All Forum Posts by: Clay W.

Chris Wosnitzer ... I've had many other experiences in both my professional + personal life where you really don't know what is possible unless you ask, so I agree.

However, I haven't heard back from the broker yet. So perhaps they get this kind of request too many times and shrug them off. They want to make sale and get paid, after all.

Since I'm new to the industry, this is the thing that seems to be the biggest hurdle. If I did my homework and had a strategy, and then each time a new deal comes around it's getting bid on 20, 30, 50+ times, ... then I fail to understand how the other parties "see" the deal and what they expect to gain from it (perhaps other than the speculative "appreciation" aspect).

As Rich Weese and others have reiterated time and time again about how you need to make sure you position yourself well on the "buy-in," then can you all give me your theories and/or tell me what I'm missing here?

-Clayton

I'd be more than interested to learn a lot more about this, Will. It is such an integral part of successful RE investment, but also such a vast topic. Care to expand a bit more?

I'm interested to use this approach as well with particular lots / parcels in residential areas. However, since I've never tried it before, it seems a bit strange to me that I could tell the listing broker that I'll give the owner $10 (or some insignificant amount) + a bunch of contingencies for me to get the property properly zoned, approved, financed set-up and/or investors within a certain time frame, etc. without them turning down the offer as silly and tarnishing my reputation.

If, say, a lot was advertised for somewhere around $140k, wouldn't I have to at least make some kind of "earnest" money option of 5% or ?

I'd really like to hone this type of approach to purchasing property - especially for undeveloped land with potential.

Thanks.

I heed your point and it makes sense ... It all depends on the area and what the market demands ... -again, the #'s have to pencil.

Also in Sean's point about lots in Boston. I also see some speculators buying houses already valued, say, $400K+ and tearing them down, building and listing for $1.3m ++.

I think the post is strong when focused and clear for all to follow ...

Will - is this 20% (rule-of-thumb or ?) typically what most would consider the lot/parcel value of a property's "exit value?" ... In other words, If I want to build a property and I came to the conclusion that the exit value was "x" (for whatever type of property is was), then as a builder/rehabber, etc., would you typically value the land at 20% of "x" ? - say if it was a tear-down, for example.

-Clayton

I have yet to dig into actually developing anything so I have no experience or complete knowledge of how long permits and approvals are for any type of residential development or what the process is for significant rehab projects in my area. This I will surely want to find out - although I doubt there is anywhere in Calif. where building approvals run along in 10 days!

My overall interest with this post - and that dealing with the "new construction" approach - stems simply from the prevailing conditions of the market where I would like to get started.

I've gone over again and again the "50 / 2%" rules and they have definitely helped me to better judge an investment rental opportunity. However, I simply don't have the luxury where I am located to sweep up any type of respectable properties for, say, $50k and expect to rent them out for $1,000. Not to mention that properties I've seen going for these amounts are generally in the slums which I refuse to get involved with - and the rents would be <$500 /month.

One of the greatest things I've learned in the past few months is that of looking at investment deals through "reverse calculation." If I were to begin by looking at an investment area and I know that a median priced 2bd/1ba in a 4-plex would fetch, say, $750/month ... Then I would have to be held to the numbers and look at the property with a realistic valuation.

Even if I used a conservative rule of 1% / month (rent-market price ratio), then the same example above with a Gross Scheduled Yearly Rent of $36,000 ($750 x 4,... $3,000 x 12) would cause me to put an absolute all-in cap value at $360k - with ZERO differed maintenance.

Unfortunately, without finding deals at huge discounts, it is easy to find similar 4-plexes in my area that are on their last-leg and brokers are asking perhaps $450k or $500K + for the same property as the example above.

To me, this is silly and therefore I simply figured that if new construction numbers penciled (even if considering high impact fees), then why not try to simply find some available parcels and / or tear-downs and try to build new within relative parameters.

As mentioned, I'm just getting my feet wet so perhaps I'm off somewhere, but the numbers need to pencil in any investment / industry.

*By the way, since I am just starting out and hustling like mad, I'd be happy to meet-up with anyone in the Northern California region to collaborate, discuss, etc...!

Question for both Mike M. and Will - since you are both in CA like myself and have experience with the construction process + the permit-maze:

I know that each area has different regulations, however:

- How much is generally allowed to be knocked-down without being considered a "new build" and therefore require the tens-of-thousands of $ in new impact fees? (e.g. - can a building be destroyed down to its slab-imprint and then re-built as long as its footprint isn't added to laterally?)

- If a property is already on a lot - meaning that it has been there and has hook-ups, etc... and the zoning states that there can be multiple units on it, then can these be added without the extra fees? Or does simply adding any new "dwelling" + meters, or zoning changes, etc. mean you have to pay new impact fees?

I'm trying to get a better idea of what actually sets-off the "impact fee" trigger with any type of residential (multi-unit) related reconstruction / rehab / new build.

-Clayton

The overall topic of this post is spec building and selling asap. Just curious if any of you would also consider building/holding/renting? Perhaps building a multi-unit +/- 5-10 units on the same parcel (* of course I am not referring to a planned "community" of single lots...)

Why / why not?

*Perhaps I'm just thinking in terms of long-term cash flow...

Thanks. -Clayton

Hi Rich -

I've had this topic in my head for quite some time so it is great to see someone with your diversified background supporting the idea. *I haven't read your book yet so I don't know your entire history...*

I am relatively new to the RE arena and do not know how long it will take to get my game-plan up and running smoothly, but so far (from what I've seen from a lot on this forum and from a few acquaintances in the "flipper" field), the prevailing industry seems to be rehabbing, flipping, wholesaling, etc. etc.

Not to say that any of this isn't a profitable approach, but I know I'd rather focus my energy in other niches - preferably building modestly in good neighborhoods *if* the numbers pencil.

*I'd like also to cover the previous posts on "new build" if someone has it already pin=pointed.

-Clayton