Please help in analyzing a Quaruplex in Raleigh for STR and LTR

[Ramez Qubain]

Hi i need your help in analyzing this property. as you might know, Raleigh doesn't have many small multifamily homes due to zoning changes in the 80s and 90s. however i have come across this newly renovated Quad. please see this link and see attached the analysis. https://www.biggerpockets.com/...      https://www.zillow.com/homedet... 

my biggest concern, is the rental income. the advert says 1,500 per unit per month, however when i use the rental calculator in bigger pocket tools i get a much lower number. another concern is, there are no comps in the area to assess the value of the property since there are not too many multi family homes in the area. 

also how can i assess the income if i turn it into a short term rental?

once i fine tune the above numbers, i am then able to decide on how much the home is worth. 

[Andrew S.]

Haven't had time to look at details, but personally, I think that price is excessive for that neighborhood.  Yes, it is close to downtown, but that part of town is at best "up and coming".  There is probably a reason why it has been sitting on the market since mid-April....  given the scarcity of quads in Raleigh, I would expect this to last at most a few days, even if slightly overpriced.

[Ramez Qubain]

Quote from @Andrew S.:
Haven't had time to look at details, but personally, I think that price is excessive for that neighborhood.  Yes, it is close to downtown, but that part of town is at best "up and coming".  There is probably a reason why it has been sitting on the market since mid-April....  given the scarcity of quads in Raleigh, I would expect this to last at most a few days, even if slightly overpriced.

Thanks Andrew. I absolutely agree with you, I am going to offer a lower price but not sure how much until I do the analysis. In your opinion what is it worth?

[Kenneth Jackson]

This property is so unique that you get to decide what it's worth to you, just like the listing agent or owner who presented it at this price.

$1,500 might be a stretch for rent for a 750 SF home in this area, especially with how tight each space is in the home. You can get a studio in the Peace building in the heart of Glenwood South for $1,655 with arguably a better layout and a little less square feet.

We are definitely an appreciation market, if you bought at $900,000 and could charge $1,200 in rent right off the bat you'd be close to breaking without property management fees. While I'm not versed in AirBNB as much as long term rentals, I don't consider the AirBNB returns without knowing I have an exit strategy to rent it long term and the above numbers barely make sense at $900,000 depending on your strategy.

Also, Raleigh has stricter AirBNB laws than its Durham counterpart (https://raleighnc.gov/services...). See Number 6.

1. For any multi-unit living use, no more than 25 percent, or two dwelling units, whichever is greater, may be used for short-term rental in any single building.

So do you have a strategy that has two long term units and two short term units? 

I think this one is a no-brainer as to why it has been sitting at the list price. For a house hacker that qualifies for this it would be an enormous stretch, for an institutional investor thats looking to park money there's no cake on top at the current price (appreciation) and there's no cash flow. Unless you're looking for a pretty house and don't care about investment principals I think this one will continue to sit. 

Every flipper/investor wants to get their money out at some point, so somehow, someway it'll move. This one was bought at $375,000 in June of 2020. I can only guess how much they've invested in the past two years of the rehab and holding costs, but can't imagine it's put them back $500,000k in that period. I just think it's overpriced and the delta between your price and their price might take months to find an agreement, months when you could've deployed capital and energy elsewhere.

[Tiffany Alexy]

Quote from @Kenneth Jackson:

This property is so unique that you get to decide what it's worth to you, just like the listing agent or owner who presented it at this price.

$1,500 might be a stretch for rent for a 750 SF home in this area, especially with how tight each space is in the home. You can get a studio in the Peace building in the heart of Glenwood South for $1,655 with arguably a better layout and a little less square feet.

We are definitely an appreciation market, if you bought at $900,000 and could charge $1,200 in rent right off the bat you'd be close to breaking without property management fees. While I'm not versed in AirBNB as much as long term rentals, I don't consider the AirBNB returns without knowing I have an exit strategy to rent it long term and the above numbers barely make sense at $900,000 depending on your strategy.

Also, Raleigh has stricter AirBNB laws than its Durham counterpart (https://raleighnc.gov/services...). See Number 6.

1. For any multi-unit living use, no more than 25 percent, or two dwelling units, whichever is greater, may be used for short-term rental in any single building.

So do you have a strategy that has two long term units and two short term units? 

I think this one is a no-brainer as to why it has been sitting at the list price. For a house hacker that qualifies for this it would be an enormous stretch, for an institutional investor thats looking to park money there's no cake on top at the current price (appreciation) and there's no cash flow. Unless you're looking for a pretty house and don't care about investment principals I think this one will continue to sit. 

Every flipper/investor wants to get their money out at some point, so somehow, someway it'll move. This one was bought at $375,000 in June of 2020. I can only guess how much they've invested in the past two years of the rehab and holding costs, but can't imagine it's put them back $500,000k in that period. I just think it's overpriced and the delta between your price and their price might take months to find an agreement, months when you could've deployed capital and energy elsewhere.

 Came here to say this! @Kenneth Jackson nailed it.

[Chris London]

House was built in 1925 per the disclosures. A 100-year-old house is going to come with additional future capital expenditures.

Only 1 parking spot total for a quad will not help get top rent.

As of Aug '22 the tailwind of out-of-state qualified applicants for luxury rentals is softening. I'd warn anyone doing rent comps to be conservative for the coming few seasons.

My inbox is filled with as many price drops as it is listings this week. Personally, I'm waiting a bit longer.

[Andrew S.]

Quote from @Ramez Qubain:

Quote from @Andrew S.:
Haven't had time to look at details, but personally, I think that price is excessive for that neighborhood.  Yes, it is close to downtown, but that part of town is at best "up and coming".  There is probably a reason why it has been sitting on the market since mid-April....  given the scarcity of quads in Raleigh, I would expect this to last at most a few days, even if slightly overpriced.

Thanks Andrew. I absolutely agree with you, I am going to offer a lower price but not sure how much until I do the analysis. In your opinion what is it worth?

Ultimately, as the saying goes, it is worth what someone is willing to pay for it.  Personally, I have stayed on the sidelines for several years now because I think the market has been way overpriced relative to rents, but that’s just me - others have done well buying.  I MIGHT be a buyer at half of the original listing price (I.e. about 700k).

[Katherine Serrell]

Ive personally looked at this property in person twice. Happy to connect and share my thoughts.

[Ramez Qubain]

Quote from @Katherine Serrell:

Ive personally looked at this property in person twice. Happy to connect and share my thoughts.

 would love to hear your thoughts Katherine. feel free to DM me

[Katherine Serrell]

Quote from @Ramez Qubain:

Quote from @Katherine Serrell:

Ive personally looked at this property in person twice. Happy to connect and share my thoughts.

 would love to hear your thoughts Katherine. feel free to DM me

 Just messaged you.

[Emily Weems]

I have toured this property it is well remodeled however there are a few things to note. As someone mentioned above there is one true parking space with addition residents having to get permits for street parking. Street parking is available in that area at this time however, much of the downtown Raleigh growth is in that direction, including the old DMV building a couple blocks north that is currently owned by the state and is expected to be sold/demolished. If you'd like to discuss this property further feel free to send me a DM.

[Ramez Qubain]

Quote from @Emily Weems:

I have toured this property it is well remodeled however there are a few things to note. As someone mentioned above there is one true parking space with addition residents having to get permits for street parking. Street parking is available in that area at this time however, much of the downtown Raleigh growth is in that direction, including the old DMV building a couple blocks north that is currently owned by the state and is expected to be sold/demolished. If you'd like to discuss this property further feel free to send me a DM.

Thanks Emily for your feedback. for some reason this property has been delisted from the MLS. Whay would that be?

[Emily Weems]

Quote from @Ramez Qubain:

Quote from @Emily Weems:

I have toured this property it is well remodeled however there are a few things to note. As someone mentioned above there is one true parking space with addition residents having to get permits for street parking. Street parking is available in that area at this time however, much of the downtown Raleigh growth is in that direction, including the old DMV building a couple blocks north that is currently owned by the state and is expected to be sold/demolished. If you'd like to discuss this property further feel free to send me a DM.

Thanks Emily for your feedback. for some reason this property has been delisted from the MLS. Whay would that be?

Hey Ramez, it looks like the multi-family listing expired on 9/1/2022 but it is still active under commercial improved on the MLS.

[Emily Weems]

Quote from @Ramez Qubain:

Quote from @Emily Weems:

I have toured this property it is well remodeled however there are a few things to note. As someone mentioned above there is one true parking space with addition residents having to get permits for street parking. Street parking is available in that area at this time however, much of the downtown Raleigh growth is in that direction, including the old DMV building a couple blocks north that is currently owned by the state and is expected to be sold/demolished. If you'd like to discuss this property further feel free to send me a DM.

Thanks Emily for your feedback. for some reason this property has been delisted from the MLS. Whay would that be?

 Update: The seller has allowed the multi family listing to expire. As of now she plans on separating the units into condos and selling them individually. Feel free to reach out to me for more information!