Long-time readers will remember I posted the original "fixer-upper" story coming out of the Bakken.
The following was posted on October 18, 2011.
I am re-posting that post, as it originally appeared. [Folks might want to remember my I-98 story that I posted yesterday when reading the post below.]
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Yesterday (October 17, 2011) I had the opportunity to explore the Bakken outback. I had heard stories of possible gouging on rents and property values so I wanted to check out some of this on my own.
It was an incredibly beautiful day. I had a nice chat with some property owners, real estate agents, landlords, and I came away quite impressed. There is incredible potential in the Bakken; the surface has literally barely been scratched.
I wasn't able to meet with any new tenants regarding some of their new property. The property in some cases was still being renovated.
The following is a very nice four-room pied-a-terre converted prairie school house for someone looking for a cozy little home on the prairie. For summer living, it is ready for immediate occupancy, but a few upgrades may be necessary for a North Dakota winter.
This is a steal at $150,000.
For those with a slightly larger home in mind, this one is also ready for immediate occupancy:
This is a rental. Recently rent had been about $350/month, but due to improvements this past year, the landlord will be raising the rent to $2,000/month.
And, then, finally, this fixer-upper:
Price negotiable.
I doubt anyone has read this far down into this very, very long post, so this posting will be moved to a new post some time later this week.
I received a note from a reader in California this past week. He says it is a parable. Which means it is not true, but it may have a lesson or a moral.
The reader told me he had become fabulously rich off the Bakken. The operators had, over the years, been very upfront with this particular reader: coming through with the lease money as promised and paying royalties on time. From what he had heard from his relatives back home, the operators seemed to be "pretty good neighbors" in North Dakota.
This reader took his millions and re-invested in California real estate where he now lives, and continues to receive unimaginable royalties from new wells which seem to pop up every other week on his property. He was a small mineral rights owner to begin with, having only ten acres in some areas but with 1280-acre spacing, and now 2560-acre spacing, pad drilling, and emphasis on reduced flaring, his monthly payments just seem to keep increasing. He's paying a lot in California AND North Dakota taxes, but he always felt that Obama-based wealth transference was the Christian thing to do. So he's happy.
He recently decided to move from his 20,000-square-foot McMansion in west Los Angeles, somewhere in the Hollywood Hills, to build a really magnificent 55,000-square-foot-Algore-villa overlooking Portuguese Point.
He was going to work within a budget, which he called his CAPEX, to finance this 55,000-square-foot home. It would be built with the latest technology and materials and incorporate state-of-the-art features. He has had a very long working relationship with the builder. The builder built this reader's first 15,000-square-foot home on Mulholland Drive, and then the 20,000-square-foot McMansion that he living in now. They were both wonderful homes, built to spec, and came in under budget. The builder even threw in some freebies.
But now my California reader is ready to build that 55,000-square-foot-Algore-villa and he doesn't know if he can trust the builder. He doesn't say why, just a gut feeling.
So, the California reader is going to build the Algore villa the same way as before, in sections. He is going to get a separate building permit for each room of the house, and build it as "it comes along." The builder says he can get a much nicer villa for the same amount of money if the Bakken millionaire simply permits the entire structure at one time. The building process will be much smoother, and the "pieces" of the villa will fit together a whole lot better.
As one example, if the builder is forced to get permits for each room of the house, the builder will end up having some extra wide hallways that serve no purpose and will simply be wasted space. Right now it appears with separate permits, the garage may have to be a detached garage when the builder would like the garage attached to the house for easier access.
So, the builder and my Bakken friend are still negotiating, trying to figure out the best way to go.
At the end of the day, the builder says the owner will have a bigger home, and a nicer home, and a more environmentally-friendly home if the house is designed "in full" from the start, and obtaining one building permit from the city with a full architectural design completed at the time of the permit request. The total cost for the house will come in at about 75% of what it would otherwise cost. The builder says he can use the additional 25% for more improvements, or even for an additional mother-in-law's home on the "south 40."
But right now, the owner is thinking of going slow, one room at a time, getting a new building permit each time, and hoping everything works out. The builder is aware that because of the gorgeous view over Portuguese Point, he might get the building permit for the first phase, the kitchen/living room, but the city could impose the "extraordinary site" clause and refuse a building permit where the guest bedrooms (all three of them) would be.
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A Note to the Granddaughters
I doubt anyone has read this far down into this very, very long post, so this posting will be moved to a new post some time later this week.
I received a note from a reader in California this past week. He says it is a parable. Which means it is not true, but it may have a lesson or a moral.
The reader told me he had become fabulously rich off the Bakken. The operators had, over the years, been very upfront with this particular reader: coming through with the lease money as promised and paying royalties on time. From what he had heard from his relatives back home, the operators seemed to be "pretty good neighbors" in North Dakota.
This reader took his millions and re-invested in California real estate where he now lives, and continues to receive unimaginable royalties from new wells which seem to pop up every other week on his property. He was a small mineral rights owner to begin with, having only ten acres in some areas but with 1280-acre spacing, and now 2560-acre spacing, pad drilling, and emphasis on reduced flaring, his monthly payments just seem to keep increasing. He's paying a lot in California AND North Dakota taxes, but he always felt that Obama-based wealth transference was the Christian thing to do. So he's happy.
He recently decided to move from his 20,000-square-foot McMansion in west Los Angeles, somewhere in the Hollywood Hills, to build a really magnificent 55,000-square-foot-Algore-villa overlooking Portuguese Point.
He was going to work within a budget, which he called his CAPEX, to finance this 55,000-square-foot home. It would be built with the latest technology and materials and incorporate state-of-the-art features. He has had a very long working relationship with the builder. The builder built this reader's first 15,000-square-foot home on Mulholland Drive, and then the 20,000-square-foot McMansion that he living in now. They were both wonderful homes, built to spec, and came in under budget. The builder even threw in some freebies.
But now my California reader is ready to build that 55,000-square-foot-Algore-villa and he doesn't know if he can trust the builder. He doesn't say why, just a gut feeling.
So, the California reader is going to build the Algore villa the same way as before, in sections. He is going to get a separate building permit for each room of the house, and build it as "it comes along." The builder says he can get a much nicer villa for the same amount of money if the Bakken millionaire simply permits the entire structure at one time. The building process will be much smoother, and the "pieces" of the villa will fit together a whole lot better.
As one example, if the builder is forced to get permits for each room of the house, the builder will end up having some extra wide hallways that serve no purpose and will simply be wasted space. Right now it appears with separate permits, the garage may have to be a detached garage when the builder would like the garage attached to the house for easier access.
So, the builder and my Bakken friend are still negotiating, trying to figure out the best way to go.
At the end of the day, the builder says the owner will have a bigger home, and a nicer home, and a more environmentally-friendly home if the house is designed "in full" from the start, and obtaining one building permit from the city with a full architectural design completed at the time of the permit request. The total cost for the house will come in at about 75% of what it would otherwise cost. The builder says he can use the additional 25% for more improvements, or even for an additional mother-in-law's home on the "south 40."
But right now, the owner is thinking of going slow, one room at a time, getting a new building permit each time, and hoping everything works out. The builder is aware that because of the gorgeous view over Portuguese Point, he might get the building permit for the first phase, the kitchen/living room, but the city could impose the "extraordinary site" clause and refuse a building permit where the guest bedrooms (all three of them) would be.
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