Hi @Anna Sam,
Have you looked into Ocala, FL on your goal to find some cash flowing Multifamily/ Apartments? I have worked and analyzed deals, on and off market in virtually every part of Florida and have not come across a sub market with existing cash flow/equity upside as Ocala. There are certainly areas you want to be and areas you don't however the target markets we are operating in have a need for entry level "affordable housing" and small multi family fills this demand. I've been investing here for the past few years and have built a little over a dozen new construction single family homes and acquired a Self Storage building so am very familiar with the dynamics/management/renter quality ect and have been very pleased. Currently building a handful of 2,000SqFt Duplex(s) for under 250k all in project cost with a market value of $425k when built (comps). Why is this opportunity so good? We have a builder relationship that we have previously worked with has presented opportunity to build block properties at a very reasonable price per SqFt. The materials and labor side of the equation has cooled off tremendously since last year which is why the price to build makes sense. What is the catch....the biggest hurdle is having to pay cash in a draw schedule up front compared to using tradition financing which we have previously capitalized on. Essentially the builder is using our money to build vs there own which is why we are able to build for 60% of market value. Typically most people that do these deals are middle man flippers but in this case for us, we are keeping as long term rentals because the cash flow is great however this may be a great market to house hack or Brrrr with the amount of forced equity day 1 or potential finance down the road when rates cool off. You will find a handful of New Construction and even decent resale Multi Family deals on the MLS and will pay between $150-$180 a sqft for the older resales and $185-$225 a sqft for new construction depending on size, specific location, finishes ect. With this builder, we are building all in (with land) at $125aSqFt. These 2,000 SqFt 4/4 models rent out for $1500+ a side / over $3000+ of gross monthly income per duplex. For reference, annual Taxes and Insurance are $3,400 and $1,100 respectively for each Duplex.
Hope this helps and best of luck with your goal! I am curious to see other markets out there that may have this same type of potential as I have only invested and have experience for the most part in Florida.
Hi @Eder D.,
It is awesome to see your interest in the Orlando market as I graduated from the University of Central Florida and am extremely familiar with the area. I have closed on properties in East Orlando (UCF Market), Winter Park, Winter Garden, Lake Nona, Windermere, Clermont and most places in Seminole and Orange county. With that being said, I did review your numbers and have some questions for you?
#1 - What is your "Why?" behind Orlando? I have spoken with hundreds of investors that are initially attracted to Orlando / Central Florida market from reading something online only to have a very un realistic idea of what they can find. Is there a specific reason that is tying you to this area? The Orlando market is super diverse and is very micro specific and requires a lot of due diligence. The markets you mentioned above for small multi family are some of the most competitive, saturated markets in the state...its not all bad as there are certainly opportunities (like anywhere else) however I think you will need to change your strategy or find another location for the plan you highlighted above to work.
#2 - Since you mentioned your goal was to buy a Duplex, I am assuming you are planning to purchase the property as a "primary home" with the option to do a 3.5% downpayment FHA or 5% downpayment Conventional loan and then live in one unit while renting out the other unit..can you confirm this is what you are looking to do? If this is the case, you will need to account for "Private Mortgage Insurance" which is added on to your monthly mortgage since your downpayment is less than 20%. This can be anywhere from a $100-$400 extra monthly cost and depends on your individual credit profile along with the loan amount. Your interest rate at 4-5% is to low and the current environment for rates is closer to 7-8% for primary purchase which will make a huge difference on your payment. I know there are options to buy down your rate but they are costly $$$ and you will have to see what makes the most sense. Your Insurance cost (very general) at $2,700 seems low for what you are looking for but its still within range. You will need to bump your taxes up by close to 50% of your estimated $3,700 with the markets that you mentioned above. I am afraid the goal to cash flow, live for free, or even just break even is going to be hard with running general PITI numbers....thats even if you found something that could work which leads me to my next point.
#3 - A Duplex under 400k in any of the areas mentioned above do not exist and you will still be hard pressed to find a good one in another area of Orlando. The ones that do exist under 400k in the Greater Central Florida area will be 1+ hour out from Orlando/ in an area that is in a war zone/ built in the 1930-1960's/ requires a ton of work/ manufactured, or in an area that is not investible IMO. To give you reference, the starter end single family homes in UCF/ Winter Garden tend to start at 400k...much higher in Lake Nona or Winter Park. Lake Nona townhomes tend to start around the 400k price point.
#4 - If you wanted to purchase a pure investment property to rent out (not living in) will require a minimum 15% down payment with Conventional Financing however most lenders are going to set their requirements at 20-25%. Even at 25% down it will be very expensive for an "Investment Loan" with upfront points/loan costs at 1-3% to give you a general idea and interest rates being 8-10%.
#5 - Areas such as Ocala Florida have great opportunity for New Construction and am currently building a handful of Duplex(s) for around 250K all in that sell for 425-500K depending on specific location, finishes, size ect however we are getting great deals because we are using cash to build these. We are keeping as long term rentals. My team and I have had to shift from purchasing properties financing as we were doing just a year ago when the rate/financing landscape was much more favorable to now using cash to make deals work. This may be an option for you.
I hope this gives you a better idea on the lay of the land and feel free to PM me with any further questions specific to Orlando or other area of Florida.
Best of luck!
@Tom Price - what did you end up doing? We are under contract for a new construction SFH in a planned development in central Florida that was supposed to be completed last month (October 2022) and now they are saying March 2023. We have been nervously waiting while we watch the interest rates go on a roller coaster ride, and now they have sent us an email stating that construction prices have increased dramatically, probably due to hurricane Ian and other supply chain issues, but they haven't received any specific cost increases from the builder yet so we have no idea what it will be. Supposedly rent projections have increased since we entered into contract so that is one minor plus. My husband wants to run from the deal now, but I am wondering if we will be kicking ourselves for letting the contract go. Housing in Florida still seems to have a high demand. Just curious what your experience has been. Thanks!
Hello everyone, I have a question for you all and would really appreciate your advice/recommendations.
I am still a rookie, starting off my real estate investing journey. Hopefully, I am stumbling on something that you more experienced investors can help provide some insight to and help me find a solution to.
I have a property under contract for 400k. It is a new build 2017 and rent ready. Zillow Zestimate is 560k. It's in a great, new neighborhood.
I tried to get the owner to seller finance but he was not interested.
Initially, my plan was to simply get into the property with hard/private money and then refinance out to a conventional loan. So I started talks with a mortgage broker to get a feel for how numbers would look once I refinanced and..... have now hit a hard stop on this process. I need help figuring out how I can take down this deal.
I am currently a resident physician making 56k, 1.5 years from finishing residency. I have a personal residence and almost 500k in medical school debt. I am married to a teacher, 50k on her end. My high DTI throws a wrench into obtaining conventional financing/refinancing but not impossible.
Interest rates I've been quoted are in the 7-8%, possibly a bit higher.
If I put 15% down (60k). Finance 340k At these interest rates, the PITI would roughly be in the 3000-3200 range which is conservatively what the rental market in this area can cover. I don't necessarily mind not cash flowing but obviously not ideal situation. My concern is that the margins are basically non-existent, no room for ANY reserves. Rent would go strictly to paying rent. The property is pretty new, SHOULD be low maintenance, but still concerning.
I'm not too worried about hard/private money rates bc they would be a short term solution just to get into the property. If I was to find a hard money lender who can allow lower down payment (at this point in my life, 60k is a lot) then refinancing a higher mortgage balance shoots the PITI to 3500-3800 which may be at the very top or even outside what the rental market for this property can bring in.
I really want to close this deal and keep it as a long-term rental but I need some help on how I can make this work. The only way to comfortably make this property cash flow with some margin is by increasing the down payment. In the future, of course I would plan on refinancing out to a lower rate assuming they come back down and cash flowing should be much much easier.
I don't want to, but as a back up, I can wholesale this deal. But on the back end, I'm wondering how anyone could make this work with such high interest rates? If anyone wants to get conventional financing after they pay cash, the property would be hard to cash flow at the higher sale price that would include my wholesale fee.
What do you guys recommend? All advice is welcomed!
Well 1st red flag, why are they selling for 400k if its worth 560k? Answer it's not worth 560k. Im sure it needs a lot of work. Connect with someone doing deals in that area, see what the real numbers are
Good Luck
Great point.
@James Bolduc - Most of the hard money out there right now is EXTREMELY expensive and I know this because I just had a few lenders/brokers send me some term sheets on another project I am working on. It is not the interest rate that will usually kill the deal (quotes between 10-14%) as you mentioned this is a way for you to short term finance the deal, but its points you will pay on entry and exit of this short term loan product that will cause things to get VERY costly.
On the long term financing/refinance, it is going to be very difficult to find a lender that will allow you to put 15% down on an investment home in this environment, and again even if you do, you will pay a hefty fee in points. For some reference back in 2021, out of probably 10 lenders I only found one that would allow us to put 15% down on an investment home and we still paid 1-2% points. This is when investment loan rates were 3-4% and financing was super easy to get. This lending market is obviously much much different. Assuming you could find a lender to make things work at 15% down, I think your PITI is fairly accurate around $3,200 however at that point you wont be cash flowing (or maybe even losing money) and it seems like you will be banking on appreciation which strikes me as very risky.
So how do you get this deal done? My first question is, what would the unleveraged return be in an ALL CASH purchase? Typically, leverage can be a great tool in Real Estate but it seems like your options are exhausted on that front and the landscape with rates adds alot of risk. If this Property could cash flow well with being ALL CASH up front, then at this point you may be able to raise private money from friends or family (NOT hard money) or bring in an equity capital partner to execute the deal. As mentioned in this thread, you really need Real Data Comps vs Zillow to nail down Valuation and you should keep in mind that the market, especially in a market like South Florida has further downsize risk for pricing in the short term. Assuming that your comps assumption is accurate at $560,000, there may be enough meat on the bones for you to partner with someone who has the cash and then you get, say 10% sweat equity for finding and managing the deal (before and after purchase). This will also allow you to get alot more experience! This is just a general idea and would obviously depend on what the actual numbers looked like for this property and if the Unleveraged return is good enough to attract outside capital. I have done something very similar to this structure in other deals by bringing in Capital Partners. It all depends on how good this deal really is from an Underwriting standpoint and please note I am relying on the basic information you provided for the sake of this conversation. Further due diligence would need to be done.
The good news is, there could potentially be maybe $160k of equity upside and assuming the property had significant unlevered cash flow, you now dont have a mortgage/debt risk to worry about and then can refinance out in the future if rates drop. The key is to formulate a business plan that IS NOT dependent on refinancing and if a successful refinance does present itself with attractive rates, you can capitalize on this and consider it "icing on the cake".
Again this is just my two cents. I hope this helps, and best of luck!
Hi Edwin!
#1) I have lived all over Florida, most recently Orlando where I graduated from the University of Central Florida. Because you mentioned BOTH cash flow and equity (appreciation, forced or market) I would seriously look into Ocala Florida. I have worked and analyzed deals in every part in Florida and have not come across a market with this amount of cash flow / equity upside. I’ve been investing here for the past few years. Currently building a handful of Duplex(s) for under 250k all in project cost with a market value of $425k when built. For reference they rent out for $1500+ a side / over $3000+ of gross monthly income per duplex. In this case for us, we are keeping as long term rentals because the cash flow is great however this may be a great market to house hack or Brrrr with the amount of forced equity day 1.
#2) I would try to find as specific niche, skill or market and get really good at that thing. You will be amazed on the momentum you can build and I’ve found success on doubling down on what I already know vs trying to do to many things at once. This will allow you for form a strategy that works for you and your goals.
#3) I have a lot of real estate book recommendations but none specific to mutli family investing. For me personally I’ve found that books tend to inspire me and light the necessary fire that’s needed to work towards a goal but I think finding a mentor that is already doing what your doing will be far more beneficial and accelerate what you are wanting to do!
Best of luck and keep me updated on how this plan works out for you!
Hi Jennifer, I graduated from the University of Central Florida and also invest locally in Ocala. How has your goal progressed with purchasing a 30+ unit multi family building? I’m currently building a handful of Duplex(s) as this is my first multi family project. I have previously built a bunch of single family homes and turned around an underperforming Storage Facility. I would love to be apart of any networking events / meet ups you or this group have going on. I know Florida like the back of my hand and I’m sure I can add some value to your goals. Feel free to PM me.
@Marelyn Valdes, Marion County Real Estate Investors Association (MCREIA) meets the second Tuesday of every month at the Comfort Inn on Hwy 27, (just west of I-75). Meeting starts at 6:00. Come join us!
Hi @Pam Krull, does this still hold true for the Marion County Investors Association? I would love to join.
Hello! First time posting, long time lurker.
Within the next 7 months, my partner and I are looking to purchase a duplex or triplex - with a 375k budget (on the high end). We plan on putting 10-20% down. We both work remotely and can go anywhere. We want to consider appreciation rates, income/state taxes, quality of life, and extreme weather. Our goals is to generate cash flow while ideally being in a location that appreciates well.
Areas considered so far:
Cleveland, OH: Great home prices, but the income/state taxes are high, and unsure how we will handle the 4 months of snow every year.
Huston, TX/Tampa, FL: No income states are great, statically better appreciation, but the hot humid weather and hurricanes are holding us back.
Memphis, TN: Another no income state, but high crime/poverty rates, with higher property taxes.
We haven't ruled anything out and are a little overwhelmed with all of the options. We would love some input! Where would you go?
Look into Marion Oaks or Silver Springs shores. I think Jacksonville, Naples and Tampa and Orlando are all great markets however a little to saturated for my goals.
PM me for any further questions.
I think one of your main problems is having so many options. Sounds great but then you can overthink and always 2nd guess. Personally, I say have some fun with it. What things do you like to do? Maybe go in a region that has those things. It could be a really fun couple years if you househack for a year in a place and move to another one. Awesome seeing that you are using your competitive advantage of pure remote work to build a real estate portfolio!