All Forum Posts by: Account Closed

Welcome Emeka!

Welcome to the community!

That is an interesting brand concept. Can you share some perspective on the market for hostels in the U.S.? From my international travels, I have seen the popularity of hostels throughout Europe but not as much here in the states. Best of luck with the venture and keep us posted on your progress.

I would go with tile instead of vinyl only if it was needed to be competitive with similar apartment/plex units in the market. Vinyl should be easier and cheaper to maintain as well.

Mick Harvey Can you leverage this to execute a lease addendum, where you would recoup the $50k over the remaining lease term and provide yourself a decent return on your investment?

This may get lost in the thread, but here is another perspective on interpreting cap rates at a high level... If I were looking to buy a 20-unit apartment complex and narrowed down to two options the following: 1) $500,000 @ 12% cap rate and 2) $1,000,000 @ 6% cap rate. Assume both complexes were turn-key and needed no additional capital to generate market rents, both complexes were operating exceptionally at managing expenses, what then could cause the wild variance in cap rates and the resulting market value? What if these two complexes were in the same city!? Further research into the complexes reveals: 1) The $500k 12% is in a substandard area of town. There is steady property crime, low home ownership rates, low income levels and neighboring properties are somewhat blighted. The tenants turn often in this complex and finding qualified tenants to fill vacancies is difficult. History shows a good % of tenants have financial difficulties and managing to collect rents is intensive. 2) The $1M 6% complex is adjacent to a bustling area with upscale shops and restaurants, highbrow cultural activities, and is a magnet for the cities growing high-tech workforce. There is a waiting list of future tenants and rent collection is no issue. Which complex would provide a stable return of your capital? It is fair to say #1 is high-risk while #2 is much lower risk. The point of my rambling is ... higher cap rates normally signal a higher risk investment. This concept is identical to banks or any credit-granting institution charging a higher interest rate for a perceived higher-risk loan. This is an extreme example, but should be a fair way of exhibiting cap rates fall in line with the risk of the underlying investment. If you are analyzing a deal involving cap rates, it is highly advisable to have a commercial broker involved to help provide that local market perspective on appropriate cap rates for the area.

Alex Corvin My 2 cents ... Assumptions: - Buy at $125k with 25% down at < 4% interest rate, - Since current tenant is on a month to month lease, inform tenant rent will go up to market in 3 months or so. This will likely cause them to move out, but with the strong market you should be able to replace with a market rate tenant around $1,100/mo. - Minimal turn expenses (paint, carpet, other light cosmetics) do not exceed $3k. - Manage the property yourself. - Initial reserves for CapEx and repair items of $10k. With those assumptions, you should be cash flow positive. As stated before, any bets on appreciation are speculation. I would encourage you to develop a set of guidelines, or metrics, by which you analyze deals. If a deal does not meet your guidelines then you absolutely must pass and move on to sourcing and analyzing the next deal. Furthermore, you can make an offer on a deal that will force the metrics into your established guidelines. It is essentially free to make an offer and the worst a seller can say is no. You will at least have the peace of mind that you tried, it did not meet your guidelines, and you will be free to focus on finding deals that work for you. Best of luck to you and let the group here know how it turns out for you. -Tyler

Lane K. Thanks for sharing Lane, and I agree with your comment!

Matthew Paul The security deposit may be subject to applicable state unclaimed property escheat requirements. Laws vary by state. A quick Google search for escheat security deposit should yield the state's applicable requirements.

TJ - If you have not already considered this, I suggest reaching out to Murray Duggins with United Development / United Management.  Mr. Duggins has developed many affordable housing properties in Cumberland County and has a great track record with NCHFA.  I worked in the tax credit industry years ago and my recollection is the funding is very competitive, as you mentioned.  Partnering up with someone like Mr. Duggins may be a great opportunity.  Links for Mr. Duggins and his businesses are 

http://www.murrayduggins.com/

http://www.uniteddevelopersnc.com/

http://www.unitedmgtii.com/

Best of luck to your team on the development!