All Forum Posts by: Nick L.

@Michael Henry What makes you say So Milw is heating up? I pass through all the time and find it getting rougher. Problems at Caterpillar are not helping. I just don't see the employment to support any kind of middle class population. It doesn't help that Cudahy and So Milw have no convenient freeway access to get to better employment centers.

@Brandyn Dietman Agreed about Bay View pricing some people out. I feel like they are going to Town of Lake though (East of Howell, between Whitnall and Layton). Are you seeing something different?

I'm looking at a multifamily on 72nd & Center that you would think is in Milwaukee but in fact is in a tiny pocket of Wauwatosa that juts north along the irregular border. It's not clear to me whether I should value it more like a Tosa property or more like a west side Milw property.

What I like about the neighborhood:

- In Tosa school district

- Near all the cool North Ave retail activity

- Might attract tenants attached to the Medical College

What I dislike:

- Proximity to rougher areas of Milw

- Immediate area is mostly scrubby retail like nail salons

Your thoughts?

@Kristin Horowitz

Just wondering how you got on with your project?

I was reminded of this thread when looking at this cool climbing gym partnership in my city: http://urbanmilwaukee.com/2016/01/15/friday-photos...

Does anyone have experience of renting out unlicensed AirBnB units? I have heard that there are a few ways to skirt detection, for example:

- Licensing and advertising one unit in a multi, but actually renting out all the units

- Advertising on Craigslist rather than AirBnB/VRBO

- Advertising openly but only providing the street address once payment has been made

I'm especially interested in Austin, TX but all experiences are valuable!

@Carrie Hiner?

@Account Closed 

I almost had a similar situation last week. 

A local investor bought a condo 5 years ago for cash. Fell behind on HOA payments and went to foreclosure over $12k first position HOA lien. FMV around $110k.

I called the HOA manager and the foreclosing attorney and they both told me he was unresponsive to all communication. The attorney told me the plaintiff's bid was so much lower than the FMV that the sale might be thrown out at the judge's confirmation hearing!

I did my due diligence and everything seemed good so I was ready to bid. At 4pm the day before the auction, the HOA manager called me and told me the investor had turned up out of the blue at the foreclosing attorney's office with a cashier's check for the amount of the deficiency.

No explanation as to why he had disappeared or let the situation deteriorate so far... just one of those things I guess.

First question - where in Austin are you getting a quad for under $300k? If it's a badly maintained property with crappy tenants and a lot of deferred maintenance, you have to figure that into your calculations.

Second question - what are the rents and expenses? What level of monthly payment can the NOI support?

I would take the deal if all of the following are true:

1. You cannot get conventional lending or use a partial seller second with primary conventional

2. The property can definitely cashflow even with the 9% interest - even neutral is ok as long as you are sure it can do it

3. You have a definite exit strategy, for example you are sure you will have 25% equity for a conventional refi in 3-5 years

4. You have cash on hand to perform any repairs that are needed before the property generates any real cash flow. Including fixing deferred maintenance issues.

If any of the above are not true, you're setting yourself up for a very risky situation.

That sucks. I wonder whether your hard costs are too high? Here in the midwest I'm looking at around $100-110 PSF hard costs for stick built. I'm sure you're in a more expensive location but $275 seems super high. Maybe you could alter your construction type?

@Bil Casimir

Have you seen the HOA docs? Are you allowed to rent out the units with no restrictions?

What are the HOA fees? What do they include? Any current or planned special assessments?

Re your calculation, gross cap is meaningless. You could say that the GRM (Gross Rental Multiplier) is 3.0. Even that doesn't mean a lot. Better would be to estimate your operating expenses and calculate the cap rate based on NOI. Assuming a 60% expense ratio for older units and a HOA fee, your NOI would be $13,000 and your cap would be 13%.

You're hitting all the right line items. A few points concern me though:

1. Operating expenses are less than 22% of rents. I get that this is new build but it seems awfully low. I don't know where this development is located but taxes, insurance, repairs and landscaping all look very low. An opex ratio of less than 40% raises questions.

2. Soft costs also look low. 20-25% might be more common. I would suggest breaking this out like you did for expenses. Are you including debt service? 

3. Your hard costs say there will be 12,495 SF. But adding together your units gives 19,100 RSF. No doubt there will be some internal and/or external common areas to be built too. So your math may be thrown off here.

4. I don't see any figures for contingency. Is this built into the hard and soft costs?

@Account Closed not me.