What to do next in Western NY ? Any Feedback on my plan?
Hello all REIs and especially local people in Western NY !
I want to get some feedback and advice on my next steps to see if this makes sense.
This will be longer post so thanks for hanging in there!
Current situation:
We came to the US from Germany apr. 4 years ago.
We own a single family home in Germany. Current Value 250K. Currently still owe 120K.
My wife always wanted a lot of land for her own animal sanctuary.
So we saved up 100K and found this 12 acres horse farm with 3 barns incl. a huge metal arena/barn with a 1800 sqf , 3 bdr, 1.5 Baths Single Family home build in 1890 on it. Its fair to say the house was in distress so we basically made an emotional decision as we wanted the land thinking a house you can Always fix. You just Need time and Money. But land you can´t fix. You have it or you don´t.
The good news was the horse boarding business should net between $1,600-$1,900 a month. So I thought great we can buy this thing and horse hack (as opposed to house hack ;-)) it, so basically have the horse owners pay our mortgage.
They asked $260,000 for the house. We got it for $220,000 as not many people wanted to buy a horse farm and it was in distress.
During the financing process the lender came back and said we can not do a conventional first time home buyer loan as this property is Not a single family home, it is classified as a farm.
So we asked the town to subdivide the property. Put the house with 1 acres of land on one lot and buy that for 220K with a conventional loan and buy the second lot of 11 acres with all the barns on it for $1.
The appraisal for the house only lot came back at $240,000 and we closed on the house in May of 2021. Which means we now also basically have 11 acres of land with barns debt free. So far so good!
The problem is the process of dividing the lot took 7 months. And by the time we closed not only were material cost through the roof but it was spring time so all contractors were busy as well. I did my part and did a full Matterport 3D scan of the property and set up a detailed contractor bid sheet divided into Material and labor as taught by our guy David Green in his BRRRR book and send it out to 7 different contractor firms. Nobody even replied.
Desperate and pressed for time I went with a contractor suggested by my Realtor. And that rehab went off the rails and is not even done yet. We are way over budget (I estimated 40-45K, we are currently sitting at 60K and are not even done) and way over time. So we are basically Living in a construction Zone as we needed to get out of our rental for the last 10 weeks. Which is not fun at all.
With the 25K I needed cash to close and 60K in we basically do not have much of the 100K left that we saved up.
However, we turned 3 bedrooms into 4 bedrooms and 1.5 baths in 2 full baths. So I hope we added some value.
However in the long run I think the property still has the potential to be worth it even with the current headache.
Plan moving forward:
My goal is to be able to have enough rental properties to have that cashflow pay our bills so I could quite my job one day if I wanted to. I figured I need around 5K a month to make that work. Or like 20 units If each unit would potentially cashflow $250 a month.
In the spring of 2022 once the rehab is done and we are able to add some curb appeal to the property I would like to get a HELOC on it as we basically dumped all our liquid savings into it at this Point.
Im hoping that it will appraise somewhere in the 290K-300K range with us buying under appraisal value, put 60K documented into it and added a beedroom and bath. We owe 200K on it so I´m hoping to get a 75K-80K Heloc.
We could refinance our house in Germany at 0.99% (crazy) and pull 75K€ = 90K$ out of that as well. For a total of apr. 165K$.
With that 165K$ I would like to BRRRR small Multifamily (duplex to fourplex) in Western NY. Im hoping to have less Competition in small Multifamily as you are not competing with the None Investors that are Looking for a house to live in themselves. so y Duplex or triplex is too big for them, but it is also too small for the serious/big multifamily Investors.
So we are Looking for Multifamily homes (duplexes I guess) between 120K-140K starting in spring next year. Where we need to put a max of 10-20K into it to make them rent ready. Pay upfront in cash and then get a 80% cash out refinance around 6 months down the road. And hopefully some improvements and inflation help us to get the majority of our money back and do it again. I was looking at Lockport, Kenmore, Amherst, North Tonawanda NY.
I would also like to make them a mix of short term and long-term rentals. So if you have a duplex renting out one unit long term and turn the other one into an Airbnb to see how they perform compared to each other. I would like $250 in cash flow an average per unit.
- 2nd Option is we have an old big barn on the second lot. It sits on a concrete slap and has power.
We could get the farm land zoned to housing and take that old barn down and build a little duplex from scratch and turn this into 2 AirBnB untis.
I guess short term vacation on a horse/ animal sanctuary 20 mins away from Niagara Falls, 10 minutes from Lake Ontario and 30 minutes from Down Town Buffalo cold potentially attrack some people.
I guess building from scratch will cost around 230K. Which I can not BRRRR basically as I don't have anough cash to pay upfront and then Refi. Any ideas about the financing for this ?
Thank you all for taking the time and appreciate your input.