All Forum Posts by: Trevor Dominique

Yes I would agree that the vacancy would be the biggest risk with this. It probably depends on the location of the property among other factors. For example, if you have a property near a big hospital, you might be able to use the medium option with a lot of luck renting to traveling nurses. Hard to say. I live in a city where a very small part of the city is zoned to legally be able to have STR's, and I think because of this, I am starting to see more medium term rentals pop up. I have never done myself. For me, I did not want to spend $5k furnishing a house just to trial something.

Are you planning to self manage? I am seeing a lot more people doing "medium term" rentals in more expensive markets right now to create some additional cash flow, charging rents anywhere from 20-100% over the fair market rent (think traveling nurses, people moving to the community and need a place while searching for their own long term residence, etc.). 

Maybe works if you plan to self manage, but if you are hiring a PM, turnover costs for this type of model would kill all your cash flow if the PM is charging a full month's rent for each turn.

I would also imagine this is partially a result of municipalities cracking down on STR's more frequently.

Hi Thomas.

I suggest a guy named JP Acosta. Works with a lot of investors in the area. Guessing a quick Facebook search and you'll come across with his contact info, as well as some other investors sharing work he has done that they have been satisfied with. 

Hey BP,

Wanted to share the deal I am currently looking into purchasing and get your thoughts!

This is an 8 unit apartment building in a small midwestern town. The property was built in 1992, and each unit is about 600 square feet, 1 BR / 1BA. There is a decent amount of blue-collar manufacturing jobs in this town, so the assumption is that is the type of tenant I would be renting to...probably a single person who works a lot and just want a cheap/clean place to live. 

Purchase price (estimate): $370,000

Rehab: $80,000 (ultimately two of the eight units have been recently remodeled, but the remaining six units will need cosmetic updates. With the units being only 600 square feet, this $80,000 seems more than adequate.

Total Investment: $450,000

Monthly Rent: $4,800/month ($600/unit)

Monthly Expenses:

Vacancy: $144/month (3%)

Property Management: $400/month (Plan to self-manage but factoring an allowance here)

Maintenance: $400/month

Property Tax: $300/month

Insurance: $200/month

Water: $400/month

Misc/Other: $200/month

Annual Net Operating Income: $33,072

Total Investment: $450,000

Cap Rate: 7.35%

Annual Interest Expense: $13,950

Annual Profit: $19,122

Let me know your thoughts!

Beta is a financial metric....it can be applied to any investment, not just real estate. 

But you are correct, it is a measure of sensitivity relative to the overall market. So a beta of 1 would represent a company/investment that behaves similar to the entire market. So, for example, Tesla has a beta of 1.94, which makes sense because in a slight downturn a lot of people are going to stop buying high end vehicles. Walmart, on the other hand, has a beta of 0.48, which also makes sense because even in a downturn people are going to continue to need groceries, and since Walmart has cheap products, people will continue shopping there, which means Walmart won't experience as severe of a downturn as the average company.

If you apply that to a real estate market, I would think that cities with high tourism have high multifamily betas (maybe Nashville as an example). Whereas a city with a large supply of large, long tenured employers would have a low beta.

I'm not an expert on beta, but hope this helps. 

I have one triplex that is not submetered so I pay all the utilities and adjust the rents upward to offset this cost. 

I just make sure that when a unit turns over, the "utilities included" part stands out and is at the top of the listing in big font. That gets prospects mentally prepared to see the higher rent amount. If the rent were the 1st thing they saw and "Utilities included" was put at the bottom of the listing, a lot of people would not even read the rest of the listing if they think the unit is out of there budget range.