All Forum Posts by: Will Kaufmann

Mike:

First off, congratulations on getting your license, that is not a small feat in the state of North Carolina! I do not have any great secret to share since I do not actively buy and sell real estate, but I do have some questions for you to consider:

Is your main objective to make as much money as possible? 

How do you define your "business"?

Is there a particular niche you are interested or experienced in?

Are you willing to sacrifice income for experience and learning?

Have you reached out to your broker in charge, or do you have mentors you can tap into at your firm?

Do you have any tangible or intangible skills that you can offer a team, like marketing, hustle, charisma, etc.?

What are you trying to create in your "business" (for example, great customer experience, high volume of transactions, build a team, etc.)?

Do you want your consistent cash flow to be a product of effort, or a passive stream of income?

There are hundreds of ways that you could build consistent cash flow in real estate, especially as an agent, so you may want to consider sketching out some answers to the above questions. You may surprise yourself with those answers that may lead you closer to an answer to your own question.

Good luck!

Specific to the Triangle, it seems like Durham is benefiting more from Raleigh regulatory environment than Raleigh itself. If pro-development incentivization is one side of the pendulum and outright restrictions (homestays, scooters, etc.) Is the other, will the pendulum swing? If so, when? I would like to hear everyone else's opinion on this topic!

Ryan

I live in DTR and can tell you that the micro markets vary widely. "Near downtown" can result in a lot of variability. I found a great data source that enlightened me to how important specific zip codes are to pricing in Raleigh: https://datausa.io/profile/geo...

(posting via mobile so not sure that link will work).

I can actually throw a stone far enough that the ARV would be 10% less than where my house is. That is not a hyperbole but pure advice.

Anecdotal evidence as well, I recently spoke to a Durham GC that said his new builds are generally at $110/sqft so I would guess that a small premium add would be appropriate in Raleigh.

Last, on purchase price, definitely look to recent comps on lot or tear down prices for the frequent DTR developers (for example, Monarch). They are sharp but ultimately appear to be buying on-market deals (I think). If you are buying pre-market you can probably discount the comparable on-market deals to inform your lot value per acre (or square foot).

Feel free to reach out if you have any questions!

Will

I sat down with the local Raleigh North Carolina branch today and was impressed with their openness and professionalism. The rep clearly explained how they operated and did not hide anything. I actually read through the notices and contracts and it all matched what was said, so that is a good sign. 

On the note of deposit, yes it is a $5k nonrefundable deposit. The rep strongly urged me to step onsite with a GC BEFORE putting in an offer since the deposit is due on signing. Keep in mind this was a general meeting, not specific to any given deal, so that could be usurped by the classic "we have 15 site unseen offers and if you do not submit one now we cannot show you the property in time" situation.

Based on my experience thus far the company may offer a valuable service. I will keep an eye on the deals that are offered and inspect as many as possible and check back in if anything goes awry.

No worries, thanks for the quick response. Thoughts on a snow-check to next week (Thursday?)

@Igor S. @Mitch Miller @Tom Regal @Brandon Freese Checking in to see if you all are willing to brave the blizzard to meetup. I will be driving from downtown Raleigh and want to confirm whether everyone (or anyone) is still attending.

@John Williams Welcome! I am also in the Raleigh area and looking for similar investments. I recommend subscribing to the Triangle Business Journal (newspapers, who does that?). There is always great up-to-date real estate information in there that I find useful. The last issue noted that we have seen roughly 40% increase in rent rates in the last 10 years, which I believe qualified as 2nd highest growth in the country. On the flip side, prices have appreciated at a greater rate. I think that the result is difficulty in finding cash flow properties in our market. It looks like Winston-Salem offers better ROI from a very high level / cursory comparison.

One thing I like to point out as well is the extremely low housing stock of multi-family properties in Wake County, something like 1-2%. Compare that to 30% of housing in Chicago, 35% in Boston and 51% in New York City.(https://www.wsj.com/articles/philadelphia-apartment-market-expands-1450175400)

@Joshua Frahm

@Will Barnard Yes, we are running a possible loss on the project. @Rick Pozos You are right, the 2 points should not kill the deal! It is the possibility of running monthly interest payments (@Odie Ayaga $2,720/month) that will quickly eat away at any potential for profit, or exacerbate the loss. 

Ultimately we overpaid for the property, and misunderstood the ARV. Comps were supporting $380-$420k but we did not factor in the market force that many flippers were jumping into the market (neighborhood specific) at once. Properties ended up firesaling for 10-20% below market value after we closed on the buy-side, which we did not foresee. The recent transactions unfavorably reset the market. Lesson learned!

We are listing a flip soon and looking for alternative exit strategies in the event we cannot sell by the time our loan terms. At the moment, it does not look like renting is a viable option as the market is thin for rentals. Under our loan agreement, we can request a 6-month extension but that will cost 2 points and continue at an interest rate of 9.99%, which may be too expensive. I searched extensively on refinance strategies and did not come across much information. Here are some key details:

Purchase Price: $172,000

Rehab Costs: $100,000

Financing and Holding Costs through Term: $48,000 (all in cost of roughly $320,000)

Balloon Payment: $272,000

ARV: $300,000 - $350,000; the variance is explained by some investors using below-grade finishes and also using "fire sale" tactics.

The DOM in the market varies, with some properties selling in 60-90 days and others sitting for up to 180 days. Ultimately we may need to keep it on the market for another 6 months after the loan terms. Losing money on the deal is a reality but we would like to minimize the loss if that is our actual scenario. The property is held in an LLC and we have the DTI to obtain a conventional loan by purchasing the property from our own company. Obtaining a note from a private lender may be difficult, so my question is would a conventional loan be an alternative (assuming it would appraise) to settle the balance with the HML ($272,000)? If not, what are the options in the current lending market?

Thanks in advance for the input!