All Forum Posts by: Abby S.

@Gregory Boulet

I put a rule on my listing if it’s slow - I’ll go as high as 60% off within 10 days of booking. It helps that I have cleaners and everything is ready at all times. I make a little extra on each cleaning as well. If you’re doing your own cleanings - perhaps the lower price isn’t worth it. I’ve typically found that it’s better to have money flowing than not for me personally.

I've generally seen a drop in Airbnb demand. After Covid, lots of people entered the STR space and lots more listings showed up. Perhaps if the trend continues, consider renting long term for a while.

I have an 8x8' bathroom in need of a demo and renovation. It will have to go down to the studs because the drywall work is pretty atrocious.

I did my own unit above, and know what's behind the walls and the labor to do it. Anyone with recommendations who isn't going to half *** it?

Unfortunately someone I hired for a bit of help to speed up the process left a bad taste in my mouth after I fired them when seeing they were using drywall mud in the shower over durock. Moron. 

I have a very satisfying and well paying career that takes up 80% of my time - the other 20% I'd like to supplement with real estate.

Day to day management of properties isn't what excites me, but the idea of developing properties from a business (and creative side) and watching growth does. And if after a while I have a portfolio of strong stable properties while working my day job, even better.

Long story short, I could get 10% through stocks, etc. but the primary difference is that I take pride in seeing something physical in operation, vs. just numbers on a screen. And in some distant future, the idea that I can hand this portfolio of physical assets in desirable areas down to (my) next generation.

Long story short:

Multi-unit property I have with nominal investment (light renovation, say 25k and no tenants leaving) can get a 10% CoC in an A+ area. Downside is, renovation is cosmetic, and the building's mechanicals are old so things like heat are on me and I'll have to factor yearly maintenance costs. It would leave a lot of cash on hand for a second or third property or BRRRR - but while waiting for this, the money at best is getting 3-4% return in savings being fully liquid.

With a full renovation to condo-quality rentals, the numbers I'm seeing are in the 350k ballpark with an additional 6-9 months of vacancy, let's call it 400k required. The math still shows CoC return being about 10%, but with much much more cash put into the property to get there. The upside: beautiful, reliable (more hands off) and attractive rentals with utilities on the tenants in an A+ area and set up for the long run. The downside: all the cash on hand put into the rehab, and while a refi could be done considering the much higher valuation (a kinda half BRRRR) - it would have to wait out for rates to be reasonable.

Which way do you lean? Less effort and less return, but less reliable with flexibility to buy in the downturn? Or put your eggs in one basket for a top notch cash producing property (that could even at a later time become a condo conversion easily)?

In the planning stages of a single unit rehab in an a mostly original 4 unit building that I own in an "A" location - Wicker Park. I've spoken to a few plumbers regarding strategy and would like to renovate one space at a time to spread out costs and mitigate lost rent of having tenants out. 

To do one space, I'm stuck with the awkward locations of the galvanized steel plumbing stacks, which limits flexibility of let's call them "modern layouts". It also prohibits addressing issues like weak water pressure at the source. Suffice to say, the analogy is doing a paint job on a unique car - but leaving the mechanicals in place without addressing reliability. 

The other part is that in doing any single unit work, it appears likely that walls will be impacted in the below floors, if at least for plumbing access - which is an issue while tenants are in. 

So the developing perspective is that by doing one unit, you do it at a time when all are open - and move to PVC and address it as a system for longevity. Makes total sense... however: That's a difference of starting with $15-20k a unit in plumbing, to a factor of 60k for all three and probably upgrading the service because you've got inspectors looking for a job properly done. Moreover, let's make that job $75k, conservatively - and months of foregone rent, so I'm at $100k just because I wanted a modern bathroom. 

And at that point, I haven't even touched the kitchens which are part of this too. 

So how would you think about this one? Looking to keep the building long term - but also anxious of what will balloon into a really large project. That said, it's all a balance of how much money to put in, and letting it work for you. Bathrooms/kitchens are the biggest bang for the buck for rentals - but it requires addressing what's behind the walls. I'd love to have as much cash on hand during the next wave of economy changes and looking for new deals, but that's another factor. 

Do you think it's worth starting small, piece mealing and managing costs - or going all in? 

Conversely, what about just using the home equity line of credit? - if there's enough equity built up that's worth utilizing

@Anthony Dooley

What if one of the units is being lived in? ie house hacking - In that case, why not a HELOC?

I'm trying to understand whether it's strategically wiser to use cash or a home equity loan to pay for that renovation. Hoping someone can check my thinking:

For the sake of keeping this example simple - $1M multi family building that after putting in 100k of renovation will benefit in an additional $1000 in rent increase per month. The cash on cash annual return is ($1000 x 12)/$100,000 = 12%

$1M loan @ 20% down @ 5.125% = $4355/month

$100k home equity loan @ 6% @ 20 years = $716/month for 20 years

1. 1. Combining the two into a single number I can compare gets me to a blended interest rate of 5.222% at $1.1M, is that correct?
2. 2. Separately, if $100k is earning 3.25% in a savings account (yes, I know that's high currently), is my effective rate of that loan actually (6% - 3.25% = 2.75%?)
3. 3. If I'm still gaining $284 ($1000-716) a month from the increase in rent, and getting $275/month from interest on the 100k that's still in the bank, my annual cash on cash return (($284+$275)*12)/$100,000 = 6.78% while still having 100k to access, correct?
4. 4. My gut tells me keeping cash on hand feels like the better option, but really wanting to remove "feeling" from this - something in my math "feels" off
5. 5. Or should I be looking at the CoC return for the entire monthly payment vs. total rent, not just the incremental return of the 100k?

Kevin - are you saying that a unit where heat and water are included are worth more to a tenant?

I feel that on paper, in an average area, they might be.

But considering the (A quality) neighborhood, I don't think basic utilities are going to sway the renter away if they like the unit/area. Therefore if anything, because central air also becomes included in this approach, the rents I get to command are higher while I get to put that responsibility back to them.

My 4 unit is at $4800 in gas for the year with budget billing, which is on me to pay. This is one large water heater tank (75gal)  in the basement, alongside a boiler that feeds the radiators throughout.

In planning for some work in the building, I have the opportunity to install separate water heaters in each unit. A few questions:

- If I can offload that cost amongst the tenants assuming a 6% cap rate, $4800/.06 = $80k in added equity?

- The work would be part of a larger project, but let's say that with running gas, electric & installing separate tanks, as well as furnaces - I'm at $18k (total swag) for the parts/labor on all four units. Then the ROI on that is $18000/4800 = 45 months?

- Is the simple CoC return math here 4800/1800 = 27%?