Best way to move forward

16 Replies

Hello BP members,


I'm going to be a new investor I've decided that I want my focused niche in buy and hold.

I've done my research and I would like to use the BRRRR method or creative finance (since I have an excellent credit score). I'm young so time is on my side, but I have a full-time job as an engineer so I lack the ability to go and do wholesaling. I also recently got a new job in Huntsville so most of my focus and in the new job to make sure I can keep it. Does anyone have any options on how to further define my path forward and how to get up and quicker?

I've been searching in my market that is red hot right now, I'm trying to get my analysis practice down but I'm not liking how the numbers are looking.

I look forward to this discussion thank you in advance BP members.

Hey Samuel,

I'm familiar with Huntsville. I was looking for a local investor in California several months ago when word first broke that the FBI was developing their new headquarters, plus the hefty investment in the local football program out there.  

You're going to have a tough time finding "good looking" numbers in a red hot market as everyone is willing to pay a premium to get in. Take a look at it from an alternative perspective; how is appreciation on an annual basis looking out there? Have homes jumped in price recently? A good plan may be to buy a property and play the long-term game, similar to what investors have been doing in CA for years.

If you think you can cash-flow plus generate a decent annual appreciation rate, it may be worth just buying something at a tighter initial ROI / COC.

Originally posted by @Samuel Smith :
Hello BP members,


I'm going to be a new investor I've decided that I want my focused niche in buy and hold.

I've done my research and I would like to use the BRRRR method or creative finance (since I have an excellent credit score). I'm young so time is on my side, but I have a full-time job as an engineer so I lack the ability to go and do wholesaling. I also recently got a new job in Huntsville so most of my focus and in the new job to make sure I can keep it. Does anyone have any options on how to further define my path forward and how to get up and quicker?

I've been searching in my market that is red hot right now, I'm trying to get my analysis practice down but I'm not liking how the numbers are looking.

I look forward to this discussion thank you in advance BP members.

 If you're not liking the numbers, then that "hot" market isn't all that hot.

Based on your definition, what are your reasons for saying that market is "hot"?  What makes it hot?

@Wyatt Franta Thank you for the feedback yea I agree it's just hard because since I'm just starting out. There is a lot of new construction going on in Huntsville right now would it be smart to buy a home near the new construction because you believe it will raise that value of the area and whats the range of improvement like that?

@Joe Villeneuve Right now Huntsville is a hot market because of the high ends jobs and all the upcoming improvement as well, the new FBI headquarters, toyota plant, new baseball stadium, and some other things as well. A lot of outside investors are here because of the potential in this market.

Originally posted by @Samuel Smith :

@Wyatt Franta Thank you for the feedback yea I agree it's just hard because since I'm just starting out. There is a lot of new construction going on in Huntsville right now would it be smart to buy a home near the new construction because you believe it will raise that value of the area and whats the range of improvement like that?

@Joe Villeneuve Right now Huntsville is a hot market because of the high ends jobs and all the upcoming improvement as well, the new FBI headquarters, toyota plant, new baseball stadium, and some other things as well. A lot of outside investors are here because of the potential in this market.

So you're saying that all of the Huntsville area is equally impacted by all those things you mentioned?

Originally posted by @Samuel Smith :

@Joe Villeneuve yes in Huntsville city limits almost everything is being affected by it I've met more seasoned investors that are saying the same thing.

So all areas are exactly the same?  For all sizes of houses?  They're all in the same price range and all have the same rents?

When you buy to flip, it will cost you the same to buy/rehab, and you will make the same profit over the same time period for every property?

When you buy to rent, it will cost you the same to buy/rehab, and you will cash flow the same for every property?

 

No areas are different what I'm saying is the sellers are raising the purchase prices to a point that the numbers don't work out. Right now my access is to on-market deals I have not broken into the off-market realm so with what I have I'm having a hard time making the numbers work out.

@Samuel Smith That would depend almost entirely on your belief in the market. Buying near new construction can increase property values as long as market demand or "Market Absorption" is there to purchase or "absorb" all of the new construction taking place, and then some. Unfortunately, I can't give you a range of costs associated with purchasing & rehabbing a property in Alabama as I'm based in CA. However, I would recommend that you bring whatever you purchase up to market standards in order to capture strong rental tenants to live/maintain the property for you until it's time to sell. 

Originally posted by @Samuel Smith :

No areas are different what I'm saying is the sellers are raising the purchase prices to a point that the numbers don't work out. Right now my access is to on-market deals I have not broken into the off-market realm so with what I have I'm having a hard time making the numbers work out.

You can't make the numbers work. They either do or they don't.  When they don't choose a different market

 

Hi @Samuel Smith !

Congrats on getting a job offer in Hunstville! I am a OOS investor with 3 SFR and 1 quad in Huntsville!

Huntsville has definitely lot of things going well for it! The population growth is really crazy which brings a lot of demand for housing! One key thing in this "hot" market is to first soak up all the info that you can read on the forums here and then come up with a strategy! Then just network the hell out! :) The local reia is really active and you definitely have a great advantage of being local!

But first always make sure you do the numbers part correctly and don't fall in for the hype! The market is definitely looking strong for the next 4-5 years but if it tanks you should also make sure you have margin of safety in your numbers! I usually put 20 offers and get rejected on may be 19 of them but patience is the key and doing this exercise has helped me identify what is a good number for both parties to be happy!

There are still deals available in HSV but it needs more effort and a lot of patience!

Strategy wise you can either buy off MLS at retail price and compensate some cash flow for future appreciation but make sure you buy in good neighborhoods or what one of friends is doing is buying new construction homes in a very desirable neighborhood like jones farm school area and given the macro trends he is hoping that the values go up in the coming 3-4 years!

Happy to answer any questions that you might have!

Regards,

Gorden

Do you have a good agent in the area you are working with?  I work the Huntsville/Madison/Limestone area and I'm just getting into investing myself. I'm looking at the gentrification areas of our city as well as the markets around us, as they too are appreciating.  

I really appreciate all the helpful feedback.

@Wyatt Franta See that's what I was thinking but from what I was reading and research a lot of people shy away from new construction because of the lack of history.

@Joe Villeneuve I agree with that statement but I also believe that if you are creative you can make something work that not seem like it doesn't work.

@Gorden Lopes oh your so lucky I want a quad so bad would help me fast track my road map so much because I could house hack it. I'm definitely doing nothing but researching and networking right now doing everything I can so that when I have the funds for access to someone so has the funds I can pull the trigger.

@Megan Wilson I've only met with one agent so far in Huntsville Ray Petit, but do you already have investment in huntsville yourself you should PM me and talk more about it.

@Samuel Smith I would recommend researching states with similar growth and observe the housing market from when population counts started to increase. You can google something like "(Denver, San Diego, Seattle, etc.) population growth" and it should provide you with counts from 2010 - Present. You'll be able to see when housing prices started appreciating, and where they're at currently. You can then find a census that aggregates the average home price over time and compare the correlating data points (Zillow is one source that provides that information). This will give you a an idea of Huntsville's potential market growth.

So while others may shy away from new construction because they don't know what's going to happen, you can approach your situation with relevant data to make an informed decision. Remember, Huntsville, Alabama is far from the only city/state to experience expansion on such a scale. 

At the end of the day, regardless of your findings, what @Joe Villeneuve said is correct. Either the numbers will work, or they won't. It's up to you to determine your risk appetite.

Originally posted by @Samuel Smith :

I really appreciate all the helpful feedback.

@Wyatt Franta See that's what I was thinking but from what I was reading and research a lot of people shy away from new construction because of the lack of history.

@Joe Villeneuve I agree with that statement but I also believe that if you are creative you can make something work that not seem like it doesn't work.

@Gorden Lopes oh your so lucky I want a quad so bad would help me fast track my road map so much because I could house hack it. I'm definitely doing nothing but researching and networking right now doing everything I can so that when I have the funds for access to someone so has the funds I can pull the trigger.

@Megan Wilson I've only met with one agent so far in Huntsville Ray Petit, but do you already have investment in huntsville yourself you should PM me and talk more about it.

 Very true.  I do what you mentioned in my name above all the time.  I find it's the best way to do this.  That wasn't an option here though.

@Samuel Smith - the numbers still work in certain areas of Huntsville, but you have to be comfortable with the higher risk associated with these properties.  If you are looking for A/B properties, like in 5 points - the numbers simply don't work right now unless you do a total gut and renovate or find an off-market deal that is a needle in a hay stack.  Heck, I saw 2 recent listings in 5 points - one I didn't even walk through once I saw that the foundation was completely shot (yet the seller wanted, and got, full market price as if the foundation was solid), the other had a river running through the crawl space and had floors with a 20% slope.  No thanks.

Now, if you want to buy a property over by Merrimack Park (35805) or in 35816, I am certain you can find close to or at the 1% rule.  But it must be a cash flow play, as appreciation has been very slow in these areas, and they are rougher neighborhoods by Huntsville standards (but absolutely nothing like other big city "rough" areas to be sure).    Good luck.