All Forum Posts by: Ross Gortney

Hello,

I'm looking for a GC to build a 4-unit in downtown Atlanta on a bare piece of land.  Any recommendations?

Thanks!!!

This is a good point -- I actually turned my previous residence into a STR in Greenville. It's only 1 mile from downtown, and it's typically booked about 80% of the time for the past year and half. People love an Airbnb house super close to downtown. I recently decided to switch it to mid-term (30 day min) to comply with the Greenville law and also to make my life a lot easier managing the Airbnb, mainly because I moved to GA. It's my first STR, and I spent quite a lot of time the first year getting everything working well with communication, systems and getting the right team in place for cleaning, maintenance, repairs. You can make double the net rent with STR vs LTR in this market so long as occupancy stays up over 80%, but it is a lot more work. In Jan/Feb this year, my occupancy dropped to 40-50%, and that made me nervous. Supply of STRs has increased a lot in the past 6 months, so the demand can be impacted accordingly. About management, I like managing myself so I know much better what's going on with the property, and also not spending 10-15% of gross rents to pay another manager.

Also keep in mind that if you do STR/MTR, you're going to have to furnish the place, which costs money and time. I spent about $15k to furnish my 3 bedroom/2 bath house for STR. It can certainly be done a lot cheaper if you look for deals and/or buy used furniture and decorations.

another thought - perhaps if you were able to take title upfront with seller financing, then rehab the house, then sell, that would cover most of the financing except the rehab, a few mortgage payments and utilities.  Then maybe you can find a private lender to cover the rehab costs.  That route would probably save you at least $5k in financing costs compared to hard money, and would be wayyy more simple and quick since you've already secured the deal!

Hi Zach

I haven't done seller financing myself, so I don't know the ins-and-outs.

That being said, I do have some thoughts for you:

-using the numbers you provided without rehab, you manage the property, $1500/yr in maintenance, and you have 0% vacancy, you're looking at $125/mo positive cash flow.  That's pretty tight to me -- if you go one month without a renter, you're break even on the year;  if the HVAC goes out, you're in a negative cash flow for several years.

-if the title is transferred on the deal and the sale is recorded at $155k, the taxes will reset on the property this year or next.  Being a rental property (as opposed to owner-occupied), property taxes are about 2.5x the rate compared to an owner occupied property.  I'd expect your annual tax bill to go to over $3k -- now you're in a negative cash flow property.  That's assuming the sale is recorded and taxes reset.  Maybe you're structuring the deal such that the current owner holds title until loan payoff and you pay the existing tax bill each year.  That would be much cheaper.

For me personally, I'd never get into a property that's negative cash flow from the start unless you play to turn it around quickly in the first year or so.

What I would do myself -- flip the house. You could probably turn a $20k profit with no rehab with a sale price $200k, or around $30k profit with $30k rehab at a sale price of $250k. No rehab route is obviously much quicker and easier. I'd probably try and do a very minimal rehab like basic landscaping and basic paint to spruce the place up. You should probably work with a good real estate agent to get good estimates on the ARV for each case.

You can do a construction loan / hard money to cover around 75% -- you can find many banks that will do this based on the deal (not on your personal financial situation).  If you don't have the other 25%, look for a private lender to cover that part.  This is exactly how I did my first flip.

@Jon Martin

Yeah, I hadn't read this closely before.  

One clear way around it is to do minimum 30 day stays.

I Airbnb my house near downtown Greenville.  I understand that they now require a permit to do so, and I’m about to check that out.  Very few existing STRs comply with this rule.  The permit is a couple hundred bucks according to the website.  So far the city hasn’t given me any grief about it, but I think neighbors can report you.  A friend just looked into getting a permit for a potential house buy and they told him he wouldn’t get one.  May want to check on that before spending any money on it.  I just made my previous primary residence into a rental which is probably why I haven’t run into issues yet, but I expect it’s coming relatively soon.

I’ve been really happy with 1Tomplumber in the area.  Very professional, responsive, great communication, and I think not very expensive as far as plumbers go.  Good luck!

Congrats, Monty!  Sounds like overall it worked out well for you and you learned some things!

What were the rehab costs and overall deal costs, and what rent are you now pulling in on it??

Sorry to tag on to your request, Nathan -- I'm looking for one ticket for myself also!

If anyone has one (offer to Nathan first:) please let me know!

Hey Sam

My long term rentals are in Spartanburg (so it may not be super helpful to you), but I'm looking at $100 increases per unit in the coming months (going from $900 => 1000, or $1000 => 1100), which is basically just barely beating inflation, but also I'm catching up on rents already having been below market rate.  I did $150 increases earlier this year, so it's a lot of increase pretty quick.  The tenants are really unhappy about that, especially the ones that have lived there for many years, and especially one that I have living on social security ("fixed income").  Tenant turnover makes it a lot less emotional to do big increases.

Ross