All Forum Posts by: Justin Moy

You can have a contingency in the PSA that says a unit needs to be delivered vacant before close. This may be covered under the loan contingency, but I'd put it in as extra. 

The MTM tenant can be vacated by current owner and if they want to sell it to you, they'll have to do that. 

Or they can say no and look for another buyer, but really you'd need the seller to agree to deliver the property with 1 unit vacant

For properties that size I'm not sure cap rates will give the best story, but for the sake of answering the question, cap rates are a level of desirability in that sub market. 

In Kansas City you can find properties with cap rates ranging from 5 - 7+

Big difference in projected cash flows, and the most desirable neighborhoods are trading closer to that 5 cap rate. 

There's likely submarkets in Vegas that trade lower, my understanding is the Henderson submarket is really desirable, so I imagine those cap rates are starting to shrink as I've heard Vegas getting lots of outside investment

I think the first question to ask yourself is do you want to be active or passive. 

Social media is filled with 'passive income real estate' but it takes a lot of work to acquire, qualify for loans, and manage property. 

If you want to be passive look into syndications or some type of fund. 

If you want to be active then I'd start with a market and niche you want to pursue. 

Once you get your market and niche down everything will become a lot more clear 

Fixer uppers - higher risk higher reward potential

Turnkey - lower risk lower reward potential

Depends on your skills and how heavy of a turn the property is. 

At this stage in my investing career I don't buy things that don't cash flow, so if the fixer upper is going to bleed cash until it's fixed, I wouldn't invest in it. 

Then you have to really stay on top of the renovations. Don't just hire a contractor a PM and tell them to fix the property. Be hands on and know what you're looking at and talking about. 

If those skills aren't you or you don't want to commit the time to managing that process, take the lower risk option and go turnkey 

I've heard a lot of investors using Anderson Business Advisors to help with things like this. 

I started the process a bit ago (but never finished just due to other priorities) and their expertise was clear and their prices were really reasonable. 

I've used MBs in the past too and it's a great simple one. For something more advanced Lone Star Capital has one on their website you can download for free I believe

In most markets people are seeing negative cash flow on house hacks. 

You can test out mid term or short term rentals on one or a few of the units to offset that, or you can accept that you're drastically lowering your living expenses and building equity. 

I'd see how the property performs if you were to move out, does it cash flow then?

Appreciate the insights, definitely harder to find those types of deals

I'm going to give my answer assuming the underwriting is correct and you've got quotes for your insurance and a few bids (and picked the highest number) for your renovations. 

If this was brought to me as an investor my first thought would be how feasible it is to double the rents and in what time period you're looking to do that. 

If you double the rents on tenants, they will all leave. In my experience, tenants who are paying $300 in rent tend to react more negatively to these things and I've had issues with getting them to leave peacefully, but very broad strokes. 

The more value add needed on a property the riskier it is, for your first deal I'd consider that when you're looking at this deal, if it's your first one a partner who has done something like this before could be very valuable. 

Then there's other factors to success especially in a heavy lift like this, some of the most important in my opinion are 

Being on site regularly to manage the contracting process

Having a lot of cash reserves - 'a lot' imo would depend on how thorough your current bids are and how old the property is

You mentioned it's bleeding cash now, whatever your timeline is for the property bleeding I'd double it and see if it still makes sense. 

Have you invested with a deal sponsor who does non accredited (506b) deals? If so, would be great to hear what groups you've had a good experience with. Feel free to comment on this form or DM me if that's more comfortable for you. TIA