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Padre_J_Roulston
last online: 07/29, 18:58
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Another investment type question....

So, my company is looking at building a 91 home subdivision to the tune of $25 million dollars. Obviously we don't have that kind of money and are going to need to find investors. The goal is to have affordable housing rather than top end...

Based on the numbers that we are running we are going to get about a 5% return on the investment.

Now we are not likely to find a single investor for that amount of money. So it will likely be 10-20 investors putting in a million or two each.

So I guess my question is, do you think that 5% is a good enough return?

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money, question, return, million, investors
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soco
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5% when it is fully occupied? You should figure that it might take 3 years to get to that point. I would shoot for minimum 7.5% at 70% occupancy.

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We have another hurricane coming this way.

16935743 1750032141977429 1455532587 o
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Padre_J_Roulston
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soco wrote:
5% when it is fully occupied? You should figure that it might take 3 years to get to that point. I would shoot for minimum 7.5% at 70% occupancy.

That is the norm for the area, but they are all high end developments, where we want to do affordable housing. The costs to build the houses don't change much, but the cost to sell is significantly less. I think that is where the problem lies. No matter how I work the numbers, we don't get much more than 5%. :/

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5% is considered quite low, especially for large investments.

However- if you marketed it properly, I think more people would be inclined to invest towards a "helping the needy" goal.

Yorick
Yorick
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hmm .. i like rockster's perspective on that.

only thing is .. what if all these robber (baby) boomers or high income families buy out all these affordable homes and screw over the needy once more.

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Padre_J_Roulston
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NaCtHoMaN wrote:
hmm .. i like rockster's perspective on that.

only thing is .. what if all these robber (baby) boomers or high income families buy out all these affordable homes and screw over the needy once more.

Well In theory we will be able to choose who we sell to... But ultimately nothing...

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Rockster160
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Not sure how it works over there- but here we have communities of “low-income housing” where people have to apply and submit their proof of income before being approved.

However, it’s usually for apartments or similar.
You could potentially set up an HOA where one of the requirements is that you can’t rent the properties, and/or have to be within a certain income bracket.

There are ALWAYS ways to game the system. Every system. What it comes down to is a balance of work you put into “security” vs how much work it takes for a malicious person to crack vs how much more difficult it makes for an innocent participant to be approved. 🤷‍♂️

Yorick
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again.. i think rocksters really on point here.

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Lano
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It's a good investment if you have only a few investors. Obviously if i put 500 bucks into an investment, I expect more than 5 dollars back. But putting a million and getting 50 grand back isn't that bad, if it's a low risk and relatively short term deal.

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Yorick
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if fairness is in play .. should be in 15% range, not too greedy and decent returns.. 5 percent is .. quite fairly low to get people interested. think of it 5 bucks gain for every 100 dollars pushed. .. gets all the " why bother " vibes goin there.

Sherlock by olga tereshenko d9qdidc
Sherlock
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Be prepared for a lot of people to default on the rent.

Yorick
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Sherlock wrote:
Be prepared for a lot of people to default on the rent.

shouldn't be a problem if they're qualified to afford it. maybe the "rent to own" measure would safeguard the commitment?

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DocteurRalph
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People still default and the laws protect them. Being a landlord is hell, my dad owned rental property and it was insane what people could get away with. Move in, never pay rent, trash your property and stay 90 days. If they're pregnant it's about impossible to evict them. I guess it depends on the economic health in your area.

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Sherlock by olga tereshenko d9qdidc
Sherlock
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I'm dealing with such a problem right now. People think that paying rent is optional if they have a good enough "hard luck" story--and believe me, they are never without a "hard luck" story.

Sherlock by olga tereshenko d9qdidc
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As for the investment, I wouldn't do it. Ninety-one units. Ninety-one renters--about 25% at any one time won't be paying the rent. Imagine dealing with that week in, week out, month in, month out. They'll have the money for the rent--but will spend it on weed or booze.

You have no idea, Padre, just how irresponsible people can be until you are a landlord!!!

Sherlock by olga tereshenko d9qdidc
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And it doesn't take many bad renters to destroy your investment. I just had one turkey do $9,000 worth of damage because the idiot's girlfriend stopped up the commode with tampons, and just kept flushing, flushing, flushing the toilet until it flooded all of the downstairs. You will realize, after you've rented out a house, that there is no limit to some people's stupidity.

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Padre_J_Roulston
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These aren't going to be rental properties... they are going to be for resale. 🙂

Sherlock by olga tereshenko d9qdidc
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No problem then--someone else's headaches!

Yorick
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no no no.. dont stop .. that loving feeling...

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