All Forum Posts by: Tyson Taylor

Is there a waiting list if some folks drop out? I'd like to come if a spot opens up.

6 floors and a 2000 square foot- footprint?

Elevator, egress stairs, fire resistive construction and probably sprinklers, structural concrete, parking.  It will be expensive.  Your per foot construction costs will be much higher because of all the additional stuff you have to do to go up that high. If you could go bigger, 4-5000sf, then you get some economy of scale (i.e. the cost of the elevator will be spread out over 24 units instead of 12).

Construction costs could be more than $200/ft., so for your 12k sf building you're looking at $2.4M plus the $1M, gets you to $3.4M or $283/sf. all in or more.

Value is all based on current and future cash flow. CAP rates evaluate current cash flow, NPV looks at future cash flow.

No one will be able to tell you whether or not this is a good deal based on the scant information provided (that's not a dig at you, there's just tons to consider in a deal like this). My only advice is to learn enough on your own to know whether or not it's a good deal, when you don't have to ask you'll be ready to jump in.

Good Luck!

They make a blade for a sawzall that works, I've used it on cast iron drain pipe. It doesn't look like a blade, it has an abrasive edge- no metal teeth. 

Cast iron is brittle, you can also just smash it with a hammer.

Serious question: If I buy a property with 100% borrowed money and make $1 in profit is my ROI infinite?

Also, while we're having a return metrics conversation: If I buy a property at $350k that is worth $600k 5 years later, what metric captures that other than a net worth calculation? Say rents only increase 25% over the same time period, your CAP rate is actually worse at the end of the 5 years because property value is so high.

I want something I can put on a spreadsheet that incorporates the increase in equity into the property returns- does anyone know if something like that exists?

@Collin Tilbe, I really only notice that trend in single-family residential. Multi-family/commercial seem to follow a more conventional supply/demand curve. Vacancy goes down, rents go up and so do CAP rates, then prices adjust up to keep the value around a 6-7% CAP.

Keep in mind too, it's not really a discount, it's just off the peak, which doesn't really establish a solid sale price (the peak is an outlier).  Also remember you're looking at city-wide data, when you drill down to neighborhoods the trends get more muddled or start to disappear altogether.  

Appraisal establishes the market value of the property.  The assessment is the value that the tax is applied to, in your case, multiply the mil rate by $9350. 

Here in Colorado we have a restriction on the  amount property taxes can increase on residential property. So a house here is appraised at $400k, but only assessed at $32k, the assessed value is kept low because taxes can only increase a certain amount. 

@Account Closed, filter the price graph to "median sale price" Zillow. There's an 8-10% price swing every year that when normalized looks like a steady increase, but I'm sure we'll hear about the impending doom from dropping sale prices soon... Though I only looked at Denver, Portland, San Diego, LA, Chicago and Dallas, I'm sure there are cities that don't follow the trend.

This could happen in any city. Zoning has pretty specific language regarding short term rentals.  Air BnB is a short term rental/hotel operation, it just is, there's no debate.

People interested in doing this legally are going to need to get a conditional use permit or the residential zoning code will have to be amended to allow short term rental/hotel uses by right. Those are your options, the latter isn't going to happen because most people don't want a hotel next to their house.

On the plus side, most zoning enforcement involves a stern warning and request for correction when it's first discovered. So you can pretty much operate until you get zapped that first time...but then you better quit.

@Sal Zafar, I have a simple one I've used. Send me a note with your email and I'll send it to you. When I use an LOI I want it to cover all the basic deal terms that would be in a purchase contract but be non-binding.

When you take a look at markets people seem to always want to distill it down to a nice flat curve though this is rarely, if ever, the case.  Real estate runs in ups in downs, it always has.  People are looking for bubbles everywhere now and papers run headlines with it because it's a scary word.

Look at residential home prices and sales, we are in the dog days of summer downturn that will last through the end of the year.  It's happened over and over, for a variety of reasons sales slow down in fall and winter and then will pick up again.  If you look at Zillow and view the median sold price for homes, over the last 3 years it's peaked in July/Aug and bottomed Jan/Feb, people see it now and are crying bubble, but it's just a cycle.  In a couple months the data will come out showing a slackening of sales and "THE BUBBLE IS BURSTING!!" headlines will show up.

Commercial real estate is on a different cycle, but it's still a cycle. We've had a long period with no new construction, a couple years ago commercial developers got back to building and are catching up with demand. Yes, some investors taking that 4% CAP rate are going to get screwed, but they know full well they're taking a risk and no banks or federal government are coming to their rescue. There will be bankruptcies and a writing down of losses, prices will adjust and life will go on. I'm not buying anything at these CAP rates, which contributes my little butterfly flap of energy to the downturn. Once prices fall and returns are reasonable we'll all buy back in but the price will get pushed up until we don't want to pay that much again.

I may also be completely wrong, it's just my opinion/observations.