All Forum Posts by: Charles Kennedy

Hey everyone - I'm in a pinch and could use some help from some fellow Tallahassee RE investors. My go-to handyman just tested positive for COVID. On top of that being unfortunate in itself, I have multiple units turning over with move new tenants moving in in 6 days! 

Could anyone provide a recommendation of a good handyman that can take care of basic repairs? 

Turnover is a cost in the form of vacancy, and cleaning. There are repairs you will have to make that aren't the tenants fault that you cannot deduct from the security deposit. It's not big. 

On multi-family vs. single family I wouldn't worry about those details. I'd just look for a deal that cash flows well and pull the trigger. I'd ideally like to buy multi-family, but I bought another single family earlier this year because the returns made sense.

JT - here are my thoughts.

Rents - don't plug in $400/bed every time. Use your judgement on a property by property case, but I'd say that's a good baseline.

Vacancy - I'd assume less, I generally assume 4.16%, which is 1/24. I assume 2 weeks of downtime when I turnover units, although I only generally have 1. I'm mostly 100% leased, but you should account for it.

Mgmt - Probably fair, but it could actually be much more when they take leasing fees. I self manage and pay someone to show my units and never do any repairs myself as I'm not local. You should self manage if you are house hacking, but tell them your parents own it and you are just managing it. I wouldn't want my college roommates (where everyone is broke) to know I own the house and am making cash flow every month.

CAPEX - I always think doing this as a % is a mistake. Total the cost of the roof, HVAC, and water heater and divide it by the number of useful years remaining. Make that $/month your lowest for CAPEX.

Maintenance - Almost all of my maintenance is driven by AC and plumbing repairs with the occasional other items. Having a newer HVAC will solve a lot of those problems and I'd recommend replacing toilets and supply lines up front to reduce these. I generally put maintenance and repairs at 10% minimum. 

Insurance - My duplex is at $1,329/year (3/1 and 2/1), my single family (3/1) is $915/year. Both are 1950s construction. Newer built will be less. 

Utilities - These should be paid by the tenant. Your roommates should split this with you.

Lawn care and trash should one in the same and I'd estimate about $75/month ($30-$40 per service, twice a month). Your lawn guy should also pick up small trash around the property if he's good. I had to fire my previous one who was terrible about service and am so happy I did.

Other - I'd add a recurring pest control, which is about $85/3months so a little less than $30/month.

You should self manage and self pest control while you live there. I also add in cleaning fees to my leases where a portion of the security deposit is non-refundable to help reduce the cost of turnover, which is generally captured in my R+M (as I do pay a professional cleaner to come after each turnover).

@Jt Marting

Hey JT. I own 4 properties totaling 8 units around FSU and can assume you there are plenty of cash flowing rentals. Tell me about how you are analyzing deals? The current ones I see on Zillow I’m not jumping for, but I bet they are still ok deals. I’d look to the west and southwest of campus.

@Dean Fiacco I self manage my 4 properties with the help of a student who does my showings. Please let me know who you end hiring!

@Vincent Hayes

No, it's cash left in the deal. My total equity invested was over $115k between my partner and I. The "equity generated" would be about $100k as a I mentioned given my total purchase price + rehab of $373k vs the appraisal of $470k.

How you found the deal should have no affect on appraisal. Appraisals should be an unbiased opinion on what true market value is. However, lenders generally will try to find ways to appraise marketed deals at purchase price unless they really feel unjustified because they want the business I'd imagine.

@Steve Vaughan

Agreed. Like I mentioned I wasn’t too excited when I was getting quoted rates in the 5s but when I found a bank at 3.5% it made way too much sense. Now I just need another deal to put the money into!

@Steve Vaughan

Of course! I’ve purchased 3 more properties in the area since this one. Two single families and one duplex.

Planning to refi the duplex within the next month or two as well.

Hi Everyone,

I thought it'd be informative and informative (and maybe get to brag just a little bit!) to share my first BRRRR deal that me and my partner recently refinanced and created nearly $100k in value on my first true rental property (if I exclude house hacking!).

When I was first learning I always wanted to see the numbers behind the deal, so I’ll share as much as I can and am happy to answer questions, but here are the basics:

Property Type: 4-Unit Student Rental (3 Bed / 3 Bath Units)

SF: 5,120 SF

Purchase Price: $344,800

Rehab: $28,481

Total: $373,281

Down Payment: 25%

Loan Amount: $258,600

Rate: 5.5%

Total Equity Invested: $115,383 (Down payment + Rehab + Closing Costs)

How we Bought it:

This property was bought out of foreclosure through a broker before it hit the MLS. It was completely vacant and needed some work, but nothing crazy. We put all new LVP across the entire property (except the bathrooms), replaced all the exterior doors (there were/are 16!! because each bedroom has a door to the exterior), and made a ton of other small repairs including some painting, replacements of fixtures, etc. Honestly most of our costs were materials + labor for the LVP and doors. We probably over-paid a bit, but I did a long-distance rehab and was just happy that the work was completely right and the contractor didn't run off with our materials.

Now, normally having a property completely vacant isn’t a big deal, but this property is located near a major university and we closed in October of 2018. Therefore, the school year had already begun, and we were concerned if we’d be able to fill the 4 units (and 12 bedrooms). Luckily, given the fact that each bedroom had a door to the exterior, we were able to rent 2 or 3 (can’t remember at this point) of the units on by-the-bedroom leases with the 4th unit being leased entirely (not by the bedroom). We were ecstatic that by Feb-2019, we were 100% leased.

At that time we were renting the rooms for $375/bedroom or $1,125/unit for a total of $4,500 month (1.2% rule!!). However, we have been able to push rents and are now getting $5,225/month (1.4% rule!!) and are hoping to get marginally higher in Fall-2021.

My partner and I knew we bought the deal at a great price and would eventually refinance (our original loan was at 5.5% - go look at the 30-year mortgage charts and see what happened in Oct-2018, they were at all time highs!) and whenever we looked to refinance, the rates on an investment property, 4-unit, cash out refinance, was always pretty high, so we just waited. Then, in September of 2020, when rates were kept dropping, I finally took the time to call around to a ton of local banks and found a credit union that would cash out refi @ 70% LTV at a 3.5% rate on a 30-year term. We immediately proceeded forward and closed the cash-out refinance in late December 2020. Here is the breakdown on our refinance:

Appraisal: $470,000 (honestly think we could sell in the low $500s so was not happy with this valuation)

LTV: 70%

Loan Amount: $329,000

Rate: 3.5%

Old Loan Balance at time of refi: $251,245

Cash Out (After Closing costs): $73,604

Remaining Cash in the Deal: $41,779

The higher loan balance with a rate that was 2% lower resulted in a net increase in our mortgage of NINE DOLLARS A MONTH, while putting over $70k back in our pockets. Based on our 2020 net cash flow of $25,286 we had a 60.5% cash on cash return!

I love real estate.

I don't have before pictures, but here are a few afters:

@Emily Segal I am going to be busy with something from 7-8 where I can't hop on right at 8 (have walk home after), but will try to join a little late!