All Forum Posts by: Troy Zsofka

@Mindy Jensen it seems that my messages are inaccessible as well for some reason

@Jason Merchey did you end up investing with Bridge?

Elena,

Kyle Lacasse would be a good contact for you:
https://homesteadmanage.com/

Troy

@Jacqueline Mee -

@Kyle Lacasse is correct per my understanding, which is as follows:
You need to be a licensed broker to manage rental properties for others (or an agent working under a broker).
This does not apply if it is your own property, or you are a member or employee of an entity that owns the property.

That's my simple understanding since I don't manage properties for others and therefore have never looked into it deeply.

Happy investing,

Troy

Make sure you understand the terms of the LOC.

I have one that is cross-collateralized by a few rentals that I use for cash flow purposes and it must be paid down to zero for 30 days once per year. If I don't, the terms are such that they can freeze it and convert it to amortizing. Not a huge deal if your intent was to pay it off over time anyway, but make sure you are aware of all provisions.

@Stephen Hollenberg - 

Can you clarify something?
Did you tell the seller that you had the $245K in cash when the contract was signed?

@Julie Williams - 

Compression simply means declining Cap Rates; whereas expansion means rising.

Tertiary markets refers to smaller metros. Primary market examples would be Boston, Chicago, LA, NYC, San Fran, DFW, etc.

Secondary would be places like Austin, Nashville, Greenville, Charlotte, etc.

Technically, I would consider Concord to be tertiary, so calling Hillsborough tertiary might be a stretch, and rural would likely be more apropos.

I live in Hillsborough and have owned multiple SFRs in town; still own several.

The Dominos is news to me. Walmart was going to develop and there was talk of a 55+ community with additional restaurants and retail, but none of it ever came to fruition.

Overall, my investments here have served me well. Strong rents, good tenants, solid appreciation.

Personally, I don't invest in small MFH due to higher turnover and generally lower tenant quality, but there is strong rental demand currently. Just make sure to screen prospective tenants well. 

Lastly, $100K/unit for a small MFH in Hillsborough seems steep. Of course, we have seen significant cap rate compression even in tertiary markets so it's no real surprise that it's priced that high. At that price I would want the property to be in outstanding condition though. Also, depending on the size of the units, rents may be below market. There is almost nothing available and rents have increased tremendously over the past couple years.

@Eliannah Linehan

Be careful how you are calculating CoC.

Cash Flow/Cash Invested.

In your unlevered example, your CoC return in Y1 is 15.38%, not 23%:

$22K Cash Flow (or NOI in this case since there is no Debt Service) divided by $143K Cash Invested.

If you put a loan on the property, you would subtract the Debt Service from the numerator since Cash Flow will no longer equal NOI, and you can subtract the loan proceeds (after closing costs) from the denominator since you will no longer have that cash tied up in the investment.

A couple other things I'm noticing:

1) You may want to factor in a CapEx/Replacement Reserves allocation to more accurately project your returns. I imagine this would be especially important with STR since you are providing furnishings.

2) The OER based on your numbers is only 32.4%. This seems low to me. Of course, I do LTR not STR so I'm not well-versed in expense ratios on STR. Does the property management include cleaning service? Do your income projections include whatever is charged by Airbnb, Vrbo, whatever?

3) Does the $50K for the structure include the foundation and sitework? The land must be cleared, the driveway installed, and I imagine some sort of foundation and drainage installed even if just frost walls and slab. If slab, it is a good idea to consider insulating it if you intend to rent it year-round as it can be a significant heat loss factor. Similarly, does the package include systems such as heating and A/C? Then there's engineering and permitting. Probably not a huge cost for those, but should be factored in for accurate projections nonetheless.

4) Have you done research to come up with your 65% occ assumption? I imagine that occupancy makes or breaks STR plays above or below the break-even point; so it would be a good idea to determine your break-even occupancy and then compare the annual occ of local comps to determine how realistic your assumptions are.

Happy investing,

Troy

@Ashley Budyak

I just invested in a portfolio of properties near a university in Georgia (not UGA).

I think the concern of COVID shutting down colleges and student housing is in the rearview, thankfully.

This is my first foray into student housing, but it is with a sponsor that just returned to me close to a 2x MOIC and 20+% IRR in 38 months (still waiting on the final dispo distribution so not sure yet on the exact numbers), on an MFH value-add in Memphis; so I am optimistic about the prospects of this student housing investment (obviously, otherwise I wouldn't have made the placement).