All Forum Posts by: Reed Meyer

Is there anyone with experience in short term rental arbitrage and willing to help a beginner like myself figure out how to get started? I am talking about renting an apartment in a desirable vacation destination and subleasing it on a short term basis on AirBnB or VRBO and profiting off the spread. I want to know what steps I should be taking now to get started and how those with experience chose their location, property manager, and cleaning service.

Thank you very much!

I love the large tiles. I think large tiles in a shower always look better than small.

However, I think a solid gray might look better with that color scheme. The tan with the fading around it looks slightly dated and Tuscan. Just my opinion though. Go with your own taste. Best way to go about a flip is create a high quality unit that you're proud of!

Hi Adam. FHA applies for all 2-4 unit properties. However, the Self-Sufficiency Test (SST) only applies for 3 and 4 units (not 2) so this can kill a lot of 3 and 4 unit FHA deals. The SST requires 75% of in-place rents (or market rents for units that are vacant or month to month) to be greater than your monthly PITI payment (principal, interest, PMI, Tax, and insurance). For relatively expensive markets, like Phoenix, this can be difficult to pass as the rent to price ratios of many properties are very low. This makes it hard to find a property with rents high enough to cover the PITI.

However, since 2 unit properties do not require the SST they can oftentimes be far easier. Just make sure you know the counties FHA loan limits on a 2-unit property.

I just looked up Phoenix loan limits and they are: 1-unit = $368k, 2-unit = $471.1k, 3-unit = $569.5k, and 4-unit = $707.7k.

So if you want to put exactly 3.5% down on a 2-unit property you would need to find a property for $488.19k or less. However, you can always just bring a little more money down and still qualify for the low-money down loan product.

Once again, I do not know the PHX market very well but in more expensive areas like the one you are looking in, you oftentimes need to adjust your goals to be more "House Hacking for the purpose of paying lower rent" as opposed to "House Hacking to pay no rent or even cash flow". At the end of the day, if you're house hacking and paying $500 per month as opposed to renting for $1,000 you're still saving a lot of money and also building ton's of equity in loan amortization and hopefully appreciation as well.

Are you saying $450 and $550 a piece for the top and bottom units? So $2,000 total monthly rent? If so, for $80,000 that sounds like an incredible deal. But it begs the question, what is the area like? From my experience, a rent to price ratio like that is usually in a very bad area but your scenario could be completely different. 

If you plan on BRRRRing the property is there enough rent disparity in the area to justify higher rents? What I mean is, if you put money into the property in order to increase the value and the rents, is there demand for $650-$750 rents in that area ? If so, then this could be a home run. If there isn't that demand but you still feel good about the area, then this could be a great buy and hold because with those in place rents at that purchase price the property will cash flow very well right away.

@Gloria N Gear is the best resource for all things Indianapolis. 

Based on the little bit I know about Indy, this is a great area with lots going on and a really great place to live. So it is a great location for a house hack or a conventional investment because it will ALWAYS be a desirable place to live. One other item I would note is to check if it is in a flood zone. I know Broad Ripple is in a flood zone and if you're planning on using debt financing for the Ravenswood deal the lender will make you get flood insurance if it is in a flood zone.

Hey Caelan. If you're looking to house hack just ask, "will I be comfortable here?" I wouldn't recommend buying in an area where you feel like you'd be scared to walk around at night. However, if you feel that there are some cool bars around and things to do then it sounds like it is probably in the path of progress. A lot of times on house hacks the best way to do to it is to buy just outside of the desirable areas. This is how you'll find numbers that work best for Self-sufficiency and living for free/lowering your rent as well as increase your upside in the future and expedite your time to a refinance out of the low-money-down loan with PMI.

I think your best option is an FHA loan house hack in LA. It may be tough to find a property that works within the cities FHA loan limits but if you can this is how you will be able to get the most out of your money on the first deal. In order to house hack in LA you will most likely need to invest just outside of good areas. So areas that haven't grown yet so prices are still reasonable and you can put 3.5% down but they are in the path of progress.

As for a side a hustle, I am in the same boat. I have a W-2 job like you but wanted to expedite my capital raising so that I could buy more, sooner. In order to raise money quicker I got my broker's license. It is a great part time side hustle where you get out of it as much as you put into it. And there are great synergies to my investment goals as well. I get a great sense of a lot of different areas in my market and get a chance to view/underwrite a lot more deals. Also a great opportunity to expand your network.

@Michael Plaks

Haha that’s what I was guessing. Thanks Michael.

I am curious if I will qualify for real estate professional status once I buy my first rental property. I will satisfy the 750 hour requirement as I will be managing my own property and also working as a real estate agent. My W-2 job will still be my main job and my work selling real estate and operating my rental property will not take up more time than this W-2 job.

However, my W-2 job is in real estate lending at a bank. Will I be able to qualify as a real estate professional because all of my working time is spent in real estate or am I disqualified since I spend the majority of my time in my W-2 job (even though it is related to real estate)?

Thanks a lot.

I am looking at a property in Marion County that currently has an assessed value of $28,800. However, if I buy it for, lets say $85,000, will that become the new assessed value? If it's an investment property will this be taxed at 2% for an annual property tax of $1,700?

Can someone provide clarity on whether the assessed value will increase to approximately $85,000 after the sale and whether that is what will be multiplied by 2% for the property tax or not?

Thank you very much.