All Forum Posts by: Steven Luttman

Multifamily Deal Analysis

Location: Saratoga County, NY (1 hour north of Albany, NY 20 minutes south of Lake George, NY)

Why this area: Familiarity, as I already own rentals in town. The county is growing in population, relatively low taxes and proximity to cities of interest Saratoga Springs & Glens Falls

Property: 3 units totaling 5 beds and 3 baths

Acquisition method: Seller financing. 2 years of interest only payments, 10% down payment. Property was uninhabitable at time of purchase, so minimizing upfront & monthly expenses was critical until units were brought back to life.

Initial plan:
Purchase $135,000
Rehab: $75,000
ARV: $230,000

What actually happened:
Purchase: $135,000
Rehab: $90,000
ARV: $180,000 (11/2023 appraisal) $210,000 (10/2024 appraisal)

How the building performs today:

Rents: $3,050

PITI: $1,450
Management: $250
Water/sewer: $75
Repairs: $150
Snow/lawn: $75
Trash: $0
Utilities: $0
Vacancy: $200
CapX: $150
Cash flow: $700

Exit: 30 year fixed rate 75% LTV cashout refinance. My mortgage company Knollhaven Capital was able to broker the loan.

Pain points:

1) Not obtaining multiple quotes from contractors on certain portions of the project. Availability of a contractor does not supersede accountability. This simple task likely cost me $10,000

2) Small markets can produce wild fluctuations in values. A fully renovated price per square foot of $110 was very doable based on 12 months of sales preceding the purchase. When the building was appraised for the refi however, those sales had become stale and were replaced by only a handful of transactions, unfortunately all at a much lower price point/quality level.

3) Small markets can limit your lending options. Classified as "rural" by some DSCR lenders made it difficult to make institutions compete against each other.

Fun fact: Disputing an appraisal value requires the appraiser acknowledging they made a mistake. Good luck!

 Griffin what terms are you seeing on products like this? 

Tyler,

Due to the property no longer being a primary residence (both units are rented) the best terms on a cashout refi will be 75% LTV. Unless you've done substantial improvements to the building or used a large down payment when buying, it's unlikely this will work.

Perhaps your best move is to find a new primary residence that is 2-4 units and repeat the process. Be sure your lender is comfortable with this, as many fear giving folks primary loans for properties they view as having a high probability of being turned into a purely investment. This can be done, it just requires finding the right lender. If this doesnt fit with your goals, it's time to bring on a partner. You've demonstrated success on your current duplex, so friends/family may be excitted to join in on the next.

Congrats on the success so far,
-Steve

 @Kevin Charles give Stonebuilt Insurance in Clifton Park a try.

Thank you @Michael Stevens

@Denis Vaughan I shot you a DM. Look forward to connecting.

-Steve

Section 8 is a common form of rental assitance in our area, however wait times for tenants to get approved due to demand/limited funding can be significant. HUD has a useful tool (Google "FY2024 Advisory Small Area FMR Lookup System") to learn what rents you'll be able to command.

There are a number of business models what can work in Albany. Student rentals by the UAlbany campus is certainly doable, however may become more competitive with the upcoming closure of Saint Rose. Clients are reporting great success with mid term rentals catering to traveling health care professionals at Albany Med. Of course there is a demand for quality housing for all of the state workers seeking longer term leases. Either way, if you offer a good product at market rate you should be successful. 

-Steve

@Rose Laurent

There are a number of business models what can work in Albany. Student rentals by the UAlbany campus is certainly doable, however may become more competitive with the upcoming closure of Saint Rose. Clients are reporting great success with mid term rentals catering to traveling health care professionals at Albany Med. Of course there is a demand for quality housing for all of the state workers seeking longer term leases. Either way, if you offer a good product at market rate you should be successful. -Steve

Buy a 3-4 unit property that you will occupy using a low down payment (3.5%-5%) loan option. You can read all the books and listen to all the podcasts, but nothing will expedite your learning curve faster than living in your investment. Gain experience, then duplicate your success in another property. 

Best of luck, you can do it. -Steve 

Hi Otto,

There's a great monthly meetup run by @Allison Keib that is absolutely worth checking out. Hope to see you there.

Steve