All Forum Posts by: Edgar Ferrari

Hello,

Just wanted to get some inputs on this investment idea. 

I will soon have own cash around (1M) that I could invest in a small size development for townhouses probably around 6-12  in the northern Suburbs of ATL and wanted to get some inputs. 

I am looking more for inputs on expected returns, builders to do it, size of lot etc. This is very preliminary and want to know if it is a feasible/possible investment with decent returns  or not.

I do have flexibility in terms of building and renting or just sell them out, though I would prefer to sell them at a profit quickly.

specifically these are my questions:

1. If I want to build 2 blocks of townhomes of approximately 4 to 6 each block each 3 bedrooms around 1600 sq ft each. How large should the lot be? I am not familiar yet with the  planning regulation in these counties (Gwynett, Forsyth, North Fulton).

2. What would be the approximate cost per sq ft on a townhome with an average level of specification?

3. Who would be potential established builders to contact for this type of project?

Any other comments please feel free to share. 

Hello,

I have three properties and an umbrella insurance I am trying to get a good lead on a low cost insurance company or a site where I could compare. 

The three properties are in North ATL. 

Any help/advice highly appreciated.

Regards,

Edgardo

Hello,

I am looking at doing two improvements in two houses I own.

Both houses are located in very good neighborhoods in NE ATL. 

1. My tenants will likely not renew their lease and wanted to know for the first house what would be the cheapest way to reform the kitchen. The cabinets are old but the wood and design are good still, they just look like they need new knobs and some maintenance. Also The counter tops are not granite and all the houses in the area have granite counter tops so I will include those anyhow. 

Could anyone give me your inputs on what would be a fast and cheap way to do this? And also how much it would cost per ft of cabinets.

The reason I need this is that last time the property was vacant for 4 months and I had to settle for a very low rent. A similar house that I have got rented 300 higher ona couple of weeks despite being out for rent during the low season. 

2. Another house that I own has an unfinished basement and I wanted to know what would be a reasonble budget per sq ft if I want hardwood floors that look good but have the lowest price possible and then finish the walls and separate teh basement in a couple of rooms. I do not plan to build a bathroom yet.

Of course as a landlord I am looking at low cost look good options that will both allow me to rent for a few more years at better rates and also allow to exit with a good price by 2020-2023.

Thank you

Thanks to all for your inputs. Overall I see it is not a big deal and should be fairly simple to solve.

@Mike T. the structure of the roof is the problem it was already there when I bought the REO and I was aware of that. The insurance company said I needed to change it sometime in the first three years and we are nearly there.

@Marcia Maynard thank you for the advice and sharing your experience.

@Art Allen I would need to replace the whole roof for a new one.

So you say I would have to put them in a Hotel then right until the work is done?

My insurance company requires that I change the roof in one house that I own,

The house is currently rented and the contract expires on Nov2015.

I was planning to change the roof after the contract expires and I really like my tenants however changing the roof will take three days of heavy work and wanted to get an opinion as to what to do with my tenant. The tenant is a couple with 4 girls and they have been very good and reasonable.

What would you do? Would you offer any compensation if they renew? Anyone had experiences like this?

Regards,

E

@Steve Maye thanks for the detail, I think we asked that because you were interested in knowing if what you did was smart or not and since we did not have the full picture I think @Joe Villenueve and I wanted to have more detail to give an opinion.

From the number you provided I think it was a good investment.

A couple of things you will need for your math to be realistic long term is:

1. Estimate for average repair costs going forward

2. Vacancy rate

3. Commissions for realtor

4. Umbrella policy if you are considering to get this in the future

As to your question on a next move, I would give serious consideration to the following:

1. Get some debt maybe buying 2 properties with 50% financing on these

2. Consider what was the increase in property prices since you bought the first home vs the increases in rent in the same period. My guess would be appreciation was faster than rental increases but it can vary market to market.

3. Prioritize buying discounted properties probably REOs but do a thorough review of property condition and assessment of costs of repairs. If you look at recent comparable sales and are able to see the pictures of the property sold and sq ft you might get an idea of the discount you are getting. Also Freddie and Fannie have very good programs for investors with very high leverage (I bought at 90%LTV with 4.375% rate)

To expand on point 1 the logic for getting some debt is the following:

1. if your return on a cash purchase is 7% a 50% leverage at 5% APR 30 yrs fixed will increase your return to 9% of the cash invested.

2. The appreciation play is double as you have exposure to twice the assets (but in the same way it plays against in the downside). Your inflation hedge is somehow better also as rentals are somehow correlated to inflation and since your mortgage payment does not change (use only fixed rate non recourse, I personally prefer 30yr fixed loans) this results that the weight of interest payments over time tend to be minimized as rents increase but payment remains constant. 

In summary I think you did the right purchase and got the correct returns but you might consider some leverage. you must feel comfortable with having to make monthly payments every month.

all the best.

Thanks @Frankie Woods . Germany and Denmark are also deemed a good place for real estate rentals. But these markets are more of in an equilibrium so no big opportunity as it was US in 2012 and 2013.

London is completely inflated in residential commercial is much cheaper.

Other European countries could be a great opportunity particularly Greece and Portugal but they have not hit bottom yet, rental returns are low despite a 40-50% decline in prices and I don't see prospects for a fast recovery yet.  So just waiting to see what happens there. I need to see a situation where I have confidence that anything I buy is going to generate some type of return. That said I do my DD on each property to minimize chances of making mistakes but it is still a possibility.

Steve,

A couple of clarifying questions:

Are you using any financing on that property to get the 7% cashflow ?

Is that 7% cashflow compared to the price you paid for the property?

If you are comparing this to the price of the property and not taking into account any financing costs it sounds like a good return to me for that property value vs my comparables in Atlanta.

I  invested in two properties similar to the ones you have and I had to put down 12K in one and 25K in the other one. The rest was financing (95% and 90% respectively). 

I am getting a cash on cash return of 0%  (break even, I had to do some repairs) but the appreciation and decline in mortgage balance would make very good returns if I get out. 

If I do not consider the mortgage interest expense the return would be around 5% on the value of the property paid.

On another smaller property that I paid cash at bottom prices I am making 12% net return against the purchase price but only 7% versus the current market value.

Hello,

I am an investor with focus in North Atlanta of single family detached homes and townhomes. I am currently live in London where I work full time building statistical models for banks. I have also been responsible for the management of a portfolio of over 1000 distressed mortgage loans and properties.   I feel very comfortable in managing individual units that do not require extensive work and leverage my knowledge of the distressed industry to get good discounts with 2 or 3 offers for every property closed. 

My objective this year is  to buy anywhere from 3 to 6 houses/townhomes more in GA with below 50% financing. 

Additionally I am also considering some of the following for the next 3 to 5 years:

1. Buying land and construct in GA

2. Looking at markets in Europe. Especially if there is a country getting out the Euro and/or suffering a major devaluation. I have experience in this type of environments and have seen 200-300% returns in a matter of 3 to 5 years without any leverage used. I am also well connected in some of these countries.

 3. Commercial property investments (open to any developed market properties) and potentially opening a business

4.  Multifamily, so far this one seems the most complicated to manage from a distance and would only be open to a 5 to 10 unit complex to start.