All Forum Posts by: Michael S.

@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.  

I was actually starting to wonder if Reafco had secretly bought Bigger Pockets...

@Flavia Vangelotti - I am not following how the numbers look great from checking out the website, at least for the AL property in Cullman.  

Purchase price of $320k for max of $2000 a month in rent?

Clearly I am missing something here, but that's what I saw on the website.  

It would only cash flow with a really large down payment.  

How can I sum up my view point on this topic succinctly and definitively?  

How about this... I don't care what Dave Ramsey says. 

@Alba Cheung - it's always a good time to buy SFHs in Huntsville/Madison proper...if the numbers work.  The problem is, the vast majority of the SFHs currently available, both on market and even off market, do not work when looking at the numbers if you want positive cash flow.   Here's some exceptions:

1.  C/D neighborhoods, although even C neighborhoods are now selling for over 150 square foot and still need rehab.

2.  More than a 30% down payment on a 30 year note.  Even then, A/B won't typically work.  

3. Off-market deals (although just because it's off market doesn't mean its a deal by any stretch - some wholesalers are now asking essentially MLS prices)

4. Unicorn deal (they exist - we found one this year)

I'd strongly advise staying away from new MFHs in this area - the supply is now exceeding demand.  Old MFHs in this area are few and far between, and still asking premium pricing in most instances.  

As a general rule of thumb, no one ever lends for less than the rate of a high yield savings account.  

@Samuel Coronado - appreciate the update.  Now that you've passed on the deal, can you disclose where the land was located?  I'm just curious - we've bought one piece of land since 2018, and not likely going to buy any more in the immediate future.  

Nice work.  We looked in Elkmont for a rehab once, but were not sure enough of the LTR market to move forward.  Let us know how the rental performs in a year - I'd be curious to know.