All Forum Posts by: Stephen Dispensa

I lived through Hurricane Sandy and the cleanup/redevelopment effort that followed it. I've also now worked in real estate/development/construction in Tampa for the past 6 years. Here's my take:

I have a hard time taking a lot of the global climate change discussion seriously, because it seems most of the legislation past to combat it conveniently raises the price of fossil fuels. I'm not saying the data is false, but I question the impartiality of the source. 

However, hurricanes and flooding ARE a real threat. South Tampa is a Peninsula surrounded by Tampa Bay and Hillsborough Bay. In the event a major storm ever got into Tampa Bay, we could see a major floodwater event that would make what just happened in Fort Myers look like childs play. 

Luckily, the unique geography of Tampa Bay have prevented Tampa from taking a direct hit. Pinellas County was hit directly 100 years ago and the damage was substantial. A hurricane would need to take a VERY specific path to hit Tampa directly. However, any Gulf storm that pushes water into Tampa Bay has the possibility of causing devastating floods. 

The problem I see in Tampa, is that we are not building high enough in these flood prone areas. After Sandy, NY State and FEMA instituted a program that allowed homeowners to receive pre-storm value for their destroyed homes. These homes were then resold at auction to developers who had to either demolish them and rebuild elevated homes, or actually LIFT the houses on a new foundation. These new foundations needed to be FEMA compliant (rebar reinforced block, flood vents, no living space in the "wet" basement, electrical outlets and wiring raised up, etc.)

I still firmly believe Tampa to be an excellent investment. However, it will probably take a major storm event to get people to wake up to the dangers of flooding. Most of the housing inventory in South Tampa are single story slab-on-grade homes built in the 1950s. These will all be WRECKED if we ever have major storm flooding. Sad truth is the real money in Tampa won't be made until AFTER that storm hits.

As a realtor who works almost exclusively with investors, this is absolutely a discrepancy that I am constantly seeking to take advantage of to find properties for my investors. If you see huge swings in the list price per square foot of a property and the average sold price per square foot of nearby properties, something is up. The trick is to figure out why. There's almost always something majorly WRONG with the subject property. Maybe its in poor condition (can be fixed, for a price), maybe it has a functionally obsolete layout (again, can be fixed for a price) or maybe it's on a busier street or next to a commericial or industrial property or sitting beneath large power lines (can't be fixed). It's your job as an investor to figure out he opportunity or the threat posed that is keeping that list price depressed and see if you can use that to your advantage.

Hey Neil, I have experience in both areas (finding land as a realtor) and the ground up development as a contractor/developer. 

First thing you're going to need to do is find a place with the proper zoning for a duplex, as well as a lot size that ensures you have the proper setbacks to build what you want to build. 

Once you lock up the land, you'll need to start your horizontal development. This involves site planning from your architect and civil engineer, coordinating utility hookups, impact fees, etc etc., and in your case most likely some degree of platting/deed restricting for duplex development. Once you have your site plan approved you can submit your approved site plan and building plans for a building permit. Once you have that you're good to break ground. 

Construction is obviously a whole entire process in and of itself, but once you receive a certificate of occupancy for the property, in order to sell the other side of the duplex to someone you'll need to create a condominium organization. The best way to do this for a property like this is to create a simple HOA that doesn't require state registration and is MUCH cheaper to create. Again, a land use attorney would be helpful here.

Feel free to reach out if you have any specific questions. 

Quote from @Ashley Oyirifi:

Thank you for your input and information. This is quite helpful. Yes, the house is not listed in the MLS. My numbers indicate that it is in fact a good deal (after getting this person to a price point I liked).

She’s now said that the title work was done ahead of time because she knew she’d be assigning her contract to someone. She has provided me information for a reputable title company who will provide the documentation, insurance, etc. So, my next question is how would you proceed? Vet the title company or dig my feet in with the company I know.

I saw a local couple close with this lender within 4 days of signing a contract, so I’m still pondering how that happened if titling takes so long. 

 So, there's a number of ways a wholesaler can close a deal. The ability to close fast usually has to do with how professional and what kind of volume the wholesaler does. This will also vary state to state quite a bit. Alot of the wholesalers down here either have their own title company or work directly with one and get title searches moving as soon as they place a property in contract. By the time they line up an end buyer the work is usually ready. Whether they are assigning the contract or doing a double close it doesn't really matter as they'll just transfer a single policy. 

For rentals there may be some additional cost savings in repurposing existing materials onsite. I managed two rehabs last year for around 12k in labor and materials each. Full paint of interior including kitchen cabinets. Resurfaced countertops instead of replacing. New hardware for cabinets. Reglazed bathtub and surround, installed new premade vanities. 

Yes they did great on that house, and the fact that they purchased it in 1980 for $32,000 because Jimmy Carter had screwed up the economy and sent interest rates sky high didn't hurt (sound familiar?) 

Yes, as investors we can plan to be on the right side of the game when the **** hits the fan. But the problem is it's never really that simple is it? When it goes down hill, banks stop lending. The deals to be had in 2009 were unbelievable, but very few could get the financing. We can't sit back and rely on the free market to solve these issues, because the market isn't free. Governments on the federal, state, and local level have all intervened in the building and development process with actions that discourage competition. They limit what, where, when, who, and how you can build. All of this serves to discourage competition, leaving large portions of our housing stock to be developed by big players like Lennar who frankly aren't innovating. Lack of competition leads to lack of innovation, and stagnation which is where we're at now. 

The true miracle of a free market capitalist economy is that with many competitors entering a space, competition leads to innovation. Innovation allows a producer to be able to take less inputs to the production process in the form of labor and raw materials, and produce the same or greater output. This results in prices coming down due to a supply increase, giving consumers greater power. This is what true economic growth looks like. When consumers are able to get MORE with their buying power AND producers are able to make a greater profit at the same time. We have NO such innovations in housing today. 

Quote from @Darius Ogloza:

@Account Closed @Stephen Dispensa

Guys: I am sitting in a house on the east side of Toledo OH.  30% of the houses here are basically empty.  Prices range from $5,000 to about $85,000.  If I were a younger guy I would see a ton of opportunity in buying some commercial just over the bridge to develop into work-live space.  You can only say supply is restricted if you define your market as a particular city or metro area.  What is the proper market definition?  We can debate it for days and ultimately not agree.  Two things are past any debate, though.  

There are tons of East Toledo's out there.  

And there is no more fundamental right than the right to travel.  

Just because it is a fundamental right does not mean that the government has to buy you a car.

 I 100% agree that no one has a fundamental right to live anywhere. You don't get to be a dishwasher and live in a Park avenue high rise. 

But there's a reason no one is living in East Toledo. Simply put there's not enough jobs there right now. East Toledo needs to attract investment first, and then people follow. 

I am not advocating for affordable deed-restricted housing. What I am saying is take the shackles off developers to let us meet demand while still making a profit. It's healthier for the overall economy. 

 While I'll admit the OP's post may be a bit basic, at no point does he suggest expanding government. There absolutely IS a supply problem. Anyone who disagrees with increasing housing density and supply does so because they know it will cause their home value to decrease. Part of the thing keeping homeowner's equity inflated is the lack of supply. So my guess is @Account Closed doesn't want to see the value of his home or investment properties decrease. It's an understandable position, if purely self-motivated. 

The problem though, is that the housing market is the backbone of America's economy. Most of American's net worth is tied directly up in their primary residence. The supply side crisis puffing up home values can EASILY crash if banks stop lending, which could easily happen. Now you've erased massive amounts of wealth from people like Mike.

My parents live in a suburb just outside of NYC. They have a 1,600 square foot, 1913 built wood frame home on a 40 x 85 foot lot. They are directly across the street from a commuter train track, and directly in the flight path of JFK and Laguardia airports. Oh and the house is buzzed by helicopters every 30 minutes because Wall Street executives follow the train tracks as they chopper out to the Hamptons.  Oh and they pay over 20,000 a year in taxes. My parents house is worth roughly 700,000. That is insane and frankly, unsustainable. Furthermore, that home value is WAY outside of affordable for the median income in the area. This is a problem affecting the entire country. 

This is not inflation, this is not appreciation, this is simply demand outstripping supply. And supply is low because governments have made it IMPOSSIBLE to build. Permit fees, inspections, code changes, ADA requirements, impact fees, utility fees, licensing regulation have all combined to drive the price of new housing stock sky high. In my area (Tampa FL) if you want to build a new spec home or town house, it only makes sense to build luxury housing in many areas, even though there is MASSIVE demand for middle income and workforce housing. Same goes for multifamily. Every new apartment building that goes up is a 5 over 1 luxury stick build, because it's the only thing economical to do. 

What we need is to deregulate the development process. Streamline it, and make it transparent so developers can acquire land with confidence and make bets on housing development to increase supply nationwide.

Hey Brendon,

Kudos for digging into the development process. A couple of notes for you before I answer your question:

- Since you have construction experience and based on your post, it sounds like you are considering filing your building permit based on an "owner-builder" exemption. This allows you to build your own home without hiring a licensed General Contractor. However, you should know that Florida law means you cannot sell or lease out any portion of the property for the 1st year after construction in this case. (Local law here in Tampa may set it out even further, I'd have to look into it.) 

- All of the trade work that your step dad is able to do, even if up to code will still need to be performed by licensed subcontractors. Plumbing, electrical, mechanical, even if the owner is serving as the general contractor needs to be performed by licensed plumbers, electricians, and ac technicians.

- You may be able to work past both the above issues by working with licensed contractors. A project of this size you are going to want a GC with some experience anyway. The deal you could work it is to get the GC to sub-out some of the work to you as an independent contractor in return for a discount on their price. This way you have no issues leasing right away, the work is done under the supervision of the general contractor, and you get some cost savings on the items you're able to do yourself.

- As far as the trades go, this may be a little more of a sticky issue. You're probably going to have a hard time finding an electrician who will let your stepdad do a bunch of wiring under their license. There's just too much liability here. 

Now to answer your actual questions:

Cost: Easiest way to figure this out is to hire a GC to work with you and give you an estimate. Or you can get some quotes from subcontractors based on square footage.

Let's say you want to build a single story 2,000 square foot frame house. 

- Call up some electricians, plumbers, and HVAC guys and ask for a rough cost. Tell them you don't need hard numbers just an idea. 

- Calculate how much concrete you will need for a foundation and get a cost for an excavation and concrete foundation pour. (monolithic probably being the cheapest)

- Get a quote from a framing company (again tell them you just need a general idea) for framing a 2,000 square foot home.

- Find a drywall subcontractor and find out roughly how much to drywall and finish a 2,000 square foot home

- Get quotes from painters, bathroom, and kitchen installers. FIgure out any other materials (doors, finish trim, flooring, siding, roof tiles, etcc etc.)

A good rough number for just a home build is about $150 per square foot, but remember this is a quadplex so you need 4 kitchens, 4 bathrooms, etc etc. Again probably best to speak with a GC.

Loans:

You need to know whether you own the land or not. Most of the big banks that offer construction loans want you to own the land outright. They won't let you purchase the land with the construction loan. So they want you to buy the property in cash, then you can take out a loan for construction. Also keep in mind they won't give you the money up front and will only let you draw on the loan for work completed. So you'll need to have some cash on hand to pay to get work started. Plus you'll need to refinance a standard construction loan once you complete construction which has some expenses.

Second option is hard money. You can get hard money loans for new construction that will include the land purchase, but it can be very expensive. Will also need to be refinanced.

Third is some local banks allow you to take out a "One Time Close" loan which covers both the construction process and converts to a regular loan once you complete construction. Mid Florida Credit Union and a bunch of other local banks offer these, as do FHA lenders, but you'll need to shop around a bit.

Hope that helps, if you've got any other questions on the development process feel free to DM me.

Quote from @Dan H.:

The only thing I found of interest in the original post is that he charges PM fee when the unit is not rented.  This is not typical in my market.  Is it typical in other markets of is it just the OP?  Note it is the PM's responsibility to minimize vacancy and place a qualified tenant as quickly as possible.

I have seen PMs charge for lease renewals.  If the fee is low enough, it will generate few complaints.  I would hope charging management fees for an unrented unit would generate more complaints but maybe it is common in some markets.

 There's no PM fee when the unit is not rented. Re-read original post example.