All Forum Posts by: Victor Steffen

As our portfolio grows I'm learning that every market has its own unique hurdle(s) that show up repeatedly. (landlord regs, construction quality, financing, MLS issues, not-so-common common practices) A few personal examples:

-upstate NY: purchase prices too low for a bank to lend on

-central TX: foundation settling in almost every property

-San antonio TX: non-permitted accessory dwelling units

-Cleveland OH: is every property locked up by a wholesaler? (kidding.. but kind of not haha)

Curious what quirks are common in your markets that you're used to dealing with?

 I love the RBTR model as long as your market can support it. A few tips: 

-ensure adequate parking (corner lots, 3-wide driveways, long road frontage are all good things to look for). At least one parking space per bedroom that won't have your residents in front of a neighbor's house. 

-avoid HOAs: their bylaws can change and most have a restrictive covenant limiting the number of non-related occupants

-4 bedrooms minimum, preferably 5 or 6 bedrooms and around 500sqft in total living space per resident (so a 5 bedroom house should be at around 2500sqft). Don't start cramming 6 beds into 1600sqft- it's a recipe for disgruntled tenants and high turnover.

-No more than 2 residents per shower. You can get by with 3 residents sharing a shower but it's going to be a headache and you will need to charge reduced rents to keep those bedrooms full.

-Furnished finder is a good resource for pricing. You can also look at what studio apartments are leasing for in the area and price your bedrooms 20% below whatever they are trading for. That has worked for us.

-multiple living spaces are a bonus- such as an upstairs media room and a lower level living room so your residents can spread out and have their own tv time.

LAST- If you find a 6 bedroom house with 3000+ sqft, no HOA, on a corner lot, in a good area, with 2 living rooms and 3-4 full bathrooms near studio and 1 bedroom apartments--- it's probably a terrible deal and you should send it to me :)

Hi Assaf,

For MTRs we look for areas where any 3 of the following 6 industries are within 10 minutes of each other: General Hospital System, International Airport, Military Base, Major University (20k+ students), Metropolitan Tourism, Fortune 500 Companies. 

All of these are a draw for mid-term tenants and will help ensure occupancy. Post your MTR on airbnb and limit it to 30+ day stays, furnished finder, or even local facebook groups. We have success with all platforms.

A fully furnished MTR should be trading 25%+ above LTR rates- if you're not seeing that in your market there's likely not enough MTR demand to justify the model.

When you purchase a MTR be sure it will at least cover your PITI if you need to convert it to a long term rental. If you invest where there are overlapping MTR tenant attractions then you won't have issues with occupancy. Just keep the space clean and don't over-extend. Most MTR tenants are single or at most a couple. I personally think 3 bedroom houses are overkill. Our most successful MTRs are a mix of 1 and 2 bedroom fully furnished quadplexes.

Good luck! 

@Estee Capland we typically get the most accurate daily rates and occupancy rates by calling around to STR hosts with inventory near the subject property. It's easy to find the host's contact info (facebook or company websites) and most are happy to have a quick chat about their experience in the market. good luck!

I think it's important to be familiar with the locations you're investing in. Those markets do not have to be where your primary residence is located. "Invest in what you know" holds doubly true for REI ! So if you are comfortable and confident in your market knowledge, OOS deals can be an excellent way to diversify and access inventory you might not otherwise have access to. Good luck!

raw land can be tough to appraise but if you can find acreage with the same zoning, overlays, mineral conveyance, utilities, and near the same location- you can get pretty close to an average cost per acre. PM me the property- I can check what traded nearby. 

@Alex Pino have you considered leasing out to mid-term tenants or using a short term rental strategy? What about finding a single family home + guest house setup? I know a lot of househackers have had great success with 30+ day rentals on the northwest side of san antonio. 

Hi BP, can anyone tell me a bit more about Forney TX? Something isn't quite adding up for me:

-New builds selling for under 300k

-4 bed 1800 sqft SFHs are leasing for ~$2500 / month with with less than 30 DOM

The dissonance comes from the rent:price ratios and asset quality. New or recent construction SFHs in the metroplex are typically selling at a .5% rent:price ratio. These Forney houses are trading closer to a .8%.. In our market that's really good! 

I can't figure out what the economic forces are in the community driving the high rents and relatively low purchase prices. We can sometimes find houses built in the 60s-80s with these ratios but never new construction and definitely not in safe locations. The purchase prices, lease rates, asset quality and neighborhood safety are not aligning. 

Hoping someone with more intimate knowledge of the neighborhoods can help shed light?

Hi Matt, it sounds like you're planning to grow sizeable portfolio. Establishing good accounting habits when the portfolio is small will allow you to scale confidently. You need good partners in this game! A CPA is a key team member. I would establish the relationship now. Learn what you like and don't like about the CPAs you work with while stakes are small. Something tells me you'll cycle through a few before you land on a good one that you align with :) By that time your portfolio will be in the double digits and you'll have sophisticated books to lean on for future leveraging opportunities and clean data for any sales down the road.

Good luck!  

Welcome Douglas! A few notes- 

If you're looking for BRRRR opportunities around Austin they are still very difficult to find even with the softening market. Most professional BRRRR investors with large off-market lead gen budgets and their own internal crews, plus wholesale materials are still leaving 5-10% locked up in their deals. Additionally, now that rates are in the 7-8% range, finding cashflow after the refi is challenging.

WE ARE, however, seeing some flip opportunities which might be a good avenue to start building a capital stack which can then be used to pick up your long term portfolio. There are plenty of options out there now that can earn 10-15% as a flip. An example might be purchasing something for 300k, put 30k into it and sell for 385k. These style deals were impossible 6 months ago but we're seeing them more now.
Last- if your goal is specifically to generate the highest level of cashflow possible you'll have to look at more esoteric management options (rent by room, STR, Travel Nurses) or in markets with more favorable rent:price ratios.

Good luck!