One Expensive Property or Two Affordable Homes? The Economics Explained | Ep 55

James: Welcome to the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing. And our mission is to equip people to invest wisely in both properties and residents so that together we can build wealth while improving housing. I'm James, and this is my wife, Jessi.

Jessi: Yep. Here. And I was just musing on. our elderly dog. Yeah. In his old age, how he's,

James: he's 14.

Jessi: He's 14. He's up there. Almost 15. I, I suppose. Well, no, no, no, no. Almost 14. Yeah. And yeah, February, but he's just funny. Like his pickiness and his eating habits and like, yeah, I, I, I feel like we taught our kids a valuable lesson in bedding tonight for multiple reasons, but it was like, yeah, it was like, I bet you betting.

Yeah. Cause he, he has been eating chicken. Like he decided he didn't want chicken anymore. I was like, okay, well what if I put some barbecue sauce on it? He was like, Nope, not that. Oh, thank you. I was like, all right, what if I put this other cheese on it? Nope, not that. Yeah, and then we were having chicken for dinner and so I was like, no way.

Like I gave him a piece of that. He was like, yep, I'm all in. Yeah. Like, okay, what if I dip your old chicken in the new sauce, ? He was like, and I bet that's where I bet you, I was like, oh, I bet. He's not going to eat this. No way. Like I bet you a foot massage. I don't, he's not going to go for it. He's going to smell the old chicken smell.

And you're like, nah. I don't know. I think he's going to go for it. Totally went for it. It was

James: awesome. Oh man. That's what we're doing after this. You're paying up. It's going to be fantastic. Yeah. And then later on tonight, we got some some new poker chips. And so

Jessi: that's right. You taught them betting, also teaching

James: them betting and the value of bluffing and all that stuff, super good

Jessi: life skills.

James: Now I am potentially one could say taking a bet. a new property investment, but I don't think so because I feel like I have de risked a lot of my bet.

That's right. We bought another property. It's super exciting. It's it's two buildings. On one lot.

Jessi: That's kind of cool.

James: Yeah. Yeah. So it's two homes.

One of them is like a stick built, normal home with a massive shop. That's actually super cool. And then the second building is a manufactured home.

Jessi: Oh

James: yeah.

Jessi: Are they like right next to each other? Is there space? They're neighbors.

James: Like, what do you mean by, when you say space, what do you mean? Like,

But probably in like a

Jessi: city block, you know, like how the two houses are right next to each other.

It's like that.

James: Oh, no. Or is it

Jessi: like. Okay. There's one up the hill and one kind of down. Yeah, I know. They're

James: like, they're two, two, like, are like a regular house where there's a I don't know, 20 foot yard in between the two. And so then we'll split that down the middle. There'll be like a little 10 footer in between.

It's cool. The stick built is super old. It was built in like 19 somethings. It's careful

Jessi: there. I was built in 19. Yeah, that's true. That's true. No, it's earlier. 19, 40s or 30s. All right.

James: And and it needs a lot of TLC, which.

Jessi: So you're just going to split it and sell it

James: essentially. Yeah.

Jessi: Wow.

James: Yeah. And it's part of our, our desire to provide affordable housing for people.

Jessi: Okay.

James: And so right now it's two properties that are needing some work, but still really expensive. It's like over half a million dollars to buy in this area. The whole thing. It's a lot to buy all of it. And that's just a lot for someone to take on. And so we're gonna be able to split it and then sell them for less and pass on instead of us paying a.

Contractor to do all the work, whoever in the new homeowner is, we'll be able to go in and buy it. Now we're going to do enough to make it lendable. This is almost like the exact same strategy we did with our place on 16th earlier this year, where we do some work, get a lendable, and then sell it to someone else who then puts in a bunch of sweat equity and they keep that equity instead of paying it to a contractor.

Or I guess they could pay a contractor, I guess, whatever.

Jessi: Which is similar to our dog. People have different preferences. Yeah. So it kind of makes sense that if a buyer And

James: the current plan is we're going to do more with the manufactured home because the previous owner had cats and cats are gross. I think cats are horrible.

If you don't want to invest in me because of that, I'm okay with that. I'm drawing a hard line and Oh, you just made some

Jessi: enemies.

James: So be it! So be it! You're like, I don't care. You know, you gotta be very clear on who, who your, who your friends are and who your enemies are. And that's Cats Are Enemies.

So anyways, as a result of that, we are, cause cats are gross. We're tearing out all the flooring and going to have to repaint everything. And we're gonna have to redo some cabinets because they scratched it because cats are gross. Yeah. So anyways, we're going to do more work on that one. But yeah, that's that's the project.

It's super straightforward. This shop, by the way, on the stick built, it's, it's awesome.

Jessi: Yeah. You showed me a picture. It's huge.

James: How would I describe it? I mean, it's, it might be bigger than the house just from a footprint standpoint. That may not be true. But it's like it's part of the equivalent of a three car garage.

But it's twice as high. So a part of it is a loft. It has a really big door for, and then it has a massive car lift in it as well. It's just big open space.

Jessi: Yeah.

James: Super cool. Yeah. So far, everyone we showed it to is like, dude, this is awesome. Oh yeah. I mean, if you're a car

Jessi: person, it's an ideal setup for that.

And it's pretty, it's super nice. A car person. So the, the shop. Was that built at the same time as the stoke house? It was put in later. Cause I was like, it looks newer. Yeah, it is. It

James: is.

Jessi: Okay.

James: Yeah. And it's got a nice yard area. That's the other thing too, is there's a lot of yard space in this place. To the point where I think if they wanted to, either one of them, once they're split, if they wanted to add an ADU onto it, plenty of space to do

Jessi: that.

James: Yeah. There might be some questions on the floodplain, but but they could be, yeah, they could easily add. Is this you, cause they're just like, there are, Like, I don't know, quarter of a lot, half lot, maybe half acre. I didn't actually

Jessi: ask, like, relative to like in the city, is it like in the city? Is it outside the city a little bit?

James: It's north Albany and it's like right on the bubble. Okay. It's right next to an elementary school.

Jessi: Okay.

James: And some shopping. So it's not like, it's not out there, but you also feel like you're, you feel like you're secluded.

Jessi: Yeah.

James: But you're not. You know, you're not 20 miles out there. Yeah. You're like, cool.

Two miles out. Yeah, no, it's super cool. We're looking forward to it. And we closed in December, which is nice. We, we ended up paying 540, 000 for it. So. One of my strategies is if something's listed for a ridiculous amount of money, I just ignore that and and, and offer something, whatever I think I can afford to pay.

What happens a lot is they say, no,

Jessi: yeah,

James: cool. But every once in a while they come back and say, you know, that initial offer you had, like. Tell

Jessi: me

James: more. Let's talk. And in which case I go, awesome, absolutely. And so that was what happened in this case. I don't remember the exact amount they wanted, it was like 660, 000 I think.

Yeah. Yeah. We came in like close to like 500, 000. They're like, no, like, okay, fine. But yeah, we came back, they asked for, can you do any better? And 540 was our answer. And so, yeah, so we got it. We're going to put in about 55, 000 into fixing both sides. So for context, we're doing another flip and we're spending about a hundred grand.

Just on the one, on that one single family home. Oh, wow. So this is like a quarter of the amount of work. Yeah. So we're really like, we're not doing much. And and I think it's good. And again, I think we can pass on those savings and I think it'll be good.

Jessi: Yeah.

James: The shop itself is just super compelling, right?

I think it's gonna attract a DIYer type of person.

Jessi: I could see that like, yeah,

James: I wanna shop and so they're gonna wanna do the work in the house themselves and have those savings and they'll have all the tools and the equipment to do it. Yeah, that's true. And so I think it'll be. That's, that's who we're going for, for that.

Let's see what else. We're doing this combination of using a hard money lender to actually buy the place and then raising, then we raised funds from individuals to do the, the fixes and the holding costs and things like that. So, yeah. So we ultimately raised 660, 000

Jessi: total to

James: do all that

Jessi: stuff.

Purchase, purchase, do the, all the fixes.

James: Yeah.

Jessi: And then whatever costs of. Whatever.

James: Yeah. So yeah, it's pretty cool. We I'm trying to think what else yeah, no, we think our timeline should be pretty quick. We think we'll get it all done. Yeah. That was my next

Jessi: question was, what do you think the timeline is going to look like?

Cause yeah, with a hard money lender, do they have restrictions on like how long you can borrow the money or like, is it just higher interest or we're getting a

James: 12 month loan

Jessi: and you

James: just pay along as you can just pay interest only for that entire time. Then eventually I have to pay back. So we've got to be done within a year.

Yeah. Our, our hope is to be done within six months. The big unknown is splitting the lot. That's the, that's the like

Jessi: unknown, like you're not sure if you can

James: do it. Oh no, we know we can. Okay. It's just a question of how long it's going to take. to take to do. How do you, yeah, like walk me through that

Jessi: process.

Like you talk to the city. I don't know it.

James: This is one of those like, just kind of doing it things. And once it's done, I'll know the answer to this. All right. But

Jessi: from what I understand, you talk to the city. You do a

James: pre app and that's like essentially you go, here's the plan. And we made like this very crude drawing.

Jessi: Yeah.

James: It was like a big rectangle, had two little squares on it and then a dotted line. That's awesome. Right there. That's right here. And then they go through and they go, okay, in order to do this, you need to do these seven different things and there's fees associated with every one of them. There's a permit fee.

There's a request to do this fee. There's a, because I said, Sophie, there's SDC, like it's, it's, it's ridiculous. And they all have different amounts and you just kind of slowly add them all up and you go, Oh, that got the 10 grand pretty quick. But but that's the idea. What you also, you need to hire surveyors to actually go through and

Jessi: Because they record like what the actual parameters are for which property, who owns what.

Yeah. Okay.

James: Yeah. One of the interesting things about it is you are technically creating new land as far as the assessor's office is concerned, because I know

Jessi: you're splitting it up.

James: I know you are, but you're, you're creating like the old one. You're now like, Oh, this old piece of land is now half and now there's a new piece that replaces it.

Yeah. All right. That

Jessi: is one way to think about that. It only

James: matters because for both of them, it totally resets the tax base. For it because it's quote new land starts over in terms of calculating its value. Yeah. Yeah. So, so there's that which is kind of interesting, but, but yeah, I mean, outside you got to make sure that there are separate sewer systems, or at least there's a mechanism in place so that the one doesn't flood into the other.

They are both on a, a well, and we're going to keep the single well. And then instead of create an easement saying, Hey, this property has permission to use this well, and any expenses will be split. And do things like that. Let's see, electrical, electric is already separate. Garbage is separate, I guess.

There's no gas for either one. So that doesn't matter. And I think that's it. But yeah, so it was pretty straightforward. And should be pretty quick, pretty quick project. Again, none of these projects make, make me a millionaire, but that's okay. Right. It's really about just helping create more affordable housing in the, in the industry and in the community.

And so that's what we're doing. Yeah. Pretty fun. I love buying stuff. This will be, it is fun. This is our fourth one. And so fourth flip that we're doing so far. And I, I, the goal, which I think is possible, like would be to like every month we're like, and another one and another one, it's kind of like, it's kind of the, the pathway that we're, we're headed on here, which would be good.

Jessi: So does this count as one or two?

James: Just one,

Jessi: I mean, it's one deal, but

James: it is one deal.

Jessi: Eventually you'll have two sales.

James: Oh man.

Jessi: Hmm. One and a half.

James: You know, one of the things that we do, I, it's one deal, but whenever we close a deal, we go get pizza to celebrate. Yeah. So I think in this case, we're going to end up with three pizzas.

Hey, because in theory you got two closings. So that's a win. That's awesome. Yeah. Yeah. Not a win for the scale, but but it's all good. You know, it's all good. It's got to learn to moderate. I'm still, still working on that. I'm 41 and haven't learned how to moderate yet, but I haven't had to. It's

Jessi: all

James: right.

You're good at

Jessi: betting, so.

James: Yeah, that's right. I bet that I will eat more pizza than I should this year and it'll be totally awesome. That's a good bet. That means you're doing deals. Exactly. I'm trying to think if there's anything else that is relevant or interesting to this, but I don't think so.

But yeah, that's what we're doing. Pretty fun, pretty exciting. It's the kind of thing where, like I said, we have private money. We have private individuals who are helping to fund this deal. And like I said, we are planning to do more. And so if this is something that you're interested in, man, I would love to hear from you.

I'd love to talk to you. You can check us out at furlough. com and you can see more about our investing thesis, what we're all about. I don't have any cool dad jokes on there. I saw this other site, like he was a property manager and he had a bunch of jokes. He was like, I'm a dad. So I have dad jokes. On my website.

And I was like, huh,

Jessi: that

James: is distinctive. I like that.

Jessi: Well, I got, I don't know if I know if I have any, Oh, I do have a building joke. Okay. Let me hear it. Okay. I always mess this up. So I gotta, I gotta say it the right way in my head. What animal can jump higher than a building?

James: I don't know.

Jessi: None buildings can't jump or all or all just buildings. I have messed that up every time, every time it should be all the actual Cause if joke has something to do with a kangaroo and I always mess that up. And so I just changed it to animals, but then, man, that was bad.

James: That was pretty bad. It's

Jessi: pretty bad.

James: Sorry. Sorry,

Jessi: everybody,

James: but I promise you are investing is not nearly that bad.

Jessi: We'll work on our joke. Usually I'm so good.

James: No, that was, that was a bad one. That was pretty bad. That's the only

Jessi: one I know about building.

James: We'll have to do some research on that one and figure it out.

But yes, anyways, if we're doing it and this sounds super interesting to you and you'd love to get involved in deals like this, we have lots of spots where we can like, again, we're going to have lots of opportunities throughout this coming year. It's going to be awesome. So we'd love to hear from you. So you can have to furlo.com sign up. And from there to ask a bunch of questions, just to learn more about you so we can talk awesome. And yeah, so I'm excited. Another deal. It's a great way to start off the year. I'm super excited for it. And so with that, thank you for listening and have a great day.