All Forum Posts by: David Stover

Howdy!

My colleague and I will be taking a road trip from California up to Idaho this November. We'll be running a circuit from Boise to Moscow from 11/22 thru 11/27. I would love to hear from anyone in the BP community, if you know someone or you are someone who would like to meet up to show properties, tour neighborhoods, or just to grab a drink and share stories about your local area.

I'm looking to grow my real estate portfolio through buy-and-hold or fix-and-hold investing of MFHs (5-20 units). Through research I've found the Boise metro is a good start, but I hear student housing in Rexburg or Moscow might also fit my situation. My budget is ~500k including financing. Of course, seller financing is always welcome, too!

My colleague is looking at a much broader area in rural/semi-rural Idaho for retirement/vacation/"hobby farm" use. The land would be for personal use, not an investment property. Structure optional, utilities optional. Their budget is ~200-300k.

If you think you could help either/both of us get networked and find what we're looking for, please reach out. Thanks!

@John Leavelle Thanks for your thoughtful response! Lots of good information here. I'll be the first to tell you I'm not sure what I'm doing, so I could be overlooking a lot. For example, you're totally right about the mortgage calculations; I was assuming rates and terms for a SFH. I've taken an action item to read up on commercial loan rates and terms, thanks to you!

As for my expense data, $2376 breaks down as follows:

$300 - Water/Sewer (~$40/mo/unit)

$140 - Garbage ($20/m/u)

$70 - Insurance

$497 - Prop. Tax (listing claims ~$5900 annual, ~3%)

$20 - Landscaping/Snow

$284 - Vacancy (8%)

$284 - Repairs (8%)

$355 - CapEx (10%)

$426 - Prop. Mgmt (12%)

As for "good value" rents, I was comparing my rent numbers to the rentometer site @Ramon Jenkins introduced me to. The site is geared toward renters, so a "good deal" is a deal much lower than market rate. The average rent in the surrounding units was at least $100/unit higher than my estimated rents.

The square footage of the property is not in any of the listings I could find. Milwaukee City Assessor's office doesn't seem to offer property attributes for parcels listed as mercantile apartments.

The $25K rehab cost is the roughest swag in this entire calculation, in my opinion. I have a few interior/exterior pictures to go off, the google maps images, and not much else. I don't have a sense of rehab costs in this area, but all the pictures suggest the unit will need at least a new roof and aesthetic rehab, wiring, new appliances for all the pictured units.

Further, the listing claims 6 slots of off-street parking but no pictures. It's a huge question mark for me. Is there a parking structure? Paved? What is the condition? So, I tried to be pessimistic with my numbers here. I worry I might have to get a contractor's estimate to get a better feel for this number.

Can you share any experience on calculating rehab costs for remote properties? Any advice here would be immensely helpful.

Overall the feedback I'm getting is that the margins on this property are slim. I agree with the $100 rehab'd to $200 cash flow numbers. This seems especially reasonable for a remote property with a lot of cash invested.

Thanks for all the excellent feedback!

Hey Ramon,

First, thanks for your time!

I came by the ARV by looking at Zillow for the value of similarly-equipped homes in the area, then derated the value by 2% as a fudge factor. The city assessed value is ~$235K but I know these can be a bit lower than market value. TBH I don't have a cap rate for the home now, so I can't forecast an ARV cap rate, which makes it hard for me to speculate on the ARV. Is this something a realtor could find for me?

I'll definitely bring water usage up. I had heard $50/unit but thought since these were mostly efficiencies that might reduce the total water usage. Not pessimistic enough.

Rent amount via looking on CL for similar rentals in the neighborhood. I love your rentometer site! According to that site, my rental values are right at the top of the "good value" range. It looks like "average valued" slots in the area are going for 1000-1100.

Overall I feel like the CoC for this is a little low considering the initial cash needed. In your experience, is this a typical return for MFH in the area?

Hello BP,

I'm new to REI and running the numbers for my first property. I'd really appreciate experienced investors to take a look at my work and let me know if my assumptions are sound or if I'm completely off base. Also, based on your experiences, does this seem like a wise investment for my REI goals, or am I running headlong into trouble?

Please indulge me for a moment while I introduce myself and describe my understanding of the property:

About me: My goal is to replace my earned income with income from long-term buy-and-hold properties. The niche that interests me most is large MFH, and I'm looking at Milwaukee as my intro market. I currently live and work in SoCal, but I may ultimately move to the Wisconsin/Illinois area (SO's friends and family).

About the property: 7 units (6 Efficiency, 1 2BR) in a 3-Story house on the Upper Easy Side. My research suggests this is a solid B neighborhood, comprised largely of young professionals and UWM students. I rate this property as a C/C-.

The home is very old (Pre-1900) and the photos suggest a property that may be sound mechanically but certainly not finished well or pleasant inside. I believe this is reinforced by the facts that 1) the home has been on the market for a long time, and, 2) the price was recently cut $43K. As such I've assumed $25K repairs will be necessary to force appreciation to market price.

Hey Conrad,

I'm not an expert by any means, but I am an aspiring buy-and-hold investor here in SB. I concluded almost immediately that the SoCal market is no place for a budding investor (CA tenants rights are unfavorable to landlords, and even these rents can't net you a solid CoCROI).

Have you considered looking outside your area for continued growth in real estate?

I've been following the wisdom of many podcast guests to look outside my area. In particular, I'm looking into the midwest markets. Looking around online (zillow, loopnet, nextdoor), I'm realizing there are many good neighborhoods out there that are receptive to remote investing. The traditional wisdom for buy-and-hold seems to be Indianapolis, but other markets (Milwaukee, for example) seem quite favorable as well.

David