All Forum Posts by: Scott Katz

I own a 215 ac farm.  15.5 ac of it is zoned hiway services and is located next to the interstate on ramp on a corner lot.  Who would I want to talk to about finding out what the development potential and value is?  Is there an advantage to approaching a development company instead of a broker?  I may ask for the zoning of additional property to be changed too. This land is flat clear ground with great access.  It’s the only corner on this exchange that is flat and clear.  A sewer line is less than a half mile away.  Development is on an upswing with hundreds of new jobs coming within the year due to the marijuana industry establishing major commercial grow facilities 3 miles down the road.  A Walmart distribution center is a few miles away, etc.

Tips and suggestions appreciated.   Is a commercial land lease an option?  

Thank you

Covering the shortfall isn’t a problem.  The good news is I get a chunk of that back in equity every month and another plus up at tax time.  I could reduce outlay with a 30 year note, but the plan is free and clear in five.  

Interested to hear thoughts on this deal on a 1bd/1.5ba 930 sq ft Spanish colonial condo in sunny Santa Barbara listed for 658k.  Located one block from the hospital, one block to State Street and ten blocks to the hub of the city.  Unit is architect designed, freestanding, and appears as a neighborhood home.  At 650k it’s near the bottom of the market.  One car garage and parking on the street.  This unit is in the hotel zoning district and can be leased short term.  No shorter than 7 day leases per association restriction.  Monthly rent is currently 2,300.  Rental occupancy in the city is 99.5% and rents are steadily increasing.

I have a 625k 30 yr VA loan @ 4.25% with zero down and zero funding fee.

I am selling a rental property with 300k equity which I will put toward the new property via 1031exchange and restructure the loan @ 4% either before or shortly after the deal closes. Fees for a VA streamline refinance are minimal. A refinance also removes the requirement of the unit to be owner occupied.

I will receive 2,610 per month in housing stipend while attending school for 32 months and staying in this unit.  This will equate to 83k in “free” housing stipend.

When I vacate I will lease long or short term.  

Purchase price 640k

Balance to finance 340k @4% 15yr

Taxes 6k yr

Insurance 1250 yr

HOA 290 month

Monthly payment on 15 yr note approx 3,241

Anticipated rental income 2,500/ month.  As a furnished short term rental possibly more. 

Property has potential for appreciation as the block it is on has larger condos at 1.5mil and small fixer houses for 1 mil. CA has plateaued.  Hard to know future direction.  Silicon Beach could take off and prices skyrocket or prices could pull back.  

Will occupy for at least the first three years.  Afterward, rent and pay it off and use part or full time, or possibly trade up.  Plan would be to pay it off in five years.

With the stipend money it seems like a decent deal to get myself into some nice weather.

Good idea?  Bad idea?

Thanks for reading, I’ll be interested to hear your thoughts.

Scott

Greg, will do.  I’m meeting with the  subject matter expert who created the zoning map for the township to get his recommendations on zoning and planning.   

What size and configuration are you seeing in your market for dedicated single family residential and duplex new construction?   

I’m contemplating building on land adjoining my farm.  No way can I get new construction built for what I could buy preexisting in town, but it would be great to have the unit(s) close and new.  Cost would be even higher since I’d build with steel roofs and high quality components to reduce long term maintenance costs and effort.  

I’d pay cash for the build.  Land is paid for.  These would be lifetime cash generators.  Currently ground is zoned ag.  Not a problem for my builds as I have acreage and frontage enough to build even under ag zoning.  Well, septic, power, and concrete drive will be under 25k.  

It's likely I can rezone part or all to medium density housing. This would give me the option to build a duplex if I wanted, or a PUD. Min square footage required is 750 sq feet. I'm thinking 1200-1400 square foot to attract tenants with no more than three in the family. I have a well kept 45 year old 3 bedroom 1.5 bath trailer with a 1.5 garage on its own lot adjoining the farm now. It rents well for 1k per month to great tenants. Rental demand is strong and the community is adding hundreds of more jobs with a new 1.1 million square foot recreation marijuana grow and distribution facility going up three miles away. Also a new 1,000 megawatt gas turbine electric power plant starting construction this year which will by itself add 400-500 construction jobs to the economy over the next two years. I've had at least one rental for the last 15 years. Where all these people are going to live is going to add a lot of opportunity.

Thanks for your thoughts,

Scott

I’d start by finding out which jurisdictions in your area if any will allow you to build in such a way,   I live in a rural township with basic building requirements.  What you propose to do here would require a variance.  First floor must be occupied and no accessory building can be constructed before the principal residence.   I have talked to some people doing something similiar to what you propose with pole barn construction and finishing part of the first floor as a residence.  Another route could be to find something existing and rehab it to meet your needs.  Again, check first with your building dept to see what you can do with it.  Hope this helps.  

I use a 650 credit score as the min

If you have doubts move on.  Far better to wait for a well qualified tenant.   If they have demonstrated “horrible” credit that is a huge red flag.   Another red flag is this is your first time.  Don’t get hung up on the story.   Most everyone has one.  Safeguard your own interests.  No one else will.  If you want to look at these applicants further are their bills paid current?  How long?  Have you checked with the employer and run a criminal background check?  Chasing rent is no fun.  I could have filled my last vacancy four times with less than stellar renters before a great applicant came along.   If your property is well taken care of, you conduct yourself in a professional manner, and it is fairly priced you will lease to a well qualified applicant.   In my view, the hardest and most important part of landlording is screening applicants.  It’s critical.  

 I’ll say this about the Ramsey approach.  It feels really good not owing a penny to another soul.  Imagine your income with no debt service.  Play with an investment calculator for awhile and see what you can do with that income.  Combine zero liabilities with a nice retirement account and paid for rentals etc, and you have arrived at a place worth aspring to.  It won’t happen overnight but it will happen.  For me, a few paid for rentals are much more appealing than many that aren’t.  Fewer structures and tenants.  Excellent cash flow, few worries = my vision of success.   What’s your vision?

How about buying a duplex, living in half and paying it off fast....  Then buy another.  One day you’ll find you are doing these deals all cash.  Compounding interest is a force you want working for you.  

Best of luck in all your endeavors.  

SK