‘Penciling out’ on Capitol Hill.

When I see real estate training courses I tend to think of daylong classes at the Seatac Red Lion where excitable salespeople encourage you to buy foreclosed homes in depressed areas.However, this training course blew my mind because they feature a story about the owners’ plans to flip a Summit Ave. duplex on our very own Capitol Hill! It looks like the duplex’s condo potential is being ballyhooed on Zillow at 1728 Summit Avenue and the DPD permits look for real.Although this story could be total BS, it at least doesn’t get all wrapped up in touchy-feely emotions, it goes straight for the reason behind the deal - to make money (or as it’s often called by the more polite set -’penciling out’).Anyway, I’m not sure how accurate or risky any of this investment story is so I’m not endorsing anything here - but I do think it it is interesting to read how these investors view their transaction:

The property is a duplex on a 5000 square foot lot zoned for unlimited density with a 60 foot height limit, but the current development standards require one parking stall per unit and the setbacks limit the building to a 34′x65′ footprint. Though these development standards would have prevented the Kos from actualizing the highest and best use of the property, they where able to gain important insight by following techniques discussed at Mike Watson’s 2-Day Camp for interacting with civic authorities. “A Multifamily Zoning Update is scheduled to take effect sometime this year that would remove the parking requirement and allow a bigger building footprint,” wrote the Kos in an overview of the deal they sent to the Mike Watson Institute……”The short-term strategy is to get the building permits and then sell them to a builder,” wrote the Kos. Their long-term strategy is to complete the project themselves and sell the condos with a profit of about $1.4M after 22-28 months.”After doing our due diligence, we found that even though the long term numbers looked fine, we were well shy of the 20% profit margin in the short term,” wrote the Kos. This inadequacy in their short-term profit came as a result of the projected cost of holding the property between the end of the feasibility period and the completion of the zoning update.”By explaining the part of the Foundation to Success where we require both a short term and long term exit strategy, and the fact that the impending Multifamily Zoning Update would give us the required short term returns, the seller agreed to extend the feasibility period until the Zoning Update passes (or doesn’t),” wrote the Kos.