All Forum Posts by: Adriel Hsu

@James De Stefano well my partner on the deal is quite hesitant given covid-19 and the oil & gas downturn.  She is thinking oil & gas professionals will be laid off int he upcoming fall and if we started now, the first batch wouldn't hit the market until Dec 2020 or Jan 2021 which is obviously low season.  

What are your thoughts as a realtor and what you are seeing in Northside Village especially but also in the loop as a whole?

Like I mentioned, 1300-1400 sq ft, 2 story, 2 bed / 2.5 bath / 1 car garage, backyard will be nice (deck, pergola, seating area, stone hardscape, bamboo, hipster lights, but no pool or anything like that) Backyards wont be that big, probably only 150-200 sq ft.

I don't see any new construction in that part of 77009 under $300,000 but my partner's concern isn't about our price being right, it's about how many people will be actually able to buy come January and if foreclosures inflate supply in the market

I'm actually looking to build 10 small townhomes in Northside Village (appreciation is strong with the gentrification) in 77009.  Im thinking 1300-1400 sq ft 2 bed / 2.5 bath  modern, unique, european townhomes with decked out backyard and modern smarthome tech to target our demographic of young professional without needing a whole lot of house. This will stand out from any other new construction and undercut the market and sell for $275,000.

I prefer B properties.  Cap rates have compressed so much on C properties that the returns are hardly justifiable. The toilet you replace in a class C and class B property are the same, and will still be $90.  The difference is the Class C 1 bedroom  rents for $650 while the Class B gets $850. The expenses don't trend linearly with income. This applies to a lot of other items such as paint and appliances as well. 

Also, you have a more secure and stable tenant base than C class properties.

@Steven Westlake if you're open to Beaumont, TX (1.5 hours from Houston), I've seen good cash flow opportunities there

@Jim Glover if what you're doing works, no need to change, unless you want to massively scale up.  Single family returns can be greater, just harder to scale. You can have 500 doors in 2-4 properties with larger multifamily vs finding and closing and operating 500 single family homes.

Larger Multifamily (Loan amount over $1,000,000) have much better terms/rates than single family loans (non-recourse and interest only etc). 

Cost segregation + bonus depreciation is probably the biggest tax advantage with larger multifamily over single family homes.  Allows for large paper losses in year 1 to offset other types of income if you or your spouse is designated as a QRP

@Clay Couvillon as others have said, the 2 are independent of each other.

The appraisal is needed for the lender to verify they are not over-leveraging debt on the asset.  It is also good insight on what factors in your home affect the value.  You can see how much a 1-car garage vs a 2-car garage affects appraisal, granite counters vs no granite counters, etc.

For example, in my market, granite countertops are a $5,000 bump in the appraised value.

The inspection is more geared towards finding what's wrong with the property (what's not up to code, safety issues) and making everything is in good condition and working as it should (electrical is wired correctly, plumbing drains well, no mold or termite damage, structurally sound roof, etc.)  This can be used to give you a better scope of rehab for more accurate numbers or to catch things you may have missed in your walkthrough

@Joshua Ferrari thanks for the further info.  As @Todd Dexheimer mentioned, that market is really a cashflow play with almost no appreciation. For that I would want to underwrite for a higher CoC and be more conservative on your exit price.

Can you provide more details? Such as Building Class and Location Class? (i.e. C class property in a B class location). That will greatly determine your CAP rate. AS well as what market you are looking at. Varies greatly by city.

In Houston, a true C-class value add property is going for ~6.5% CAP

I find success on Facebook marketplace as well as the local facebook real estate groups in your area

I came across a deal for 2 adjacent lots, one with a dilapidated house on it, just 10 minutes from Downtown Houston.

I'm thinking about knocking it down, building a driveway down the middle and building 12 townhomes (6 on each side)(Very common in Houston). 

Numbers look lucrative, come out to $97k profit per townhome if I sell at $275,000 and $47k profit per if I sell for $225,000. just not sure the market will respond.  If I get it under contract today, it still won't be until end of 2020 before the first set comes online for sale. Given the unknown circumstances and effects of coronavirus and all the talk of an even worse 2nd wave hitting November/December, am I crazy to consider this?

I would only build 4 first and see how the market responds and make 1 as a show home to pre-sell the new ones.

Also, will people be deterred to buy the first batch if they know there will be on-going construction right in front of them for another year? 

My play is to build smaller homes (1300-1500 sq ft)(2 bed / 2.5 bath / 1 car garage) with nicer and unique finishes while still undercutting the zip code's pricing (New townhomes are $300k-$450k and I would sell mine $250k-$275k).

The concept is supported with a unique 1360 sq ft 2/2.5/0 townhome currently pending at $300k and back in September, a 1/1/1 at 545 sq ft (Yes, 545 sq ft for the ENTIRE house) in the neighborhood sold for $220k. 

I do see some older townhomes that are larger (4 years old, not as nice finishes) sitting around the $275-$295k mark and not moving.

I'm targeting working professional millennials who want to be close to downtown, in something affordable but nice and don't need a huge house.

Thanks