All Forum Posts by: Patrick Sears

Hi Greg, thanks for the reply.  Yeah I was thinking Hampton-Sydney and Longwood, which would be Farmvile, Amelia, Buckingham counties & therabouts as development/purchase costs would probably be cheaper than in Richmond and UVA ( what they want these days for a triplex near VCU is outrageous).

Since your in Charlottesville, what demand are you seeing in the surrounding rural areas for rentals?

Thanks for the advice, Clay.  Yes, the potential for roommate disputes and drama is a definite concern of mine...

That is a good point and one I would definitely find out before going forward.  I wouldn't think 6 would be a big deal, but you never know.  Different counties have different zoning laws, and these colleges have 4 different counties within driving range.

Hello,

Fellow SFH landlord here. Had an idea that I wanted to run by y'all. What would you think of building new (using a "build on your lot" stick builder) a single-family home that had say 6 large bedrooms, each with their own bath, plus a large kitchen (possibly with multiple ovens and microwaves) and smaller communal living room area. Then, I would rent out rooms individually for higher cash floor vs the standard one-family for one house routine? I would probably locate this next to a couple of smaller rural colleges about an hour from my residence. Designing this from scratch, I could also custom design individual storage units, maybe garage spaces for extra $$$, extra kitchen cabinets, etc... Basically, a dedicated "rooming house" or 6-plex that would let me get around apartment zoning regs, commercial loans, etc... for a SFH price and financing.

I realize managing 6 separate tenants would be more work than a standard family, but as recent BP podcasts and blogs have highlighted, the cash flow can be significantly better.

I would eventually like to get into larger apartment investing, but trying to build a bankroll for that at first and apt cap rates are garbage right now anyways.

Thoughts?

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Hello,

Fellow SFH landlord here. Had an idea that I wanted to run by y'all. What would you think of building new (using a "build on your lot" stick builder) a single-family home that had say 6 large bedrooms, each with their own bath, plus a large kitchen (possibly with multiple ovens and microwaves) and smaller communal living room area. Then, I would rent out rooms individually for higher cash floor vs the standard one-family for one house routine? I would probably locate this next to a couple of smaller rural colleges about an hour from my residence. Designing this from scratch, I could also custom design individual storage units, maybe garage spaces for extra $$$, extra kitchen cabinets, etc... Basically, a dedicated "rooming house" or 6-plex that would let me get around apartment zoning regs, commercial loans, etc... for a SFH price and financing.

I realize managing 6 separate tenants would be more work than a standard family, but as recent BP podcasts and blogs have highlighted, the cash flow can be significantly better.

I would eventually like to get into larger apartment investing, but trying to build a bankroll for that at first and apt cap rates are garbage right now anyways.

Thoughts?

Hello,

Fellow SFH landlord here. Had an idea that I wanted to run by y'all. What would you think of building new (using a "build on your lot" stick builder) a single-family home that had say 6 large bedrooms, each with their own bath, plus a large kitchen (possibly with multiple ovens and microwaves) and smaller communal living room area. Then, I would rent out rooms individually for higher cash floor vs the standard one-family for one house routine? I would probably locate this next to a couple of smaller rural colleges about an hour from my residence. Designing this from scratch, I could also custom design individual storage units, maybe garage spaces for extra $$$, extra kitchen cabinets, etc... Basically, a dedicated "rooming house" or 6-plex that would let me get around apartment zoning regs, commercial loans, etc... for a SFH price and financing.

I realize managing 6 separate tenants would be more work than a standard family, but as recent BP podcasts and blogs have highlighted, the cash flow can be significantly better.

Thoughts?

Thanks for all the great replies!  So in other words, the math that I use on single family properties is exactly the same as the math you use on apartments, and well, everything else in this universe.  My calculator isn't bullsh*ting me ( although certain "Gurus" on YouTube might be).

I can certainly see buying a property with neg cashflow due to extremely poor management, then turning it around to make it profitable (those are usually the best deals in the end if they pan out), but you wouldn't (or at least shouldn't) be buying those "fixer uppers" at a 3.5% cap.

In my example, I chose a 3.5% loan interest rate.  Since we've determined that cap rate has to be higher than that for the deal to pencil out, what type of spread are you pros looking for? 1.5 points seems pretty skinny unless there is upside in the way of low rents, etc.. I'm not really seeing a whole lot out there in apartments that are listed at >6% cap.

What are you guys buying? Or are you even buying right now?

Hello,

SFH investor here thinking about kicking it up a notch to apartments. Everyone knows the current market is definitely a seller's market, with low cap rates. Been reading that cap rates aren't as important as every newbie thinks, and that a low cap rate property can be a good thing in the long run i.e. "go with quality".

However, my financial calculator is telling me this doesn't work...

For example: A class apt complex, $20m purchase price, 3.5% cap rate ($700,000 NOI), 20% down ($16m note).

At an interest rate of 3.5% over 240 months, the yearly debt service would be $1.11m for a negative cash flow of $413k.  For a 360 month term the yearly pmt total would be $862k for a negative CF of $162k.

So how does this work exactly? What am I missing?!?!

@Mark Wurtemberg

Sounds like it is working out well for you. My big worry with starting this business is the competition. When I go on RVShare and Outdoorsy and look up the available units for my area (Richmond, VA) there are a TON of units of all classes available for rent. I would imagine it is the same for your area in California? How much demand do you get for yours? I don't see this working if it is rented less than 15 out of 30 days per month...

Thoughts?

By selling a partial on an actual note, you are recouping your initial capital outlay to develop the project (owner financed house you flipped on terms to end buyer).

In my example, I'm not selling the house, but holding it as a rental.  But I still need some cash to replenish the bank account so I can develop another rental property.  Hence, the desire to sell some of the income stream from rent payments.