How to Develop a Build to Rent Duplex (How to Build Ground Up Real Estate)
ฝัง
- เผยแพร่เมื่อ 11 มี.ค. 2024
- In-depth training video on developing rental duplexes ground up, including how to determine value of land, perform due diligence and line up financing!
Links from the video:
Land Due Diligence Checklist: RehabValuator.com/list
Free Land Video: • How to Get Free Land! ...
$1 Trial of Rehab Valuator: RehabValuator.com/try
Topics we cover in this training:
- Why duplexes are better than single family rentals and will make you more $
- The full development process outline
- 3 most important financial metrics when evaluating build to rent deals
- The one factor in development you have most control over
- Do deals still pencil out in today's market? I address that
- The 8 Vital Steps to Deal Financial Analysis and figuring out the offer you must make for land!
- Why I don't like 3 Bedroom units in my properties
- How to figure out construction costs on your project
- The concept of "Max Leverage" and why it's crucial to understand it in a shifting market
- The smart "leverage levers" you can pull in order to be able to borrow more $ and need less cash!
- Vital Due Diligence Steps you must take to protect yourself against buying land you can't develop
- How to structure your financing (cash vs. construction)
- Multiple creative options you can use if you lack cash
- The BIG advantage to development vs. buying existing assets
- And much more!
![อยู่ได้แล้ว - LIPTA feat. Mirrr [OFFICIAL MV]](http://i.ytimg.com/vi/-9-hpntNym4/mqdefault.jpg)
I'm a Design-Builder in Tampa Florida. I've been in this business professionally since 1992. The information that you provide along with your perspective and advice is sound. Great job!
Very cool! Appreciate that feedback!
@travishills5552 I'm looking to build in Polk County, can I please get your business info? tnx
Any contact info ? We have land in Florida and Atlanta we need a builder designer like you.
Max% LTC 85 (60k+30k+308k) 338,000 max loan. Please Where's coming the 30k?, can you explain?
How do we contact you please?
I work as a superintendent for a large Multifamily developer (merchant builder).
Lately, I’ve had feelings that maybe I could do this myself, but ultimately I think what’s holding
Me back is fear.
Videos like this really help chip away at that fear.
Sincerely, thank you Sir!
Really glad to hear that! You already have the construction experience. If you combine that with knowledge on putting deals together (finding land, securing $ and entitlements) you'll do great
I’m an agent turned new developer here in Atlanta and it’s been an uphill battle for me and my partner the last couple of months but we have several deals in the pipeline. This video sheds a lot of light on that entire process. Love it! Thanks so much ❤
Really glad to hear it and you're welcome!
One of the most comprehensive lectures on the web. Thank you sir.
You're welcome!
This is simply beautiful.
Thank you!
Great video Daniil. Thank You!
You're very welcome. Thanks for the feedback!
Great video, information and numbers......
Glad it was helpful!
Great training. Thanks so much
You're welcome!
Great Training. Thanks!
You're welcome!
Very helpful Thank you for sharing
You are very welcome!
this is fantastic content , invaluable information , worth its weight in gold . thanks D
Glad you think so! Appreciate the great feedback!
Awesome video Daniil
Thank you!
Great video!!👏🏿👏🏿💥💥🔥🔥❤️❤️
Gracias! Glad you liked it
Love the video,
You did an amazing job.
Thank you!
Well done.....love it
Glad to hear it!
This type of project is what I am looking to start this year!! Thank you for this video!!!
Let's go!
Very informative Thank you very useful
Glad it was helpful!
Thank you sir ...for yet another outstanding and highly informative presentation!
I just love your presentations and always learn alot from it!!
Appreciate the awesome feedback and glad it's helpful!
This video has been so helpful. I’d like to thank you for taking the time to share. Someday I’d like to become a developer. Your training answered a lot of my questions. Take Care!
Thanks for watching and I am glad the video was helpful!
This is fantastic Daniil. I have been following you for a while now and love your presentations. They are easy to follow. It is my goal to sing up for one of your mentorship programs, so I can learn so much more from you in person!
Glad you like them! Look forward to you signing up!
🔥 🔥🔥
Great video
Thanks! 😃
Exquisite presentation. I have been using Rehab Valuator but in this video I learnt the concept of maximum leverage and how to solve for it using the other parameters.
Ramez! Good to hear from you bro. Yes maximum leverage is a crucial concept and right now is more important than ever to understand given what rates have done.
AMAZING JOB
Thank you!
This was sooooooooooooo valuable ✔
Glad to hear that! Makes all the hard work worthwhile!
I really enjoyed this video. It is the best I have watched. Thank you so much. I will like to stay in touch as I have a couple of land I am looking to develop.
Appreciate the great feedback!
I found this information extremely valuable , you have certainly earned my business & I will be giving Rehab Valuator a spin ! 🥂
Glad you found it valuable, Colby and look forward to having Rehab Valuator be a valuable part of your biz as well.
Should have just waited , thanks for the thought behind the 3 /1 roommate clause
thank you
You're welcome!
I loved it
Glad to hear it!
I am almost exactly like you. So much of what you said in the first five minutes is my life right now. Also after building and renting for years, I can sell and hold the mortgages.
Awesome!
Leave us your comments/questions/feedback! What other topics do you want videos on?
is this Canadian specific content?
@@td000 We are based in the US. But you can apply this logic (and software) to Canada as well. No reason why you can't other than that your government is a disaster and your real estate prices are out of control 😀
I really appreciate your presentation and the content. I am going to try this out (hopefully, in Texas and California). I will stay in contact and let you know how it goes. Thanks again
You're welcome and sounds good!
Getting ready to build in Charlottesville, VA! This was very valuable
My alma mater! What are you building?
@@RehabValuator Duplex, thinking side by side but you have me contemplating top and bottom since its on a slightly larger than average grade.
Thanks for this! Hoping for my first in 2024 💪
Let's goooo
Currently building first duplex in Georgia! Awesome vid
How are land/real estate prices in your area?
@@pimpinaintdeadho Bout $150-$160 a sqft
what part of GA, BJ?
@@uhhcrave Richmond county
What’s the build cost?
Great
Very nice
Thanks!
Daniil, thanks for all of your valuable insight. I wish I could put this theory into practice but, in my local market, real estate is massively over valued currently. The fundamentals of income to rent/mortgage costs are not aligned. Rents are plateauing in the metro Nashville area. I'm very apprehensive right now. Anyways, thanks for the uploads and keep em coming!
Land is too expensive in Nashville. Has to be sold as NOO Airbnb outside the city. Not worth the risk in my opinion
Check out the Free Land video I link to at the top. There are always creative ways (that very few people know) to general cheap land basis even in tougher markets
Do you have a video completing the steps? Would love to see your advise and experience on the second half or 2/3s. Very informative! Thank you
Not yet but working on additional content
Live in Mt. Vernon, NY where it takes a year and a half to build something like this because of the building dept.
As someone who is brand new to developing and seeking to learn this is the best educational video I’ve found thank you for putting this out! 🔥
You're very welcome!
Hey if i paid you would you help guide me through this process? Please im trying to buy my first home and would love to do this. I am a realtor and understand most of the process but i am still afraid to proceed without an experts guidance.
@@jeremytorres973 we don't offer one on one consulting or coaching right now. We do have a group mentoring program but even there we don't really take people by the hand - it's more of a mentorship group where you can ask questions and get advice
@@RehabValuator well how can I join?
@@jeremytorres973 www.RehabValuator.com/inner-circle
Great content❤
New Subscriber here🎉
Welcome aboard!
LETS GO!!
Let's go indeed!
Hi Daniel, I've followed your content for a while. I really appreciate the information you put out. It is very helpful to new investors.
Question for you:
Have you ever built a stacked duplex on a sloped lot?
I purchased a property with a neighboring duplex in 2022. There were some septic issues limiting the # of bedrooms that could be housed under a single structure. The water will be connected within the city limits. I was wondering if you've encountered a septic installation issue or if most of your projects have access to city sewer?
Thank you for the video and best of luck in 2024!
Hi. Never dealt with septic. Everything we do is only city sewer/water hookups. Sloped lots can be challenging but really depends on specifics of topo. Can still develop in some cases
good explanation of why new rentals cost so much ,
Glad you liked it!
Great video,well detailed
But if you don’t mind can you please explain how you got the final Max loan amount,im a bit confused
If you're using the software it'll tell you. If you're doing it by hand, I use Excel to back into the maximum loan amount at a certain interest rate and amortization at x DCR (example max payment that will meet 1.25 DCR at 7% rate and 20 year am). It's an excel formula basically
I've been watching you for years now. I'm here in Richmond with 5 single family homes and I would like to turn them into duplexes and maybe a 4plex but can't seem to run into the right builders. I'm going to try to get some plans to get quotes.
Small builders that can do a good job are actually harder to find than those that can build large commercial projects. I feel your pain!
I would pull permits at the county to see who's active and call them. Or drive around and look in the construction boxes on site
Why not 8-10 units
Hi Daniel, great video and very interesting software! To calculate the build cost do you use the total GIA (gross internal area) or the GEA (gross external area) which includes external wall thickness? If it’s the GIA does that area assume the cost of building the external walls, roof, porches decks etc?
Thanks
Always gross external area for this but i don't include exterior decks in the sq ft calc.
Great training video! Question, new to this so is the permanent loan amount the new sweat equity value that you can walk away with cash in hand? A bit confused on that particular process. Thanks
All good. Glad you're asking questions! The new perm loan amount is the maximum debt that can be supported with the project income of the property. Not the same as sweat equity and sweat equity is actually an indepent figure from financing. Sweat equity is New Value minus Total Cost of Project. So if your new building is worth $100k when it's built and it cost you a total of $80k to build it (land, soft costs, construction), then the sweat equity you create is $20k. Doesn't matter if you finance $50k or $100k. Does that make sense?
Daniel, the hardest part of this process seems to be estimating the rental income. You are very familiar with your market which is an advantage. How do you recommend someone learn rental comps and what the demand is for a new market?
Thank you
Well for rental comps, I am partial but I do recommend Rehab Valuator Premium. As for what's in demand, talk to local people. Talk to local investors. Look at your specific target area and look at all the rental listings. What is there a lot of? What is lacking? Call around to some of the larger apartment buildings and find out how many units they have vacant. That will tell you if they're renting out their 1st quickly, 2s quickly, etc. Talk to local management companies - same thing - ask them what they're renting out quickly and what's sitting for a while.
Hey man, any books you recommend on real estate financing ? Something that goes into detail about the lending process and what banks are looking for etc etc
Hi Anthony. Can't think of books specifically. I do have a detailed video on how build to rent financing works here if you haven't seen it yet: th-cam.com/video/EFOJ18FluYU/w-d-xo.html I am also working on a new video specifically talking about what banks want to see before funding deals. Actually started putting together content for it last week!
great inspiration video. You have a full time job as software developer? Do property builder as part time job? Thanks 😊
Not quite. I am a full time real estate developer and am a full time software company CEO. Don't ask me how :)
Great content! Do you have any duplex designs you can share?
Sorry but I don't typically share my architectural plans
🔥🔥🔥
Glad you like it!
Great video!
What's the $30k in the LTC calculation (27:37min)?
It's the soft costs (I cover it earlier in the video I believe)
Great video, very appreciated. Two questions;
1) should we have the land under a contingency agreement before doing the due diligence?
2) how do we determine the market value of the land?
Thank you!
The video covers determining the market value of the land :) Did you watch it? What parts are still unclear? And yes, I recommend having land under contract before you do any real due diligence.
@@RehabValuator
I must have missed that part, that's why I asked. No worries, I'll figure it out. Thanks for your time.
@@notrust27 yep. I cover that in this video but also here's another: th-cam.com/video/HWZX8ec1dO0/w-d-xo.html
I would like to know about the how to get land for almost nothing or deals with land owners
Check out this video: th-cam.com/video/rj5Ym-MWZZU/w-d-xo.html
Great video as usual, i wish you would do more of real life challenges investors face. Just a little bit about my situation, i lost my love of my life for 30 yrs to covid19, prior we started investing after i retired in 2018. You speak of credibility we had it, my our credit was damaged once she took ill and the virus took her life. Im 63 yrs old how do a investor build credibility from my situation. By the way no foreclosures or bankruptcy. Thanks
Really sorry to hear about your loss, Matthew! That's terrible. I have more content coming for sure and will add your suggestion to the list!
Would love to hear you speak about setting up your business entity.
It's an LLC. There's nothing to it
@@RehabValuator There's more nuance to it than just going to legal zoom and getting an LLC. I was just asking about your process.
@@whymindsetmatters my process is I call my lawyer up and tell him I need an LLC created. He creates it. That's all the legal advice I am giving on here
@@RehabValuator I wasn't expecting that kind of response. Hope your having a good day!
@@whymindsetmatters don't get hung up on irrelevant stuff like overcomplicating entity creation. Keep the main thing the main thing. I am always having a great day.
Hi Daniil,
Great TH-cam channel.
Do you know if building a backyard duplex is possible on a property which has a 30 year mortgage? I have a corner lot that could fit it without affecting me much.
Thank you!
Possible but 2 factors you need to look into: 1. Zoning 2. Would your existing mortgage company allow a partial release so that you can split off that land? Right now the entire piece of land (along with the house) is security for that mortgage. They'd have to allow the split.
Thank you. I'm planning to call my city's zoning office to confirm
Afternoon, one question I have is why not a 3/1 ? I'm my market an extra room brings more cash flow. It's a middle to lower class area, but I would like to build new.
Great question. In our area we typically don't see families or kids so 3 bedrooms just invites roommate situations with non stop turnover. But if I was building in areas with better schools, would certainly consider building 3 or even 4 bedroom units
Great video Sir, very instructive, I'm a realestate investor who currently resides in Canada; but we plan on investing in the US, therefore I plan on purchasing your software.
1 Question, does your software also calculate Comps in foreign markets, example Canadian realestate market?
Glad you enjoyed the video. Rehab Valuator is used by investors all over Canada currently but our data (for now) is US only. We are looking into adding additional data but don't have a timeline yet
@RehabValuator Sounds good, I'm looking to use the software.
On another note, have you ever been to Canada , Toronto, Mtl, Ottawa for speaking engagements? If not, do you ever plan to? We need to be exposed to more sound minded developers like you. These 10x Gurus conventions are getting overplayed...
@@lindor-1luv402 I hear ya about the 10x gurus. Feel your pain. I don't do a lot of speaking engagements in person with 3 young kids at home. Mostly do webinars these days. I was in Toronto last fall with my wife. Gorgeous city. But that was just for fun!
Would financial institutions give you a construction loan based on ABV? I think they mostly use Cost.
They look at ABV, LTC and DCR. Usually at whichever is the lowest. These days DCR drives max leverage more than anything.
Thank you for the very enlightening video. Do you just build the houses without garages, greenery etc. I noticed they are all standing alone. Is this because of Zoning requirements? What would you advise, if the zoning law requires a garage, greenery? Does your duplex-style build not allow for garages?
In my rental projects I never build garages. Doesn't pencil out. We either provide off-street surface parking or they park on the street. In our for-sale product sometimes we'll add garages. As for greenery, we typically plant trees on the street and if space allows we'll addo some backyard or common green space.
@@RehabValuator Thank you so much for your response. I have been judiciously consuming your content on YT. My other question is, For an Owner-Build-Rent-Hold, as I intend to live on the ground floor of the Duplex I wanna build. Do I include my own rent in the Projected operating income? I tried excluding it, and the numbers didn't look good. It affected the ARV, I could n't hit the Cap rate of 7% without reducing my ARV. I played around with my sweat equity, % cost to be financed,and it didn't look good. what do i do pls?
@@Coemuze If you exclude your rent it'll definitely crush the numbers. But I don't know if the bank will accept your rent in the pro-forma and count it towards DCR. You could always just include your rent and not disclose to the bank that you'll be living in one of the units, then create an LLC that will have a lease with the property and pay rent to yourself through that LLC. That being said I am always a fan of full disclosure and honesty with my lenders. So not the way I'd go about it.
@@RehabValuator Thank you again for responding. I had a chat with the financial institution yesterday, and it was established that since this is my first home, the bank is mostly interested in Debt-Service ratio before I am pre-approved. My spouse is of the opinion we shouldn't include our own rent in the POI. She however, thinks, we should include our utility bills ( electricity, gas, and water) in the POE, that way, the numbers may suck but we will establish the gap we need to pay out of pocket to meet our obligations to the bank. The smaller that gap, the better. Does that make sense?
@Daniil: in the software, when you increase your loan term from 20 to 25 years, and when you get the land cost down from $60k to $50k, in neither change does your cash flow increase. It just remains $528/month. What am I missing here?
@43:50 I change to 25 year amortization and cashflow goes to $722/month. Decreasing land purchase price doesn't affect cashflow. It only affects cash on cash return.
You are using less capital to generate the same 528$/month (cash/cash return increase). However, one should also consider that increasing the AM period could also increase the mortgage rate. In summary, the objective of this info session is to provide some guidelines, knowledge, and tools to analyze these types of projects. Thanks @RehabValuator for sharing. Great job!
hello daniil I live in an area that has townhomes and condos instead of duplexes, I found a vacant lot of .25 acres and want to build multiple quads on that property. My question is how do you run comps if there is not a comparable product, would an appraiser have to determine the value independently through the bank or would I need to consult with an appraiser to assess the deal?
From my experience, when there are no duplex comps, an appraiser will use single family comps and adjust them up/down for duplexes. What kind of adjustments they make depends on the appraiser (do they increase $/ft or decrease, etc). What you may want to do is if you have a specific bank identified, confirm they'd be willing to fund them, then ask to speak to 2-3 appraisers they typically go to and ask those appraisers how they'd approach this. The bankers may have some feedback as well. I prefer local community banks for these types of loans.
When will you make the rest of the steps??🔥🔥
In due time :) What are you looking to learn specifically?
@@RehabValuator Everything on the list and how to partner up with developers like your self and equity investors to fund getting the lots and the soft costs and down payment before I refi or cash them out with the rest of the construction loan
So what is a better option side by side duplex or stacked ?
What's your opinion? I can give you about 7 reasons why stacked duplexes are more efficient ;)
Please confirm, when you say you can get" 90% of construction costs financed b/c you are bringing so much of the land equity into the deal". Does that mean that the value of the land will cover the difference of Constructions Costs - Projected New Loan Amount (for Refi)? So if I buy the land in cash and the value of the land if high enough, I shouldn't (in theory) need any more cash to close on the loan? Just not sure if I need to plan to have cash for the land purchase as well as the construction costs that will not be financed due to the DSCR constraints.
Good question ❓
The answer is "maybe" and that's what I show in the video here and what Rehab Valuator allows you to figure out. If the value of the land is high enough then very possibly you may not need to bring more cash into the deal to cover construction costs. But it also depends on other #s such as LTV, LTC and DCR. It really depends and that's why I am working hard to teach people how to run their own #s on their deals
i am building new single family bec duplex is not allowed without special use permits here in NJ but new counstructioun numbers still work better thane rehap. how do i find cities that do allows Duplex?
Why not apply for special use permits? The real $$ is made by CHANGING zoning not complying with zoning. That is the way to increase land value for yourself instead of paying the seller for existing value. Read this again and let it sink in!
wow your really have so much value here. i did look into rezoning but i was told it could take 2-5 years sometimes to push a rezoning through due to local municipals having so much power and angry neighbors who don't like change. If there was is a way to get the engineer, attorney and architect to move faster i would love to know!@@RehabValuator
2-5 years sounds very long. Definitely some areas have so much NIMBY'ism that it's not worth it. Gotta pick your battles!
How do you get your construction costs so low. In my market it’s 250 per sqft.
It's market dependent. $250/ft in our market would be astronomical. Our market is "middle of the road" kind of market.
He would this work if I want to build a duplex but owner occupy one side of the duplex
With the right numbers, absolutely!
Can someone please tell me if I’m still available to get a construction loan if I only have 20% equity in the land? And does it limit the amount I can borrow for construction?
You can still get a construction loan if you have 20% equity in land (owe $ on land) but that construction loan will need to take out (pay off) your existing land loan. This also means you'll be able to borrow less for actual construction since part of the $$ will go towards land.
How bankable are expats in the US?
Not an expert in this but you can definitely be bankable. Depends on the lending institution.
Are your duplex plans available for sale?
They're not. I always advise people to hire a great LOCAL architect who's familiar with your building codes, your local architectural styles, your local zoning and your local construction methods. It will be worth every penny!
13 mins in … does this apply to 2-4 units or just duplexes… (with regard to building code demands and costs)
Andrew - can you clarify your question. I am looking at 13 min in but not 100% sure what you're asking about.
Hey, How'd you add the soft cost to the cost per sqft?
Not sure I follow the question. Can you clarify please?
@@RehabValuator sorry about that my main question was how did you calculate the closing/holding/financing cost? Like how did you ballpark that to 20 K?
@@Iamaprilkimiya construction interest at 7% for 6 months so that's about $10k, closing cost on loan 1 point - $3k, rest for holding costs. It's a very rough ballpark. If construction takes longer, that # should be higher but we build quickly then roll over to perm funding
@@RehabValuator Disregard my last comment, I took what you said and did a deep dive thank you.
140.00 per sf? Where is that area at? By me north nj is around 250 sf
I am in Richmond, VA. Markets are different. But I also bet $/ft values around you are higher as well. If my ABV (as-built-value) is $225-250 per ft yours are likely north of $330-$350/ft
how much money did you need to start developing? 50k 100k 200k?
I originally started with nothing but I didn't start out developing but rather rehabbing houses (doing BRRRR). We have content on BRRRR here on this channel btw
I have land in Durham NC. Looking for a partner to develop and build few duplexes. Do you do partnerships?
Great market! But I've got a crazy big pipeline here already so no bandwidth for new friends :)
Do you build in Florida?
Just Virginia for now :)
Do tenants complain about noise from the upstairs neighbor? Mine is a side by side duplex
I was thinking the same thing. Side by side is better in my opinion
Apparently not the way he builds. He has previous shorts were he talks about the materials he uses to deaden sound.
We sound proof between floors very well and rarely get noise complaints. Building side by side also is much more inefficient! 1. You need more land. You need less land when you stack them vertically. 2. You need more staircases 3. HVAC costs will be higher. I can keep going. There's no comparison
I am a general contractor in Illinois and I have been thinking about building two single family homes but after watching your video makes more sense to build a duplex
My question is how do you manage the electrical and gas bills? Since you have one climate control unit for the bolt of the apartments.
@@hugofebrerohh we have separate electric meters and HVAC systems for each apartment. No gas. Water is on 1 meter and we just split it (that's an oversimplification but we don't pay any utilities)
Max% LTC 85 (60k+30k+308k) 338,000 max loan. Where's coming the 30k? please explain
$30k was ballpark soft costs (closing, financing costs mostly)
How is cash on cash calculated? 500/100K is 0.5% not 5%. 5% would be 5K, 10 times the actual pre-tax cash flow. Correct me if I am wrong please
Never mind. Is 500 times 12 because it is annual. 6K/115K is 5%
you got it
I’m not following the part when the loan resets
For investment properties, especially with local community banks, you won't get a loan fixed for 30 years. Typically the perm rate is subject to a balloon or a "reset" after 5, 7 or 10 years. At that time either your loan is due or you will renegotiate the rate with the bank based on current market rates. Or it will just reset to a pre-determined spread over a specific index, as determined in your loan docs
Why not renovate cheap existing property?
1. Not easy to find cheap property I actually want to renovate in the areas I am targeting 2. With new construction I get to create a much better product from scratch than anything I can do via renovating old properties
Tic tok mind...lol❤
Tik toc brain! :)
doesnt $2128 x 12 months x 20 years = 510,720?
That sounds right. What is your point?
@@RehabValuator you said the max loan was 274,500, I thought the 510k+ would be the max. Am I missing something?
@@christianstill.6654 yeah :) You're missing like a whole lot of math and logic here! It's not how that works
@@RehabValuator Care to explain? That's why I'm asking after all.
@@christianstill.6654 I can't explain something so basic. It's like having to explain to you why you shouldn't fuel up your car with milk or something like that. I am not trying to be a dick. I explained how the max mortgage amount is computed in the video. If you don't understand how mortgages work, there's a ton of other videos on youtube about it.
Tiktok Brain 😂😂
It's a real thing sadly :)
When the project is done and rented, I want $866.00 net rent per month for every $100K invested.
That's a good cash on cash!