All Forum Posts by: Tyson Taylor

@Patrick Rowe,

You're on the right track. I've not done any work outside of Colorado, but you'll definitely want to check into the local subdivision regulations- zoning is only 1/2 the battle.

Make sure you consider the amount of time it takes to get a subdivision plat approved, around here it's 18-24 months, though I know some areas jam them through much more quickly. 

Final plat approval out here also triggers payment of lots of development costs- impact fees, water tap fees, sewer tap fees, the list can be very long-  go talk to the local zoning department about subdivision plats and see if you can get a copy of a subdivision agreement or plat fees from a similar project (if they do that out there).

Phases are a big deal, pay attention to absorption rates, if you think you can sell 10 houses a month then build it all, if it's 2 houses a month then start looking at how you can divide up the development into 2 or 3 phases to keep your up-front capital down.

Good luck.

@Alissa S., if you're looking to market to homebuilder/developers you'll need to contact them directly.  You should know who is building locally, they'll have an office out there somewhere. Just call them up and ask to speak with someone in Land Acquisitions (I was in land acq in Denver with a homebuilder, we did development and finished lot deals) have a nice brochure ready to email... Don't overlook local builders, just go on a new home tour in the area and you'll see who's building. If a national builder doesn't have a project anywhere near there or a local office then I wouldn't mess with it, they'll need a big project to move into a new area.

I wouldn't bother with the MLS either.

If you want to be more pro-active, make sure you include the current zoning information and check the master plan and list the future use designation.

In addition to the civil engineering firms, you may try local landscape architects, they are the two disciplines that will be most involved in developing buildable lots from raw land.  

Keep in mind that published market data is almost always a quarter old, they will never reflect the current market. And as @Bill S. said, looking at statistics for the whole state will be skewed, it's more helpful to understand the different regional markets.

Colorado Real Estate Journal- list of lots of resources.

and a couple more that I don't think are on the list above:

DBJ

Pinnacle Reports 

@Isaiah Foster

 Very helpful! Thank you.

@Alexander Carlson

You're getting some sound advice, but I'll throw my $.02 in.

If I were you, I'd figure out how to do the deal without a partner, FHA deals are cheap, you can figure that out. In my opinion, you don't need to mess with an LLC yet, you can always move the property into one later if you want to.

Keep an eye out for small multi-family buildings. 3 or 4 units.  I bought a little 4-plex in college and didn't have to pay any rent. Sold the place when I graduated and used the cash to buy my first property up here in Denver.  I worked part-time all through school, graduated with no debt and actually made money. I think I'd put 7,500 down or something and when I sold it netted $20k or so.

Unless you want to be a RE agent, you don't need your license, honestly, I'd say the same goes for law school. I was thinking exactly the same way you were when I was your age.  I started having conversations with land use lawyers and the almost unanimous advice was, if you don't want to be a lawyer, don't bother with law school.  It doesn't mean you don't know RE contracts, land use law, etc, but you can learn it without getting a degree in it.  I like knowing enough to know when I need to call a lawyer...

Good luck, and don't let your tenants push you around because you're young.

@Robert Perkins,

I'd suggest downloading a Schedule E from the IRS website and working through it. It's not really as straightforward as being taxed on the positive cash flow.  If you're only $700 positive on $4,375 total rents you'll probably end up with a negative rental income on the schedule E, which is great for taxes.  Depreciation is a huge deduction, but not one you incorporate into the cash flow.

I'd say call an accountant/tax pro, but I feel like the process of completely jacking up one's taxes is a noble right of passage for anyone looking to get into real estate.  I only had to amend 4 years worth of returns after I went through mine with a pro the first time...humbling.

Good luck!

Denver operates around 1%, but I want to jump on the bandwagon and say I also hate that metric.  

Look for deals that meet your financial requirements...when I was 20-something I didn't care if it made cash, I was using nearly 100% borrowed money, I just wanted assets that broke even to get in the game.   

Once you go through the pro-forma exercise a few times in excel it gets pretty easy. 

Thanks for doing this!

So, for example, say I'm looking at a property with a NNN lease worth $2,000/mo., does this mean I should be able to get debt that costs $1,667/mo? Assuming the $2k is free and clear and the rest of my financials are sound?

That would make it a $370k property at a 6.5% cap rate. Assuming a 30y amortization, 6%APR and the $1,667 payment would get me to a loan of $280k.

Am I doing that right?

Also, how is commercial property value established? Is it a cash-flow/cap rate calc or appraisal? I'm finishing up a project where I changed an old little chop shop/junkyard into a tavern. I did a lot of demo and clean up and built a new addition onto an old little brick structure. I have a lease and the tenant is finishing up their improvements, they'll occupy the building next month. I bought the property super cheap, the only debt on it is from my construction costs. I'd like to get long-term financing to pay for construction costs and then get a LOC or something on the remaining equity to use for future deals...

Sorry if I'm too vague on details, I don't want to clog up the thread with too much text.

Cheers!

I don't know, the only possibility I see is there's enough land to build something else in addition to the restaurant.  Offer them $1M, doesn't hurt to ask...

It'll be my first meet-up as well, looking forward to it.