All Forum Posts by: Chris Eidson

@Karl McGarvey

Yes the HOA knows. This is specifically why this development was created. The shutdown did not affect it as this is a school was a 35K plus enrollment. In fact, there are tenants on lease in the unit now. The parents sign all the leases, not the kids. My main question is would you want a property like that if there was little upside appreciation? The only driving factor for price is driven by the cap rate because the property literally is only going to sell to another investor or a parent with kids in school. The market does always move because of those factors however.

I am looking at purchasing a 4br, 4bath house that is in a gated community that is exclusively rented to college students. Even though these are SFR, they operate like an apartment complex. There are on very nice on site ammenities and on site property management that rents all of the houses by the BR. I can buy it for around $205-$210K and gross rents should be around $2500-$2600. Occupancy is 85% at the lowest and 120% leading up to Fall semester. Many of these homes are purchased by parents of students as a cheap housing option with some residual cash flow. There is a $240/mo HOA which takes care of lawn maintenance and security. I've run the numbers and my total COC with equity capture comes in between 19-20%.

The only issue is there has been very little appreciation during this market bubble.  In fact, this development started in 2008 and most everyone is just now back to even.  Would you take this deal?

@Jim K.  Maybe you should watch "No Country for Old Men" before you decide on your next move.

@Ruben Esparza  I started investing in Indianapolis 2 years ago I have found it to be a great market.  I just closed on my first multi-family a few days ago.  

@Lee Burns

I have a property management company who does my other properties and they provided a rent comp analysis, so I feel good about the income projections.  The problem is that there aren't any good sales comps in the neighborhood, so I'm going in a little blind on that side of the deal.

This is my first attempt at a multi family. I used my SFH spreadsheet and here is what I came up with. My biggest concern is that I can't find good comps, so I don't know if my purchase price is too high.

1. Target purchase price $200K

2. Rehab budget $40K (2 units are occupied and the others need minimal to be rent ready, but I would probably need to upgrade them to get market rent.  Two rented units are $600 and market suggests $725 each.

3. Assumptions are 10% vacancy, 10% maintenance/cap ex, 10% prop mgmt.

4. Financing is 25% down, 4% on a 30yr fixed.

5. My COC return is 10.7% with 13.48% total ROI 1st yr, cash flow is $847/mo (at market rent)

I can certainly drive up my COC return if I can cash out refinance after I get it rehabbed. It does not cash flow with current rent and vacancy, but the rehab of the vacant units is less than 30 days. I should be able to get to positive cash flow within 60 days.

Would you do this deal?

@Barb Asay  

Thanks.  I ran into a dead end with my lender.  Any suggestions on a bank who would offer appraiser at subject to improvements?

@Kevin Sobilo

That's a great suggestion financing in some of the repairs. I will see if I can do that. I think part of my concern has to do with getting a true ARV. Prior to Covid-19, this would probably be a $130K property that I could be in at 70% less repairs. Now I'm not sure that by the time I get the re-fi, it will appraise at that same level. Let's say there is a 12% drop. ARV is $115K and I'm pulling 70% back out. The cash in the deal is 10K more than doing a purchase at 3.8% with 25% down vs. a higher rate with a 70% cash out refi. Rates may be less favorable in the future, so my ongoing debt service is higher than I can get right now.

Just so you know, I tend to be more conservative anyway and am looking at the worst case scenario with the uncertainty going on.

@Kevin Sobilo

If you had a choice right now with refi options drying up and values likely dropping, would it make sense to simply get a purchase loan (3.8% for 30 yrs) and pay for repairs in cash. I'm looking at a bank owned property in a SFH in a B+ neighborhood that is just a cosmetic rehab 15-20K. I don't think the difference in a cash price will be more than 3-4K.

@Chris Seveney

I'm looking to buy my first note. It is secured by a SFH, low end, but the borrower put a considerable down payment. I see exit strategy worse case is holding a low end rental after foreclosure. Would I be correct in thinking that the fact that it is a short term note-24 months, would reduce my risk considerably? It's a 9.1% yield after using your free calculator.