All Forum Posts by: Lesley Resnick

Putting in $5000 is a attractive to control $450k worth of property.  Cash is king and this allows you to put your other funds into the next project.  The 3 year balloon is going to be tough.  You will need the property to increase in value 20-25% in 3 years to get a more conventional loan?  If you had outlined a big value add play, then it would be easily to make the increase.   

As a practice the last dollar is ALWAYS, the most expensive one.  Whenever I have tried to squeeze out the last dollar, I have regretted it.

 I am with Victor, the zoning is your first challenge  The 2 big ones are:

Are you zoned duplex?  You can look it up online or contact zoning in the municipality. 

Do you have enough land? - There are strict guideline on how much land the duplex is built on.

Assuming you meet both criteria, will the project make sense financially? Most SFH do not lend themselves to conversion. I have looked at SFH with attached garages and thought about making it an apartment. The hassle and the numbers have not made it worth the trouble.

As far as the duplex, I would think long and hard about only purchasing half.  You share a common roof, firewall, possibly a fence.  However, there are a lot of Town House communities that are connected in the same way.  I would research it further and make a decision on  a case by case review.

 There is always a bit more art than science.  Initial take is the numbers are fair, with that said I would ask for the following:

Expenses:

Power, water/ sewer

trash

maintenance - is there differed

property management - 24 is going to be tough unless you can be almost full time on it 

any other related costs.

Is there an opportunity for a value add, raise rent, improve property.

 Rent is 538 per unit.  Could it be higher?

If it is truly 100% rented and it can be proven it is an huge piece of the puzzle.  You can reduce your vacancy loss % in your calculations.

I typically want to be a 1% a month, it gets harder to make that number as the number of units grow.  With that said, IF the 100% occupied is verifiable, there is no deferred maintenance (roof  a/c), utility costs.  This could be a winner.

There are fannie mae loans specifically for student housing, i dont recall the terms but I could check it out.     

The closest model I have seen is to buy distressed properties and stabilize them.  The goal would be to get out in under a year.  In most cases it it a cash business.  Hard money financing is expensive for projects this large and would still require a lot of cash down.  The exit strategy is to find a buy and hold investor who uses conventional financing.   Not quite wholesaling, more like a flip.    

The deal makes sense and is reasonable.  The 0% for 7 years is great.  As far as the legality of the owner passing, it is your place and you owe him a debt, or his estate.  The estate will be under contract until the 7 years runs out.

The bigger issue is your financial stability.  You need to consider your own viability.  You have to plan for the worst case scenario.  All the numbers above are estimates or historical.  There is no way to predict what will happen. 

How old are you? 

How stable is your job?

Do you have a spouse that works? Kids?

ETC.

I would recommend finding a partner, friend, relative, so on.  Taking this on by yourself could destroy you financially.  The down side risk is huge.  People on BP are sometime to aggressive in their approach and risk way to much for my taste.  This is a long race and it is more important not to lose money or make a mistake then any individual deal. 

First and foremost you need to determine if your municipality allows airbb?  If they don't then you need to have them stop.  Things like this always get out.  The same way your found out the municipality will.  If they are good tenants, pay rent on time and do not trash the place, let them stay.  Otherwise tell them they are in violation of the lease and need to move out.  It is always better for people to leave on their own, than evict them.  It costs time and money to evict and it is rare that you come out even or ahead.

If you can legally have an airbb, then game on.  A revenue share model is fantastic.  The tenant will manage and run the service, the landlord collects additional money.  The tenant has their stuff in the unit and assumes the greatest risk, since you have their deposit.  You may want to consider raising the deposit.    

That is a great RE investment!  How did you finance the property?  I am working with a few Canadians and they have been using US mortgage from the Canadian based banks, TD and RBC.   As I understand it the US mortgages are longer (30 years) and typically cheaper.  They both run a "cross boarder" program. 

We offer a hybrid approach.  We have a team and you tap into it.  We help you identify a property that fits your needs.  If you need rehab work we have a team of contractor we regularly work with. We will manage the property and put your rental listing in the mls and it would be syndicated to  something in the range of 2000 different web renal websites.  Upside / downside of our model, you have greater control and input.  It is more time consuming, but you have greater control and input into your investment.

I am an investor friendly RE agent in Jax.  I have my own investment properties.

Feel free to PM me and we can connect on what you are looking for?

The trend is your friend.  Deflation is a temporary situation, it can not last for any extended period.  There are no long term examples, after wars, famine, government impropriety, etc it may occur.  There are more people every year chasing the same limited resources, supply and demand will take over.  

As long as the US maintains its high level of debt we will see fed rates well below below the rate of inflation.  They can shrink the deficit by paying with dollars worth less than when they borrowed them.  This will result in low interest rates on the 10 year T Bill, which drives the 30 year conventional mortgage.  If you believe this as I do, then leverage is only sensible strategy.  Since you will pay back the loan with cheaper dollars than you borrowed.  Further, I would suggest interest only loans, since the net effect of the interest minus inflation would be negligible.  For example, long term interest is in the 3% range and  interest rates are currently under 4%.  Who would not borrow money at  a 1% net interest rate?

This is not to say that it is an excuse to be reckless and not maintain proper cash reserves.  No one knows when the down turn will occur, but given enough time....