All Forum Posts by: Aaron Pfeffer

@Christopher Webb

I'm looking at Big Bear inventory myself. The key seems to be manager or no manager. Looking at anywhere from 20-27% management fees + some other costs, so if you're doing it all yourself and offer the renters an attractive and affordable space, then you're going to see plenty of ADR and cash flow. Big Bear has also become a major destination for Nevada dwellers, so not just Californians any more, and the town is growing like crazy. Plus, when the next downturn hits (12-24 months from now), it's going to be an even better vacation destination. People still need to go away, even during a recession, and Big Bear will offer an inexpensive alternative most nights and weekends, with inexpensive family activities. Maybe not the skiing (Aspen just bought the mountains), but plenty of other things to do, especially over the summer. Pray no more future droughts! Also very curious to hear what others say about it up there...

Glad to see this deal will ultimately not come to pass and you can focus on much better ones. What's most interesting is wondering if there are $50,000 plots of land where you could build a 2/1 at under 1,000 Sq Ft for a better price than the cost of your rehab and generate an ARV of around $100,000 or even more. The...build-to-rent concept. There are places in the country the numbers make sense. Not saying I would take on the task for anything less than a finished duplex with 1 - 1.5% rent rule margins, but last year I had someone pitch me their build-to-rent model down near Ft. Myers Florida. Passed for a slew of reasons, but at least plots of land, compared to time of permitting, compared to all costs involved did compute for decent final rent roll.

Bottom line is that when a rehab costs as much as your purchase price and you'll end up with same size and sq footage you started at...pretty much a never. 

Thanks all for thoughts on AirDNA, and my apologies to @Bryan Harvey for splicing the thread. Appreciate all you've been offering as well, including your spreadsheet template. Wish you well with the project.

Enjoying this thread. How does everyone following here feel about AirDNA as a reliable source of data for their STRs?

Eh, it's a mindset thing @Dave DeMarinis

From a lending perspective 100% CLTV is obviously horrible, but this is more annuity than loan. Follow...

Custodian retirement accounts are hard enough to find suitable vehicles to generate good returns on (especially if you're not an accredited investor), and JV deals trigger UBIT, but straight interest won't. Loaning a flipper 100% money or gap financing can be treacherous, but show me someone who lives around and owns 10 SFR rentals in a small town and suddenly I'm piqued by their business model. If each house is worth $150,000 and rents for around $1,500 and they've got 70% NOO first loans at 5%, that's $565 in mortgage. My $45,000 costs $300 a month to be in second position and if taxes/ins/expenses are another $400 a month, they are cash flowing $200-300 a month, which obviously only grows as rents increase and my lien looks better and better as the principal decreases.

Now, sure, I'm painting a choice scenario...1% rent rule, an investor with that kind of SFR farm...but funny enough...I see more and more of those scenarios existing the more I talk to people. Point being, there are way more landlords like this who exist than I expected, just as there are a ton of private individuals with self-directed custodian accounts who consistently look for 8-10% returns that don't cause too much brain damage. 

The structure may not be for everyone (nor do I put any of these types of deals together personally), but they exist. And if the real estate investor is competent, those retirement account holders are often happy with the results.

@Mark Weinberg you're looking for an individual with a self directed IRA or Solo 401k who would park their money as a second TD at 100% CLTV. Doable yes, but hard to find and you need to structure it all well. Would aim for 70% NOO loan from conventional lender in first position at 30 year fixed note and then source second lien private for 15 years, 8-10% IO loan and small guaranteed piece of the upside if spike in equity and you ever sell. That could entice retirement account individuals who would like to lien behind the 70%, especially if real estate entices and property cash flows even with both liens and expenses. The hard part will of course be sourcing these private lenders, but that's up to you to do so. They do exist and plenty are looking for that type of passive real estate investment if you can prove to them you are a worthy risk. Good luck!

Hard Money Lenders exist to fund renovation deals. Depending on how well and what you are buying, they fund from 70-90% of total project cost (purchase price + construction/rehab costs) and dole out the rehab money in draws.

I think plenty of HMLs will fund with no interior inspection (we do it here if necessary), but it all depends on the leverage you're asking. If the leverage is low enough, not a big issue, especially if you intend to do work to the property after picking it up. The issue becomes asking the HML to carry the weight. Meaning...you mention the property is undervalued. That's all well and good but if it's one of those conversations with an HML where you are buying for $250,000 but claim it's really worth $300,000 (even before repairs) so you want the HML to carry the difference of that valuation AND they can't get inside...yeah, that can get tough. Keep the leverage low and "carry the weight" on your side and plenty of HMLs will fund the deal. But if that's not possible, raising private capital and giving away more of the deal may be the only route. Best of luck.

Interesting and well done! Though, when you posted "Manufactured Home" was hoping this would be thread about pre-fab flips. Hard to come by. Here in Los Angeles apparently the banks are now mandated to fund these on the back end, so I'm curious to see how many more pop up here and there. ADUs are the new value add play in Los Angeles at moment, but even they haven't taken off completely.

Are you giving down payment money or rehab money to this partner? Or both?

If rehab money, dole the funds out in construction draws if possible.