All Forum Posts by: John Gossett

Thanks Jeff for the bubbly market confirmation - I was expecting to hear that after a visit to the REI club last month. Do you have any insight on the cash flow part of my query?

John

I am ramping up to purchase SFH in the Austin Texas market, which is quite bubbly right now. (Stepping in at peak?) I've been running numbers on MLS properties my realtor has been sending me and should be pre-qualified for a rehab mortgage by next week. I desire to pick up "TLC" or "As is" properties because I have available a vastly experienced contractor acquaintance who has agreed to help me in the rehab and I've been remodeling my own home for years.

Running Fix-and-flip numbers (70% ARV-rehab=max offer) has produced numbers I can deal with financially on two "as is" properties where gross rehab estimate is preliminary $35/psf (at the recommendation of my contractor). The offer would be lowball but I'll selectively toss lowballs out until one sticks.

However, I don't feel like the numbers work well for buy and hold because when the 50% expense rule is factored in with Austin's HIGH tax rate, my evaluations never cash flow more than $50 unless I offer a similar F&F lowball offer. I was thinking buy and hold offers should be higher than F&F with desired target numbers for buy and hold to (given the >$230k median home price) end up with something in the ARV ~175-200k range with at least 25-30k equity and cash flow >$100. Is there anyone with SFH experience in the Austin area that can help me understand how to target offers considering price, taxes and what you're targeting for cash-flow? (Should I be looking at wholesalers rather than MLS?)

Thanks,

John

Cedar Park, Texas

I've rented SFR in the past and though I didn't have problems I feel lead to invest in CRE due to the risk/reward equation - especially with buy & hold cash flow as the goal. Here in TX the non-homestead SFR tax rate makes cash flow difficult in my calculations.

Several folks cited cost of entry - for those of you who have made the leap into commercial, what is a reasonable cost of entry?

My goal - develop enough cash flow in 5 to 8 years through CRE to be able to "retire" from engineering and do what I really love, woodworking. In the best of all worlds I would like to buy or develop a multi-bay industrial site where the cash flow is sufficient that I can retain one bay to use for my woodworking business. My engineering income is high enough that my SO flatly won't let me start woodworking business unless I have other income to replace my EE income. Also the cash flow from CRE allows me to have freedom in my woodworking to build and sell artisan projects more than having to rely on customer-driven/spec'd projects.

The problem I've had so far is encountering all the gurus. I am trying to find local brokers/resources that listen to my goals. Point me in the right direction and I can certainly run with the ball!

I had better hopes that this would get a response. How do I post to a forum to get more readership?

Hi, i recently saw an ad in Austin for a 4-plex in an area rezoned as light office. The building needs work (1969 build) and for the area they're asking too much for residential. But per SF office space ranges $4 to $20+. It's on a well traveled road. 2240 sf. Assuming only 2000 rentable sf and 4 offices at $4 per, it looks like at least $8000 gross per month.
Not having done this before, i would like to hear from this community how to approach this and how to execute the conversion. Assume either buy and hold or exchange into bigger opportunity.
In a year i would have decent amount to work a leveraged deal with $20+k for reno/ conversion work. Also, more info, my brother has been house renovating for >10 years and we would do the work. Is something like this viable for hard money lenders?

Thanks for your feedback