New Build, investment property.

[Mandelon]

We now have three lots, free and clear.

Plans being submitted for the first one tomorrow. All are in the City of San Diego. Submissions and permitting are a real pain. Have to submit 6 sets.

First lot is going to be a keeper. Two 1080 square foot houses. Will keep these as rentals. I got the lot for $80K and expect build costs to run us around $250,000. Hopefully on the low end. A big concrete driveway and fire sprinklers will add in to the cost. Once completed it should be worth over $500,000.

Not sure about upgrading the water hookup, it has a 3/4" now. And sewer connection. We'll find out shortly.

They clamor for builders to put up more affordable housing, then make is so hard and expensive to build.... just dumb. I am picking up affordable lots in lower end but up and coming areas. Even if the economy poops out a bit, first time buyers always want a house. And cheaper product reduces my risk.

Anyway, We will be building the same house twice, on the same lot. One facing the street, the other facing the driveway.



Each will rent for $2000 a month without a problem. The other two lots will get a duplex and an SFR, which will be sold once complete.

Stay tuned for irregular updates. LOL

 

[OutCole'd]

I'm looking forward to following this thread

 

[crzy2bealive]

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[Mandelon]

Just a few years ago you could buy a place for half of the materials costs.... now that has totally flip flopped. It is pretty amazing.

Shitbox houses that were $110,000 in a rough neighborhood are now up to $350,000. The rental market is tight here. Vacancies don't last and people are paying a lot just to rent.

 

[Mandelon]

Plans are submitted for review. Keep in mind we are building the same house, twice on one lot.

The review fees are how much you ask? $3789.06

Not the permit cost. Just the plan review fee. In a couple weeks they will let us know what else has to be on them.

 

[Raffit78]

Plans are submitted for review. Keep in mind we are building the same house, twice on one lot.

The review fees are how much you ask? $3789.06

Not the permit cost. Just the plan review fee. In a couple weeks they will let us know what else has to be on them.

Excuse my ignorance, when it comes to developing. When the land is owned, can you do some type of a loan for the build? Or is the whole project paid by as it's built.

I have heard that unless the land is free and clear, a loan cannot be established.

 

[Mandelon]

With good credit you can finance the lot and the construction costs. Many people do it like that. For many loans at the end of the construction project the loan can be converted to "take out" financing and become a 30 year mortgage if set up that way.

The lot in this case was affordable enough, and owning it outright makes my loan package stronger. Being self employed they really eyeball my application.

The lender I am working with says they will go 65% LTV of the projected value of the finished product. So all done it should be say $500,000. I should be able to borrow up to $325,000. There are more aggressive lenders, but you will most likely pay more in points, fees and interest.

The $325,000 will more than cover what I need for the build. Even if we end up $400,000 deep in the project, we will still have equity and strong positive cash flow when completed.

The lender builds in an "interest reserve" so that the payments are made with the loan proceeds. That way you don't have to make any payments until the project is done. I will be able to get draws as the project moves forward. They use a local building supplier's escrow company. The lender has unlimited draws available, so I can get money at either milestone completions, or every two weeks, or once a month...whatever...as long as work is being done of course.

I have been remodeling and flipping places for 25 years, but this is my first ground up new development project. The economy has to be just right around here anyway for building to make sense. I think I have it timed right... LOL, we'll see.

 

[Caydens Cat]

With good credit you can finance the lot and the construction costs... For many loans at the end of the construction project the loan can be converted to "take out" financing ...

The lender I am working with says they will go 65% LTV of the projected value of the finished product. So all done it should be say $500,000... Even if we end up $400,000 deep in the project, we will still have equity and strong positive cash flow when completed. ...That way you don't have to make any payments until the project is done.

I will be able to get draws as the project moves forward. The lender has unlimited draws available, so I can get money at either milestone completions, or every two weeks, or once a month...

The economy has to be just right around here anyway for building to make sense...

I shorted your quote, but that is some very interesting insight, Thank-you.

My wife and I are in SD as well and have been thinking of this market pricing for the past year or so. Looked at a few places, but the math just didn't seem to add up to really want to make it work. I never had the insight or background to put the puzzle together with new builds (as simplified as you did). She's in real estate law and a broker & my pops is a retired GC -I have some good resources on my side. I just haven't taken the plunge. What's the saying? "Don't work for your money, make your money work for you"...

Good luck and keep the updates coming. Perhaps I can throw a few ideas past you given your tenure in this field. ...I took a wrong turn when I listened when they said science & medical was the future :bash:

-JT

 

[elcajones]

Those are good prices for buildable lots. I've been shopping for a while and finally bought one in Spring Valley for $90K. Will be building a SFR soon. I'm working on selling a property so I can build mine with cash. I'd be interested in learning more about your lender, if you don't mind sharing. Thanks, and good luck!

 

[NicPaus]

You do not plan on doing a lot split subdivision for the two? That will cost you even more with the city. My nightmare build ended a few weeks ago. Plan check missed half of the fees. Got us started and then raped us. Just like are soil engineer and structural. They are all so incompetent it is ridiculous. Plan upgrading those water meters and there supplies for the fire sprinklers. The Fire sprinkler engineer will determine the size.


I was all about building spec until my last go round. Now back to flips and no PERMITS. They literally do not want most cities to be improved. And there new codes drive any one thinking of upgrading there home running when they here the prices per sq ft.

 

[Yellowboat]

You do not plan on doing a lot split subdivision for the two? That will cost you even more with the city. My nightmare build ended a few weeks ago. Plan check missed half of the fees. Got us started and then raped us. Just like are soil engineer and structural. They are all so incompetent it is ridiculous. Plan upgrading those water meters and there supplies for the fire sprinklers. The Fire sprinkler engineer will determine the size.


I was all about building spec until my last go round. Now back to flips and no PERMITS. They literally do not want most cities to be improved. And there new codes drive any one thinking of upgrading there home running when they here the prices per sq ft.

yep... in down town sac there were dozens of empty lots in good areas that you could buy for less then 100k but it would cost you 47/ sf in fees for the permit and another 45k for hooks.... which were already there, just need to be un capped. right after I left they were doing a deal were if 20% of a multi family was section 8 they would rebate the fees back to you over 5 years. guess what? after year 1 they stopped paying. last I heard it was still in court.

 

[NicPaus]

yep... in down town sac there were dozens of empty lots in good areas that you could buy for less then 100k but it would cost you 47/ sf in fees for the permit and another 45k for hooks.... which were already there, just need to be un capped. right after I left they were doing a deal were if 20% of a multi family was section 8 they would rebate the fees back to you over 5 years. guess what? after year 1 they stopped paying. last I heard it was still in court.

They took next years taxes out of our escrow check. Said if the new owners pay them like they are suppose to they will refund the money. They over charged us on several other things. Another $26k in fees we were hit with we have been trying to recoup with no luck. Another $8k took 4 months to get the check and they mis printed it so bank would not cash and had 2 wait a month for the replacement check.

 

[pronstar]

Another $8k took 4 months to get the check and they mis printed it so bank would not cash and had 2 wait a month for the replacement check.

Sounds like a broke-ass city took a page from Tim at OCM's playbook

Reading thru this thread, I had no idea fees and permits were so damned expensive. The .gov is just wringing us tighter and tighter, getting every last dollar out of us....

 

[charred1]

Congrats on the property purchase and upcoming builds. Where about in San Diego are you building?

 

[Yellowboat]

They took next years taxes out of our escrow check. Said if the new owners pay them like they are suppose to they will refund the money. They over charged us on several other things. Another $26k in fees we were hit with we have been trying to recoup with no luck. Another $8k took 4 months to get the check and they mis printed it so bank would not cash and had 2 wait a month for the replacement check.

Are you sure your not from sacramento? Sounds just like sac city/ county. Then there is the stealth inspections where they show up at night/ weekends and send you a letter stating you failed... 3 weeks later.

 

[Mandelon]

The lot is zoned MFR 3000 so i can get two homes on it. I plan to keep them and rent them out. I know the fees and regs are so high it is retarded. I think there is a window now to make this work even with the high fees. We'll see....:rolleyes

Fire Sprinklers will mean I need to upsize the water hookup... another way they can get more money out of us.

I plan to keep tight records, then pen some articles and expose the City for how hard they make it to build affordable homes.

This first lot is on Euclid south of 94. The next lot is in Logan Heights, and the third is also on Euclid between Home and Talmadge area. None are areas where I would choose to live.... but folks gotta start somewhere! LOL

 

[Mandelon]

Those are good prices for buildable lots. I've been shopping for a while and finally bought one in Spring Valley for $90K. Will be building a SFR soon. I'm working on selling a property so I can build mine with cash. I'd be interested in learning more about your lender, if you don't mind sharing. Thanks, and good luck!

We are working on a HELOC and also applying here. Nothing approved yet.

Marie Crivello
Vice President | Client Relationship Manager
Phone (858) 847-4750 | Fax (858) 847-4781
Cell (760) 473-7308 | NMLS #814619

12265 El Camino Real, Suite 100
San Diego, CA 92130
www.banksocal.com


1. Application (attached)
2. Personal financial statement (attached) or you can provide your own copy
3. 2012-2014 personal tax returns with all schedules and k-1s
4. 2012-2014 business tax returns for any business you own 20% or more of
5. 2015 operating statements
6. Cost breakdown of construction costs
7. Bank/brokerage statements verifying stated liquidity
8. Copy of signed Construction Contract
9. Copy of General Contractor’s License
10. Resume of your building experience

 

[Mandelon]

Got the HELOC approved for $175,000. So no problem moving forward for now.

Having issues with the construction loan. Business didn't make money in 2012, and we pushed 2013 income into 2014 to make 2014 look better.

We are working on it though. They seem to be listening to logic and our strong equity positions in other properties seem to help.

City Planning is still reviewing the plans. Water and Sewer hookup fees look to be $7500. Water hookup is already there in the sidewalk. Not sure about the sewer. So we'll see how that goes.

With water prices rising, I may decide to put in a second meter and let each tenant pay their own bills.

 

[Mandelon]

So we submitted to the building dept on 9/17/15. Plans assigned to our reviewer on 09/26. Review was completed on 10/02. Today I got the notice by mail of the corrections needed.

They sent a list of 22 simple items that are mostly dimensions they want verified, put on the plans, or added. So far, so good.

The loan gal is still working on the paperwork but we may go a different route if they are too stuffy for us. LOL There's plenty of sources of private money.

 

[Yellowboat]

2 weeks? damn that's fast. last house I built took 7 months...

 

[Mandelon]

The gal at the bank has been given the "green light" whatever that means. I guess we passed the first step.

 

[Mandelon]

Bank sent me a list of 20 financial and property related items to show our liquidity and feasibility. Assembling those now and sending them back. :thumbup::thumbup:

 

[wet hull]

When you are ready for quotes on the any tile that is needed, I would love to give you a estimate.

 

[Mandelon]

I plan to have both units floors done. And 6" of base in tile too. No carpet. I will let you know.

 

[wet hull]

Sounds good. I will PM my contact info.

 

[OutCole'd]

Updates?

 

[Mandelon]

City is dragging along with plan review. Lender went a bit sideways on us....self employed makes it tougher.

We secured a good equity line and are now thinking we may build the single family house to flip first. I can afford to do that one all cash with no financing. So we have plans started on that project next.

 

[Mandelon]

So I have learned that the city planning district my projects are covered by is changing in January. We will be able to build simpler plans. Right now we have to have expensive opposing planes on each face of the structure. Which is expensive to build. The district is supposed to drop that requirement, or at least amend it next month.

So to save a bunch of extra effort materials and labor (money) we are going to wait and see what comes out in a couple weeks. If it goes as we think, we will revise the plans..... so more time wasted but some money saved.

 

[SummitKarl]

Plans are submitted for review. Keep in mind we are building the same house, twice on one lot.

The review fees are how much you ask? $3789.06

Not the permit cost. Just the plan review fee. In a couple weeks they will let us know what else has to be on them.

I am betting a ton and total permit cost to be approaching 20k

 

[crzy2bealive]

Any update on this project?