All Forum Posts by: Dylan Brown

Hello everyone! It's no secret that the recent nature of the real estate market has been wavering and confusing for many with the United States rocky economic position, high interest rates, and (in many markets) stagnating real estate prices. With that being said, I have been entering the idea of a new strategy (new for me that is), and I'm looking to get some opinions/critiques as I am still a relatively new investor. The strategy consists of purchasing "fixer upper" single family and multifamily properties for cash within the markets that meet my requirements, flipping and holding as LTRs for a minimum of 5 years, then entertaining the idea of selling for a 1031 exchange or pulling financing for more purchases. Below I'll go more in depth on each aspect of this strategy.

MARKET REQUIREMENTS:

1. Job Growth: Positive short-term (1 year) and medium term (5 year)

2. Wage Growth: Positive short-term (1 year) and medium term (5 year)

3. Population Growth: Positive short-term (1 year) and medium term (5 year)

4. Presence of Fortune 500 companies or large tech industries

5. Easily accessible broadband internet

6. In the 75th percentile of cost-of-living affordability 

7. Low supply of developable land

I feel these metrics will ensure not only a high probability of occupancy, but also the continued growth of rental values and overall appreciation.

WHY CASH? WHY NOT LEVERAGE?

Pros:

- Ability to make offers at a significantly reduced price point

- Significant reduction of monthly expenses (larger monthly cash flow)

- Larger equity position (can be used for potential future financing)

Cons:

- Larger upfront cost

- Lower ROI/COC return

With these pros and cons in mind, and as much as I love the idea of leveraging real estate, I am not comfortable with neither the economic state of the US nor the current position and uncertainty of banks. For that reason, I'll be leaning more towards cash purchases.

LONG TERM FIX AND FLIP

It's not really a secret that one of the best ways to make money in real estate is to add value to a property, increase the monthly rent, and allow it to appreciate for years to come. With that being said, running under the assumption these will be cash purchases at 80% of ARV minus estimated renovation costs, there will be large opportunity to add value. Holding these properties for a minimum of 5 years would allow for an adequate buildup of cash flow, and (assuming the market performs as expected) appreciation. After 5 years of ownership the property would be reevaluated and either sold as a 1031 exchange into a larger property, or the equity itself will be used to finance the purchase of more properties.

I would appreciate any opinions/critiques on this strategy as I know there are individuals more experienced than me who may have tried something similar. Thank you to all and I wish you all the best of luck!

Quote from @Michael Baum:

Hey @Dylan Brown. So that will narrow down your areas if you want a true 4 seasons location. Most are 3 seasons.

Like @Lyndsay Zwirlein said, it will all depend on your budget.

What are you looking to spend?

As of right now I’m looking in the 300-400k range

Quote from @Michael Baum:

Hey @Dylan Brown, what areas are you interested in? We don't look at cities specifically. Especially large metros like Nashville etc. Too much risk of banning them altogether.

Like @Brooklyn McCarty said, we look only in vacation areas with strong STR presence and common sense rules.

The bottom line is what are you looking for? 

My strategy right now has been looking for markets that offer four season attractions (hiking, boating, snowmobiling, skiing) as well as large hospitals and universities but it seems those areas tend to be some of the most strict and saturated. My thought process is the more attractions (vacation or non-vacation), the higher the potential for a successful investment.

I've been struggling to find an STR market to buy my first STR as every market I like either doesn't allow STRs or has a waiting list for permits due to all permits being occupied. My question is, with how many cities there are across the US, what puts a city on your radar and how are you looking for markets that aren't extremely saturated?

I’m looking to move on from the long term rental game and start pursuing short term rentals. I’m looking for already established, but underperforming short term rentals to purchase. 

Check out the book "Optimize Your BNB" by Daniel V. Rusteen. He's a former Airbnb employee who has owned and managed short-term rentals. Lots of good information there.

Does anyone know of any online marketplace for buying and selling established (profitable or struggling) short-term rentals? If so, did you use them and what was your experience like?

Quote from @David M.:

@Dylan Brown

Yes.  The whole point is to purchase before the auction date so that the foreclosure does NOT goes through.  This saves the seller's credit, a bit...

However, remember if you are trying to use subject-to, how will that help you?  They are foreclosing on the lien/loan.  Are you planning on making all the catch up payments?

Thanks David! And yes, my plan is to acquire properties via Subject To prior to foreclosure, bring the payments current (assuming the numbers still work), and continue servicing the mortgage by turning the property into a rental.

I'm looking to purchase preforeclosures via "Subject To" agreements but many of the properties I've been coming across already have a pending auction date set. Is it possible to still purchase the property before the auction or is it too late?

We are looking for preforeclosure leads and other distressed homeowner leads in the Oakland County, MI market. We purchase properties via "Subject To" agreements and are willing to offer referral commissions, partnerships, and wholesale fees to any and all referrals we end up purchasing!!!