As a builder myself, this is basically what I do, build STRs with cash, finance to pull the cash back out, then cashflow from the rent. New homes have such lower expenses and maintenance needs, much easier to manage and higher demand product. Also far easier to find a deal on building lots than to find a good deal on existing homes. The absolute best strategy for gains if you ask me.
I am also a builder and have been doing spec homes and currently building my first subdivision with my Dad. I built 1 rental and I love it. Everything you say is true. Infinite return since I refinanced and pulled all my cash out plus some extra. Only problem is my cashflow is very low. So I realize I need to build and keep like close to 25-30 doors in order to live off that cash flow since they will all be financed. Its the long game with rentals but im happy I can offset that with development and take the big chunk of cash home and reinvest in some rentals.
@@Tkenny35 Cash flow can be low, especially with traditional long term rentals, although STRs in a good area can do much better. In the end, as long as you are pulling all of your cash back out with the financing youre still getting an "infinite return" on that investment no matter what the cash flow is, as long as it stays positive. So if you ask me its still a good investment. As time goes on, your mortgage stays the same (unless you refi) but rents go up, so after a few years they should be cash flowing much better and you wont need so many properties to be financially free. Keep it up, youre on the right track!
@@DGarcia007 Not planning on selling them. I prefer to hold for the cash flow and just refi whenever I need to access equity. No reason to get rid of a good investment. Just gotta keep accumulating them, recycling the money from one to the next.
I have watched hundreds of BP podcasts and read 10 books from BP, this is the first time build to rent is mentioned. Given how competitive the market is and how expensive interest rates are, I found out that build to rent is the obvious way to create equity in real estate. I think BP should start offering more content on the build to rent .
Right the number don’t really work especially with interest rates higher. People are sell ing there Approved d projects left and right Prices are down.
Great podcast. I just started on my new construction on a commercial property that has an 1898 3 story Victorian in disrepair. My husband and I rehabbed and turned into 2 STR units. The property has an existing workshop in the back we building 2nd story on. Bought most items NEW at a discount building places for 90% less than retail. Wrong sized or slight blemish for multi million dollar homes, still new in package. I design around that. My husband does all the trim, flooring, plumbing, electrical including running the utilities and installing the new meters, I do all the architectural design and have an engineer that does full set of plans for $3k. We have 1 full time worker. I sub out framing, roofing and concrete. Purchased the property 2 yrs ago for $340k, have $60k into existing house, will put $80k into new build. ARV is $2+ million. STR income projected at $350,000 yr, not including commercial activities. It's a lot of work, especially dealing with the city, but the juice is worth the squeeze. All the properties we purchase have additional lots and zoning to add more units. A lot of turn of the century houses that are practically tear downs have multiple lots or R2 zoning around our downtown area. The properties are a giveaway sometimes because they have major foundation issues but they are by far the best bang for the buck if you're willing to do the work. Estate sales are also great because most of the time they don't know what they're selling and just want a quick close.
I think of this ALL the time. I build 10 homes a year already. A 1900sq ft home on land for 300k that could refi up to 500k. I think the best is to refi at 300 to keep mortgage down with better cashflow. Just gotta pull the trigger.
From my personal experience, buying and selling has been waaaay more profitable and with less headaches than dealing with rentals. We had a lot of rentals and the maintenance issues drove us crazy. As opposed to buying a foreclosure or tax property, renovating and flipping for $50k to $100k plus and more. Renovations come with headaches as well but the reward is worth it. We are still selling properties at the top of the market.
Which area are you in? Planned on doing this 10 years ago in Detroit, buying, fixing and renting, refinance and buy another property and keep expanding the portfolio, but now I’m looking back and kicking myself because I did not do it, and would like to start buying a duplex and renovating and flipping now. A lot of the things they talked about in this video resonates with me… how do you get those up front costs, risk of finding the right people, etc.
@@EmilGhiurau There are plenty of areas in Michigan that are still hot. Detroit wouldn’t be on my radar. Bloomfield Hills, Grosse Pointe. Okemos. Buffalo New York, Columbus Ohio, Indianapolis, Minneapolis.. to name a few areas red hot right now. Stop planning and do it, read and watch real estate investment pros and just get going. Stay away from houses with basements and crawl spaces unless you can have it inspected first by a trusted engineer. Some of those houses develop structural issues which can be extremely expensive. As a rule, I don’t buy houses with basements and crawl spaces no matter how sweet the deal.
As a builder I agree but in current conditions most lenders will not let you GC the build yourself if you have no experience. Also Triplex and Fourplex in some areas like Houston they fall under commercial code so the cost is too high that’s why don’t see many new triplex or 4plex in the area.
The cost of land alone in my area without being surveyed, cleared, and utilities costs around $600,000 to $1,000,000+. Much of the land and area laws do not allow multi-family construction. Say you find a piece of land that enables multi-family. Now, accounting for materials and other building costs, you can buy something built within the past ten years for a better price. Building makes sense in certain parts of the country, but here in my neck of the woods on the East Coast, it's hit or miss. You essentially need to be a big corporation or have multimillions to build multi-family around here.
Agreed 💯 the truth don't know what world they live in but where my rentals are I can barely fined good help for tlc repairs for my rentals can't image building
In less developed areas seeing more rapid new growth (TX) there are rural developments where a developer paves roads and supplies underground power and water to each lot, puts in community amenities, and sells decent acreage within. The land comes at a relative premium of course but a lot more affordable than doing it all yourself. It's great when lakeside or near other interesting destinations.
My first new build was a nightmare because I hired the wrong GC. They messed up the schedule and architecture. It took twice as long to build as expected. Codes took a year to process. The financing was 160k alone. At the end I was able to refinance but could not get back the 500k cash I put out. It is 100% worth the "75k" to have a GC. Gc license is required anyway which requires passing the state exams and paying fees. And having all the sub relationships is needed. After all that I realized I could have purchased an existing new build and been making income for an extra 2 years. Always analyze the development and hold time compared to competing assets such as rehab or buy to rent.
I scrolled the comments to see if this was already mentioned so I will add a tidbit - as a Mortgage Agent in Canada (Ontario specifically), we are NOT capped at 5 year terms. Lenders WILL offer up to 10 year terms for rates however, the 5 year fixed rate is priced more favourably and is the rate most advertised for. Longer terms are not advertised although they are available. Not 30 years though.
There are privacy issues involved with filming the inside of rental units. It’s one thing to take pictures of damage, but another all together to film their stuff.
@@sparksmcgee6641 The renters have privacy rights. My wife worked for a property management company for several years. Guess it depends on the state but most have privacy laws for renter. You can take videos of damage done obviously. Walking through without permission and filming then posting it? What if they have pictures of themselves out, and sex toys. Easily associate them with the toys and if they find it open yourself up to a massive lawsuit. Remember, you can sue anyone for any reason.
I actually bought a house a few years ago because it had an additional lot with the plan to build on it in the future. I have toyed with the idea and have considered what to put on it, but haven't had the financial ability to do it. I know it would rent well, because the house I bought the lot with has never been empty more than 30 days since I put it on the market.
Not sure why everyone ‘loved’ this episode. No meaningful discussion of the costs, the rents she was able to generate, or how the numbers work with this strategy. I kept waiting for you guys to get into the numbers but never happened. Shame.
Anyone that gives you numbers is selling a convention or book. How would her numbers mean anything to where you live. I live Downtown Denver and last year I was talking to bankers in New York and they were shocked at the price of land here. Maybe San Francisco is the only place with higher land values now. How would her numbers have anything to do with me. You should be able to build a house for 20 to 30% below what it appraises for.
Nice episode! I’ve being wanting to start this type of business since I was in college but, I’m always afraid of the upfront costs. Civil engineer background and a masters in Architecture so in terms of design and construction budget I have a lot of experience. Always thought I needed to have huge amounts of cash to cover these costs. I appreciate she shared her experience and input on this topic. I’m hoping to get started on this type of projects sooner than later.
@17:18 Yes, I always thought my parents were secretly very wealthy and had some land in South Texas that had oil on/in it. For decades, I thought that. It was not true. LOL!
Great insights. Is there an episode where it focuses on more on the preparation and due diligence? Do I buy land first or do the surveys on a land that is not mine yet? How to finance?
Thanks for the interview and insights. I am doing this with the sustainable building material of hempcrete. Happy to share ideas about building with hemp.
GREAT info! Thank you for sharing this, I love the house hack idea for us newbies as a realistic approach to get into new construction. Really great video 👍👍👍
I am an architect and did the build and househack recently in Bellingham, WA. We designed it to have a large (4 bed 3.5 bath) main home with a 1bed1bath ADU rental. I am hoping that the market values the flexibility of this layout, either a SF with 1 rental, or a multigenerational home (aging parents get their own place). The cashflow while we live here will be nice, but the big payday comes when we sell the home. I'm curious how much more this type of home can sell for over a traditional SFR. My next big leap will be to buy and hold a 4plex rental in Spokane, WA. I can save on the soft cost (being architect and GC), but the challenge will be the upfront capital for land/initial build costs. Hard money seems like a big cost with the high rates, but finding an investor could take a bigger chunk of the profits. Its hard to compare the two without knowing what an investor would take out of the rent/final sale of the home. Are there general ranges that are typical? Thanks in advance for the advice.
@biggerpockets - Thanks for have Nat on as a guest. Add to you guest checklist asking guests for any social media and any authored books etc 😊. Another build to rent investor to have on would be Winston Templet - does both build to hold and a form of unlocking value in land for developers.
This is the same idea I am trying to get to work. I am running into issues with getting approved on loans. Basically, the bank wants me to borrow as if I would need to pay a builder to build the home (I plan to build the rental myself with one or two workers but I won’t pay myself). Do you have any suggestions or ideas?
I am doing this same type of build right now. In order to maximize my returns, I am building with cash/equity from other properties and then getting a loan/mortgage upon completion. The mortgage is capped at 80% of the appraised value, but it’s still plenty enough (or pretty darn close) to pay off the cost to build and the land. With my latest one, I had to subdivide the lot I bought to make it profitable for me. I had a lot of money tied up in the land and land prep so a second duplex we essential to earn a profit. The banks, at least as far as I know, will only do a new construction loan if you go to them for money. If you don’t have enough equity, raising private capital might be worth a shot. You can offer decent returns on short term loans.
I built using a HELOC from another property. Credit unions offer cheap ways to create a HELOC although IME not really cheaper rates once you are using them.
ok, now we know she does her own design that's huge and is the contractor.. when i hear of real estate ideas being sold .. than you learn the person was raised in real estate or is builder or has good amount of capital to start up and make mistakes.. but it is not revealed in the pitch.. this is common. I like REI but it takes good amount of cash to really start right and knowledge or partner with skill set .. to comfortably get rock'in in ti. there are exception... enjoy the listen
Would love to see her books as this is not a slam dunk easy thing as she plays it up. Built several houses and they are an ordeal to say the least and take 6-9 months if you are lucky. Just to get the land you need all the cash or minimum of 60% down to roll into the build. Then getting the engineering and permits are another painfully slow process. Then after all that the 6-9 months starts if it passes the appraisal for the bank with more cash needed most likely. So all in you could have close to 1 year of no income but just cash and time going outflow. Now buying a current dwelling is over in 30 days without the 6-9 months of no income. Just not connecting the dots on this story unless Canada has some slush fund for the masses to do these projects.
It’s very similar to a traditional BRRRR. You only need to put up cash in the beginning to get the project started (or you borrow from a private lender), afterwards the bank refunds in progressive draws and at the end the goal is still to pull money out to reinvest in the next one :) Not saying it’s a slam dunk everytime and it can still be a complex process, but we generally prefer new builds over old houses
Not bad, but Canada is different than the USA. Of her five points that started at 7:30 1) New construction is higher value than old construction. Not the case in here, at least not in all markets. In my market new or old does not matter, only zip code, comps, etc. Debt is great when interest rates are 2%, but above 5% Dave Ramsey is right. Generally. New construction is not passive. And addressing 21:40 no, there is some pretty ugly new houses and there are some very lovely older houses. In fact I really love the homes built before WWII (excluding mill houses) far more than almost everything newly built. - But I do love her energy, confidence and 'move forward' drive. Alot of people can do these things but don't and some that can't but would. Also, despite what I just typed, she does make me want to experiment with new construction. Thank you.
Building an ADU where permitted is popular right now since it has been "decriminalized" in many areas where housing is needed. I'd love to see more build to rent videos. We picked up some OZ dirt in Florida to test this out, because why not? Our rezoning for 2 townhouses / 2 ADUs supported by the City; NIMBY killed it. We can still build two SFRs + two ADUs which we need to design. Can't break ground until the rates are a bit lower, and we may benefit from deflation by sitting out the long high times. Let's do Build To Rent 201!
What does she mean about go into the municipality and have a pre consultation? Is she saying go in and ask them can I build a 8 family here for instance ? Before purchasing a lot and ask what are the limitations? Something like that ?
Oh and you have to meet with 3 or 4 departments. Went to one town where they have everyone in a meeting once a month th for walk through with everyone. People like fire departments usually won't talk to you until you've submitted plans. They tend to be the least flexible, I was even building structures that were fire proof and they wouldn't let me put 1 hydrant between the two houses instead of a dedicated one for each house.
In my view, unless the buyer has the ability to do much of the work, you are always better off with a neglected property. The strategy you have highlighted will put you in the poor house. The munipality, getting the land prepared, all utilities, and given in Canada your amortization period and term will present issues. To be so young, I am jealous, sadly so many experts today❤
I feel like talks here are great but then trying to go to the forums on BP can be very frustrating and depressing. It doesn't convert like the show. People are ranting about how people are on there trying to learn from people or ask for contacts like contractors or lenders. A person responded to one of my posts and wanted to chat until their calenderly invite asked a few questions like funding and goals which wasnt in alignment with theirs which essentially said I was wasting their time. They reached out to me! Its just becoming too toxic for me.
Speaking of ugly builds, here in Fayetteville georgia, new homes are going up with zero brick, hardly any windows, and not even an acre for 400 K or 500K. It is a joke. They are ridiculous. They are trying to make us into New York. We enjoy the fight!
Bummer, I'll keep my 2.6% 30yr fixed. I bought 3- 2.5 acre lots and used construction loans to build out from blueprints from packages I purchased. Once C/O is obtained roll construction loan into mortgage. I was the general on each and walked in the door w/$100K each. Seems new construction builds equity faster than existing while attracting tenets easier. I lived in each a few years before starting a new property over again.
If you're in the US you should look into exiting some to take advantage for the primary capital gain rule. Better to take the adjusted basis and build a new rental when you can.
Not as a landlord. The easiest rent increases I do are waiting until March every other year when my taxes change, then I pring the new tax statement to show the tenant. When they do some new housing affordability program that runs up my cost I pass those along also. Tenants pay the taxes and expenses not the landlord.
Hi BP friends. Valentine’s Day, 2024. I have an off market lot in Brea California. Build 8-9 houses. Sellers wants $1.5. No plans submitted. Rent for $5-6k sell for $1million each house. 411 Sievers, Brea
Numbers …NO. NUMBERS… A LOT OF WORDS THIS IS the OPPOSITE of what I’m interested in… Too much design…. You don’t spend millions on design.. you have Two or three “ unique” designs that are templates…. But are at similar rent price points. … Or… buy distressed homes cheap . that are concrete block ( THE strong bones) Rehab… flip. That BRRRR stuff is too often the foundation of financial collapse. Refi and repeat… means trade equity for cash… so when the market gets tough, Low equity = no cushion ..LEADS TO HIGH FAILURE RATE. We were here in 2003 - 2005… which resulted in 2008. Stay conservative… keep debt low and cash reserves hi.. Wait ( yes… sorry..no you don’t get your candy yet).. Wait for the 25% -30% correction… THEN get in and accept the next 15% - 20% loss. STAY CALM… You got in lower.. and NOW you can ride a wave because ..REGARDLESS YOU BOUGHT RIGHT. BUY HI… always fails
The way you made it is a dumb way to tell other people two. Fix and flip hasn't been a option for full time work for 20 years. Won't be coming back because of the appraisal rule changes after 08. Everything is now $psf so you have to add square footage
@@sparksmcgee6641 houses that need repair… are still available… but between some wholesaler (sharks).., REIAs that aren’t advocating for CONSERVATIVE …DISCIPLINED …INVESTING…. Real estate agents that are not trained…and .. people over paying….. the market…is NOT….investment…. It …IS….just gambling…. Buying high and COUNTING ON ( hoping) that real estate PRICES…will continue to go up. Pure pubble
@@sparksmcgee6641 buy low…. ( NOT BUY AT CURRENT RETAIL PRICES)…And then create equity by adding square feet… is an option .. IF… the neighborhood supports the value and size of the bigger property. But buying LOW…because a house needs substantial repair…. Is a “double hit”…. Buy low because the house is VERY …UN…ATTRACTIVE… and then after rehab… sell at the high end of retail because now you have one of the nicest properties in the neighborhood. That has..ALWAYS….been the gold standard… for effective ROI
I'm a builder / developer in the US and just got an 84% LTC loan for a 3 lot subdivision. It definitely took some hunting cuz most lenders are 65% like you said.. but they're out there.
For me, it makes no sense to build to rent since used and abused properties cost $20 a square foot up to $40 a square foot I need another $60 to make them more than like new instead of building for $200 a square foot it makes really, no sense
