All Forum Posts by: Sue Hough

@Dominic Cruz welcome to real estate!  You mentioned you found land and new construction.  I would advise strongly against doing new construction on your first venture unless you are partnering with a builder.

New construction has elements of an advanced nature such as; accurate bidding, navigating the local municipality zoning and permitting, having the knowledge to work through soil suitability, detailed architectural elements and so forth.  

I would advise to take your time, go to at least 2 Meetups a week in your local area and build a small tribe of good folks with experience.  I have said this before; once you become a regular at Meetups there will be seasoned investors who will take your interest seriously and gladly work with you on a project.  You will not start out making millions but you most likely will not loose any money, and you will gain an education.  I call that a win, win, win! Any investor telling you they are making millions on their first year in real estate, are just not telling you the truth.  This industry requires many years of hard work and learning many lessons.

Good luck!

@Stella Xu  I just posted an article on Bigger Pockets where I dive deep into the changes which we will be seeing in the near future, predominately the migration from Big Cities to Small Towns.   History has shown when we encounter large scale upheaval as a society, people will re-examine many of their values asking questions such as "Am I safe and is my family safe" and "Am I happy and is my family happy".  These personal inquires will result in movement, and I believe the tides are already moving to a more urban lifestyle.

"Small Town Markets Have Huge Investment Potential in 2020—Here’s Why (& How to Capitalize on It)" https://www.biggerpockets.com/...

Good luck!

Congratulations @Sean Endecott, it is a beautiful project.  Wishing you many more successes in the future!

@Elizabeth Pare good morning!  I see you want your uncle to change, but I doubt he feels he needs to change, there is a big difference.  If he sees his value as “performing work” I highly doubt he will ever find value in hiring someone else.  (This also is prevalent in people who are more mature in age and most noticeably in many immigrants)  If that is the case, it’s not him who needs to change, but rather you.

You may want to explore other options when hiring a GC, as time is money when you are investing.  A simple conversation with him explaining the value of money vs. time may be required. I can sympathize with you, as this will most likely result in hurt feelings and I can tell that is the last thing you want.

Good luck!

@Joyce Jackson my heart goes out to you, as you are in a very sticky (pun intended :) situation. I am within Chicago and the Housing Authority does provide for emergency inspections for the reasons you mention.  They will, in turn provide an immediate (usually 60 days) notice to the tenant to remedy the damage or they can easily loose their Housing Voucher.  Since we are one of the most “tenant friendly” states, I can assume Florida will provide you, at least that service.

Unfortunately the evection falls on you and with Covid you may be stuck for some time.  Having said that, you want to find out what your Housing Authority provides as a remedy and play your cards wisely.  If your tenant knows she can loose her voucher there is no reason to leave your building and things may get even worse. You can notify her of your plans to report her and see if she is willing to move peacefully in consideration for a continued housing voucher.   Playing hardball with a tenant who has already proven she has no respect for your building is a very slippery slope, be careful. 

Good luck to you!

@Alexander Palomares good morning! Just a thought about value-add; can you incorporate an ADU on the property? The payoff on an ADU is usually very profitable as the cost of construction - rental ratio can be double that of a single family home. And, as a builder myself, I always recommend going stick built!

Good luck,

@Kim Leech good morning!  I have done many spec homes using various financial scenarios.  Many hard money lenders offer new construction loans, it just depends on their comfort level.  Start calling around and see what is available in your area.  I will say, at this time (Covid-time), many lenders are tightening up their belts, as the future is a bit murky for real estate.  If the lender tells you they are not doing ground-up construction you want to verify if they did them in the past and are they considerIng the product again in the future, their decision may be temporary. If you would like to message me we can discuss further.

Good luck!

@Shawn Choi good morning and great questions!  It is very refreshing to see @Greg Dickerson list “vision” as the very first requirement to becoming a developer, I couldn’t agree more.  I will attempt to expound on Greg’s comments;

To be a good developer the crux of your job description is; see something which doesn't’ exist yet, meet the wants, needs and desires of your market,  see it to fruition and have the tenacity to learn from every obstacle while having fun.  

In practical terms you would need to follow these steps, in loose order;

1. Determine your market have vision; who is your customer?  Age, income, family status and so forth.  What need is your development meeting for them and how are you better than the development down the street?  This is your business model.

2.  Finding the right property means you must be able to build on it and build what you need to fit your business model. Before purchasing anything make sure the following criteria are met; a)is it properly zoned for your needs. b) is the “dirt” suitable to support the buildings - obtain accurate soil borings and procure a topographical and platt of survey c) determine if detention areas are required, necessary fire safety access roads, suitable septic/well areas d) make sure the land has never been home to any toxic dumping or environmentally questionable materials e) easy access to utilities.  If the property under consideration comes through with flying colors, proceed to the next phases.

3.  Once you determine the property meets your needs it is time to put together the construction financial analysis.  Work with a good builder or two to come up with great and accurate numbers.  I would partner with a developer at this point so you can learn the ropes yourself.

4.  Work closely with people in the community or a marketing firm (depending on the size of your project) to create a formidable marketing strategy.

5.  Calculate all of the potential pitfalls of your project and assume some of them will occur.  Break them down into two categories; the first you have control over, the second you do not, then there is somewhere in the middle.  You can control the plumber who is not performing and causing delays by hiring a different contractor.  You can control the weather to some extent; building temporary roofs over building areas, but you can not stop the rain altogether preventing road construction. You do not have control over a large scale tornado.  If your project has the wherewithal to sustain some of these and you are prepared to meet them head on, then you have the green light to go to the next phase.

5.  Once you have everything in place RUN THE NUMBERS TEN TIMES!!  I can’t emphasize this enough; calculate the entire project in conjunction with construction timing expectations and how they correlate to the sales/rent of your development.  Include all debt, holding expenses and assume the project will run over at least 5%.  Then run the numbers past your accountant, your next door neighbor and your dog if needed :)  If the numbers don’t work, the project won’t work.  Never believe things will go smoothly and the outcome will improve once you get going, this is never the case.

I wish you the best of luck and have fun, it really is the best occupation out there!

@Jake Marotta welcome aboard and glad to see a new friendly face in Chicago!  I am going to give you the unfiltered truth for most of the Chicagoland area; when it comes to renovating single family homes and/or 2-4 units the market is over-saturated with smaller investors, therefore the prices of the homes available are overpriced and allow for little or no real profit.  The south suburbs are a bit more forgiving than the Northwest or North areas.  To further the frustration, every “wholesale” opportunity I have seen in the past year would yield a net-loss.  Wholesalers are infamous for deflating construction expenses and inexperienced investors are subject to entering into a bad deal. Please be very careful when looking at any of these opportunities.  This is not to say all wholesale deals are bad, just do your due diligence.

There are a few areas which show a bit more profitability; Englewood, Roseland and the West Side.  These areas are in challenging neighborhoods but can be profitable.  The markets are flush with Section 8 renters, which provide a solid rent base.  The rent rates are set by the Chicago Housing Authority and are very nice; roughly $1561 for a three bedroom.  Tenant screening is always important, and learning the ropes with CHA is necessary.  They offer free workshops and are happy to have good landlords working with them.

Having worked in the Englewood community for many years beware of unqualified contractors and contractors taking your money and running, there are plenty.

Good luck to you and feel free to message me if you have any specifics questions, I’m always happy to help!

@Colton T. I am a huge proponent of new build and believe it can be very profitable assuming the following criteria are met;

1.  Land development is complicated and you absolutely need a qualified developer on your side.  Working through the ins and outs of everything from assessments to  soil compatibility require some solid knowledge and experience.

2.  New construction comes with very few, if any, “surprises”.  Everything is out there to build and cost containment is reliable and dependable.  As opposed to buying a building which requires renovations, which we all know, always lead to the unexpected surprises located in the walls or foundation.  Those pitfalls do not happen in new construction.

3. It is crucial you know your market inside and out. You absolutely need to know who is going to rent from you, how much can they afford, do they need schools, medical care and so forth. You need to determine, through exhaustive MLS analysis; where your property falls into the housing market through rents, how close are you to the areas which are getting higher rents, why are they getting higher rents, are you in a market which is declining and so forth.

4.  Don’t quit your day job just yet :). New development takes quite some time without reaping the rewards.  Plan on at least one year and up to two years depending on the size of your project and the difficulties you many encounter within the municipality obtaining permits.

The one large hurdle which prevents many investors is you, most likely, will not be able to fund the land itself. Banks do not issue loans on raw land unless it is “Prime” real estate (in the heart of Downtown Chicago, Manhattan, etc) so you need to prepare a financial structure to obtain the land.

Good luck!