All Forum Posts by: Jack Luzecky

Every decision made by an investor is personal to that investor. But it is my opinion that you should not wait for a market crash. Homes will continue to become less and less affordable for the average consumer. The percentage of investor ownership is rapidly increasing. It my assumption that 1st time home buyers will find it more difficult to purchase a home in the years to come thus forcing them to rent. As more people begin to rent for a long term housing solution the higher rental rates will climb. If you purchase a rental now your Principal and Interest is fixed for 30 years most likely (for 30 year fixed rate mortgage that is). As rent rates increase over the next many years your margins in theory will become larger and larger, in addition to building loads of equity at your tenants cost. BUT, this does not mean you should rush into an investment property. Understand your numbers, and don't FUDGE your numbers. If you need help running numbers reach out to those here on BP. Most people here are happy to help!

@Rob Pattison I'd be interested in hearing more specifics on the property. Feel free to DM me so we can start a conversation if you are serious about selling. But to get the most bang for your buck i would recommend selling the property vacant so continue with the eviction. If non paying tenants continue to reside in the property most wholesalers or end buyers will use this information to help reduce the overall sale price, or sway the purchase terms in their favor.  

@Erik Nordgaard i am bias towards St. Louis as this is where I grew up and do business today. Any questions at all about St. Louis feel free to reach out! Best of luck, Erik! 

Best of luck @Firas Naji! Never hesitate to ask questions and seek out guidance from members here on BP. It has changed my life. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in St. Louis.

Purchase price: $275,000
Cash invested: $68,750

Purchased a 2-family in the North Hampton neighborhood of St. Louis City. The duplex was renovated in 2014. At time of purchase it was 50% occupied, with one tenant paying $1,250/month. The 2nd unit will rent for $1,250+. The property appraised for 51k higher than the sales price so a refinance will likely occur in the next 6-12 months after purchasing the property.

What made you interested in investing in this type of deal?

The property is considered to be in an A-B class neighborhood in St. Louis City.

How did you find this deal and how did you negotiate it?

MLS. I called the agent the first day it was listed on the market. The agent seemed motivated to reach an accepted contract quickly. Within 12 hours the agent received my offer sight unseen. Within 24 hours I had an accepted offer. Based on the agent's remarks, he received a lot more interest from agents/buyers after the contract was accepted.

How did you finance this deal?

Conventional - 25% down - 3.325% interest rate - 30 year fixed

How did you add value to the deal?

I plan to increase the rent on the vacant unit from $1,250 to near $1,400. Otherwise, it is a turn key investment as it was rehabbed in 2014.

Lessons learned? Challenges?

Be quick to submit an offer in a highly competitive market.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a realtor and represented myself.

@Angelina Anani sent PM. let's connect. 

@Rei Reid St. Louis is a very diverse city in terms of demographics, types of investment property, and return on investments. In some neighborhoods a 4% ROI is considered lucky due to low inventory. Other neighborhoods that were producing 15-20% ROI are now producing 8-10%, yet most of these types of properties (D-C) still involve the same amount of risk. Again, the reduction in ROI is due to low inventory and the continuing upticks in buyer demand. In fact, last month (May) we saw an increase in median sales price of 20% compared to May 2020. The month's supply of inventory decreased by nearly 50%. However, closed sales are up 12% compared to May 2020, even though there were nearly half the properties listed for sale than last year. What does this mean? Buyer demand is increasing quicker than inventory decreases. With all of this in mind it is not too far out of the question whether or not properties will continue to appreciate at a 10-20% rate year over year on average for the next 1-2 years. This is on the assumption that the Fed will keep rates low. But, due to recent inflation reports the Fed could introduce 1-2 rate hikes in the next 1-2 years by 2023.

Yes, all great responses above. I usually recommend newer investors submit offers contingent on viewing rental verification (income/basic expenses), leases, ledgers or rent rolls. This is a good start to ensure the tenants are paying, expenses are not out of the ordinary, and a timeline for when tenants leases are up for renewal. 

Best of luck. Reach out with any questions. 

@David Ounanian has great advice regarding your question. If that does not work, then my only other thought would be to get it under contract now, with a closing date of 60 days or less from end of lease date. But, doing so may require additional fees from the lender if they allow you to lock your rate for more than 45-60 days. And, of course, you will not be able owner occupy until you close on a later date. Sorry for the late response but wanted to provide some feedback to your question in case you still have this lead. 

@Scarlett Tao 1) contact an attorney if you're looking for recourse and 2) check your PM agreement. Probably #2 before #1 so you don't waste money on an attorney if it is not spelled out as the PM's responsibility in the management agreement. 

This is a specific duty in our management agreements. Some owners say they will handle "utility transfers" on their own. Most owners of ours leave the job to us, however. In this scenario we 1) transfer utilities back to the owners name when a tenant moves out and 2) bill the tenant for utilities that remain in the owners name after the tenant takes occupancy. 

Utility transfer/billing is VERY cumbersome. We have a full time employee for this one duty alone across the 1,500 doors we manage in St. Louis. If you are with a smaller PM (1-5 employees) then it wouldn't surprise me if they are not providing this service. 

Typically, the owner's name will remain on sewer which will then need to be billed back to the tenant. Depending on the municipality, the same may apply for water.