All Forum Posts by: Shanelle Jones
Shanelle Jones has started 3 posts and replied 6 times.
Post: Has Anyone Experienced Instant Equity Building A Modular Home?
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Has anyone experienced instant equity building a modular home? Or oppositely, did it cost more than it was worth?
Post: Building A Four Unit
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I want to build a small 4 Unit for $400,000-$500,000 in Northern Virginia using either a VA loan, FHA loan, or other low downpayment loan. Any advice? Any lenders I should contact?
Post: VA Loan or FHA Loan to Construct 4 Unit/ 4-Plex
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Originally posted by @Alexander Felice:
I work at a bank doing loans similar to this, maybe I can give some perspective.
if you are not a builder, giving you money for a loan that requires a giant build is risky. Why would anyone want to loan money for a business you're new, when they can give that same money to a builder who specializes in this thing.
sure the numbers may work, but it's a lot of risk to a bank to take on construction loans. so its' not so much that this isn't a deal worth doing for you, it's just not a deal worth doing for a lot of banks. a 4plex is not a great asset for many banks either. Are the big GC's in town building 4plexes? If so, are you building cheaper than them? and if not, why not and what do you know that they don't?
Also you mentioned low down payment. Again, think of the bank perspective, they are going to put out 500k and you're going to come up with what? 20% 0% super risky for a bank to put all the skin in the game and you have none.
**Do you have a contractor lined up already? You would be in better shape if you had the architectural plans complete and a contractor bid or two. This can make a big difference.
Keep looking around, someone will probably pick this deal up for you but I wanted to show why maybe you're having difficulty.
@Alexander Felice: I do have a builder lined up and I have the plans, quotes, etc. Thank you for your input, I can see the risk from a bank's perspective. But really it is little more risk than if I were to build a $600,000 single family home, especially because I live in a metropolitan area with lots of fouplexes (none for sale though unfortunately, because people hold on to them because they are money makers here). Wish me luck! And please point me in the right direction if you know any resources. I appreciate your expertise.
Post: VA Loan or FHA Loan to Construct 4 Unit/ 4-Plex
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Originally posted by @Jaysen Medhurst:
@Shanelle Jones, those numbers could work. Figure you'll have to put in ~$650/month (could break even if you self-manage) as an owner/occupier, until you satisfy the FHA / VA requirements (1 year, I think). Here's how I got there:
$6800 GSR
-$1700 Owner's unit (you'll be living in one unit)
-$2890 Expenses (42.5% of GSR - left out CapEx, included management)
-$2863 Debt Service ($582k @ 4.25% for 30yrs - that's 3% down on $600k)
Total $653 cost to you each month
Once you move out, you'll see ~$1050/month CF, which isn't bad. Especially when you consider your very small investment. That works out to nearly 70% cash-on-cash return.
I think you'll have some challenges with financing if you don't have construction experience. Have you considered partnering with a contractor on a deal like this?
@Jaysen Medhurst The math you quoted will be my worse case scenario because my expenses will be minimal for a variety of reasons. I should have at least a little positive cash flow to start. In the beginning I thought about partnering with a contractor, however, there will not be much profit to split with such a small project. So far I have found a lender that will finance a duplex. However, I am trying to get the most bang for my buck and would like to pursue building a fourplex; and then continue to build more properties in the future. It has been more difficult than I thought to find a lender because in the area I live in I really don't need a loan larger than what I could spend on a single family home. It seems to be the 4 units that is making this difficult, but not the costs.
Post: VA Loan or FHA Loan to Construct 4 Unit/ 4-Plex
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Originally posted by @Jaysen Medhurst:
Hi @Shanelle Jones, you're going to have a VERY difficult time making this happen. I assume you have never done anything like this before, so getting a bank to take a chance on you with so little equity in the deal is going to be next to impossible.
There's reasons you don't see a lot of new 4-plexes going up. In many places they have been "zoned out" of local cities, meaning the town won't allow any more to be built (unless a replacing existing). More importantly, the finances are very hard to make work. With land prices comparatively much higher than when most 4-plexes were built, the numbers just don't work out.
This is why when you do see new rental units being built they tend to be large (40+ units) and class A. The developers need both economies of scale and top-end rents to make the numbers work.
Post some more details, location and your financial breakdown, and the community will help you walk through whether this is actually a viable plan.
@ Jaysen Medhurst The project I am doing will be between $500k-$600k, in an area where the average rent is $1700/mos. Building is cheaper than buying in my area. I found great land for a great price that is zone properly and is included in the total cost I quoted above.
Post: VA Loan or FHA Loan to Construct 4 Unit/ 4-Plex
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I am interested in using either a VA Loan or an FHA Loan to construct 4 unit/ 4 plex. While this is allowed by both the VA and FHA, I am having a difficult time finding a lender willing to do this. I live in Virginia. Has anyone had success constructing a 4 unit with a low down payment loan?