- Website: https://www.aurorasinvestmentgroup.com/
- LinkedIN: https://www.linkedin.com/in/karl-krauskopf/
- Thach: https://www.thachrealestategroup.com/
- Legacy Capital: https://legacyg.com/what-we-do/
Show notes: RE Development Business Podcast with Karl Krauskopf!
- Karl’s backstory
- How long was Karl part time in real estate
- What is Karl working on now?
- How did Karl get experience
- What was Karl’s first development deal
- Timing of real estate purchases
- How do you compete with conservative underwriting
- Does it makes sense to take less profit on first few deals
- 20% minimum
- Your ability to carry payments
- Working with investors
- How much did you have to raise
- What would you use for construction costs
- What kind of profit margin should you bake in
- What are the loan terms you are using today
- What are rates
- Biggest learning curve
- Improvements to contracts
- How much is a DADU
- Would you rather do townhomes or DADU’s
- The DADU total cost
- Go through the process
- RSL Zoning vs Single Family
- LR Zoning
- Where do you NOT have to do owner occupied
- How long would it take for a seller to get pre approved plans
- What’s the timeline
- What are Karl’s goals and helping people
- Join us on Thursday sometime
- Investors are competing with builders
- How do we connect with Karl
Karl grew up as a beach bum in Florida.
Got him NBA after undergrad and then moved to Texas.
He moved out to Seattle because of the great outdoors activities. After 2 years he was driven into the real estate space. The cost of living in Seattle was tough. And he was starting a family. After self educating, and after 6 months he bought his first duplex that he was going to BRRRR. Couldn’t BRRRR is because of a bad purchase.
Then did a few flips that did really well, and kept going from there.
Karl even had an identity theft during one of his flips.
He loves the flexibility that this life offers. Even though he works way more than he did in his corporate job.
How long was Karl part time in real estate
It was 2 years before Karl when full time into real estate.
What is Karl working on now?
The 11 town homes. Everything that Karl is working on is in Seattle. He understands the zoning and codes and all that stuff.
How did Karl get experience
He left a great paying consistent job. The biggest fear was that he wasn’t getting paychecks regularly. At the start he wasn’t going to get paid for 3-5 months.
What was Karl’s first development deal
It was the townhomes that was brought to him by Thach Nguyen. It was a permit ready site.
Timing of real estate purchases
You want to get moving in 2 weeks of acquiring. He ran into having to take electricity from overhead to underground. Then he had to purchase lumber at the height of the market.
They did extremely well from an appreciation standpoint. Which was buying at the right price.
How do you compete with conservative underwriting
Relationships, and they are probably getting passed up on a lot of opportunities. Now they are looking at buying their own land so they don’t have to compete as much.
Does it makes sense to take less profit on first few deals
Karl thinks absolutely. Go in expecting to make less profit.
He disagrees with trying to break even just for learning. You are going to put in so much time that you should get paid.
It depends on the lender. We work with Legacy Capital out of Bellevue.
Your ability to carry payments
It depends on the lenders as well. They are looking to get into softer money. They like interest reserves, and work with investors.
Working with investors
Karl’s team is bring in money as well that will give them more flexibility during the construction phase.
How much did you have to raise
$700k and $600k. Both of the units were very different.
What would you use for construction costs
In Ballard… we are $300-310 per square foot.
$250-255 per square foot for the other deal.
What kind of profit margin should you bake in
Auggie Buc is a great lender and investor. Karl owes a lot to Auggie!
It depends on density and volume.
What are the loan terms you are using today
Interest only 12 month is the product that they use with Legacy Capital. They will need longer terms for the bigger projects. There have been delays in supplies, and municipalities cause construction delays.
Being in and out within 12 months can be touch.
What are rates
They are at 9% for 12 months.
Biggest learning curve
The list is endless. Ryan Gibson has the most extensive due diligence checklist. Karl’s list is not quite as long. Every time they get into due diligence they learn something new.
Trusted partnership with general contractors, attorneys, and lenders is a huge deal.
Improvements to contracts
Builder warranties are so important! Know who you’re working with and what they are doing.
They have a master scope agreement.
Syndications – 3 Pillars Attorneys
Contract Law – Wilson Law Firm
How much is a DADU
Like $10k and you get so much flexibility!
If you can sell the DADU separately, you can make more money and sell easier.
Would you rather do townhomes or DADU’s
DADU’s are nice because they get to work with the city. Last time it only took 5 weeks to get started with permits.
The DADU total cost
Go through the process
From zoning you can put them on any zoned land as long as the lot size is 6500 sq/ft or more. The issues could be if the house is in the middle of the property.
1000 sq/ft 2 bed, 1.5 bath. It’s under the threshold from an undisturbed ground perspective.
AUD Universe will tell you what you can guild.
RSL Zoning vs Single Family
Density, so cottages that are 700-1000 sq/ft. They like 4 cottages. Around 5000 sq/ft for the 4 unit lot that he’s working on now. These are duplex style. So, two duplexes.
These are unparked, so no parking. You don’t need to have parking. But it affects your price.
Townhomes are the easiest thing to put into Low Rise zoning. You can expect these to be permitted and entitled in 12 months. Then 12 months for construction.
Where do you NOT have to do owner occupied
Tacoma, Burien, Seattle and Kirkland. They like Seattle because of the pre approved plans. It’s so much faster (9 months).
How long would it take for a seller to get pre approved plans
For a home owner you could sell a permitted DADU ready site for $100k. They cost is probably less than $25k. Boundary, and topo survey, you have to have the condo process started, and architect and permits.
What’s the timeline
The biggest time are the survey’s. They work with Terrain. They are about 4 weeks out.
True passive wealth creation is lending!
Are you looking for a property to move into?
Karl is doing this right now, and will be looking for another next year.
What are Karl’s goals and helping people
Goals – continue on dev side. Purchasing up to $30m is goal.
Join us on Thursday sometime
Every Thursday at 11:30am PT at https://meetup.com/seattleinvestorsclub
Investors are competing with builders
They could be working together, but they don’t want to do that. As an investor you should buy the whole package.
How do we connect with Karl
He’s mentoring some people right now. High income W2 with a lot of cash and not a lot of time, or a lot of time without a lot of cash. No paid coaching right now.
Contact with deals: firstname.lastname@example.org