All Forum Posts by: Bobby Hosmer

@Travis Bryenton

I like your thoughts on this. Here’s my take, while I agree that debt plays a large role in affecting your cashflow, regardless, if you were to pay cash for an investment of similar cap rates in an “appreciation” market and a “cashflow” market, wouldn’t you agree that your IRRs would/could end up wildly different?

@Zach Fridrich

I’d almost recommend just picking a market you might be interested in, and then googling “is it a cashflow or appreciation market?”

But, I also think the best way to figure it out would be to network with people from that market, (Like on bigger pockets) or just start to analyze deals. Decide which strategy fits your long term goals, and then start analyzing deals from those markets.

Generally, you have cashflow in Midwest and other snow markets. Southwest markets have a lot of appreciation at the moment. Candidly, I haven’t analyzed Southeast markets 🤷🏼‍♂️ 

If you are trying to retire and need income each month, look for cashflow markets. If you are interested in shorter term plays, look for markets with appreciation.

(Of course, submarkets might play differently, which is why I suggest analyzing with a lens of scrutiny) 

Hi @Carlos Mendigochea

12k cash on cash off a 350k investment is not very high. But while Tucson can offer decent cashflow in certain neighborhoods, I feel as though most of Az will be an appreciation market, with rental increases to follow over the years.

Are there other parts to option 2 which you might be considering that you didn't list in your post? E.g. if you plan to Brrrr and pull most of the capital back out, 1k per month in CoC might be pretty good!

Hi @Zach Fridrich

Great to see how motivated you are!

For long term business plan, give “Vivid Vision” a read. It’s quick and high level. But it’s great for describing how to get big ideas down. This is great for writing down “what you want to achieve” and creating a plan visually.
For multifamily education, check out books by David Lindahl, Rod Khleif, or Steve Burgess. These will provide great introductions to the space. There are so many variations of multifamily investing that it’s tough to do everything. Once you start reading and learning, you’ll probably find a specialty or focus you’ll be more interested in. Example, I’m interested in Value-add multifamily of C class properties of less than 50 units, located within SW markets. (You mentioned Az and MO which are two completely different markets. Nothing wrong with that, but one is a cash flow market, and the other is an appreciation market)

once you educate, it’ll be easier to find more resources based on that specialty. I also recommend looking up meetups in all of those markets. Most meetups have zoom sessions for networking if you can’t attend in person. Happy to chat more once you begin your journey! Good luck!

Hey @Alex Kanaval

Nice find! One suggestion I have is to be completely transparent with your sister’s friend, especially if you decide to wholesale it. Whatever the situation, it’s best to avoid bad feelings or put your sister in an uncomfortable situation.

Second, how is the market value being determined. Is this property renovated? Then maybe a purchase followed by a quick sale would be best. If the property isn’t renovated, then wholesaling might be the route for you; however, most investors who purchase wholesale deals will want a substantial margin on their flips.. e.g. 15-20k below renovated market value doesn’t offer much room for end-buyers profit.

Hope this helps!

Hi @Michael Furst

Great questions. From what I’ve seen, that’s on the lower side for comps. However, the units are pretty small compared to other sales recently. I’ve seen sales of 60k-75k. This pricing might make more sense since the units are around 400 sq feet.

With regard to rents, this also depends largely on the area of the 12 unit. These rents seem at market for Tucson, as spots can rent for around $1 per sq foot, just in general. But, the location is key for future increases or even appreciation.

There are managers who would manage this for you. Because of the size, you might be able to negotiate fees down a bit since it’s all in one spot. With 12 units, you have negotiating power for maybe 6-8%.

Hope this helps!

Hey @Ryan Bertolami! 

Until tucson gets a handle on Covid, Colby has been hosting these meetings via zoom.

I just went to my first one last week,  and it was really informative. I plan on attending more in the future. I’m sure @Colby Fryar could leave some additional time for a meet and greet or conversation session. But since he’s the host, he might have a better idea of the schedule.

Hoping to see you on the call!

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Tucson.

Purchase price: $490,000
Cash invested: $40,000

4-plex consists of four 2 bed/1 bath units.
- Two are one story, and are 800 sq. ft
- Two are two stories, about 1300 sq. ft

The area is in North Tucson, about 2 miles from the University of Arizona, and a half mile from the University Medical Center. Currently, the area may look rough, however, it is developing in a direction that was appealing to me and my criteria.

What made you interested in investing in this type of deal?

Background:
This unit is close to a University and even closer to a Medical Center (two economic engines). While this property did not meet the 1% rule upon purchase, I saw a lot of long term growth in the area. This includes upscale restaurant development in the neighborhood (think Starbucks and other chains). Since I plan to own the property over 10+ years, it fit my criteria to add it to my portfolio.

How did you find this deal and how did you negotiate it?

A family friend was the listing agent on the deal, and she sent it to my attention before it came on market. Originally, I was beat out by a cash buyer. But, after they pulled out of the deal, I didn't need to negotiate much. One thing I did to separate myself from other buyers was to increase my escrow deposit, and decrease my Inspection time frame to show how serious I was.

How did you finance this deal?

Traditional Financing with an Investment Loan through a Mortgage Broker I've used in the past. I also took on a partner to fund part of the down payment with a line of credit.

How did you add value to the deal?

This part of the process is ongoing, and has been delayed, but I am still plugging away to get it done. Here is a summary of my inital projections:
Plan is to renovate all four units to modernize the living spaces and add square footage. This will be done by:
- Removing the original carpet flooring, and replacing it with faux porcelain tile
- Updating counter tops and adding a tile backsplash
- Updating lighting and lighting fixtures
- Adding sq footage by moving the entry way

What was the outcome?

I have finished renovating the first unit and will be putting it on market for rent this week...

Lessons learned? Challenges?

I would have delayed my renovations until 2021 if I had to do this over again. Covid-19 has caused problems with finding contractors, getting materials, and has severely delayed my renovation timeframe. It also has reduced current rents in my area. So, I have shifted my goal for this property to be about capital preservation (getting tenants into the property to help with mortgage paydown) and will worry about adding value next year.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with James Igbinovia from VIP Mortgage in Scottsdale. VIP is a bit more expensive when it comes to closing costs, but the level of service and attention to detail which James provides to me and my property business is awesome, and it is why I stick with him. I have used him for all of my deals.

Hi @Sam Ohanesian

By the UofA is a nice find! A couple things that popped into my head, since I don’t know much about the property.

- have you included taxes and insurance in your monthly payment? It seems like yes given the offer price, just not sure.

- is your heloc a variable rate payment?(fluctuate with interest rates)

- you said you’ll have to put dollars into it, contractors are very expensive right now in Tucson because it’s so busy, do you know approx how much you are putting in and per unit? (Paint, landscaping, appliances)

- why is one of the 1/1 getting so much lower rent than the other 1/1? (Size sq footage, appliances, washer dryer, hvac), will it prevent you from increasing rents as high as you say? (I am leaning to agree with @Brian Kimminau on this one about rental value)

- do you plan to use a management company, or manage it yourself? (That will impact cashflow and your return. I’ve found companies who will manage for monthly fees, but also safe to calc 8-10 of gross rents)

- renovating the place will lower your annual expenses and maintenance costs for a few years, but have you calculated a maintenance budget in your return? (Havent seen the property, but might be safe to at least calc 5% of gross rents... that could still not be enough. It could also be way too much, but if it’s too high of a number, then works out better for you)

- you say rents can get higher, which is good, but What is telling you that? If you had to keep your rents where they currently sit over the next three years just to prevent vacancy, how does that impact you?

- this is more for what @Andrew Aldridge  has said. But the goal would be to buy at below market value, fix it up, increase rents, and refinance cash back out to pay off your Heloc quickly. Is the property at current market value? Or a discount? Will the updates help you increase appraised value?

Hope this helps!

Bobby

Hey @Patrick Allen

This is great stuff. It’s a very clean way to present the data, and also helps argue empirically where opportunities might be available. Would you happen to have the average sq footage of the units within these zips, or maybe an avg rent per sq foot?

Thanks for sharing!