@Chad Kinsley
Thanks for the input Chad. I'd like to add a few notes to clarify points mentioned. We are here to support whatever makes sense for your investment criteria regardless of the location. We have new construction in many parts of the country along with rehabbed SFR & MF properties.
Just to be clear, this thread is about Ocala. We are currently discussing a different market in SWFL (Cape Coral). This is an exceptional market that is growing dramatically. This is driving rents & market values up consistently throughout the year. Just over one year we've seen an increase of market value of about 18% to 20%, and rents have increased faster than that. If this trend continues over the next year (which it likely will) there will be a large amount of equity and cash flow beyond what we are seeing with today's analysis. The nice part about investing in this location is the opportunity to have a brand new built house in an appreciating market that has high rental demand. You will likely come into immediate equity while still having positive cash flow. In most instances it is very hard to obtain positive cash flow on new construction.
Here are a few points I think would be worth considering in your evaluation to determine what the best path forward is. It's important to know what numbers to input in your analysis.
-We run $2,395 on the pro forma for rent evaluation. We have seen finished projects renting in this range very quickly. I'm not sure where the $2,500 to $2,700 came from, but that would be too high for current market rent. Maybe in the future if the market continues how it is. As @Stetson Miller mentioned, going the STR route is a great way to achieve higher rents. Please evaluate your rental at the $2,395.
-With new construction there is always a 1-2 year comprehensive warranty along with many longer mechanical & structural warranties. I do not think it would be correct to evaluate 5% for maintenance & 5% for cap ex with new construction. Maybe if you are holding 15+ years, but then you also need to factor in rent increases, etc. Leasing fee coming through our network should be 1/2 of what is mentioned, not full month's rent.
-The pro forma shows a regular 30yr conventional loan as that is the only way to compare apples to apples for long term holds. There are loan options that are realistic within these parameters. This is not evaluating a construction loan upfront like you are doing & there are different construction loan options to choose between. We need to evaluate each of these on a case by base basis with varying numbers.
-The CoC play is not dead. If the market continues as we have seen over this past year the rents will likely be higher. Also, please note we evaluate the taxes at over $3k in yr one. The reality is that with new construction your taxes should be a fraction of that cost the first year & will gradually increase to be fully accessed in yr 3 likely. That means in the first couple of years your cash flow should actually be ~$1k to 2k higher than projected due to the tax amount. If CoC play is not attractive on this, then maybe the equity position would be. On this 1774 model you are considering, we just had 5 appraisals that came back in the $400k to $405k range. It's a good to have options with homes to cash out refi, sell, vacation to & use as a STR, etc.
Not trying to oversell this too much. It's not for everyone. The building delays are real and the market could slow over time, but these do make a lot of sense right now any way you slice it up.
