All Forum Posts by: James Lauer

hello everyone!

Thank you all so much for your insights and answers. The duplex will still work quite well if I need to pivot back to LTR and even mid term, but as stated before, the property is quite profitable when it was able to be done as STR.

I see these challenges as new opportunities to grow and continue to learn and improve my craft.

Thank you all,

James

Hello all,

I wanted to ask for everyone's help for a fairly large problem I am having for a rental I purchased. I purchased a duplex at a shore town in NJ. My township has changed the ordinance to 30 day MINIMUM for rentals. Although I can still get rentals for 1 month at a decent premium, it is not anywhere close to how much I can make through STR like airbnb/vrbo etc. Essentially my bottom line will likely be effected nearly 30-40% because of discounts I will have to give for longer stays.

I guess my questions are the following:

1. Has this happened to you? What did you do ? Did you sell, did you just continue to rent and accept fines/penalties, did you shift to mid term or long term rental?

2. Does anyone know if there is a way to remove public reviews on the Airbnb app, essentially the township zoning officer looks for properties in the town with more than a few reviews and that is how she determines if people are still renting the property out on a short term basis. I know this because I own another duplex and have ignored the rules the previous summer.

3. Has anyone hired attorneys or legal counsel to determine if what these towns are doing is actually legal, when it comes to enforcing STR rules?

This whole thing is very upsetting and silly as I see it to be a completely nonsensical rule change and not well thought out by my township.

Sorry if I rambled a bit, ANY HELP, is greatly appreciated!! Thank you so much

James

Hey BP community,

An interesting opportunity just came my way and I am having trouble analyzing this deal and deciding if it is the best usage of my capital. Here is the scenario (I will try to make it as concise as possible):

A brand new construction high end condo complex went up for sale this past June in my community. I ended up buying a unit for myself, as I truly felt it was a great investment opportunity and more importantly was the perfect home for me at the time (I was looking for something low maintenance and move in ready, as I was working on many BRRRR/Flip projects at the time). Anyway, over the course of last few months, I have befriended the builder and he recently told me, the penthouse unit has fallen out of contract, it was pending for so long because beneath the unit are 2 commercial units and the town would not issue C/O for penthouse, while those were under construction. The buyer backed out and the builder called me to ask me my opinion on market rents for Airbnb/STR for summer season (this property is located at the Jersey Shore). During our discussion, I told him I would buy it, if he decided he didn't want it. Long story short, he called me and said he would sell it to me for $860,000. Full transparency, I feel $860,000 is what it was worth last year, so I feel this number is inflated, but I know he would rather hold the property and rent himself if he cannot get that number. After running numbers, here's what it looks like:

$860,000 Purchase Price, however the builder will hold $400k of paper (interest only) at 6.5% per year for 5 years. So essentially, I only need 20% down on the $460k portion of the loan, which I plan on funding through a local bank.

Mortgage/Taxes/Insurance/HOA Fee will be roughly $3900 per month on the $460k note

Mortgage on the $400k through builder will be $2,166.66 per month.

Capex will be a little lower than normal since A. It's brand new construction B. HOA covers all ext. maintenance roof, side etc. and landscape / snow, but I will adjust and say $60 monthly for CAPEX

Cleaning fees, W/S, Gas/Electric for the year will likely be around $3,800 for the year.

My all in costs for the year will likely be around $78,000

The estimated revenue from Airbnb/Short Term rentals will likely be around $144,000 per year. That accounts for peak summer season and off season rentals. This is in a highly desirable area.

My net looks to be somewhere around $40,000 low end to 66,000 high end per year.

My out of pocket will likely be $125,000 from the 20% down payment and then furnishing the rental. 

If I use cash on cash calculations, the returns are absurd. What do you guys think of this deal? Does it make sense? Is it too risky? Hopefully if everyone has read this far, you will leave your feedback! Thank you so much :) 

James

Hi everyone,

I am really hoping someone can help me with my evaluation, analysis and anything else you all feel is important for my new purchase of a 5 unit in New Jersey!

I really will try to keep this as short as possible, here are the numbers (current numbers and projected)

$1,150,000 Purchase price

$9,522 gross rent (4 residential, 1 commercial) currently the owner of the building, also owns the business in the commercial space and will do a leaseback for 5 years @ $4200 = $114,264

$12,500 taxes, $3200 insurance, $2750 W/S, $1800 maintenance = $23,996 expenses per year (from owner)

Based on what we see in the market right now, our projections for this unit once totally renovated/stabalized will be:

$7,400 Gross monthly rent from residentials

$4,200 Gross monthly rent from commercial

= $11,600 Gross monthly rent

We expect to spend about $150,000 - $200,000 on renovations, this will cover all exterior upgrades, total renovations of 4 residential units and some miscellaneous.

Up until now, my largest purchase has been a 3 family, so I have always done cash out refi with 30 year fixed. This will be the first time getting a commercial loan, thus I am a little wet behind the ears in this area. 

My plan was to buy this with a 20-25% conventional loan to start. After we stabilize it, go back to our bank or another bank, ask for new appraisal and refinance. Based on some comps and rental projections, we feel we should easily be in the 1.5 - 1.8 million range after renovations (comps aren't easy to come by in this area). What do commercial banks generally loan up to? We are aware and prepared to leave about 150,000 to $250,000 invested in the deal as we should be cash flowing around $3000x each month after we are stabilized and this accounts for capex, vacancy and all the normal expenses.

I am curious if anyone has an tips, suggestions and pointers for me. My biggest area of confusion and trepidation is around the commercial lending and what banks generally allow for!

Thank you so much for all the replies!

James Lauer 

Hey everyone! Just looking to connect with some people who are going to BPCON! I am very excited to hopefully meet some awesome people and learn. If anyone wants to meet up on the first day, I would love to meet some new people and hopefully develop some relationships while I am there! 

PS: Does anyone know if we need to wear masks while inside?

Hey everyone,

I recently locked up a home in Brick township, New Jersey.... I am debating on just BRRRR'ing it or doing a quick fix and flip. I will try to keep this as short as possible for you all. Before I give the numbers, I think it is important to understand what I want out of life and real estate. I am NOT looking to be a Cardone type investor with thousands of rental properties, to me that seems like hell and just seems like trading one rat race for another. My 5 year goal is to have $20,000 a month in passive income (not focused on the amount of doors, but rather the amount of passive $). I am currently 31 and I am up to $5000 a month in passive income from RE. Here are the numbers and info on my latest deal. I look forward to hearing your responses!

Also one quick note: This is a townhome/hoa, which I am normally not a fan of. It seems well managed, I have not gone too crazy into the hoa budgets and accounting, but I would do a major deep dive, if I decided to keep as rental.

If I keep as a fix and flip. It is a straightforward flip that will take me approx. 3-4 weeks to complete and estimated profits are $30,000-$35,000.

If I keep it as a BRRRR here are what the numbers look like:

$145,0000 - Purchase Price + Closing Costs

$30,000 - Improvements 

$1,500 - General holding costs (taxes/insurance/utilities)

$2,900 - Loan on unsecured line of credit 

All in - $180,000

Comps are around $225,000, which would put me right at $168,750 (75% LTV), this means I would leave around $12-$15,000 invested in the deal after the refinance went through. 

Rent comps are around $2100 easily for a nicely redone townhome in this community. With conservative capex, hoa and taxes/mortgage I would be cashflow positive around $600-$625 per month from this unit. I love the cash on cash return ... 50% or so if my math is correct (please correct me if I am wrong here), but I am not thrilled that it is in an HOA. My area has seen an explosion in rent prices and the demand for them is absurd, this is the main reason, why I am thinking about holding this piece instead of flipping it. I really am leaning towards keeping this because of the strong cashflow, principal paydown and tax implications, but again, the HOA turns me off a bit.

I am open to any and all suggestions or comments! Thank you for reading this far, sorry if it was long

God bless,

James Lauer

@Jason Wray so tough right now, there’s literally no deals for us investors in my area of New Jersey. Wondering if I should just sit on the sidelines until things calm down or maybe just accept lower returns than I’ve been accustomed to. Thanks so much 

@Jason Wray actually I don’t have any lenders right now. I was able to get 75% or 80% on the last multi family I did in the same town, although I did call it my primary. Hmmm great point, at $283,000 it would not be worth it for what I feel comfortable investing. Crap ... 

I will try to make the post as short as possible. I am under contract on a side by side duplex ( two - 1 bed 1 baths). Purchase price is $300k. Before I continue, I would like to say, this is a VERY desirable beach town and the demand for annual and summer rentals is ALWAYS high. Originally I was going to try to keep my construction costs to around $35,000, but if I am being honest with myself and my design tastes, I KNOW I will be closer to the $50,000 number. The arv is only $380,000 - $390,000, which would put me around $305,000 when I refi. This means I am potentially going to leave $50,000- $60,000 into the deal. The only reason I have not killed the deal, is the market rents for each are around $1400- $1500 and I know they will be filled immediately upon completion of construction. This would put my $ on $ return around 14.5- 15% (property should be $800 positive each month). I currently have $300k liquid in the bank/investments. I have very low cost of living, so for me to leave the $50,000 in there would not change my quality of life. I really am leaning towards doing the deal, especially since this is the town I REALLY want to invest in. My hesitancy is the fact that compared to my other BRRRR deals, this one seems significantly less enticing.

In this crazy market, what do you guys/gals think? My goal is to keep investing for as long as I can imagine, throughout all markets. Has anyone had a similar situation and what was your outcome?! I would REALLY appreciate any and all feedback. 

Thanks everyone,

James

@Andrew Zannotti thank you man. That’s definitely helpful to hear! Wishing you best of luck on your properties under contract as well. Yes I do totally agree though. Once I’ve confirmed my numbers and then reconfirmed them... and then reconfirmed them again lol, I think it’s best to continue the process and stop listening to the nay sayers and like you said make sure adequate $$ in reserves. I know it sounds stupid but sometimes it feels good to have other people who have done it or are doing it, give some perspective.