[clearfund]

For the design review guidelines coupled with the demands of the resale buyer, you would be hard pressed to build a home less than $200/sf.

Example, all front doors/windows must be recessed 18″ and all side windows 12″. These types of items raise your cost as your essentially frame a house inside a house.

You cannot use vinyl windows (must be wood windows) and cannot use cheap “S” tile track roof. Must be a ‘redlands clay’ type roof (read expensive). Multiply this by 100 different items and up goes your budget.

At that price you would be cutting corners everywhere and will end up with a product which is vastly inferior to your competition. Trust me, I’ve seen it happen out there.

Right now you can buy below replacement value which is a great starting point.

[clearfund]

For the design review guidelines coupled with the demands of the resale buyer, you would be hard pressed to build a home less than $200/sf.

Example, all front doors/windows must be recessed 18″ and all side windows 12″. These types of items raise your cost as your essentially frame a house inside a house.

You cannot use vinyl windows (must be wood windows) and cannot use cheap “S” tile track roof. Must be a ‘redlands clay’ type roof (read expensive). Multiply this by 100 different items and up goes your budget.

At that price you would be cutting corners everywhere and will end up with a product which is vastly inferior to your competition. Trust me, I’ve seen it happen out there.

Right now you can buy below replacement value which is a great starting point.

[clearfund]

For the design review guidelines coupled with the demands of the resale buyer, you would be hard pressed to build a home less than $200/sf.

Example, all front doors/windows must be recessed 18″ and all side windows 12″. These types of items raise your cost as your essentially frame a house inside a house.

You cannot use vinyl windows (must be wood windows) and cannot use cheap “S” tile track roof. Must be a ‘redlands clay’ type roof (read expensive). Multiply this by 100 different items and up goes your budget.

At that price you would be cutting corners everywhere and will end up with a product which is vastly inferior to your competition. Trust me, I’ve seen it happen out there.

Right now you can buy below replacement value which is a great starting point.

[clearfund]

I have a very intimate knowlege of Santaluz having owned/sold over 10 lots/homes out there during its early stages.

Early on people were very scared of the place because “where are the trees?” they would say.

Now that custom homes have been built on about 50% of the dirt (to varying degrees of refinement) and the higher end price point of $4mm has proven attainable the fear factor has subsided somewhat.

70 Degrees’ comments were very accurate. I believe that upon buildout in 15 years it will be looked at as an amazing community and folks will wonder why they didn’t buy in when it was cheaper.

For now, the flood of custom homes preparing to come tumbling down in price due to foreclosure is set to begin. Several are in foreclsure and the market is jammed with homes between $2.4- $3.4mm. Once this breaks it will be a race to sub $300/sf for a good quality custom home on an above average lot (6,000sf for $1.8mm or less).

My take is that it will get to the point that you can buy that home for its hard construction costs ($250-$300/sf) and get the lot,permits,effort, etc for free.

If you can handle the MR/HOA, have young kids, or like the active family environment, and plan to stay for the long term, I personally feel you cannot go wrong. Flipping, however, may prove hazerdous to your retirement.

[clearfund]

I have a very intimate knowlege of Santaluz having owned/sold over 10 lots/homes out there during its early stages.

Early on people were very scared of the place because “where are the trees?” they would say.

Now that custom homes have been built on about 50% of the dirt (to varying degrees of refinement) and the higher end price point of $4mm has proven attainable the fear factor has subsided somewhat.

70 Degrees’ comments were very accurate. I believe that upon buildout in 15 years it will be looked at as an amazing community and folks will wonder why they didn’t buy in when it was cheaper.

For now, the flood of custom homes preparing to come tumbling down in price due to foreclosure is set to begin. Several are in foreclsure and the market is jammed with homes between $2.4- $3.4mm. Once this breaks it will be a race to sub $300/sf for a good quality custom home on an above average lot (6,000sf for $1.8mm or less).

My take is that it will get to the point that you can buy that home for its hard construction costs ($250-$300/sf) and get the lot,permits,effort, etc for free.

If you can handle the MR/HOA, have young kids, or like the active family environment, and plan to stay for the long term, I personally feel you cannot go wrong. Flipping, however, may prove hazerdous to your retirement.

[clearfund]

I have a very intimate knowlege of Santaluz having owned/sold over 10 lots/homes out there during its early stages.

Early on people were very scared of the place because “where are the trees?” they would say.

Now that custom homes have been built on about 50% of the dirt (to varying degrees of refinement) and the higher end price point of $4mm has proven attainable the fear factor has subsided somewhat.

70 Degrees’ comments were very accurate. I believe that upon buildout in 15 years it will be looked at as an amazing community and folks will wonder why they didn’t buy in when it was cheaper.

For now, the flood of custom homes preparing to come tumbling down in price due to foreclosure is set to begin. Several are in foreclsure and the market is jammed with homes between $2.4- $3.4mm. Once this breaks it will be a race to sub $300/sf for a good quality custom home on an above average lot (6,000sf for $1.8mm or less).

My take is that it will get to the point that you can buy that home for its hard construction costs ($250-$300/sf) and get the lot,permits,effort, etc for free.

If you can handle the MR/HOA, have young kids, or like the active family environment, and plan to stay for the long term, I personally feel you cannot go wrong. Flipping, however, may prove hazerdous to your retirement.

[clearfund]

I have a very intimate knowlege of Santaluz having owned/sold over 10 lots/homes out there during its early stages.

Early on people were very scared of the place because “where are the trees?” they would say.

Now that custom homes have been built on about 50% of the dirt (to varying degrees of refinement) and the higher end price point of $4mm has proven attainable the fear factor has subsided somewhat.

70 Degrees’ comments were very accurate. I believe that upon buildout in 15 years it will be looked at as an amazing community and folks will wonder why they didn’t buy in when it was cheaper.

For now, the flood of custom homes preparing to come tumbling down in price due to foreclosure is set to begin. Several are in foreclsure and the market is jammed with homes between $2.4- $3.4mm. Once this breaks it will be a race to sub $300/sf for a good quality custom home on an above average lot (6,000sf for $1.8mm or less).

My take is that it will get to the point that you can buy that home for its hard construction costs ($250-$300/sf) and get the lot,permits,effort, etc for free.

If you can handle the MR/HOA, have young kids, or like the active family environment, and plan to stay for the long term, I personally feel you cannot go wrong. Flipping, however, may prove hazerdous to your retirement.

[clearfund]

I have a very intimate knowlege of Santaluz having owned/sold over 10 lots/homes out there during its early stages.

Early on people were very scared of the place because “where are the trees?” they would say.

Now that custom homes have been built on about 50% of the dirt (to varying degrees of refinement) and the higher end price point of $4mm has proven attainable the fear factor has subsided somewhat.

70 Degrees’ comments were very accurate. I believe that upon buildout in 15 years it will be looked at as an amazing community and folks will wonder why they didn’t buy in when it was cheaper.

For now, the flood of custom homes preparing to come tumbling down in price due to foreclosure is set to begin. Several are in foreclsure and the market is jammed with homes between $2.4- $3.4mm. Once this breaks it will be a race to sub $300/sf for a good quality custom home on an above average lot (6,000sf for $1.8mm or less).

My take is that it will get to the point that you can buy that home for its hard construction costs ($250-$300/sf) and get the lot,permits,effort, etc for free.

If you can handle the MR/HOA, have young kids, or like the active family environment, and plan to stay for the long term, I personally feel you cannot go wrong. Flipping, however, may prove hazerdous to your retirement.

[clearfund]

Flu – We’ve bought/sold/developed over $1B of commercial real estate in the western US over the past 10 years.

In summary, commercial is all about cash flow, cash flow, cash flow.

This makes the asset class completely different from the residential world where most investors are simply “hoping” for appreciation and profits. Homes rarely turn a positive cash flow.

To be brief, there are 3 deadly problems in commercial: 1) vacancy; 2) rising expenses; 3) reliance on profits/sale

Vacancy: when you lose a tenant, you NEVER get that rent back and your montly check drops immediately. Be scared of lots of small, local mom/pop type of tenants as they disappear regularly.

We own bldgs leased to Fortune 500/100 clients exclusively with investment grade credit (s&p BBB or better). NO VACANCY RISK

Expenses: do not be exposed to paying expenses yourself as they will rise over time yet if your rent income drops (vacancy) then you get hit, hard. We prefer NNN leases where the tenant pays 100% of the expenses thus reducing our risk/exposure to inflation, etc. Couple that with high credit Fortune 500 tenants and our expense exposure is minimal.

Profits: most people think the sale is where profits are made, no. Over 50% of your profits should come from dividends and distributions. Remember, the odds of needing to sell at the peak of the market is rare, thus don’t use a projected sale price to guage your purchase price. Buy based on cash flow/credit then as the market improves consider selling into a rising market. Don’t expect a huge killing from the sale, but rather enjoy the huge cash flows you can earn/grow.

Over all its the best vehicle (done correctly) for generating cash flow & upside potential that I can imagine.

Someone else already hit on the cap rate/value topic so we’ll leave that alone.

Feel free to PM me if you want add’l insight from an investor’s perspective.

[clearfund]

Flu – We’ve bought/sold/developed over $1B of commercial real estate in the western US over the past 10 years.

In summary, commercial is all about cash flow, cash flow, cash flow.

This makes the asset class completely different from the residential world where most investors are simply “hoping” for appreciation and profits. Homes rarely turn a positive cash flow.

To be brief, there are 3 deadly problems in commercial: 1) vacancy; 2) rising expenses; 3) reliance on profits/sale

Vacancy: when you lose a tenant, you NEVER get that rent back and your montly check drops immediately. Be scared of lots of small, local mom/pop type of tenants as they disappear regularly.

We own bldgs leased to Fortune 500/100 clients exclusively with investment grade credit (s&p BBB or better). NO VACANCY RISK

Expenses: do not be exposed to paying expenses yourself as they will rise over time yet if your rent income drops (vacancy) then you get hit, hard. We prefer NNN leases where the tenant pays 100% of the expenses thus reducing our risk/exposure to inflation, etc. Couple that with high credit Fortune 500 tenants and our expense exposure is minimal.

Profits: most people think the sale is where profits are made, no. Over 50% of your profits should come from dividends and distributions. Remember, the odds of needing to sell at the peak of the market is rare, thus don’t use a projected sale price to guage your purchase price. Buy based on cash flow/credit then as the market improves consider selling into a rising market. Don’t expect a huge killing from the sale, but rather enjoy the huge cash flows you can earn/grow.

Over all its the best vehicle (done correctly) for generating cash flow & upside potential that I can imagine.

Someone else already hit on the cap rate/value topic so we’ll leave that alone.

Feel free to PM me if you want add’l insight from an investor’s perspective.

[clearfund]

Flu – We’ve bought/sold/developed over $1B of commercial real estate in the western US over the past 10 years.

In summary, commercial is all about cash flow, cash flow, cash flow.

This makes the asset class completely different from the residential world where most investors are simply “hoping” for appreciation and profits. Homes rarely turn a positive cash flow.

To be brief, there are 3 deadly problems in commercial: 1) vacancy; 2) rising expenses; 3) reliance on profits/sale

Vacancy: when you lose a tenant, you NEVER get that rent back and your montly check drops immediately. Be scared of lots of small, local mom/pop type of tenants as they disappear regularly.

We own bldgs leased to Fortune 500/100 clients exclusively with investment grade credit (s&p BBB or better). NO VACANCY RISK

Expenses: do not be exposed to paying expenses yourself as they will rise over time yet if your rent income drops (vacancy) then you get hit, hard. We prefer NNN leases where the tenant pays 100% of the expenses thus reducing our risk/exposure to inflation, etc. Couple that with high credit Fortune 500 tenants and our expense exposure is minimal.

Profits: most people think the sale is where profits are made, no. Over 50% of your profits should come from dividends and distributions. Remember, the odds of needing to sell at the peak of the market is rare, thus don’t use a projected sale price to guage your purchase price. Buy based on cash flow/credit then as the market improves consider selling into a rising market. Don’t expect a huge killing from the sale, but rather enjoy the huge cash flows you can earn/grow.

Over all its the best vehicle (done correctly) for generating cash flow & upside potential that I can imagine.

Someone else already hit on the cap rate/value topic so we’ll leave that alone.

Feel free to PM me if you want add’l insight from an investor’s perspective.

[clearfund]

Flu – We’ve bought/sold/developed over $1B of commercial real estate in the western US over the past 10 years.

In summary, commercial is all about cash flow, cash flow, cash flow.

This makes the asset class completely different from the residential world where most investors are simply “hoping” for appreciation and profits. Homes rarely turn a positive cash flow.

To be brief, there are 3 deadly problems in commercial: 1) vacancy; 2) rising expenses; 3) reliance on profits/sale

Vacancy: when you lose a tenant, you NEVER get that rent back and your montly check drops immediately. Be scared of lots of small, local mom/pop type of tenants as they disappear regularly.

We own bldgs leased to Fortune 500/100 clients exclusively with investment grade credit (s&p BBB or better). NO VACANCY RISK

Expenses: do not be exposed to paying expenses yourself as they will rise over time yet if your rent income drops (vacancy) then you get hit, hard. We prefer NNN leases where the tenant pays 100% of the expenses thus reducing our risk/exposure to inflation, etc. Couple that with high credit Fortune 500 tenants and our expense exposure is minimal.

Profits: most people think the sale is where profits are made, no. Over 50% of your profits should come from dividends and distributions. Remember, the odds of needing to sell at the peak of the market is rare, thus don’t use a projected sale price to guage your purchase price. Buy based on cash flow/credit then as the market improves consider selling into a rising market. Don’t expect a huge killing from the sale, but rather enjoy the huge cash flows you can earn/grow.

Over all its the best vehicle (done correctly) for generating cash flow & upside potential that I can imagine.

Someone else already hit on the cap rate/value topic so we’ll leave that alone.

Feel free to PM me if you want add’l insight from an investor’s perspective.

[clearfund]

Flu – We’ve bought/sold/developed over $1B of commercial real estate in the western US over the past 10 years.

In summary, commercial is all about cash flow, cash flow, cash flow.

This makes the asset class completely different from the residential world where most investors are simply “hoping” for appreciation and profits. Homes rarely turn a positive cash flow.

To be brief, there are 3 deadly problems in commercial: 1) vacancy; 2) rising expenses; 3) reliance on profits/sale

Vacancy: when you lose a tenant, you NEVER get that rent back and your montly check drops immediately. Be scared of lots of small, local mom/pop type of tenants as they disappear regularly.

We own bldgs leased to Fortune 500/100 clients exclusively with investment grade credit (s&p BBB or better). NO VACANCY RISK

Expenses: do not be exposed to paying expenses yourself as they will rise over time yet if your rent income drops (vacancy) then you get hit, hard. We prefer NNN leases where the tenant pays 100% of the expenses thus reducing our risk/exposure to inflation, etc. Couple that with high credit Fortune 500 tenants and our expense exposure is minimal.

Profits: most people think the sale is where profits are made, no. Over 50% of your profits should come from dividends and distributions. Remember, the odds of needing to sell at the peak of the market is rare, thus don’t use a projected sale price to guage your purchase price. Buy based on cash flow/credit then as the market improves consider selling into a rising market. Don’t expect a huge killing from the sale, but rather enjoy the huge cash flows you can earn/grow.

Over all its the best vehicle (done correctly) for generating cash flow & upside potential that I can imagine.

Someone else already hit on the cap rate/value topic so we’ll leave that alone.

Feel free to PM me if you want add’l insight from an investor’s perspective.

[clearfund]

‘buy low sell high’ is too hard for most folks…people prefer the ease of ‘buy high, sell higher’.

it works…until it doesn’t.

[clearfund]

‘buy low sell high’ is too hard for most folks…people prefer the ease of ‘buy high, sell higher’.

it works…until it doesn’t.

[Author]

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