All Forum Posts by: Amanda Brown

@Amanda Brown

That rehab budget seems a little low. Here is a rule of thumb I use for my market in Jacksonville FL. 

Light Cosmetic ($40-$50 x Sq. Ft)
Medium Cosmetic ($45-$55 x Sq. Ft)
Heavy Cosmetic ($55-$65 x Sq. Ft)
Studs Down ($80-90 x Sq. Ft)

It is easy to underestimate your rehab budget. It is easy to overestimate your ARV. It is easy to underestimate the timeline.

@Amanda Brown: here are my initial thoughts.  I don't necessarily need/want answers, but just questions I would ask if we were talking through this:

Is running a boarding house legal in the market?  What costs are associated with that, if any? Is there actually a need/demand for such a setup?

$120k seems cheap to fully build and outfit 5 "brand new" apartments.  That is 5 kitchens, 5 baths, drywalls, framing, a lot of plumbing, etc.  Are you planning on separating all the utilities for these units, so you not on the hook to cover the tenant utilities?

What is condition of foundation, HVAC, water heaters, current baths upstairs, do you need to add the kitchen in smallest bedroom? Will plumbing, gas lines need to be added/moved to make this kitchen?

How long have the properties been on the market?

What will your real estate tax and insurance bills be?

What are you budgeting for landscaping/snow removal?

Turnover costs? Trash services, if needed? 

I've never run a boarding house, but is there housekeeping needed for the common areas?

Common utilities budget?

Repairs and maintenance budget?

Marketing costs?

Would the on-site be collecting a salary, or just free room and board for their services?

Are you providing Internet or Netflix or anything like that in the boarding house?

Again, maybe you have all of these things outlined and just didn't share, which is fine.  But ultimately, there is a lot missing here to even know if you have begun looking at this in a realistic way.  You need to think of this as an operating business.  You will have a lot of ongoing costs to keep things going.  In a traditional rental, most people seem to screw up because they assume 5% capex budget is enough, but then the roof needs replaced 3 yrs later and they don't have enough money for it because 5% of $2000/mo is $100.  $100x36 months is $3,600, and the roof estimate is $7,000, as an example.

But assuming you have a healthy capex reserve ready to spend whenever needed, the other part is simply knowing all your monthly/quarterly/annual expenses (utilities, taxes, insurance, turnover costs) and holding back more to cover the vacant units, when your actual cashflow is reduced.

Make sure you're looking at holding cost. If you hit a HML you'll need to understand the loan rates you get from HMl and then conversion to a conventional loan. Also your cost associated with holding (utilities paid by landlord or tenants, taxes). Also you'll need to check with local ordinance if converting to boarding house is legal and steps needed to do so (you don't want to pay assuming those numbers to only be told you can't do it)

you hml money you can roll into your conventional loan but you’ll need to understand the scope of time from the Gc to make sure it’s feasible
 

As River mentioned, you first need to figure out what strategy works best for you. BRRRR, fox and flip, buy and hold, etc. Once tou figure that out, you can start looking for properties that match your goals. I'm in the Syracuse NY area and options are plentiful for almost any type of investing. Multi family properties are very common here. Bigger Pockets has many resources available in terms of where to start, certain metrics to understand, and strategy specific learning modules. Hope this helps!

Hey Amanda - Congrats on making the jump, can be a tough decision. 

Curious if you have thought about what type of investments to consider as you start your REI journey?