All Forum Posts by: Scott Meech

Quit being offended. You're the typical new poster here that asks for help, then gets mad when constructive feedback comes.

Those questions posed will help understand where you're coming from and going. Do you own properties? Are you a landlord? Have you looked up other MTRs and how they work, and is this the direction you want to go?

We don't owe you a thing, so appreciate constructive feedback when it comes.

@Scott Meech Furnished Finder is the largest and most well known MTR site. They have a stats page that can help you do some research about your market

I also use DPGO for stats because it’s free but Price Labs and Airdna are also paid alternatives 

You can always start by looking on Furnished Finder. This site says it's for travel nurses, but their users come from all walks of life and it's growing daily. go to https://furnishedfinder.stats and enter the city information. This will show you how many furnished units are currently listed on FF, their size and monthly rate as well as the number of searches. Then look at some of the competition to see what your property needs to offer in order to be competitive. You can also search Airbnb & look for 30+ day stays and do the same. Checking their calendar helps you determine if there is strong demand. If the calendar is booked, there's demand. If it's wide open, that should be a red flag. Are there extended stay type hotels in your area? If so, that's a good indicator that there's demand for MTRs. I'd encourage you to think more broadly than just hospital travelers. They can be a great source for tenants, but the world of people traveling who need furnished rentals is much, much larger than just traveling medical professionals.

I am going to try and answer this question with a fair amount of grace, so please bear with me.

As to the original question, here's a rough idea of my thought process regarding a potential purchase:

The hospital is a Level II trauma center with 390 beds (that's a decent-sized hospital), so it probably needs a fair number of travelers. If you want a general sense of their demand for traveling medical professionals, go to the hospital job recruitment page. If there are a large number of openings, then they are likely filling that need with travelers.

See how much the property will cost a month. Principal, interest, taxes and insurance. 280k with 20% down at 7% = about $1500 a month for PI. Taxes are public record, and are about $125 a month (will go up after purchase a bit). Insurance shouldn't be bad as this is a condo, so a lot of potential risk is covered by the HOA insurance. Add another $20 a month for that.

Add in HOA fees ($300 a month; shown in your link), Gas, electricity, high-speed internet, water, trash and snow removal. A lot of those costs are probably part of the HOA dues, so let's say and average of $175 a month for electricty and another $80 for internet. You have a better idea of those costs as I do not live in IL.

So, costs so far are $2200. Play around with that with your more accurate estimates.

Rentometer estimates that rents in the area for a 2/1.5+ are around $2500. Using a 1.5x estimate for what a MTR rental rate might be gives us $3,750. Then I would compare that estimate with what Furnishedfinder.com has in the area. In the immediate are there are 3 houses on FF that are going for 4000 to 6000 a month, but they are 3 BR to 4BR SFHs. I would then adjust down the original MTR rental estimate based on those findings. Let's say $3200?

$3200- $2200 = $1000 month of profit, right? Not really. Put aside some money for fixing things up around the condo from time to time ("CapEx"; 5% to be conservative), and some for vacancy (maybe 10% of the monthly). That leaves ($3200 x .85) - $2200 = $520 a month in profit. Bear in mind, you will have to tweak these numbers based on what you think are proper estimates. For instance, I suspect vacancy might be a little higher based on the train tracks running directly behind the condo. That might be normal and expected in IL. I don't know.

So for $56,000 dollars down plus (an estimated) $7,500 in closing costs plus another $5000 in furnishings, you get an asset that produces about $500 dollars a month. $68,500 / $500 per month = about 12.4 years to get back the intial investment.  

So why do people bother if it takes 12 years to get back your investment on what looks a pretty good monthly profit?  Well, in that 12 years, your tenants will have paid down about $35,000 in principal (aren't amortization schedules depressing?), and at a 2% average yearly increase in value of the condo, it will be worth about $60,000 more than when it was purchased. These numbers get better if the area is becoming more in demand over time as rents will go up and the condo will appreciate faster than 2%.

*Now we come to the hardest part*: does this property have "potential"?  I have no idea primarily because deals are only "good" or "bad" in the context of what the goals of the owner are. Would I self-manage this deal to earn $500 a month allowing me to own this property in 15, 20 or 30 years? Yes.  Should you?  Again, I have no idea. that's a much more personal decision, and that is probably why Jonathan Greene asked for more information from you about your experience level, especially since you wrote "I am totally out of my league understanding the possibilities of an MTR".

To be successful in the MTR space, I would recommend that any owner or operator strive to provide the best customer experience possible. Potential residents can tell if the owner/operator authentically cares about providing that A+ experience, and they will vote with their wallet regarding where they stay.

So going back to my original sentence, here is where my grace runs out. I have a challenge for the OP.  I took over an hour, on a Sunday,to click a suspicious link in order to look over your property, to learn a little bit more about the West Chicago sub-market, to analyze a deal for a stranger; and to present a rough algorithm for how to analyze the numbers of a deal so that a general process could extrapolated for the next property you consider. All of that was done without thought for any return to me. It was done simply because I enjoy helping in my very limited way.  If at any point in this admittedly large wall of text, you, OP, found yourself getting upset with me, then I would recommend you avoid the MTR space as you will find many similar opportunites to learn that you will not enjoy. LTRs are a great way to approach real estate, and it sounds like you are doing very well in that space. Keep crushing it there.

Hi Scott,

When determining if a property is suited for MTR you should do some research on what brings people to the area who need to rent midterm.