All Forum Posts by: Thomas Magill

Investment Info:

Single-family residence other investment.

Purchase price: $75,000
Cash invested: $600,000
Sale price: $269,000

This is my largest new build development to date. I purchase the land from a local jeweler who I tracked down at his business and asked he was interested in selling. After a Valentines purchase as well as a couple others, I was able to convince him this was a good move. There are 4 Single Family Homes built on the site. 2 are built-to-sell and 2 are built-to-rent.

What made you interested in investing in this type of deal?

I've been following the build-to-rent method for some time and even lived in one for 2 years. After building a portfolio of fully renovated homes I wanted to give this model a chance. So, I started with a couple build-to-rent homes, then a couple more, and then felt comfortable to build a mini development.

How did you find this deal and how did you negotiate it?

I found this deal while looking at the deal next door which was a larger piece of land. Unfortunately, I wasn't able to purchase that piece of land but this one still made sense to purchase. I tracked the owner down and approached him at his Jewelry store. I asked if he had any interest in selling it and he said he would think about it. So, I kept going back and buying things for my girlfriend until he sold it to me.

How did you finance this deal?

I financed the acquisition of the land with personal and private money. And, financed the build with a construction loan.

How did you add value to the deal?

Initially, I though I could only get 3 lots out of the land, but after some research and some luck I was able to subdivide the lots into 4 separate lots. This lowered my cost basis per lot by 7k. Then, I built 4 homes on each parcel. 2 homes were built as rentals and 2 were built to sell. The for sale homes are 1530 sq ft and the rentals are 1380 sq ft, both with 3 bed 2.5 baths.

What was the outcome?

The outcome is on going as I just listed all the properties. I listed the for sale homes for 269,000 and the for rent homes are $1585 per month.

Lessons learned? Challenges?

The biggest lesson learned was managing stress. There are larger fluctuations in emotions as larger sums of money go in and out of your account. So, I feel its building calluses for the next deal that's larger... and the next... and the one after that.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I hired a GC to do the build. Slate Building Group. They did a great job and the property was very turn key. The construction lender was Finance of America

I have been pulling lists from List Source for the past 8 years and have finally made it over to PropStream. I'm curious what filters you have while looking for infill lots or lots that can be subdivided. I am a builder looking for infill lots and some subdivisions. Any help is welcomed. 

I missed the part about what your goal actually is… I think that goal is very achievable. It would depend greatly on your market. I’m not familiar with the Minnesota market but that’s 5 deals a year that cash flow $200 a door. If you supplement some equity in the deals from money you’ve saved or your W2 income. That goal gets more and more achievable. 

William,

The best thing I did was drive around the area I was looking to invest and started talking with contractors. I exchanged information with them and would stop by their projects for the next month to see their progress. Speak to their references. Then, find 3-5 contractors to bid on your work, assuming you have a project to work on. This is exactly what I did and it worked out very well for me. 

Hey Jake,

I'll number my responses so its easier to follow...

1. I started when I was 37 and have achieved much more and less than I thought was possible. I'm 44 now.  What I mean by that is, your goals starting out are kind of meaningless because you have yet to live in the moment of achievement. My goal when I started was much more grand than what I've currently achieved but looking back it was a WAG goal. Then, life happened and I have two kids now and things change. But, I'm completely financially free and can live comfortably. In short, things change. 

2. My biggest fear was achieving my goals. I still have to work at this daily to get out of the blue collar mindset of trading time for money. But, the longer I've worked at it, the easier its been to accept the things that have come my way. I'm very Fortunate 

3. Contractors. I came from the Construction Management industry and my ego lied to me. It told me I could, of course, handle these contractors because I PM'd multimillion dollar developments. I learned very quickly that they are bad at every level, but you learn how to deal with them. And, they are not all bad. Once you find ones that are good, you have to be good too. Pay them as soon as they're finished with the work. Make sure you've inspected it, but pay them quickly. Treat good contractors like gold because they have the highest dollar impact on the investment. 

4. I would have started with new builds from the beginning. It's so much easier and quicker to scale. 

5. I am very conservative in underwriting deals. I plan for what's happening right now and not what might happen, unless what might happen is a downturn. If things aren't looking good I'll bake in an additional 10% to protect myself.

6. I would become great at acquisitions. Become an acquisitions manager for another investor. Find someone you can learn, not only acquisitions, but the rest of the process. Become great at systems and processes because that is really the only thing that makes investing work consistently.  

I realize some of these answers are generalities, so if you want more specific answers, please let me know. 
 

Thank you for all the reply's. I've been pulling tax delinquent lists and using deal machine. The leads are coming in but not at the pace I'd like. I'm sure it will take time like anything else. 

 Robert:

Build-to-rent is going well, but you have to bring some equity to the table because the cost to build gap to value is shrinking. But, with 10-20% equity they work fairly well. With the builder confidence coming down hopefully the cost will follow.

 I’m looking for infill lots because they typically have water and sewer. But, you are correct, they don’t have to be infill lots. But, I do need to have water and sewer tap connections