All Forum Posts by: Richard E.

Hi All,

I am looking to do a BRRRR in a market that I am not very familiar with (Actually not familiar with at all). The person I am doing it with brings alot of value and they have resources in that market that will make this cool (Sober living).

Comps are an issue though, because there are really no comps of similar properties. This is a 5/2 ,but it is only 2300 sf, whereas most of the 5s in the area are 3200-4k+. This is more the size of 3/2s. 

So here is the question: When evaluating ARV, if we have a 3 bed and a 5 bed of similar size, build, condition etc, how much value do we give to the extra bedrooms for the 5 bed, when the square footage is the same as the 3 bed?

I've seen articles with arbitrary numbers like 10, 20k. Anyone have any ideas? Thanks,
  

Esteemed listmates,

I have a couple of RE clients who are going after properties which are the types of properties that cash investors are snapping up. Value add, lower price point, up and coming hoods- these guys are getting zero traction on conventional offers for the stuff they are after. 

I have seen services advertised which allow people to make cash offers. Curious if anyone has any experience with these services, or if there are lenders who do this? and for real estate agents- wondering if its even ethical? 

im bumping this only to see what @Eric Chiang has figured out on his riverside MTR, and if renting by the room is better than whole house? Im thinking of changing up what I am doing with one of my MTR's, which seems now to be struggling (YET- its LITERALLY A MILE from County General Hospital and 1.5 miles from White Memorial (also a huge hospital).

My house is a 3/1, gangbusters from early 2021-late 2022, but been on the struggle bus since then (had an almost two month vacancy gap(!) in Sept/Oct 2022) 

I too have read nurses like doing things by the room (but i have had a couple bookings where some of them travel together too). Curious experiences.

Hi all,

Curious peoples thoughts. I have a 3/1 near USC Keck medical center. Ive had some trouble getting medium term tenants of late, and was wondering what people who cater to travel nurses specifically, think about the idea of:

What if I just did this particular mid term by the room, instead of the whole house? If a travel nurse is going somewhere by him/herself, then a 3/1 is a little bit much. I have had a couple nurse bookings but never really effectively capitalized on the travel nurse thing. Im wondering if anyone has had success chopping a bigger MTR up into rentals by the room for this type of renter?

(The fact that the property has 1 bathroom kind of makes this not as great too I feel like) 

Wondering if anyone has experience doing MTR's by the room instead of by the whole house, and if that works for anyone?

Quote from @Mitch Davidson:

@Richard E. I agree with the fact that there isn't really good data out there on MTR's Many of us MTR owners won't use AirBNB for advertising or leasing, and with Zillow and other sources you only see listings. If I was shopping for a new one I'd be avoiding markets that are really saturated with STR's, because underperforming STR's are often becoming MTR competitors. For example, we have about 400 homes on Furnished Finder in Asheville, for a population that's about 17% of Charlotte where there are about 600 homes listed. I'd also focus on markets where people really want to be, and are relocating to, as I don't think the traveling nurse population is nearly as large as advertised, nor stable and reliable.

 I totally agree; I have hosted my fair share of travelling nurses in my spots near the Big USC Keck Medical Center, but I also have hosted a couple times now, construction type of people in town for a project, Egyptian tourists one time (not sure how that happened), a professor in town for something or other, one couple who were nurses but who were not actually working as nurses when they stayed there, they were in school of some sort. But to the point of nurses, it is probably true that close to half my people have been nurses/medical.

 "go to the places where everyone else is going and where people want to be" is pretty good advice.

Esteemed listmates,

I am located in LA, and run some MTR's here.  However, I am looking to expand into other cities now- and a little curious peoples thoughts on a couple of issues:

-What are your factors for evaluating a good midterm rental

      *City/market in general; and

      *location within a city/market?

Being near big universities, level 1 trauma centers, and business/downtown type of centers (like where the big office buildings are), I know are some good criteria. 

However, the places I have that fit those things seem to be dragging of late behind some of the other stuff. Example, I have an old timey craftsman I have which is in a more residential and nicer neighborhood than a couple others, with not as much closeby-- but is very cute (but small) place with lush yard, old timey hardwood, and more charm, etc, it is really killing the game, moreso than the stuff that is in more traditionally "good" MTR locations. 

Curious peoples thoughts on what makes a great MTR location/neighborhood. It is starting to look like evaluating MTR's is similar to LTR's which is, have a nice property in the nicest possible location to maximize rent.

Any thoughts / experiences, and what tools and/or factors people use to evaluate MTR cities, and locations within cities. I use the usual ones  (AirDNA, Mashvisor, and other Long Term rental rent tools) but don't see much that is geared towards MTR's really. 

Example, I look in a place like Fresno at STR data- totally dismal. But MTR's there do well according to what I have read/heard. Any thoughts/experiences appreciated.

Esteemed listmates,

I am trying my hand at starting a real estate agency. I have a few names I am bandying about, curious what people think / thoughts on a name in general (and if it even matters

BIG DEAL REALTY

BIGTOWN REALTY

BIG WIN REALTY

most of my friends like big win, but most of their wives like bigtown.

the agency is geared mostly towards investment minded people. I am located in the heart of Los Angeles. I am a plaintiffs litigator / lawyer and an investor myself so that will be part of the marketing spin, my reason for why people ought to use us instead of others. These names kind of fit my personality, to differing degrees.

Any thoughts/opinions appreciated.

Quote from @Henry Clark:

Approach from their viewpoint and an REI viewpoint.

Contracts are contracts, but thanksgiving is thanksgiving.  They have to live with them.

Why would they want to be REI? Forget whether it is a good deal. What REI approaches have they checked on? Syndications, BRRRR, fix/flip, cash flow or appreciation models, how many deal analysis have they done, how do they plan to scale, how many podcasts have they watched, posts have they made, books read, renter contracts, insurance, property manager, team. etc.

If they are making $400,000 per year, unfortunately there is no compelling reason for them to do REI. They have to want it.  If they owe $200k on a house worth $1.4mm and make $400k per year, there is nothing compelling.  

To your concerns, layout the deal, and ask a mortgage or home loan person about the scenarios and Debt to equity and income streams.  You can tell ahead of time if they will have any issues.

Consider House 1 as an investment:

A.  What is the cash flow return? What rent can you get? What costs to maintain, including CAPEX? On top of that include foregoing the Capital Gain exemption, say they plan to hold past the 5 year limit. Let's work this backwards, what return do you need on a $1.4mm property to make it a good deal? Let's say 15% return net. I was going to say 10%, but you have to make up passing on the Cap Gain exemption. Thus $210,000 per year net.  Can you achieve that?

B.  Let's say you are looking for an Appreciation return.  They bought for $900k appreciated to $1.4mm or a 55% increase.  You would need it to appreciate to $1.4 x 1.55= $2.17m value to achieve the same return.  When will it ever get to $2.17m, at some point but when.  In the meantime, you tied up $1.4mm less $200k loan or $1.2mm in cash. 

Forget the 1st house, they actually want to do REI:

REI is about Leveraging.  If you assume that market will appreciate that much, then with $1.2mm assuming commercial loan at 25%; let's say you do 4 houses with $300,000 down; at 25% down that would be 4 houses valued at $4.8m total.  At a 1.55 appreciation that is $7.44m on an initial investment of $1.2mm, net of the original debt of $3.6m.  Thats $3.8m assuming net cash flow offsets carrying cost. Which you are assuming if you keep the original house by itself and rent.  If you just do House one you earn $2.17m less $1.4m or $1.3mm.  If you invest in 4 houses, you earn $3.8m before transaction costs and taxes for both transaction examples.

Walk the REI stepmother thru and ask her what she would recommend they do.

-True, they have to live with the contract;

-Also yes, they don't "want" to be REI's, they are therapists and not of the REI mind, BUT they want to build wealth, as we all do, and I am trying to help them do that.

-I understand what you are saying re numbers (not really "understand" per se because clearly you are a numbers whiz and I am terrible at them) of this 'investment' being not as good as others- and you are correct, these people are not into "REI" per se; they just want to build wealth and keep house 1 and live in house 2, as opposed to just sell a great house to be in a new house.

-Another thought: Maybe they can house hack house #2, maybe get one with a guest house or additional unit they can rent/airbnb to supplement income/offset mortgage.

-But then, this is also something they have to be motivated to do. they have a 2yo and a 6 mo old so.

-REI stepmother is a great resource and I thought of this too and i like this idea. REI stepmom wants to help so we should give her the opportunity to do so.

-I am an atty but also an agent and investor, and I am just launching my company, and my goal is really to help people like this build wealth- and one thing i learned if nothing else- best wealth building tip is, (unless there is a real compelling reason to do so like you can and WILL redeploy the money better) never sell your house!

Single fam house in A+ neighborhood at 3.5% rate-- i say, never sell.

Quote from @Henry Clark:

They need to sell. 

1.  $500,000 primary residence capital gain non taxation  if they lived there for 2 out of 5 years.

2.  Let’s say their mother bought the original house for them, same as your mentioning for the new house.   They don’t get the market increase.  They just paid rent.  

3.  Let’s say the mother buys the new house and seller finances to them.  You’re an attorney.  What are all of the life situations that make this a bad deal?  The closest I would get to this is for her to make a low interest loan for the downpayment.

4.  Unless they want to be landlords they shouldn’t.

5.  Is the new neighborhood just as good as this neighborhood?

6.  Little late in the game.  Refi the first house to get payments down.  Cash out their 401k.  Make sure their $400k salary jobs are secure.   See how their Debt to income ratio works.  

7.  Determine the rental rate and the net Cashflow would be in the current house.  Make sure it make sense to hold as a rental.

On top of all that Understand what doing this in California means if anything from a rental and taxation standpoint. 

Thank for the reply.

-You are right re step mom seller finance being conducive to things going wrong. But contracts are contracts, that's what they are there for. What I am really trying to figure out is, what good terms of this arrangement could be so that they are most secure.

-Jobs are secure, they are self employed Therapists;
-Most particularly my worry is that if they get a heloc on House #1, then
-When the balloon comes due for house #2, and they need to refi with a conventional lender, they may not qualify for the loan, due to the encumbrances on house #1.
-However, if house #1 is rented out for good rents that cover the loan((s) against house #1, then they should be ok? Is what i am thinking.

My solution for them is

-HELOC on house#1
-Have stepmom buy house #2
-Seller Finance house#2 with stepmom using HELOC from house #1 as downpayment
-get good terms with 7 or 10 year balloon;
-WIth secure jobs and income from house #1, when balloon comes due, refinance house #2.

-They now own house #1 and house #2 and are now real estate investors, and not just homeowners!

esteemed listmates

I have some friends who have a real estate problem - but don't know it. 

SITUATION:

They have a great 3 bedroom house in San Rafael, with About $600-700k equity. Bought for around 900, worth at least 1.4 now. Its in an awesome hood and they should never sell it, ever, unless they absolutely have to.

 But, They are outgrowing it. They make together, about 400k a year I would say. 

They want to sell their house and buy a bigger one. I am saying- DONT SELL.

They are saying: BUT we cannot come up with a down payment for the new one unless we sell the old one.

POTENTIAL OPPORTUNITY:

They have a rich RE investor stepmom willing to buy the house they need, in cash (through a 1031) and do some sort of seller carry deal. 1.8mil 4 bd house that would be suitable for them. Terms TBD. 

QUERY: How do they 

-come up w downpayment for the new house without selling old house (I suggested heloc);

-Structure the seller carry in such a way that they would be able to buy and keep the new house without too much worry of not being able to pay later?