI ($250 savings)

Home valued at $410,000.

$74k equity

We are renovating the house, interior and exterior doing most of the work ourselves. All-in is $40k. We've added a bathroom and kitchen downstairs and created a basement apartment.

Basement just passed rough-in inspections and has 1 month until completion.

We will get it reappraised at the year 2 mark. Conservative ARV and local comps has it at $450k.

Plan is to rent out the basement on Airbnb. Property will cash flow $200-$300.

We do not want to live here for more than a couple years. We want to use the equity to get into another deal.

Here are the details of my deal. Englewood, CO 2 bed 1 bath, 1300 sqft. $300k, 5% DP. 30 year 4.125% rate.

We added a second bedroom and updated the interior. All-in $15k. ARV $380k- $400k.

$288k remaining on loan. $1,860 PITI.

$92k equity. 

We fully furnished the house with extra furniture we had and are renting to traveling nurses as its close to a couple hospitals. The property cash flows $200/month. 

Its located within walking distance of a Starbucks.

Both properties are our primary residence. 

The property in Englewood was purchased because of its potential to densify. It sits on a large lot and is zoned for medium density multifamily. This means we can have 1 unit for every 3000 SF. The lot is currently 9200sf. 

We can increase the property square footage to 12,000sf, AND gain access to the alley, if we purchase the parcel to the west. I have had a casual conversation with the owner (older retiree) and they would sell it for $100k. It is a small single store front that rents out to a small business. 

We plan on scraping the existing home (and hopefully the adjacent store front) and building 4 side by side townhomes.

My agent sent several comps for in-fill new construction within a mile of my property. They are all 2,500 sf - 3,500 sf duplex and triplex. The all have 3 bedrooms 3 baths or more. The lowest sold duplex comp is one side of a 4 bed 4 bath for $571k and the same for the other side totaling $1.142 mil. The highest sold duplex is a 4 bed 4 bath each side both sold each for $662k, totaling $1.324 mil. There are several others on the market listed at $720k+. If we sold our 4 units at $600k each that's $2,400,000. They would be 2,000-2,500 sf. 

We have met with an architect to discuss $/sf. He recommends purchasing the adjacent property so we have access to the alley for our garages. We believe we can build anywhere from $135/sf to $165/sf. I have an advantage in that I own and operate a concrete contracting company and we specialize in residential foundations and flatwork. My business will build the foundation, reducing the cost/sf. There is the possibility that we act as the GC. My family has experience with new builds back in the early 2000's and we think its possible to manage the project ourselves. I also have a degree from Colorado State in Construction Management. Realistically there are inefficiencies with being the GC as we don't have an established business and it may cost us more money and time to fix problems that do arise compared to hiring an experienced GC. 

We stand to make $50-$100k per unit but I really want to nail these numbers down. This accounts for acquisition costs, demo, construction costs, taps, permits, fees and contingency. 

These are very rough numbers and they seem too good to be true. 

We currently have very little cash as its tied up in the renovations of both properties (in order to get them cash flowing).  With the two cash flowing properties we will be able to save ~$200k in 2 years, potentially more. Plus, we will have considerable equity in both properties $150k-200k. 

We think we have a great deal here and eventually could have the capital to do it ourselves. Do we wait and fund the deal ourselves and hire a GC or manage it ourselves? Do we act now and partner with someone who has cash?  How does the purchase of the adjacent property fit into the deal? We are not sure what to do next. What do you think? I can answer any questions you may have about the deal. I'm sure I have left something out. Thanks in advance.

@Scott Choppin

@Scott Choppin

Hey Scott,

Hope your projects are going smoothly. Thanks for showing interest in what we are doing! I love BP for that.

I have made minimal progress due to the fact my girlfriend and I are renovating her house and getting it ready for us to move in to. We remain on the critical path.

Regarding the property for development, I spoke with an architect that we work with through my business (Cain Construction CO LLC - Concrete Contractors) and presented him my zoning information (setbacks, max lot coverage, building height etc.) He and I are going to sit down and discuss what's possible regarding the building envelope before I go to the city.

The store front property that is next to me is still an option for purchase. I will be able to make a more informed decision about adding this property to the development once I run the numbers on the property with my current lot. (this is a challenge right now due to the fact that I am in learning mode)

My girlfriend has a great idea of buying the store front property and then leasing it out to a restaurant/wine bar. That coupled with developing this triplex would really add value to neighborhood that is definitely up and coming. Those are the initial thoughts without running the actual numbers. We will see.

Like I said, I am in complete education mode as far as developing is concerned.  We are education ourselves on how to run pro forma numbers to make some economical decisions. It's novice for sure. But, we believe in the principles of cash flow and leverage and want to keep that in mind as we proceed. Selling any of my property does not interest me, I also don't want to be short sided so it's subject to change if I can see the numbers work. My basic 10,000 ft view on the developing process is not enough to make any decisions right now and we need to keep learning.

Both of these properties will be cash flowing, through a short term rental strategy, that we are working out tails off right now to get set-up/stabilized. We are doing most of the work ourselves so it is taking up all of our time, as it should. This will allow us to not have any living expenses and increase our savings rate. We can then be financially situated to move on the development of this property) 

If I could, with the right information, make a decision to move on this development tomorrow I would. But as a construction manager, this is not on the critical path for my girlfriend and I. I understand that once I have the numbers figured out it may move right to the top of the list as far as priorities are concerned but I just don't have that information yet.

I really enjoy reading your posts regarding the lifecycle of the CA Multi-family. I have learned a ton so far and its really been the most beneficial piece to come out of bigger pockets for my girlfriend and I.

I love talking about out real estate and the future for her and I. Its a passion that is developing for us rather quickly. We love learning about it so if you are ever in Denver and want to meet up and talk we would be excited to do so. Again, thanks for showing interest!

@ScottChoppin The owner of the store front has said he would sell for 100k and I could rent that unit out for $2000 a month. That's a great cash flowing deal. The cash flow along with adding the unit and increasing density and acquiring access to the alley are all the reasons I would want to acquire it. I will check out your thread and definitely get back to you.

Let me start off with what our goals are. We want to own 10 units in the next 10 years with an emphasis on multi family. We currently own two SFH within the last six months. Ok. Now, some info on the properties. My girlfriend and I currently own two SFH, both primary residents. The first property is a house hack in Denver and in renovation mode. It will be a $1000 a month cash flowing Airbnb by September. We will live upstairs and rent out the apartment basement. The second SFH is in Englewood and was built in 1927. We are currently living in it. It's in great condition, 1400sf, 2 bed 1 bath large farm house with hardwood floors. We will rent it out when the house hack is move in ready and it will have minimal cash flow every month. Here is where it gets fun. The 1927 house is in a b+ neighborhood, near hospitals and a university, it's surrounded by progress and sits on a 9000+ sf lot which is zoned for 1 unit per 3000sf, medium density multi family. Directly adjacent, and to the west, is a small store front occupying 3000sf of land which unfortunately blocks my properties access to the alley. I've expressed interest to the owners that I'd like to buy there property from them when they are ready to sell. They responded saying they'd give me first right of refusal. We could use the store front as additional rental income if we acquire it. More importantly, acquiring this land is key to developing the property properly. It would give us an additional unit to build, along with access to the alley. So, Assume I acquire the store front by saving up for a down payment from my cash flowing Airbnb. The 1927 property now goes from a minimal cash flowing 9000sf property to a 12000sf $1000/month property. My questions are: What are some steps we can be taking today that will help us prepare for the development of this land? Is developing the land even the right answer? We want to maximize the value of the property in the present and in the future, in order to continue on our path of reaching the goal of 10 units in 10 years. I can't fit all 10 units on this 1 property so I know I need to Consider beyond that. I'd like to hear some philosophy and what are some of your general rules when dealing with land that has so much potential and the cash flow to help save.

Hi Guys! We are in a debate on the Denver rental market - whether doing a long-term rental or short-term rental. Are there any resources to help determine the potential rental income for short-term rentals? Thanks!