All Forum Posts by: Jonathan McKay

Wow that's great! Is this by Kendall Yards? 

What services are you adverting on? Using 1st party or 3rd party property management? I have about 5 STS units across the portfolio but have decided not to convert any entire building yet. 

I think Guenther is hands down the best in Spokane, but they may not be taking on new clients. LT is a good full service group as well, but they might want to do bigger buildings. I would shy away from Madison. 

We're at 23 units in Missoula and buying more where we can find it. I think the new construction is almost invariably higher quality, bringing in more remote workers and people GDP to the area, creating a Bozeman-like flywheel. 

I have a few small multis in that area and they've performed well. Renting by the room is definitely a good strategy in that area. Sounds like you put together a solid deal :) 

How did you take care of the electrical work? 

How long did you hold it? 

Great time to be investing in Spokane! 

@Kalin Stocker - to attempt to answer the question I think you wanted to ask: 

1. 8% Cap rates in Spokane are rare, and imply something that requires substantially more work than a typical SFH or multifamily investment. Sober living, with more difficult tenants, liability concerns, and intensive property management fits into that. The highest cap rate I've purchased in the past 24 months in Spokane was a 7% cap, on an 8 unit building that needed $150k in renovation, had bed bugs, and a drug dealer actively selling from the side door.

2. When you get into the nuances of cap rates, everybody has their own method of calculation, which means cap rates only matter insofar as you use precisely the same methodology to compare buildings. 

3. Going in cap-rate is substantially different than stabilized cap rate. Since rents have moved so much in Spokane, there is a big gap in these. I've seen and purchased cap rates in the 3-4's but this is only because I know there is opportunity. 

4. In Spokane, for a reasonable neighborhood, I underwrite an exit (stabilized) cap rate of 5.5-6%.

Some thoughts based on my experience in Spokane: 

1. Sounds expensive, but will probably add $200-300 in rent for Spokane market. 

2. I'm a little skeptical of this. We tried making a small bedroom out of a floor plan in the Valley that would have been large for a 1bd 1ba, and that unit has turned into one of our most difficult to rent. 

3. This can probably get you an additional $1-200 in rent. There are very few 2bd 2ba apartments / houses available, so I'm not sure how much that would add tbh. 

5. Sounds like there are things you need to update (grounded incorrectly) and things to monitor (fuse box) that could wait for a full update. Often insurance will come do an inspection and they won't insure the property if it is actively unsafe so you'd be forced to fix it. 

Sounds like a nice deal! Chief Garry near the river is likely to get interesting over the next 5-10 years. 

@Will Lawrence: West Central can be a difficult neighborhood to find property management for. I still think Guenther is the best in Spokane but I'm not sure if they are accepting new clients or willing to do West Central. 

I faced a similar case where I accepted prepaid rent - and then had trouble (drugs, arrest) with the significant other of the tenant. Ended up needing to evict, but tenant (and their legal team) claimed they were owed the money as a deposit. Turns out the distinction between prepaid rent and deposits is murky in Washington State, and you would probably need to litigate in order to get a distinct brightline. There are specific rules in Washington state around how you must deal with deposits, if not you are liable for 3x the deposit amount. 

In summary: we no longer accept prepaid rent.