All Forum Posts by: Konstantin Ginzburg

 Since there is no way to determine when or if rates will go back down, I think a good mindset would be to proceed on deals and calculate your numbers with the interest rate you get. If the rates go up more, then you are you are set since your rate is locked. If the rates do go down over the next few years, then you will be able to refinance at that point to a lower rate. I don't see the likelihood of a large increase in inventory occurring in the future if there is a current inventory shortage in that market. New home construction has not kept up with market demand for over a decade and I think it will take time for inventory to balance out.

Regarding which strategy to choose for you: I think it is more of a matter of seeing what property is available on the market right now and basing your strategy around which property generates the best return on your investment once you calculate the numbers. Since it's more difficult to do a HELOC on an investment property compared with a primary residence, a cash out refinance might be the strategy you will need to select unless you are able to find a lender that will do a HELOC on an investment property.

Some things that I look for when screening a tenant is whether or not they have previous evictions on their record. Any prior evictions is a giant red flag to me. I also strongly prefer to have a tenant that is able to show monthly revenue that is at least 3x what the rent is. Keep in mind though, I have heard that certain cities dictate what things you can and can't screen for from a tenant so I would get familiar with your local tenant discrimination laws to ensure you stay compliant. 

 The cruise lasts for 8 days. I agree that is seems like a great opportunity. It will be my first time at this conference so I am not sure what to expect but I am excited for it. The next cruise/conference they have planned will be next spring that will take place through the Caribbean. 

 I would love to connect as well however, there is no port of call in Anchorage on this cruise. The stops on schedule are: Sitka, Skagway, Juneau, and Victoria. If you have any tips on must see restaurants or must see attractions at these cities; I'd love to hear them. 

Since any seller would likely ask you to make those repairs anyway, I would do the repairs and place an ideal tenant and list the property afterwards. This way you will have a stronger selling point for buyers in a ready-made rental property that is fully occupied. If an offer comes along that you think is too good to pass up, then sell the property then. Since you are cash flowing, you won't need to be in a rush which should increase your negotiating leverage. At the same time, begin looking around for a property to 1031 exchange into. Since there is a time-limit on how long you have to roll a 1031 exchange into a new property, you could hold off on a sale until you find a property you actually want to move on. This way you increase your options effectively allowing you to choose between holding the property, selling, or exchanging depending on what the market presents to you.  

 A percentage of rent will be counted towards your revenue (I believe 75%). I've typically had my CPA provide a schedule E form in these instances when it has been needed by lenders. 

 As some others have said: it's hard to give a definite opinion without seeing the actual numbers involved in the deal. Due to there being no down payment, then no initial cash flow wouldn't be a deal breaker (assuming you factored in every cost such as capX, maintenance, vacancy, management, ect.) but if the negative cash flow is very substantial, than I would say it is better to walk away from the deal and find a better option on the market. This is especially true since the internet rate on the deal is 8-10% which is quite high.

I have not looked into the Alabama market too often but I am nearby in the Louisiana market so there may be some overlap in those markets. One thing I have learned in the Louisiana market is that new construction rarely were able to cash flow since the higher rent they brought in did not offset the increased monthly payments that came with their higher purchase prices. However, I was able to find several used homes within the same market that were able to cash flow on day 1 and I viewed as better long term investment options. From my experience, the southeast is also not an area were you can depend on high appreciation to quickly improve a non-ideal real estate purchase. Both home appreciation and rental prices will increase over time but it might not occur as quickly as you anticipate so ensuring your property has a high initial cash flow would be in your best interest for your first property in my opinion. 

My ideal goal would be to generate the max revenue so would prefer finding a price point that creates the best combination of vacancy and nightly rate that would create the largest monthly revenue. It's a hard balancing act to perfect but I have personally lowered prices if I saw that my vacancy rates were slipping. I do try other things first such as improving listing, optimizing SEO, doing marketing campaigns, ext. but if vacancy is still high than I tick down price a bit to see if that improves things. STRs are still run on a supply and demand cycle. Compared with the last few years, it does seem that the demand for STRs has dropped to an extent once the post-covid travel craze reduced down. At the same time, a lot of areas became flooded with more STRs than there was a market demand for. That had a downward effect on pricing in those areas. So if an entire area had to lower their price in order to get bookings, I don't consider that pricing being below market rate; that is simply the new market-rate. We also use software to track competing prices of listings in our area and dynamically updates our pricing daily. As long as my expenses are still equal to my revenue; I can continue to operate. If there is a market saturation in an area, then eventually more STRs will likely leave the market if they are not able to make a profit which will likely allow for prices to balance out by that point. Just need to focus on keeping head above water until then. 

The National Real Estate Investors Association is holding their annual cruise in September this year that will embark from Seattle towards Alaska. This will be my first time attending this event since  I thought it would be an excellent opportunity to network with investors from around the country. Will there be anyone from this forum who will also be attending this conference event? It would be nice to connect with others prior to the cruise. 

It depends on the underwriter. Their expectations on a property condition is not standardized so the requirements of one lender may be different from others and may require you to do additional repairs prior to them financing the property. In general, they want to the house to be in good standing and habitable since the property will be what is protecting their investment. The house doesn't generally need to be pristine but it does have to be comfortably habitable. Lenders may turn down financing if certain things are found during the inspection though such as knotted tube wiring or other things that have historically caused severe property distress in the past. Since you are using an FHA loan though, they will have separate requirements of their own that are outlined in the FHA guidelines. For example, one property I purchased would not allow for an FHA financing option because the property had window units while FHA require central AC so factors like that may effect you if you are using an FHA loan, especially if you are purchasing older buildings that have not had frequent updates and renovations. The insurance providers may also have their own separate standards that they will require the property to maintain in order for them to provide insurance on the property which you need to factor in. If no insurer will provide hazard insurance, no lender will be willing to loan to a property that isn't insured.