All Forum Posts by: Zach Matson

Does anyone know of a financing option for somebody that wants to build an ADU on an existing property?

The tricky part to this transaction is the house was just purchased this year with a VA loan, so there is no equity. There will be equity(but not a lot), and cashflow, when the ADU is finished, but there doesn't seem to be any construction loan options that take 2nd position.

Is anyone aware of anything? Or is private money basically the only option?

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Boise.

Purchase price: $165,000
Cash invested: $50,000

4 bedroom home with a 1 bedroom apartment attached. Originally bought as a house hack. Currently live in and work out of, but will be moving out this year and renting both units as short term rentals.

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

Originally back in 2015 I was looking for a 2nd duplex that I could house hack and live in one unit while the other unit paid the mortgage. This one didn't quite do that, but the 1 bedroom apartment paid half the mortgage while I lived in the 4 bedroom house for $500 a month and fixed it up. I knew once it was fixed up and both units rented it could cashflow over $1000 a month.

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

On the MLS back in 2015, used an agent, before I was licensed myself.

How did you finance this deal?

Conventional Mortgage 5% down and 4% interest rate.

How did you add value to the deal?

Renovated it.

What was the outcome?

I ended up living here longer because I got into real estate full time and didn't have the energy to finish fixing up, but moved out a couple months ago and it's almost ready to rent out as 2 units for Airbnb's or mid-term. I'm currently doing a cash out refinance and taking about $300k in equity while leaving equity on the table still so that it cashflows whether it's rented out long term, or as an a short term.

Lessons learned? Challenges?

This was a really good buy back then and super glad I took the risk, even though I lost my job 3 months after buying. Still made it work and has been a good investment and the value skyrocketed. I'm now taking out cash and funding the rest of the fix up, as well as going to gain significant cash flow.

 Sent!

 I've sold spec homes off renderings when the market is hot. I haven't really attempted since rates increased, but I'm about to on a few homes. It's tough because people don't have very good imaginations. So your renderings need to be on point. When I did it the first time we paid $3000 per house to have photo-realistic renderings made that incorporated all the finish selections we made. If you just put plans up with no good renders, plan on sitting on it for a loooong time. 

 You bet! Shoot me a message with your email address and I'll send it to you. 

 You bet! Sent!

I've created a daily schedule and habit tracker that fully aligns my daily habits and tasks with my longer term goals. I'm able to start with my annual goals and break them down quarterly, then into monthly and weekly tasks, then down to daily habits and tasks. I've been using this for years to some extent, but this version is and will be multitudes better at helping me achieve my goals. Every time slot during the day has a purpose... even if that is just free time, social time, family time etc. A few of the principles I've learned over the years that have contributed to this set up:

1. Time blocking - The calendar is set up in 15 minute periods, but most of my day is blocked off into large chunks of these periods. 

2. The One Thing (book by Gary Keller). - What's the ONE most important task you can accomplish during your day that has the largest impact? I assign my daily tasks (1 business and 1 personal) to account for 50% of my task points for the day. I'm a busy entrepreneur so I always have many things on my plate, hence the multiple tasks, but I can feel good about my day if I check off those 2 things.

3. Psycho Cybernetics (book by Dr. Maxwell Maltz) - One underlying theme in this book is that our subconscious mind is a powerful force. But, it also doesn't distinguish between positive and negative statements. So, if I want to get rid of habits, it's more effective to create good habits to replace the bad ones. If I want to eat healthier, I assign more points to the positive habit I want to focus on, but also reward myself for NOT doing that bad habit. Or, if I want to STOP using Facebook wastefully, I make it a goal to maximize my social media use to grow/build my business and give myself points for that intentional use. Another principle is
that you can train your brain to work for you while you sleep. Reading right before bed can not only be relaxing, but also lets your brain go to work for you while you sleep. I also write down positive phrases I want to repeat throughout the week, as well as a bible verse I want to reflect on. 

4. Goal setting: Lots of different sources - using the well-known S.M.A.R.T. goal system for setting goals. And, most recently adding a method Brandon Turner introduced to many people for organizing thoughts and brainstorming goals(Outcome goals), then breaking those down into habits and actions(process/action goals) to accomplish those outcome goals. It also incorporates all the major life areas, so you can build your life to achieve your goals in all areas of life. I took what I learned from Brandon's goal setting seminars and applied them directly to this daily calendar and habit tracker. 

5. The 12 Week Year (book by Brian Moran)- I just recently listened to this as an audiobook, but realized that this calendar already very much aligns with the system they talk about in the book. This calendar is gamified(points) and has a system of tracking those points. The one modification I made to this schedule while listening to the book was to write down my quarterly goals on the daily tab instead of my annual goals. I still have my annual goals and everything is focused on achieving those, but they are broken down further into quarterly goals and once the quarter is done we reset and start on Q2 goals.

I'd love to share this with anyone who is interested. I've already begun emailing it out to people in my circles that were interested, and I'd love to find 1,000 people or more this year that could really benefit from it. It's totally free, and you'll receive instructions on how to set it up the first time, as well as reset and plan your day each day in less than 15 minutes. I also plan on creating a phone app this year that further simplifies the sytem. If you'd like the download shoot me a message with your email address and I'll send it with the instructions. I'll also start creating some videos on how to best use it in the coming weeks. 

 Yep, was that the meetup through Boise REIN or the one at the Lounge at the End of the Universe? Thanks for reaching out! I'll shoot you a message and perhaps we can grab a coffee sometime. 

 Looking forward to maybe partnering or having you as an investor on something in the near future!

 I would definitely say that there hasn't been an overbuilding problem in the single family space that I'm in. Possibly in multifamily in the short term, but with interest rates where they've been there haven't been any new deals started, so we may see a short term increase in vacancy rates and lower rents, before being massively undersupplied in the mid-term. For over a decade we've had vacancy rates in the 1-2% range before increasing the past year or so to around I believe 5% now. 

But as far as my niche, in single family infill... we still have a lack of supply. There are definitely buyers sitting on the sidelines due to high prices and high interest rates. 

You're right about Boise being a hot market...really in the top 5 from 2013 to 2021 consistently as far as price increases and population growth, as well as ranked places to live. We have dipped since mid 2021 in prices because many locals have been priced out of new homes. And, the 1% rule hasn't really been a thing here since probably 2015 or so, and even then it was hard to find. It's physically impossible to build to the 1% rule right now and for the past several years, unless someone is doing MT or ST rentals. 

I know that in general we need the housing in the single family space. But it's definitely good to hear from people how they analyze their plans for rentals. I guess in comparing to what my buyers have already been , to what people have been saying in here... most of my buyers have been using my new builds for ST or rent by the room and finding cash flow that way. I do have some townhomes I'll be building coming up that may make more sense for LT rentals so this is a good start to see what I can make work.