All Forum Posts by: Justin Fox

I would get with an attorney and see how hard and how costly the deed restriction is to enforce and if it's even legal in your area.  Most times residents have to form a committee and formally sue you.  Sounds like the owner has other STRs in the area and wants a form of non-compete unless you pay for the privilege.  At the end of the day, if you want no competition then don't sell the business.  I would try my best to weasel around it.  If I couldn't, pass.

@Lara Ishtayeh
The goal is to always find deals that make money and cashflow on the buy.  So if you find a deal that works and you have adequate reserves, pull the trigger.  I would not suggest floating any negative cashflow hoping for a refinance anytime soon. 

I usually estimate 2 - 3% of 80% of the market value for taxes.  In this case you're looking at between 375 and 450 per month (could be less not sure).
Depending on age of the home I'll set aside anywhere from 1 - 3% of my all-in value for repairs and capex, 300 per month in this case (2%).  You can decide when to taper and at what amount.
I don't know the sqft of your rental but I typically estimate roughly 94% of the sqft for the annual home owner's policy, ~100 per month in this case based on a 1250 sqft house.

Just the PITI and repair fund contribution on this looks like $1,872.00 - $1,947.00 per month, leveraged over 30 @ 6%. That's not including any potentially required, additional insurance riders or profit.

The lowest OO mortgage rate I've seen is 4.9% from a credit union. I would budget for 6.0%+ for a cash out on an investment property at least. Don't have any experience regarding points. Lender fees can vary but I would say 3500 - 5000 in origination and other underwriting/prep fees.

As long as you can earn your desired profit per month leveraged, it's a good deal.  You also have the benefit of lower capital expenditures up front.
This interest rate environment is pretty ugly though and the Fed's committed to deflation and demand destruction at this point, so you're going to have to find private money builder's hard up for a sell.

We were building to sell but we're about to move back into the build all cash to rent.  Right now, with current rates, a 1250 sqft 3/2 with no garage would run you ~1350/month.  That's with no profit or repair reserve contributions.  I'm looking at right under 1,700.00/month with repairs and a sub-par return.  Makes 0 sense right now in my area.  Rents like these aren't sustainable here and I don't want to get caught with my pants down paying for 8% money (unless stuff starts going for ~80/sqft).

I had a 7% interest rate in '05, but it cost us $65/sqft to build our own home (doing some stuff but still paying a contractor) and that's not happening anytime soon.  We just build another house for ourselves we did a lot of the work and were the contractors: 130+/sqft.

I would additionally invoice each tenant for 1/2 the bill come the 1st.  Maybe send them out a curtesy notification about the charge and explain that, that's the policy.

Want to change the behavior?  Change the money.

Next door elderly lady's Pit Bull bit her finger off.  She said he was having a sneezing fit...  I told her that if she loved him to keep him in the fence.

Talk to some local credit unions about a possible residential construction loan for a 4-unit and tell them you'll live in one of the units.  You'll probably need to hire a contractor.  Just stay involved, take notes about the permit process and order of operations and when inspections are done.  You'll be paying the subs so keep a contact list.  If you want experience, put your time and money on the line, only way to do it.

I would get a bid from contractor(s) based on your sqft, that it's two story, the number of beds/baths, roof type and exterior material, before purchasing and solidifying a plan.  I would preferably go with a contractor that provides a cost-plus bid approach.  I would then talk to some appraisers and ask what new construction residential is appraising for.  If the appraisals are covering the loan amount, cool, but does it CF at that price?  If it doesn't appraise, you'll have to decide if it will cashflow, is it enough and is it worth your liquidity?  The market can change a lot (especially now) over a year+ of the building process (material costs, interest rates and etc).

You'll need to talk to some local building material companies as well, see what lead times are on windows and other materials.

Get bids from a few contractors, if one stands out as being a deal too good to be true, steer clear.  You'll just get notified every line item that you went over budget and be out of pocket and pissed off the whole time. 

Honestly, I would only do this if I had a majority of the cash required.  That way you could avoid carrying a large interest bill during construction to boot.  The #1 indicator for development success is the cost/prep of the land acquisition.  This is were cold calling and tax sales come into play.
 

August 21st I believe.  I've always heard 'one year and one day'.

So is it federal law that the buyer must provide the seller with the appraisal if they back out due to the property under-appraising?  Or is it only state specific?