All Forum Posts by: Andrew Johnson

@Anthony Garcia I don't know a lot about NWA but in Central Arkansas there are a lot more "For Sale By Owner" signs that I see out here in San Diego. Those properties typically don't show up on MLS listings (from my research) and might still represent an opportunity for a deal (with legwork) and avoid some of the hassles that come with foreclosures. If you've driven about NWA you'd probably have a feel for if it's similar to Central Arkansas in that regard. It was certainly a shock for me driving down a street where I thought there was 1 listing and there were actually 4 signs. Way more legwork for the realtors but could be viable if you identify target neighborhoods.

@Brad Norman Your first step might be to determine the geography in Arkansas where you want to invest.  The reason that I say that (as someone in California who invests there) is that it tends to be more of a community bank driven market.  What that has meant to me is that the person that I work with at Centennial Bank will actually drive by properties that I'm considering, may know something about the history of the property, etc. and since they generally hold the note themselves on commercial multifamily that street-level knowledge can play into conversation in the loan committee.  That being said, numbers still have to pencil out, you'll deal with 5 year ARMs, likely have a full recourse loan, etc. but there is definitely more of a partnership feel to it.  The reason for the lengthy monologue is that the effectiveness of the partnership has a lot to do with the hyper-local focus.  I could give you a name if you were looking into North Little Rock, Maumelle, Conway, etc. but that person wouldn't be a great contact if you were looking into Fayetteville, Fort Smith, Texarkana, Jonesboro, etc.

@Shelby Pracht You make a great point about pricing.  I know when I was getting the T12s I always asked for a snapshot of bookings already reserved for the next 12 months.  Some were decent, some weren't, even in the same geographic market.  The properties that had the best occupancy were with the PMs the longest and had developed groups of peak season renters that would consistently book the property for the same week (family vacation) every year.  The newer listings didn't have that built in "subscriber base" (horrible term).  I think you're right on the money when it comes to building that review pool and/or recurring tenant base (even for less income at the beginning) and have slow easy-to-digest nightly rate increases as time goes on.  

@Joshua Biondi I think my advice will be a little counter-intuitive but lay out for the realtor if there's anything that you don't know about navigating a real estate purchase.  Since the realtor has worked with your uncle she may assume that he's been tutoring or mentoring you for years.  Or she might assume your goals are similar to your uncles.  Even if you trust her to steer you a certain way, if you don't know why she's steering you in that direction, ask.  When you're dealing (I'm assuming) with your first real estate purchase there's no shame in asking for details, explanations, etc.

All I can say @Shelby Pracht is well done.  I did about 50 pro-formas based off of T12s that I got from vacation rental markets (both ski and beach) and never found a property rented for 300 days out of the year, let alone closer to 330.  Being in San Diego it looks like I stubbed my toe by not checking out just about the closest ski destination to me!  I was checking out areas of Wyoming, Colorado, and a handful of beach cities along the Gulf Coast.  I was always getting better cap rates from even marginal multifamily properties so I admittedly through in the towel on looking at vacation rentals.

Kevin Walters My advice is pretty basic but it would be to get a T12 and ask to know where the current tenants are in terms of their leases. Ideally these would be through a property management company. Not that they can't augment the records but it's more reliable than just asking the seller. High repair costs and stated rents not matching up with collected rents could be signs that there's a challenge with tenant quality. However, if you want to purchase a value-add property and put work into it then it will be harder to determine tenant quality post-renovations or change in PM.

@Jeff Bisgier How many banks have you talked to? From my conversations (after an all-cash sale) to do a cash-out refinancing they could look for no seasoning, 6 months, or even 12 months. I wish I could say there was a rhyme or reason to it, but there wasn't. That being said, I wasn't buying it to rehab, the mortgage was based on the sales price (supported by an appraisal that came in higher than the sales price), I had T12s showing it would/should cash-flow well based on the previous record (including the new mortgage payment), and I wasn't looking for anything close to 80/20 LTV. My advice: check with more banks and ask about options other than equity credit loans.

@Dallas Lee Maybe I'm missing something but why a 15 year mortgage?  Interest rates are extremely low so locking up a 30 year mortgage (especially on a place you could rent out in the future) would make more sense to me.  The same could be true for the townhouse, why pay it off in a few years?  If it doesn't cash-flow well until it's paid off, that's another story entirely.  I know condo fees can be very detrimental but I have to admit I know nothing about the Norman market.   

@Sebastian Marroquin If you buy something for $40K out of town it's probably not going to be turnkey or in the best area (keep $10K for reserves and the unknown). That means (even with a PM) he might have to be more "active" in the investment than he wants to be. A lot of people are looking for "passive" income but it still takes time, energy, and money to find the property. And even though he's a risk taker he's probably going to want to be prudent and check-in on his property from time to time. If you start to budget $2K (for round numbers) for a round-trip flight/car rental/hotel/etc. you can eat away (on a percentage basis) at the nest egg pretty quickly. If a $50K real estate investment slows his consulting business growth it's likely a bad ROI for him.

@Michael Johnson You're definitely going to narrow your group of potential buyers at resale.  You'd have to figure out what to do with the extra kitchen space.  Not to mention if you double the square footage of the house you'll likely end up with a (relative to the size of the house) small master bedroom, closet, and master bathroom.  If your pour money into the property to address the kitchen, right-size the master bedroom/closet/bathroom you'll probably end with the best house in the neighborhood.  The "best house in the neighborhood" usually ends up selling underpriced (not overpriced) because the surrounding homes and area drags the value down.