All Forum Posts by: Michael S.

@Mohamad Guene  Simple answer - you will be cash flow negative, and your appreciation will be limited.

We did a new build once for a rental - it performed miserably cash flow wise despite a great location and property - we ended up selling it 3 years later.

There are very few new builds in Huntsville proper - are you referring to an outlying area like New Market or Meridianville?

I will give you the simple answer - you are unlikely to cash flow whatsoever on a turnkey property in Huntsville or Madison right now unless it is in a C/D neighborhood, and/or you plan on putting more than 30% down.  

We just sold a turnkey for $200k.  It should rent for around 1500/month.  The investor that bought it from us paid cash.  So they will cash flow - but that's because they effectively put 100% down.

We have two more turnkeys listed on the MLS right now for under 250k in good areas. But unless someone puts down at least 30% on the purchase, they won't cash flow.

@Rachel Hadass - here's my thoughts on your questions:

- What areas have the highest tenant demand and why? What are the demographics (eg, mostly families, young professionals, etc)?

Downtown Madison (35758) will always have enormous demand, but the area doesn't cash flow.  Huntsville proper under 1500/month has high demand as well in either good neighborhoods and/or nicely updated properties.  

- Are there certain areas you would stay away from and why (eg, high crime, bad schools, poor quality builds, etc)?

Not really, although the area around Pulaski Pike has some rough patches

- Would you recommend trying to rent to Section 8 tenants? If so, are there certain areas that would work best?

We have never done section 8 rentals, so I have no experience to comment on here.

- Where are the areas with the tightest inventory?

-Madison proper, and the nice areas of Huntsville (Jones Valley, Blossomwood, etc) - simply because the numbers don't work well in these areas, limiting rental supply.  

- Are there areas that would work well as a mid-term or short-term rental in addition to long-term?

STRs are now forbidden in Huntsville without proper zoning - and they have been enforcing it. 

We tried two MTRs and lost money - won't try it again.  

@Tim Porsche - disclaimer - I know nothing about Pennsylvania real estate law.

That said, I don't see any recourse for you here on this issue, as they would likely argue that you had a chance to do your due diligence before writing the offer and/or could have written a due diligence period into the contract and chose not to.  

There is only one time we did not close on a house we had under contract with a wholesaler - this was due to a title issue, and we received our EMD back because the seller/wholesaler ultimately could not uphold their end of the contract (inability to deliver the property).

 1.  Answering any post that starts with "I have one million in liquid cash and not sure what to do with it".  

2.  Putting "Columbus, OH" in any part of their post.

3.  Answering any post that starts with "I want to start investing and have no money".

4. Continuing to interact with posters who have no experience in REI, yet tell the experienced investor they are "wrong" or "old school" in their investing strategy.

5.  Conversing with any poster who is new and tells us how "great" their mentor program is that costs $20,000.  

@Vanessa Switzler - would NOT recommend Huntsville for MF right now - too much inventory and too high of prices right now.  Check back in 1-2 years when syndications are dumping their MF here at a discount.  

@Elan Adler - I think the reason you are not getting much in the way of responses is that you will not find a house for $250k here that rents for 2k.  That is not realistic here whatsoever.  In Madison or Huntsville proper you could buy something for at least 300k that might rent for 2k.  We have one property that rents for over $2k that we bought quite a while ago - it is in a prime Jones Valley location (35802), and would sell for way over 350k if we ever decided to move it.

$250k will get you a rent of around $1500. Heck, we have two flip properties listed on the MLS for just under $250k that we will instead rent for $1500 per month if they don't sell in the next 1-2 months.

@Kevin Nolan- I am an "actual investor" in Huntsville, so I will give you my honest two cents.  Where is your new construction house located?  Truly in Huntsville proper, or in an outlying area like New Market/Meridianville/Hazel Green?  Makes a huge difference in your rental ask amount and demand.

I am not sure how you got the numbers to work on your new construction house.  I ask because we purchased a DR Horton new build within 7 minutes of downtown Huntsville before the pandemic.  House was fine - really no cap ex expenses for several years.  20% down.  Interest rate below 5%.  However, it did not perform well overall and barely cash flowed (although, to be fair, it was on a 15 year note).  We sold it about 3 years later (and had an amazing net return from appreciation).

Unless you are putting 30%+ down and are doing a 30 year note, I am not seeing much cash flow opportunity for you.  I would not bank on any appreciation for at least 3 years on a new build as well.

Also, as several other posters alluded to, vacancy is very tightly correlated with rent ask these days.  Anything less than 1500/month that is a solid property and decent location will typically move in under 30 days.  Over 1500, it better be A/B neighborhood and reasonably updated.  Over 2000, it will not move unless it is an absolute pristine location or property (prime Jones Valley or Blossomwood location for example). 
 

@Derrick G McIntire - where are your investors buying new constructions where the numbers work?  Are you referring to the present, or purchases several years ago?  Just curiousity, as I have zero interest in new build purchases at present

@Nathan Frost - there is a lot of solid advice already on this thread.  

I would definitely not buy additional houses right now when the properties you own are already giving you sleepless nights. 

Of your properties, are any of them in A or B neighborhoods that at least break even after property manager expenses, insurance, property taxes, and capex?  Those are the properties you should definitely keep when you decide on properties to sell.  A and B will typically have more potential for appreciation and solid renters.  Obviously, if you own anything in an upcoming area or transitional area, best to keep those as well so long as they are even or better.  Good luck.  

Agree with @Joe Funari - we only work with local/community banks and regional banks - they are quicker to respond, take a personal interest in partnering with your real estate business to see it have success (which makes sense, because they want you to make good on your loans), and offer much better rates than hard money loans - we don't pay any origination fees, they can even fund in less than 30 days, and interest rates have never hit double digits over the past 2 years.  

Now, here's one important point I've learned over the past 7 years - never do business with ONLY  one bank (unless you are only buying a property or less per year) - you never know when the bank will lose their appetite for cash out refinancing or construction loans.  Always have at least two banks you are active with as far as business account and getting loan quotes.  We got delayed on a cash out refinance years ago when the bank's philosophy changed overnight.