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Progress Thread Let's Build a Spec House!

Discussion in 'Progress/Execution Threads' started by Get Right, Sep 16, 2015.

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  1. JScott
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    JScott Platinum Contributor FASTLANE INSIDER Speedway Pass

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    I've spent this thread trying to point out the mistakes I see you making, so that you can hopefully avoid or mitigate them. These are the same mistakes that I, and pretty much every other experienced investor I know, have made in our careers as well.

    In fact, reading back over this thread, you've thanked me several times for my comments, and even said:

    "Ha! I don't take constructive criticism personally. Thanks for the input!"

    I assumed you were being honest about that.

    In this case, you made a claim that you can cut costs with an employee. I gave you feedback that that's not true in my experience, and asked for more information. If that's true, it's a learning opportunity for me and others here on this forum. If it's not true, it's a learning opportunity for you.

    I figured that's the kind of constructive criticism (where one of us can learn) that you indicated you wanted. Instead, you don't really seem to want the feedback. And that's fine. I just wish you would have said it earlier, and I could have saved a bunch of time in this thread.

    Look, I make mistakes in this business all the time (I've written for 8 years about all my mistakes). I don't get defensive when I screw up (again, it happens all the time) -- instead, I learn and try to improve my business and processes. If pointing out things I see you doing can help either of us learn, I would think that's a good thing. I came into this business knowing nothing, and I posted on this forum to get feedback to improve my chances of success. I got a lot of tough love here from real estate people much more experienced than I was. And you know, they were right about a lot of things, and they helped me to build a successful business.

    I assumed you were interested in getting feedback and learning as well. Sounds like I was wrong, and for that I apologize.

    Good luck with the business...I won't comment any further in this thread...
     
  2. Striver
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    Striver Contributor Read Millionaire Fastlane

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    Half the time time is twice the profit.
    Third less time is 33% more profit.

    Just saying!
     
    Last edited: Oct 16, 2017
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  3. WJK
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    WJK Bronze Contributor Speedway Pass

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    I have a question -- where do you live now?

    Rather than building spec houses, with all of the bear traps in the real estate market, I would consider another plan IF I was in your shoes...

    With the current tax laws that allow one to pay NO taxes on a large amount of the profits from an owner occupied SFH (single family home) when sold -- why not find a situation where you can buy the right property well, live there during that prescribed holding period, max out the market value through sweat equity, and then sell -- all to do it all over again with the next house.

    OR -- rehab or build one small-unit building (2 to 4 units). Rent out the extra units and live in one, while you rehab or build the next small-unit building -- that you move to when you get that first unit ready for occupancy. By living there, and the fact that it is under the commercial lending threshold, the project qualifies for regular owner financing. That will limit your financial exposure and give you help with the mortgage nut.

    My mentor, Alice, taught me to start out live in my smallest property and rent out the rest of my properties so they can pay for themselves, and be a step up to more assets. I have learned over these last 41 years that Alice was right. She also taught me to do what I have to do, to get the properties ready to sell or rent. My path hasn't been flashy or sexy. Real estate is a game of LOTS of hard work (sweat equity), patience and good chess moves. I'm not too good to do any "dirty work". My Juris Doctor degree doesn't exempt me from picking up trash, pulling weeds, mowing lawns, washing & painting walls, cleaning toilets and anything else -- when it needs to be done. Getting dirty, by doing my part, is my badge of honor.

    This is just my humble opinion of your plan. You may be really successful on OPM (others people's money), but this is my 6th business cycle since I started my real estate career, and I've seen a lot of people go deeply in debit, rise quickly and then crash in flames...
     
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  4. amp0193
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    amp0193 Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    What was negative about that? I thought it was very constructive.

    His post was skeptical as what you're saying didn't gel with his previous experience. I think calling it cynical is a stretch though.


    I'd also be curious to how you handled the taxes + insurance and how that played into the employee cost as well, and if it was actually cheaper after taking this into account.
     
  5. WJK
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    WJK Bronze Contributor Speedway Pass

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    Thanks. I've been playing Monopoly with real money for about 40 years, as part of my real estate career. (And I have a whole list of licenses, degrees, credentials and experiences.) So, the guy didn't like my comments. Sorry about that. I was trying to tell him about reducing his risk factors. I take calculated risks all the time and I spend a lot of time upping my odds. His plan sounds to me like jumping off of a cliff.
     
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  6. Get Right
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    Get Right Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Thanks for all the ideas @WJK ! I've owned my current single family house for 1.5 years now. The plan was to flip it at year #2. This will be my third flip to capitalize on the tax loophole. I planned on buying another single family but the multi-unit idea is intriguing. I have a piece of land zoned for multi-family that might work...now to convince the family!

    That's a fair observation. If you read the last five pages I've been told I'm "over my head", building sub-optimally, doing everything wrong...and it gets old. I spent the last 4 years getting rid of negative people in my life. I'd prefer not to have negativity creep in my forum-life as well.

    I'll tag @JScott here and welcome him back (if he chooses) but the skepticism and/or negativity can't be in every post.

    So there are a few things at play here. I am building more now so I needed a part time project manager/ part time laborer. I found a person that is very good at both. I will transition him out of labor as we grow. At the same time, we have a huge shortage of painters and trim carpenters in my area. IF you can find one, they are twice as expensive as 2 years ago. So with all the taxes, insurance etc. I'm saving close to $9k per job.

    I think I did a good job mitigating risk. The market research, the skill-sets, back up plans etc. What scares you?
     
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  7. WJK
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    WJK Bronze Contributor Speedway Pass

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    I think I did a good job mitigating risk. The market research, the skill-sets, back up plans etc. What scares you?[/QUOTE]

    The first thing that scares me is the OPM (other people's money). By bring in investors, you loose control of the project. It's like inviting a 600 lb gorilla to the party and expecting him to behavior while you serve the cake. I've seen too many project go south while the investors walk away with the project and the borrower is let sitting on the curb with cake smeared all over his face. It's a total control issue...

    My second concern is IF your plans are within your personal skill set. Real estate deals and projects are a series of road blocks, and people in power saying no -- usually on a daily, or more, often basis. It's a learning curve that has to be honored. If you haven't been there and done this before, the odds are against you. I like to limit my exposure by starting small when taking new directions, and then dove-tailing on skills that I already have. I try to find things similar to my past successes and put a new twist on them.

    And those two concerns are just for starters. There are several major ruts and stumbling blocks in the road you are planning to take. But, what I know after 40+ years...
     
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  8. WJK
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    WJK Bronze Contributor Speedway Pass

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    You're smart to use that tax loop hole to your advantage. Hopefully, with each flip, you are getting rid of your mortgage nut. By now, or soon, you should be mortgage free. And that gives you leverage to step up to better performing investments.

    Check with your accountant as far as that SFR (single family residential) tax loop hole concerning the multi-unit idea -- proportional parts of the profits, upon selling, are treated differently since you will own income units with the associated depreciation. (But, that depreciation from the rentals can really change your Federal tax picture.) I would stick with 2 to 4 units, due to the mortgage market -- it will keep you out of the commercial lending market, especially when you are ready to sell. The residential lending market is much broader and forgiving.

    I mentored a young man for a few years, who did the small unit plan a few times. He's retired in Florida playing with his kids and doing the small unit plan again there.

    Good luck!
     
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  9. Johnny Le
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    Johnny Le New Contributor Read Millionaire Fastlane

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    Thank you for continually updating this progress thread! I look forward to see how far you can go!
     
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