Initiated week Golan # Post 5
In this post I will briefly address a number of issues that I thought were right to be presented for those who do not know.
1. Private home as a yielding asset
WE ALL KNOW THAT COMMERCIAL PROPERTIES ARE PRICED DIFFERENTLY FROM “SIMPLE” RESIDENTIAL PROPERTIES (SFH).
THEY ARE PRICED ACCORDING TO CAP RATE, THE CAPITALIZATION RATE OF THE PROPERTY.
IT IS IMPORTANT THAT YOU RECOGNIZE THAT THERE ARE SITES FOR THE SALE AND PURCHASE OF “SIMPLE” RESIDENTIAL PROPERTIES AS WELL ON THE BASIS OF CAP RATE.
2. Does the renovation need a contractor?
A large part of the developers who are engaged in renovating and selling properties receive 3 quotes and chooses a winning contractor according to the criteria he sees fit and the weights he gives to each criterion in the choice.
In practice, there are quite a few problems with such a contract with a contractor.
For example - the type of marble, raw materials, the quality of the flooring and more. Each of these issues ranges in very wide price ranges.
So it is true that it is possible to tighten and precise the agreement with the contractor and enter into it details - but from the experience of solving this problem - creates other new problems.
Another option is the employment of subcontractors, the employment of PM (Project Manager) to manage the project and contracting with a company such as LOWE'S for raw materials and finishing materials.
THE PM'S SALARY CAN ALSO BE TIED TO THE PROJECT'S SUCCESS. AND SO WE EARNED TWICE AS MUCH - WE ALSO WANT TO FIND IT FROM A PROMOTIONS AND DISCOUNTS WEBSITE AT LOWE'S, SAVING COSTS AND SO MAKING SURE THAT THE PROJECT ENDS ON A DATE OF SALE, BECAUSE IT HAS INCREASED ITS INTEREST.
In short, thinking outside the box can increase profit in addition to increasing the involvement of those involved in the project with a desire for the project's success in terms of price and schedule.
3. Mother's Precellation
I agree that the term sounds like a disease and it does make many investors worried. But it has a lot of profit potential.
I'M NOT EVEN TALKING ABOUT BUILDING A RESIDENTIAL COMPLEX LIKE SUB DIVISION, IT'S A PARCEL IN A SIMPLE PROPERTY.
What's beautiful is that It turns out That Americans are afraid of it, too.
This concern has yielded us huge profits in a project where we purchased a vacation home adjacent to a chalet on the banks of a lake in Alabama.
The owners of the property were concerned about the procedure. They were also concerned about the difficulty of creating another pier in the event of the assets being split. The move they deemed impossible.
In the final line,
With an investment of thousands of individual dollars, we were able to produce SURVEY with right of way, perform a paracelization, get approvals from the lake administration and the district and put another pier in a defined place.
And Hope, Hope Tarlalala.
From a place that costs about $ 300,000 or so
We got two separate houses and piers that sold for a total of about $ 800,000.
And left a handsome six-digit dollar profit.
Happily, we transferred to the sole investor-lender in the project 12% return per year on the loan. We knew there was a good profit here and we decided to give the investor a good return in advance.
The owner of the property who just sold us the property a year ago and a little asked to come, see and understand what happened here.
The pictures I attached show a picture from before and after the renovation and the lake.
4. Get out of your head
It seems to us (at least to me) that everything has a logical explanation and that everyone thinks like us.
So that's not it.
First, people from different backgrounds and different cultures think differently.
Second, in certain situations ordinary people (and we too) act in a very irrational way (and not by accident).
I'll explain by example.
We negotiated a property / mansion that we really liked.
The valuation for tax purposes is around $ 900,000.
The property is in a state that requires a major renovation and was purchased a year ago for $ 420,000.
We made an offer of $ 350,000 and it was accepted.
We took a step back. The offer was accepted too quickly.
We sent a team of 10 experts to check the roof, foundations, pool, electricity, etc.
There may have been all the information received - and the numbers turned out to be good.
We questioned all the professionals we sent and could not find the cut.
We decided to offer $ 250,000.
The customer who just a year and a half ago in April 2018 purchased the house for $ 420,000
Agreed to the sale for $ 250,000.
A simple calculation shows a loss of about $ 200,000 after sales expenses !!!
We could not figure it out.
We decided that we were not trying to make sense of the event but were continuing with cold numerical analysis, with the understanding that we needed to get out of our heads.
We purchased the house in November 2019.
We just happened to be in Birmingham, Alabama at the closing date