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All Forum Posts by: Steve W.

Steve W. has started 11 posts and replied 110 times.

@Spencer Abeyta I remember I was practicing deal analysis on a springs property that was already pending. It was listed at like 300k, with a similar type of analysis I think it came in barely cashflow positive. I thought great it would have worked! I checked back later and it sold for like 40k over asking...nope!

@Carl Flint you mentioned elevator pitch which means fast and simple.

Imagine you bought 100k stock and it goes up 15% in one year. You just made 15k and 15%.

Imagine you bought a 100k property with 20% down = 20k. You can buy 5 of these properties. Each goes up 3%, or 3k × 5 = 15k. It's a wash right?

The difference is you are controlling 500k worth of assets for 100k, the houses are also throwing off cashflow (dividends), and the tenant is paying off your 400k worth of mortgage, in addition to inflation erasing your debt.

@Dan Rowley LOL, what you doing to navigate 2021?

Thanks for sharing Evan 👍 

The "after" pictures look stellar, but the "before" pictures don't seem so bad to me...it seemed like a pretty good house to begin with :) How did you know how much rehab to do? That the "before" wasn't good enough and the "after" is worth the investment? Did you have a projected rent increase due to the rehab?

Best Wishes

I don't need the free BP calc access but hey it's a promo why not have fun with it.

I just scoured the Colorado Springs MLS and yikes pretty much everything I looked at came out negative cashflow even with 25% down payment. Obviously it depends on your underwriting but you can see mine below/in the bp calculator link. I focused on 3 bed and 4 bed units (SFH, Townhome/Condo), $330k max asking price, it's hard for me to believe things would change much for a 1 or 2 bed.

What is everyone else seeing out there? Am I missing something, coming in at the wrong angle/perspective?? Looking in the wrong areas, are my rent estimates low?

BP Calc Report: https://www.biggerpockets.com/...

Underwriting details:

  1. Rent: $1,750
    1. Plug the property address into zillow rent estimate ($1,600) and Rentometer (median/75th percentile: $1,850/2094). 
    2. Choosing $1,750; pretty much just going between the Zillow and Rentometer values.
  2. Total Expenses: $1,717
    1. Property Taxes: $1,500/yr
    2. Insurance: $1,200/yr
    3. Maintenance: $122/mo
    4. Cap Ex: $140/mo
    5. PM: 9%
    6. Vacancy: 5%
    7. Mortgage: $985/mo
      1. Down Payment: 25%
      2. 4% interest
      3. 30 Years

I also tossed in $10k for improvements, like for the stairway railings, improving the deck, the basement ceiling looks weird, landscaping improvements, other things that might pop up. But regardless it doesn't affect cashflow only cash on cash return which is abysmal to begin with.

Conclusion: I would not buy this deal. IMO, that's a lot of money to park and break even, banking on appreciation. Which, don't get me wrong, I like the Colorado Springs fundamentals but I am not comfortable putting myself in that position. I only do this to understand the going market rate of things.

They only way this could possibly makes sense, to me, is BRRRR, which is my going in strategy for this market.

@Christopher John McCarthy Since you are open to moving and want to house hack, I would suggest moving to a place you want to be. For your own personal happiness - life is for enjoying. For example, it appears for @James Carlsonlegal marijuana is an important factor to consider ;) It is pretty subjective and hard to give advice on.

But there are some objective things you can consider too. Sounds like you prefer a growth market based on the cities you mentioned. 

But what creates growth? Population. But people need jobs, so you also want job growth. And you want that job growth to be in good jobs, that push up income, so people can afford to pay more for housing (driving appreciation). That is the demand side.

I put a chart together to compare this demand 2010-2019 using Census data. What you'll see is Chicago has had no population growth and very little job growth compared to the others. And to be expected the income growth is also less. The black dot is the median income in 2019, and although pretty high for Chicago, given these metrics does it seems reasonable for the income to keep climbing? For rents and housing prices to appreciate? Doesn't seem likely to me.


What about demand side? Austin, Colorado Springs, and Denver permitting seems to be keeping up with population growth. Chicago is still permitting a little, even though there is no population growth. Phoenix looks like there could be a delta between population growth and permitting, suggesting more supply side shortages compared to the others, but this could also be do to over-building prior to the great recession.

In attempt to look at supply side from another vantage point, I looked at how many households are being formed, vs housing units being created, from 2010-2019 and took the average (otherwise the graph is all jittery and hard to look at). In Phoenix, households are forming faster than units are being created. Now, you can't actually form households without housing units, so I think this just suggests Phoenix is consuming its previous oversupply. But still, that's a good thing.

How might the cities fair in the future, given the economic turmoil caused by COVID. Here is another vantage point of total job growth over time, paying attention to job loss/recovery in 2020. Chicago has petered out since about 2016, and COVID erased all job gains since 2010. Austin has rebounded the best. The others have faired comparatively decent.

Lastly, an important metric is rental yield (the 1% rule). How likely are you to cash flow in these markets, vs feeding the beast? I have plotted below yearly rent / house value, as provided from Zillow data. Chicago smashes all others out of the park, and that may be important to you if you seek cashflow. However if you are looking for growth, well it's no surprising the others are a lot less. One thing to consider is that both Chicago and Austin looks better than they are, due to high property taxes (which eats into your cashflow, which isn't captured in rental yield). And all yields are going down due to the current housing craze.

Data is useless if you can't make a decision based off of it. For me, and to meet my goals, I like Colorado Springs. It swings with the heavy weights, but isn't a massive beast of a city like Phoenix. It has a better rental yield than Denver with an easier entry point, and therefore better runway for appreciation. And maybe some of that Denver growth will spill over and give tailwinds to Colorado Springs (though it is doing just fine on its own accord).

Disclaimer: I don't yet invest in Colorado Springs, but with analysis such as I have outlined above, I have chosen it as my target market.

Post: Should I buy this duplex?

Steve W.Posted
  • USA
  • Posts 119
  • Votes 102

Threw it into the BP rental calculator, using your numbers plus a few other assumptions. You can check it out here.

https://www.biggerpockets.com/...

Post: House Hacking With a Family

Steve W.Posted
  • USA
  • Posts 119
  • Votes 102

Looking for advice / methods to house hack when you have a family. Anyone have some success stories?

About the only thing I can think of is find a property with an ADU or 2 houses on one plot.

Thanks!

Originally posted by @Tucker Cummings:

@Joe S. my property manager (who is fantastic) does the management for me. Which if you're getting a massive premium with rent by room, I would highly encourage outsourcing your management, because you should be able to afford it. Market rent in my area is about $1000/month for a 3 bed, 2 bath. I'm getting around $1500/month with rent by room. My PM is 10% rent, so I net positive $450/month - well worth it.

...

3) I only rent to soldiers at Ft. Bragg in Fayetteville, NC. Soldiers tend to be much cleaner and disciplined, not to mention we have direct lines of communication to their CO and HR on base. So direct payments and a way to be able to get them reprimanded if they are overly rough on the property. That only scrapes a few benefits of soldier renting.

In summary, I'm getting a premium for rent by room, the management is outsourced, the turnovers are cheaper and the people I rent to keep the property in good shape. Hope this helps you!

How do you position yourself to only rent to soldiers? Can you really deny an applicant because they are a civilian? 

Originally posted by @Matthew Malley:


We bought the STR in the Poconos because of the influx of companies that are investing in the area and the potential of all year round rentals. Large companies don't pour billions of dollars into an area if they think it's not going to produce. Camelback, Khalahari, Vail, KSL Resorts, Pocono Springs (coming soon) - we're trying to eat their crumbs - 2 hours from NYC & Philly. Ultimately it's up to you to manage and run your STR for it to be successful.

Get a STR real estate agent in the area to navigate the regulation/ordinances and find the right property, in the right area, for you.

 
Curious how you chose/identified Poconos as a potential market to begin with? And then how you determined that there are large companies investing in the area?