All Forum Posts by: Account Closed

Apartments on top, commercial space on the bottom. Have you build one or do you own one? I'm trying to get some preliminary numbers to see if this is a realistic possibility.  

We're thinking about doing a 3000sqft foot print... 3000sqft upstairs (4-5 apartments), 3000sqft downstairs = 6000 total leasable space. My business would occupy 2000sqft of the commercial space. We own the property and would not be purchasing a new piece of land.

Property tax would come on at around 15k/yr or 1250/mo

I got a quote on insurance that would put it at 8,500/yr or 710/mo

The number I'm having a really hard time trying to nail down is the price per foot to build. 

I was told by a builder, it would cost 60-70sqft to build the shell. I was told by a neighbor with a similar property it would cost 150-170sqft to build ($80-110 to finish out?). I've been told by another builder 200-230sqft. I am aware that a lot depends on how everything is finished. Would half of the finish out for the apartments be closer to residential buildout cost? Which I've been told is closer to 135sqft. The building would need to be 4 sides masonry per city ordinance. 

If the commercial space was basically "roughed in" with A/C, cement floors, drywall, and a basic bathroom, could I save any substantial amount on the build? 

I'm in the process of having an architect do some elevations to talk over with the city and the bank, but I'm not wanting to pay for the full design until it's been confirmed to me that we are on the right track. I understand that it'll be hard for anyone to give me any exact numbers without full architectural plans. But can anyone give me some insight? 

@Thomas S. - Awesome advice. Thank you. Why do you say the finish I have now will command top rent? Just to clarify, you don't agree with the Spend 12k, earn an extra 1,200/yr and that being a 10% return- is that right? You'd rather have a functional unit that is going to rent for 900 and have the 12k to put towards the next down payment or repairs when the time comes?

I like that line of thinking @Max T. & @Tandi H. . Thank you for the feedback. Tandi, you could estimate roughly a 12% ROI on the money spent on upgrades and the current rents, correct? and if rents raise again, that would boost the return further. That gives me some stuff to think about- 12% sounds a lot better than cash sitting in checking accounts and I could enjoy some of the upgrades while living here!

What do you to think about a shed and carport? Not needed for such a small place? 

Good stuff Karl- thank you for your insight! 

Educate me on this please.

I’m newish to investing (3 properties over 3 years), and I live in one of my units. It’s going to be a perfect rental someday. It’s a 1/1 and about 650sqft. I can tell that whoever built it, did it on a budget. Cheap vinyl tile floors, cheap counter tops, cabinets, window unit a/c’s built into the wall, near zero storage, nice, just finished out on the cheap.

I put a metal roof on it recently and my plan is to own it for life and rent it in the next 1-2 years.

Based on my estimation, it would probably rent for 900-1000 as is. Are there any upgrades I could do, that I’d enjoy while living here, that would help if rent for more to justify making the upgrades?

Things I’d like to do: minisplit (5k), LVT flooring throughout (2-3k), shed (1.5k), carport (2k), countertops (?), and I could go deeper down the rabbit hole with porches, etc, but this is a good baseline.

I think the max rent for a 1/1 in my area would be 1100-1150.

How do you improve a property and see a return for the money spent, but not over improve and waste your money?

I bought a property a few months ago that is on three city lots and .53 acres. There is a main house that is roughly 2300sqft spread out over two of the lots and one 640sqft house on one of the lots. 

Initially, it looked like the city was going to say the smaller house was nonconforming because the property is zoned for single family residential, so the appraisal came in low at 218k with the big house and all three lots. Total sale price was 247.5k. 

Since the smaller house was on it's own lot, the city ended up approving, and saying it was conforming. There was some push back from the appraiser, who wanted to disagree with the Head of Planning and Zoning about plats and zoning issues. The bank basically told her, "Hey, just do your job and add the smaller house to the deal." She did, and how did the appraisal change? Came in right at 247.5k, conveniently. 

I am pretty much a newb, this was my second deal and I was just happy to get it, but I've continued to have this nagging thought in my head... If the big house was valued at 218k (with all three lots included), are you telling me that the extra 640sqft of living space in the little house is only worth $29.5k??? Maybe it is, I don't know. I'm living in the little house and it's pretty nice.  What do you think? I'm just hunting for more equity so I can refi and have some cash to put into the next deal. Maybe I'm barking up the wrong tree, and please just tell me that if I am. 

But in my Austin suburb, the average price per square foot is $127, My big house was appraised at $94, then when the value of the little house was added, the overall price per square foot went down to $84. The main home was built in the 60's, so I understand that maybe it's not going to command the same price per square foot as a new(er) build, but in your opinion, is there any reason to consider refinancing and hoping to get a higher appraisal? Even if the new appraisal came in at the $94sqft number that would give me roughly an additional 30k of equity to potentially use for the next deal. 

I'm saving up now for the next one, so either way I'll get it done- just curious if there's more meat on the bone for me here. TIA 

@Brie Schmidt & @Max T. thank you both for your input! good point about buying cashflow Max and Brie think you for the projected amount to charge myself in rent! 

Hello, just got my first property residential property under contract a couple days ago. Still needs to be inspected and check out, but I just wanted to get the advice of the group on a few things.

 3/2.5 with a detached guest house. I'm single, no kids, going to move into the guest house for a year or two and rent out the big one. 

Purchase price: 250k 

Amount Financed: 237,500k (5% down)

Projected PITI: 1,800/mo or so

Market Rent: 1,500/mo (main house) & $800 (1bdrm that I'll live in initially)

I understand this isn't the deal of the century and I need to account for expenses related to vacancy, repairs, capex, etc, so I won't REALLY be living on a $300/mo "rent." But, it's near our small downtown and I can walk to work from this location so it has some perks to me outside of just income. With that being said, I'm not going to live here forever and in 3-5 years will be looking at this thing from strictly a business standpoint.

Questions to the group:

-Should I put more down?

-What should I be projecting to pay myself in rent every month to help build up the emergency fund and cover any repairs or expenses associated with the property?

-I would assume I shouldn't expect rents to rise to have the "1% rule" make sense, but should i expect decent cashflow from this thing eventually assuming my town doesn't have a mass exodus?

-It is probably not smart to count on refinancing in 3-5 years to help reduce expenses considering how rates are starting to climb, is it? 

Thank you and I appreciate any feedback 

Hi BiggerPockets, sorry for all of the questions and long winded post, this is just some stuff that's been on my mind and I haven't received any advice from people in the biz, so I am looking for your guidance.

A partner and I own a property in a fast growing city (400% population increase since 2000), 40k ppl, on the town square. We operate a small business out of an older building and have a mortgage on the property. The business is growing and I could see us outgrowing our space in 2-3 years.

On one side of us, there is a two story mixed use development that is about 6,000sqft (3000sqft apartments, 3000sqft offices), built in the past 10 years or so. On the other side, there is a newly built two story mixed use development that is 10,000sqft (5000sqft apartments, 5000sqft offices).

The apartments all filled up quickly. Commercial space took a little longer but both buildings are at 100% occupancy. I've began putting some feelers out there about cost to build on our property and the general consensus is that it'd be about 100-150/sqft in our area. We would put down 25% and finance the rest with our bank if we built.

Our thinking is to potentially build something two story, 6000sqft total, rent the upstairs, use 2000sqft of the commercial space, and lease out 1000sqft to another business. So, we could end up owing about maybe 800k-1m. Which to me sounds crazy to type out, but i know for some folks out there on the west coast that's just a home loan. Rental rates are ~1.20sqft residential and $1.20 would be a very conservative estimate for the commercial space. So all in all cashflows of 7,200/mo maximum (not accounting for vacancy i know) including the rent we'd charge ourselves as tenants for 2000sqft of commercial space.

When I crunch the projected rental income vs mortgage, tax, building an emergency fund, etc. It seems far from a home run- almost like why bother. Am I missing something that will make this make sense?

As someone who's never been a property manager, or developed a property, does it sound like i'd be biting off more than i can chew to owe around a million, be a landlord with 3 residential tenants and a commercial tenant on the first go?

Landlording is definitely on my radar as a business i would like to enter. But i don't know if this would actually be the correct move. If not, what do I do with the property once we outgrow it? Add on to the existing old structure? Move and rent the current building? I'd assume if we sit on the property long enough it will become valuable, so does improving it actually speed that along or is it just taking a risk and potentially putting the ownership in jeopardy because things could go wrong with a big project and we'd default?

Hi Bigger Pockets Members! 

I posted a little over a year ago with an intro and an idea about a mixed use property. I received some great advice and now I'm back with some updates and in need of more guidance. Here is my post from a year ago: https://www.biggerpockets.com/forums/55/topics/181...

A brief synopsis of my situation: I am a martial arts school owner. 9 months ago we purchased a property on the square of my small town (30k ppl, bedroom community). So far, it has been working out really well! I had a slight concern that our membership wouldn't be thrilled about a step down in our physical building (1300sqft pier and beam), but it seems to not have been much of an issue.

Future Plans: Real estate is not my profession, but I do have plans of becoming financially independent so I have an interest in investing wisely and also finding ways to maximize profits from my business. In my mind, a mixed use facility, 2 stories of businesses on bottom and apartments on top would be the thing to do because, it would allow us to expand the size of our school in a new construction building and use the rent from other tenants to offset our mortgage. On the left of my property is a mixed use facility where the owner told me a tenant is moving out and the new tenant is moving in on the same day. To my right is a mixed use facility that is brand new and supposedly has already preleased the 6 apartments above it. 

My Questions to You: 

1.) Is mixed use a decent idea? According to wikipedia: Mixed use development is often seen as too risky by many developers and lending institutions because economic success requires that the many different uses all remain in business. Most development throughout the mid to late 20th century in the United States was single-use, so many development and finance professionals see this as the safer and more acceptable means to provide construction and earn a profit. Christopher B. Leinberger notes that there are 19 standard real-estate product types that can obtain easy financing through real estate investment trusts. Each type, such as the office park and the strip mall, is designed for low-density, single-use zoning. Another issue is that short-term discounted cash flow has become the standard way to measure the success of income-generating development, resulting in "disposable" suburban designs that make money in the short run but are not as successful in the medium to long term as walkable, mixed-use environments.

2.) I know it is different depending on the area, but can anyone in guesstimate build costs for new commercial in central Texas? 

3.) If I want a 2500sqft martial arts school, is it excessive to build a 10,000sqft building? I'm thinking 5,000sqft retail and 5,000sqft apartments above. Would it make more sense to add 1,200sqft onto the old pier and beam based on building costs? This could only raise our mortgage and not give us the opportunity to offset our mortgage with rental income.

Rental rates in my area for 1bdrm apartments are around $1.5/ft and commercial rates are $1.5-2/ft +NNN.

4.) I would just like any general advice on managing this type of property you might have. Horror stories, successes, if I'm too green to do it, etc. I'd rather have you shoot it to me straight and let me draw my own conclusions.

Thank you in advance, 

Will