All Forum Posts by: Stuart Udis

@Sam Shikiar By your own admission you are struggling with deal flow. Therefore, why are you focused on capital raising? Your focus should be on building a sustainable pipeline of projects. I am concerned you are prioritizing the wrong things. Secondly, you mentioned having sufficient funds to complete two to three projects without loans and fund a few more with hard money loans. There are plenty of banks out there offering 75-80% LTC financing which are more cost effective capital sources than hard money loans. Remember bank debt is generally the cheapest input in the capital stack, so take advantage to the extent you can.  Based on what you shared you have sufficinet capital on hands to undertake at least 5-6 projects at a time with well thought out financing + have reserves/capital to help advance the construction without relying solely on the bank draws. 

Until you have more than 5-6 projects running at any given time, I will leave you with two action items: (1) focus more of your time and energy on sourcing quality leads on acquisitions; (2) learn how to responsibly use leverage given your cash on hand. 

There are other factors that have far greater influence on residential mortgage rates than the fed rate. Bank funded construction debt is the loan product that is typically most aligned to fed resere rate decisions. There is the assumption if/when rates drop to low 6's residential transactions will pick up but that's merely speculitive. There are plenty of people in this country with loans originated a few years ago in the  3's. Perhaps these home owners are at a stage in their life that would customarily lead to purchasing a new home, but many will opt to stay put because they don't want to trade their mortgage coupled with the cost of purchasing any new real estate. The combination doesn't allow for them to make a worthwhile trade.

 New supply is the best remedy, but uncertainty surrounding tarrifs, potential labor shortages and progressive local building codes driving up costs and new build starts will continue to lag. This is why many of the national builders are emphasizing higher end housing supply in their development pipeline.  This buyer pool will transact due to emotional or lifestyle decisions, not solely influenced by financial decisions & its easier to absorb the higher cost of building these higher price point homes.

Many who already purchased their starter home are likely going to be remaining in that house longer than they first expected. Those who are still renters will likely opt to rent longer and wait until they can make the forever home purchase. There is a ton of money being poured into rental townhomes and even larger apartment units recognizing this is a trend that will be persistent and rental supply geared towards this consumer will become increasingly necessary.

In Philadelphia in-fill development remains popular but the numbers don't pencil too well unless you are in well established neighbohroods. For new construction to pencil (and even heavy renovations, particulalry for multi-family/commercial projects that trigger more costly construction types) the following has to be true:

For-Sale: SF Houses: $350/SF  Condos: $400/SF  

Rental: 1 Bed 1 Bath (550 SF unit)-$2.75/sf rent; 2 Bed 2 Bath (800 SF unit) $2.50 sf rent; Units over 1,500 SF at least $2.00/sf rent....and these numbers are tight. Add an additional $0.25 to each for some better performance. I see investors building 1 Beds at $1350/$1400 and don't see how they are staying afloat. Of course these are also just general rules, construction costs will vary greatly dependent on site conditions and design.

Most material costs, insurance costs, permitting, licenisng etc. don't deviate greatly depending on where exactly in the city you build and unfourtnately, most of the in-fill opportunties are in the neighborhoods that can't achieve the required pricing to make the cost of new construction pencil. Those who make it work in the neighborhoods that can't achieve the outsale or rents are usually construction companies merely using the builds to collect fees

Chris is correct, amended and restated operating agreement is all that's needed. Also, if your son requires your signature to co-guarantee loans on his first purchases, the lender would most likely want you to be a member of the LLC as well.

@James Mc Ree Prioritize possession above all else. Payment plans are often just kicking an issue down the road to be dealt with later & judgments are as worth as much as the paper they are written on in most instances. Also make sure you are properly prepared. In Philadelphia this means  having an active  rental license. Without one,  you will have a difficult time pursuing any remedy.

@Gregory Coppola If you have any leads in the 19119 zip code,  run those down for me. You have yourself a buyer :)

Is it your money or is it someone else's? If its your money, is it in a bank account? IRA/retirement account? proceeds from a line of credit/refinance? 1031 Exchange? If the capital came from someone else how is the equity structured? Or is it a loan? Then there's the investor's skill set, time/availability and where they are in their life. I recognize what you presented was a hypothetical but the answer is going to be dependent on the individual and their personal circumstances.

Hi Greg, a list that was assembled over a 5 year period will be perceived as being a stale lead list. A lot can change over that period of time. Most who pay for lead lists will be interested in recent data such as tax delinquent lists, recent violations etc. There's likely a few properties on your list you would consider to be the better leads. Financially you probably come out ahead focusing your time on pursuing the best leads as opposed to selling the list. 

@Dani Beit-Or I can appreciate the need to add safeguards. I've personally been burned investing in partnerships. However, there has to be some level of trust and reasonableness involved. I don't see how you can operate, particularly a high transaction business such real estate development if $1K checks require multiple signatories. I will double down in saying that if such a low threshold of trust exists where writing checks over $1K require multiple signatories, you should rethink who you are getting into business with.

You build wealth through accumulation of equity, not cash flow. When I hear investors are chasing cash flow and looking to invest in distant markets alarms should go off because that typically means the investor is ignoring the fundamentals that are most important to sustained performance. Cash flow should be viewed as being necessary to cover expenses, provide sufficient reserves and through these two items provide the opportunity to obtain favorable loan terms on the real estate. Most who are able to generate cash flow that is meaningful are hands on operators and are really operating a business, investing is secondary.