All Forum Posts by: Jason L.

You're contradicting yourself here. Do you really "just want to help him out" or do you really "just want to help him out...if he pays me to,"? To be clear, I'm not judging you in either event, but your mission statement is very unclear here. If it is the latter, then you need to be prepared to justify that fee when you bring it up to him (write up a scope of work similar to how a contractor would; make it very official). You may want to consider what his reaction might be once he processes that the preliminary advice you've given him that he thought was in earnest, was actually for business solicitation because he might be taken aback by that.

As for actual practical Tampa real estate advice, Tampa is unfortunately a really bad market for house hacking. A lot of these older Florida neighborhoods were just not built for duplexes or triplexes like they were up north. It's mostly SFH, unless you are willing to head into the war zones and put a ton of work in (if you go into South Tampa, then you'll see a fair number of larger SFHs that were converted to MF, but that's also one of the richest parts of town). A better goal might be to help him secure a low down-payment loan to finance a SFH in an up-and-coming neighborhood (check out Seminole Heights, north of Ybor City).

Add value to my experience trying to buy something. Don't just be a conduit to me signing the closing papers. 

A good agent should be presenting properties that fit the investment parameters we likely discussed at the onset of our relationship, and then try to tell me why it would work for me (ARVs, comps, rent demand, neighborhood characteristics, etc.). Tell me stuff I wouldn't know myself (at least stuff I wouldn't know immediately, before doing my own due diligence). 

If you have to source and research properties yourself, and then they cannot provide any additional input besides offering to get you the lockbox code, then what value are they adding to you? If an agent's idea of sourcing properties is to just put you on a generic MLS alert and otherwise never speak to you again, then what value are they adding to you? If you ask specific questions about a property's value and the best you get are terse, one-word answers or "I don't know the ARV," then what value are they adding to you?

Simply put, a good agent should be making the entire house-buying process easier for you. Signing the contract at the end should be a reward for both the agent and the buyer; not just the agent.

Zillow data is exactly what you are looking for. You can download time series CSVs of price data by zip code. It's updated as of 12/2017.

https://www.zillow.com/research/data/

Unfortunately, I don't think you're going to find many duplexes in Orlando (at least outside of the war zones). 

A common mathematical model that companies use for a problem like this is known as a Monte Carlo Simulation. Essentially it takes a distribution of a bunch of variables, randomly selects a value from each distribution, runs some sort of equation or algorithm using these random values, captures the result of the iteration, and then repeats this process many thousand times (5-10k times is typical). The final result is that you'll get a normal distribution of results for your model that sufficiently takes into account the possibilities of all the variables that feed into it and how they relate to each other. 

So in this case, you could provide a random distribution of all of the operating expenses, debt service, appreciation/depreciation rates, etc. and see how it affects the cash flow of the property. You're essentially simulating buying the property 10,000 times with different conditions each time. You could then definitively look at the distribution of results and say, "x% of trials resulted in positive cash flow." Something like this could prove to be very useful in modeling a multi-family since it has a lot more variables than a SFH would, but it could prove useful for either.

So your next question might be, "That sounds great, but how do I make a MCS?" While a lot of companies will probably rely on a data scientist or programmer to work on a complex version of a MCS, you can find some free (or at least not super expensive) programs or Excel add-ons that will be much more user-friendly.  I have more experience with the former than the latter, but I might be able to help you get started.

@Pedro Recarey

You're probably going to need a ton of equity in the deal to make that plan work in Lake Nona. The ratio of median rent to median value at .55% is among the worst in Orlando (which already among the lower cities in the entire state). Winter Garden is cheaper than Lake Nona, but it once again has the issue of the home values outpacing the rents at a faster rate than the rest of the city. That's certainly not a bad thing that your house will likely gain in value, but it is if your goal is to rent it out in 2 years while covering all your operating expenses and debt.

You're also looking at new construction, which means you'll be paying top of the market. It's just not very likely that you'd be able to rent it in 2 years at a price that A) cash flows positively, and B) is attractive to someone who wouldn't just buy something themselves in that area. You'll get a great home for you and your wife, but if the goal is to move out in 2 years to renters, then you should look for areas that aren't as much on the high end.

 I cannot attend next Monday, but I'd possibly attend one in the future.

 I'd like to attend a local meetup if one materializes in the near future. Otherwise, do you know of any other local meetups?

 Is this actually happening this weekend?

@Garrett M. I do plan to do renovations, but inventory has risen at a much faster rate than rents have in this region, which makes getting cash flow extremely difficult.  The BRRR method would certainly be a long-term goal, although I don't think it'd be feasible any time in the near future using this approach.

Buy house for $110k + $10k rehab = $120k AIC. 

The house rents for $1250/mo. Using a 45% expense projection, that's $8250 annual NOI.

Use 80% from the private line of credit ($96k) and fund the other $24k myself. At 5% interest, that is $4800 in interest every year (meaning I'd be making 14% COC).

With some small "renter-ready" renovations, maybe the home is worth closer to $130k by the time it rents. A 75% cashout refi gets me $97.5k from the bank. That's enough to cover the private loan, but only takes out $1500 of my investment so I'm still pretty much in the same spot. Furthermore, a $97k mortgage's payment goes up to $750 per month, which is not only nearly double the private loan but also makes the house cash flow negative.

So realistically a refi is not in the cards any time soon, unless the market appreciates at some major rate over the next year or two. The house would need to be worth closer to $160k and fetch higher rents to make that feasible (which is just very hard to find in Central Florida right now). More realistically, my goal is to lever off private money for as many years as I can to keep it cash flowing. Am I missing something here?