All Forum Posts by: Erik R.

@John Underwood We initially started looking at houses as well, however one of the larger influences for us was to also be close to the beach.. and the shorter term ROI on Hilton Head doesn't work so great for these types of properties as vacation rentals. We've shifted to Condos, where compared to other vacation markets we like (such as Southern Florida), the condo fees are relatively low and the rental rates are pretty good for properties on the Beach- at least so it seems.

Still in the due diligence stage- but it seems like it is practical to find properties where expenses (incl PITI) can be covered via rental income, which is something that in today's market cannot be said for other vacation markets I've looked.

Also BTW - I'm very curious on what impact Covid has on HH and other similar vacation markets.. as it seems a large amt. of folks have flocked to these locations to remote work, and I'm curious as to how much 'staying power' it has on both property values & inventory levels, as well as rental vacancies and income. If anyone local has a perspective on this, would be great to hear!

thanks

Erik

Hi @Ron Williams, 

Thanks very much. 

My wife and I would be buying both as an investment as well as a lifestyle opportunity; I can get much better CoC return investing in residential real estate here in MI as well, however this is a place my family enjoys, and for us there is also qualitative value.

That said, I've been looking at properties that will maximize my ROI vs. those that may have great intangeables but return less on rental income (via more restrictive HOA policies, etc). We've really honed in on Beach & Tennis lately, and I'd love to pick your brain a bit on rental scenarios vs what I've seen so far. I'll PM you to try and get in touch. Thanks again

Erik

Hello BPers,

I’m looking at a few properties in Hilton Head as potential vacation rental investments, and would appreciate any local investors or folks that can give feedback on my financial assumptions.

Please reach out if you can help!

Thanks

Erik

Hello All-

I have a B-location property I am in negotiation to purchase, and need some advice to create a win win if possible.

Background: The property is in Metro Detroit Michigan, B location.. across the street from a school on a dead end street, down the street from a park. Comps value the place at $99k, I can get $1200/mo rent. My offer was $91k site unseen, would hit my ROI and cash flow metrics assuming 30 yr mortgage and $5k of additional improvements needed. HOWEVER- after inspection and research have uncovered some issues....

The house was flipped by an aspiring real estate investor who acquired the place as a wholesale deal (re-assignable contract)....did the flip without pulling permits from the city and therefore sunk money on CapEx (I.e a new kitchen) which now requires more investment to be within code, and also has a list of city inspection issues which requires even more investment (driveway cement repair, new chimney mortar, front porch cement work). Note- My team went to city hall, talked to the city, got the inspection list from them directly.. they aren't happy with this guy at all.

His business case is already in the red, he's desperate to get rid of the headache but can't sell it without a clean COO- yet has no more money and is already behind on $40k of private money... He also seems very negligent, not just naive..

He has netted $105k on this property all-in through acquisition + investment, I need it at $91k for my math to work. I want to help this guy out but I honestly don’t know how to create a win win without this guy bleeding severely, and I won’t acquire something that doesn’t meet my numbers.

I've considered a land contract that helps him with his debt short term, puts all owness on him to bring it to code, and keeps my ROI strong... also thinking of just offering a cash offer I'm comfortable with, taking ownership of all improvements with the city based on a solid SoW, then refinancing.

About to walk away but thought I’d check with my creatively - minded fellow BPers to see if there’s a solution I haven’t thought of.

@Jamiel Strickland thanks Jamiel, very helpful. I grew up in Dearborn and know the areas very well.. just am unsure about a duplex’s expected income. Good advice tho. Erik

@Jeremi Singletary thanks... yes I checked the MLS, the most recent similar sold properties are from Jan and Feb 2017. I was also thinking of using rents (via gross multiplier method), but wasn’t sure how accurate that would be on a non-commercial property (duplex) Thanks Erik

@Jeremi Singletary Thanks, helpful. But 70% rule is still a tough tool to use when comps arent there and thus ARV is difficult to calculate, no?

Hello All,

I'm in process of analyzing my first potential duplex deal and I'd appreciate some input. I've analyzed plenty of SFH deals but need some help with my assumptions on a duplex.

Property is in Dearborn, MI - a good midwest rental market, on a C+ / B- area.

Duplex has a 2Br, 1Ba bottom unit with a finished basement.. and the top unit is a 2Br, 1 Ba. 

List price is $140K. 

Rental comps for 2BR units in the area are $965/mo.

Assuming I purchase the property for $135K, invest $10k in improvements, utilize a 25% down/30 yr mortgage, and achieve 80% of the total market rents (from rentometer) + 7% vacancy/attrition, this property looks to cashflow approx $400/mo with a 9% CoC return and 12.5% total ROI.

My questions are the following, not having much experience in analyzing duplex deals:

- How would I accurately estimate rental income in my area for a duplex, if my area is mainly SFHs ? In my analysis I'm assuming 80% of rentometer area SFH comps, since I assume the average renter would rather pay less to stay in a duplex vs a SFH.. also, do I need to assume a higher annual vacancy rate for a duplex (my analysis currently assumes 7%) ?

-Not sure of the overall 'market' for duplex renters vs SFH.. this area is a suburban, working class neighborhood not within walking distance to a proper downtown.. thus do I need to be concerned that I won't find qualified renters (probably hard for someone not knowledgeable of the area to answer, but nonetheless is a concern).

- I'm struggling to accurately assess the ARV, as there are not many comps available for assessment. The most recent sold duplex's in this area were in Jan and Feb of 2017, and were for $80K (and half the $/sq ft.. ). The only way I've figured to estimate, is to take the approx market appreciation % from Jan 2017 to now, apply to these comps, and compare. Any other advice?

I'd like to make an offer, but want to verify my assumptions. 

If anyone has experience being in the MF game in my area, with similar challenges or advice on how to verify my duplex's analysis assumptions, please be in touch I'd love to connect.

thanks!

Erik

great work! Good success story

Thanks to all- I've certainly scouted Livonia, Redford, and other lower priced metro Detroit markets.. and agree that ROI can be better achieved in these areas, given the right deal- no doubt.

I am very attracted to Plymouth due to the transient demographic there, and the obviously strong property values and appreciation (same with Northville).. which is why nearly anything that pops up there that is selling for less than $150K, I take a good look at.

That said, I would be happy to find a good deal in Livonia, am subscribed to Livonia MLS listing updates and synced up with a few realtors, but honestly haven't seen any good deals in a while (but that goes for much of metro Detroit, outside of C markets). That said, anyone with off market deals - I'd be happy to see them.. but I suppose I'm speaking for many.

thx again-

Erik