All Forum Posts by: Zach Matson

 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.

 Interesting enough there are a ton of older mobile homes sprinkled throughout the city, and in particular in the high growth/redevelopment area I'm pretty excited about. But, the zoning laws are pretty restrictive for bringing in new ones. I would actually like to develop some mobile home parks in the mid-term future, but not really what I'm focused on at the moment. 

 A LOOOOT of multi-family isn't penciling right now either, with high construction costs and high interest rates, on top of elevated land costs. And, when it comes down to it, we need the housing. Plus, I found a niche that doesn't have a lot of competition and provides great returns when I sell or allows me to keep units after I sell 80-90% of them. 

Way to dive into new construction! Sometimes you just have to go for it and figure it out! A few questions for you to start: 

1. What do you own the lots for? 

2. Do you know what other builders are building for per square foot in your area? Ideally their cost, but even if you just have what they would charge you to build you can work backwards. 

3. What size are the new construction comps that are selling for $500k-$700k.

A couple comments:

1. New construction subcontractors are mostly all different from rehab contractors, most don't do both, and if they do you may not want them to. 

2. There are a TON of nuances to get into with new construction. You are doing well to seek consultation. =)

 In a particular development I'm working on I'm wanting to market to investors, yes. Probably more for mid-term or short term rentals. Half of my Infill new builds have been sold to investors, not purposely, but they saw the value as opposed to buying older homes that needed some work. I think in Boise in particular it's somewhat difficult to find any rental that pencils, but new construction allows for getting the highest possible rents without investing additional cash. Obviously with interest rates it's harder for anything to pencil right now as a rental, so I'm curious to see if people have changed their criteria or lowered expectations, or how I can help them make a new build work. I haven't reached out to other agents proactively, but that's a good idea. 

I just closed on a mobile home on about 1/3 acre in a medium density residential zoning area. The mobile home and garage are basically no value besides bringing a little rent in while going through entitlements, but this looks like it's going to be an amazing deal. 

Details: 

Purchase Price: $250,000

Entitlement costs: $75,000

Infrastructure Costs: $350,000

Vertical Costs: $1,500,000

Interest Costs: $440,000 (over up to 42 months)

Sales Costs: $250,000

Total Projected Sales Price on exit: $3,400,000

Total projected profit: $535,000

This is if I take it down completely on my own and leverage 100% of the development using private money and construction loans. There is also the potential to fit another unit, which would actually decrease my construction costs (less total sq feet), but increase sales costs. The downside to that is 2 units would be 1 bedroom, so I need to contemplate and research more how those would sell. 

These are also intentionally very conservative numbers. A few factors and assumptions I've made:

1. Infrastructure costs: 50% higher than a recent development I did 2x the size. But, that was before inflation hit, and there is typically a floor to development costs no matter what size lot. 

2. Overestimated entitlement costs (hopefully, but have experience that says yes)

3. Vertical costs. Took my vertical costs on upper mid-level single family homes and increased 4% annually for 3 years. Construction should start in about 2, and townhomes will cost less psf generally than SF. I will also dial back the level of finish slightly for this product.

4. Projected sales: This was a little harder(as there were no perfect comps), but based it off of today's data on some townhomes in an area a few blocks away a little more desireable that sells for about 20% higher. Lowered price on those comps by 20%. I didn't account for any increases in sales prices as that's never a good assumption, but I also didn't account for any decrease, as this neighborhood has not been affected very much by price declines over the wider metro area in the past 1.5 years and we have mostly leveled off. 

Overall I'm super excited about this as it is the hottest redevelopment neighborhood in the Boise area. There are new construction projects everywhere (including my own 350 ft away) and some really unique products and community features, and its a block from the river and greenbelt. In the end these will be affordable compared to many other new construction products in the area. I'll keep updating my progress on this project and others! 

 That actually makes me think I should reach out to some property managers and SF owners and see what their average annual maintenance costs are. I think new construction generally prices out long term rentals, at least with the prices and interest rates where they are at, so I'll focus more on the MT to ST rental market to appease on my single family homes. I also just picked up a townhome development that may make more sense for LT. I like the idea of duplexes and tri-plexes and there haven't been many new construction of those in Boise for quite some time, just due to land costs and the single family market, but it may be a good opportunity to look into that also. 

Yes, most planning and zoning depts require HOA's on new developments/subdivisions. I keep mine as least restrictive as possible, and so far my niche is infill development which is usually just building on land that is already within established neighborhoods with extinct HOAs. It's interesting to hear that perspective though. I've also heard investors that want HOAs as the neighborhoods typically look nicer.

But yes, I think if there is a way to make it cashflow, which is hard on any SFR right now, that's key to attracting investor interest.