Fremont, CA · Member since 2018 · 4 posts · 2 votes
I've been investing in syndication deals. Most recently, I invested in new construction multi-family in Madison, AL (35758). I'm looking to buy a couple of new construction homes either by D.R Horton or Adams Homes in Madison. It sounds like they are in 325-350K range and in top schools. Anyone has experience in buying and renting in these new communities? I'd love to connect.
@Peter McDonough I am assuming $2K rent, and with 20% down, the cap rate came down to around 3% with many assumptions that I need to cross-check with someone on the ground. My experience with a recent multi-family deal suggests rents are going up, and appreciation in the long run for 5/10 years might be more than 5%. Being remote, perhaps it's easier to get into a new construction to avoid maintenance.
@Peter McDonough I am assuming $2K rent, and with 20% down, the cap rate came down to around 3% with many assumptions that I need to cross-check with someone on the ground. My experience with a recent multi-family deal suggests rents are going up, and appreciation in the long run for 5/10 years might be more than 5%. Being remote, perhaps it's easier to get into a new construction to avoid maintenance.
What is the business plan for the syndication? Cap rate isn't your return as a passive investor, it is just a metric of NOI vs price. Avoiding maintenance is good, but this sounds like paying too much.
@Taylor L. I was just using syndication deal experience as a reference that Madison's market seems promising for SFH buy and hold strategy. I'm still learning the jargons, but I used the calculator here https://www.calculator.net/ren... and cash flow turned out to be positive if I go for $325K new construction house. Thanks for the feedback though about paying too much. I will continue to explore and crunch the numbers.
Some of my clients are fans of this model. What we have found is that buying houses 5-10ish years old is a good play. No major system breakdowns for another few years. As far as appreciation is concerned, you definitely want to buy and hold. Madison County had an average appreciation of 12% in 2020.
@Pritesh Dave - there is a significant difference in the Madison zip codes; if those properties are in 35758, then the numbers might work. If you are buying a new home in 35757 or 35756 for 350k, you are really rolling the dice on cash flow.
I agree with @Peter McDonough - tough sledding to cash flow at a purchase price of 350k in Madison regardless. Any prolonged vacancy or significant damage to the house, and you'll be in the red.