All Forum Posts by: Jeff Bridges

I have an off-market lead on a mixed multi-family property in Harrisburg, PA. Unit has 5 residential units and a retail beauty salon. Owner self manages and wants to retire and move out of the area. Owner is asking for 750k, though valuation from my calculations is about 736k. Their realtor previously suggested 800k listing price. Harrisburg is a flat population and hasnt grown in the past 15-20 years. Owner will consider seller financing. I've calculated possible 700k loan and 50k down as a hypothetical and get just about breakeven cashflow after debt service.  Owner states they've kept rents low to avoid paying additional taxes (but we know thats BS). He does have some long term tenants that he has not raised to keep up with market. There is some value add through renovating unrenovated units and increasing rents, but just a smidge... This would be a out of state deal for me so I Would be having it professionally managed, but oversee it remotely.

What would you offer on it given the cashflow or NOI shown below? I wouldnt buy it at 750k because it doesnt cashflow, but wondering what you would do. Could I buy it with the breakeven, increase rent, re-stabilize and then force appreciation and then flip/sell?

here are the image links:

https://ibb.co/yg13vLW 

https://ibb.co/C0VxMTL

Revenue before expenses are factored is not cashflow. Leasing from owners and then using Airbnb model relies on owner to give you permission to run their house as an Airbnb business. You'll get alot of no's. Lets say your revenue is 2000: subtract 20% management fee, airbnb management tools, Utilities, repairs, etc. Not as sexy a figure anymore...

Quote from @Henry Zhu:

@Chad S.

I was researching about Airbnb in TX the other day, and have found out LTR is really hard to cash flow these days with high property tax. But Airbnb still let you pocket some money.

400k house there might only rent for $2000/month as LTR, you will be in the hole from day 1. Your PITI will be at least 2500.

So if you rent this house from the owner for 2000, then put it on airbnb. Your cash flow is 2000 before expenses.

Is this a crazy market? The down side is that you are not building equity. But you are also not losing money from day 1 either.

Anyone else can also share their numbers?

Also, it helps to look at the seasonal housing inventory situation. The 7-day average in feb was 248k homes . Thats 25% less than a year ago and down 65% (723k homes at the time!!!) the same time in 2020. The article shares that inventory typically bottoms seasonally around feb. So we're in a year with a very low inventory in a season where inventory reaches its bottom. Not a great part of the year to be tripping over deals without fighting for them with other investors (even off market ones from wholesalers). Here's hoping inventory goes back up April/May/June and also on an annual basis. Let's get some of those  foreclosure sales through the pipeline that were artificially constrained during the pandemic.


Here is a good blog article that talks about Feb inventory relative to other years/months/seasons:
https://www.calculatedriskblog...

I would schedule you to personally walk through as close as possible to the closing date beforehand to ensure all promised items/repairs/etc are completed in the unit before closing. Then have your agent go the day before closing to make sure it hasnt been burned down/burst pipe and that the inside matches the condition during your initial walk through. Have them do a video tour with you at the 2nd and final walk through. Schedule to have the locksmith change the locks as soon as possible when legal the day of settlement. good luck!

I'll echo what others said and I've refinanced using the delayed refinance option usually once I got a lease in place and post rehab (all my properties need a rehab before tenant placement). There was a BP podcast where one technique was for the investor to get bids before purchase and then add those as line items to the HUD and get checks to the contractor issued at settlement (with the investor holding them until project starts or designated draw schedule). This was effective because the lender can lend UP TO the total on the HUD, not just the purchase price. So if the purchase plus the rehab cost is on the HUD, then you now have a higher total to work with. They'll still get an appraisal and give you 75%, and if that is the total on the previous HUD, then that's acceptable. So that's another way to walk away with less out of pocket than literal 25% and avoid having to wait the full 6 months to get the post rehab value equity out.

https://www.biggerpockets.com/...

Originally posted by @Ivy Markov:

also opportunity is in houston and margins here in today’s market are very slim so it’s not metropolitan area like dc

Are you selling us your numbers or wanting feedback on them to form your own opinion? I see a really high HOA fee pulling out 5000 a year from your cashflow, plus somewhat high prop taxes, combined, likely are killing your cashflow and making it not worthwhile. You need to find HOAs with lower fees and see if the cashflow/ IRR improves in your calculations. Keep looking! The DC reference was about high prices and cashflow still getting a 20% plus IRR. Prices are lower in Houston so you missed the reference to more challenging market than yours to keep a high IRR...

Can you elaborate on house 4 and 5 and how they further your business goals? Does house 4 cashflow at all with 170k purchase and 1400 rent? What made you go for that deal, cashflow or appreciation? So for house 5, that seems like a non-business related project to house family for subsidized $500 rent and 190k purchase. Sure your annual expenses may be covered to project a possible break-even (assuming you considered Cap-ex/maintenance expenses), but your ROI on your 190k investment is very small. congrats but just be careful about getting more houses for the sake of adding to your portfolio rather than adding cashflow positive properties to your portfolio.

@Santiago Belmonte turnoverbnb.com is free for first property or 6/month for each additional property. Also look into other automation improvements like beyond pricing or price labs that help with tweaking your pricing automatically to help maximize revenue.

@Ariel Castillo I just got 4.5 with no points from one lender. Need very good credit to get that rate. Another lender had the same rate but more points. I can give you my lender info if you pm me.

@Andrew Brady Aberdeen.