All Forum Posts by: Jay Lutz

Helpful to point out that there is hope if you find radon at your property.  There are ways to mitigate it and let it out of the ground. They'll essentially put a holey tube under the building, piped to the roof so the gas can pass through and escape without seeping into the building.  (Correct @Russell Quinn?) 

Not sure I'd personally buy a property that has a radon issue, but I've worked on large MF deals that build and rent anyway.

Thanks, Bonnie :) You make some good points.  It's probably best to take a step back and see if there's something more manageable and profitable rather than keep trying to work out this puzzle. It's in a great location and sat on the market for a year, and has the benefit of an extra lot and the transitional zoning, which is hard to find. But maybe timing isn't right on either side.

Thank you for suggesting owner financing. Hadn't thought of that and will keep it in mind as an option for this or other opportunities.

Thanks Kevin Sobilo! I hadn't thought about making a high and low estimate. Seems like a great way to get a range and some confidence in the cost! Any tips on sizing wiggle room for any unforeseen surprises on a property like this?

The deal does not pencil out as-is. It's in a growing city, so the numbers are tight without adding rentable SF. From what I've seen, everyone is buying for appreciation only: properties rarely meet the 1% rule -- more reach 0.6% or so. STR isn't allowed. If I rent the rooms MTR, I'd still be short $1600/mo (0.85%).

The property has a cottage, split into a micro studio and a one bedroom, and a 3/2 house with a semi-finished, stair-accessible, windowed, empty attic 75% the size of the house. It's been rezoned to allow a live/work component, allows 4 units, and the FAR allows room for plenty of additional SF. 

The idea is to split the huge kitchen in the big house and divide the house into a 1/1 and a 2/1 and slip the additional unit in the unused attic. Plumbing can be pulled up and stacked. OR maybe the attic could just make for 2 or 3 additional bedrooms.  Definitely less investment. But then we've got a 5/2 or a 6/2 house that's harder to rent.

Alternatively, the attic could be used as "office" space or storage, since there's an exterior stairway to it already, too. No clue where to find comps for this sort of offering though. Maybe renting this out this way would make the deal pencil on its own though... I'll take a second look. Thanks for the tip!

It's in a location with million dollar homes and small businesses, so the price they're asking isn't cheap. (Owner got it from his parents for $1, so has nothing is owned on it.) Asking price could be the ARV, but not pre-rehab. So I'd have to offer 60% of asking and have no clue how to do that confidently.

The property also comes with an additional, empty lot (there are a few sheds on it). Would have to figure out how to split that off again to build on it, but it'll allow additional units if split off. Or we could sell it to fund the rehab. Building on the extra lot makes the numbers work for the whole deal, from the cost per SF new construction I've seen floating around. 

I don't have other properties I've flipped or upgraded to give the banks confidence for financing.

As a compromise, you could put a wire set of drawers in the closets. You can get them at Ikea or Container Store. They are small, take up less space, often have wheels on them, don't collect dust, and easily show if something's left behind in them (so you don't even have to open them when you're cleaning!).  I worked for one of the largest co-living companies, and this is what we provided instead of dressers. They also leave floor space for the guests' bags (whether they put them in the closet or not). 

Our guests rarely use the dressers in our unit.  But the dressers are an easy place for them to set things as they get ready. You may consider providing a low shelf or bench instead. I've seen these in some more modern / minimal / younger-demographic-oriented hotel. Often with wall hooks instead of full-on hangers.

Also, Craigslist and garage sales continue to be a source of affordable furniture gems for me.  Good luck!

Hi all, There's a 125 year old MF property that I have my eye on, but it needs upgrades (roofing, electrical is very old, mechanical is ad hoc, asbestos mitigation, etc.). I'd also like to split a unit and add a unit if it improves the ROI.

1. How do I go about getting a cost estimate for this type of rehab / such an old building? Can this be done on general cost per SF only? Or is it necessary to walk through with a structural and MEP engineer and a contractor before putting numbers together?

2. I feel uncomfortable asking to walk the property with a contractor because I don't have an established relationship with a contractor, am not confident the deal will pencil without the rehab estimate, and would need the owner to approve the walkthrough even though some units are occupied. 

3. When I visited the property, my (investor-experienced) agent gave me some rent estimates for the property's units, but they seemed really high to me and seem out of line from what I've seen the market absorb. Any tips on this? How should I balance / evaluate this?

Thanks in advance!

PS: If you have any tips for resources where I can learn more about this, that'd be helpful, too!

Hi all! We (husband and I) have a successful STR in Orlando, FL, and are starting conversations with a friend to purchase another property. We ran into some unexpected costs last year, so aren't able to contribute much to the down payment on the next property right now as we build up our savings again (DP will be her contribution). We have experience with this exact type of rental: we know the business, we know the building, we have the contacts, we've done the management, and had other arbitrage properties pre-COVID, etc. She does not have this experience.

1. How would you recommend structuring this type of deal? 

2a. What's a fair financial / equity split?

2b. How does this break out in terms of profit vs revenue?

3. We'd like some ownership of the property, too. How is that done? Can we ride on our credit for some of the ownership or would we need to put in $$ for the financing, too?

Very grateful for this community and looking forward to helping as I can :)

Hi all! Working on growing our fledgling RE business and looking forward to learning more about the process and options. We have one STR, closed down our arbitrage business, and are looking to partner with a friend on some investments (STR and/or development). Our background is in architecture, so trying to learn more about the business and financing side of the game. Feel free to reach out!