Getting the first deal done

15 Replies

Good Morning,

I have a deal that I am currently evaluating and I am looking for advice such as are they truly deals, what other things should I consider.  

Just so we can connect a little more I am a 22 year old investor in Hammond, La. I recently graduated from college a few months ago. I was heavily involved, ran track, and had ambitions to become a physical therapy. When I graduated, I went to Miami as a graduation gift and ended up connecting with an investor from Michigan through mutual friends. After interacting and learning of an entire new realm, I begin reading in search of something more and was connected to bigger pockets by a friend. I begin searching deals on MLS and begin exploring the market for off-market deals as well. I found a property on MLS that could bring higher yields just by taking a different approach.

Deal. 

105,000 4 bed 1 bath condo located very close to major university within walking distance. The surrounding area is filled with grocery stores, food places, etc. and other things many college students look for. It is currently unoccupied The building was built in 1944 as a military base and was transformed into condominium complex. Most of the walls inside are concrete. (Any concerns with this?) the rents are currently 1100 fully furnished and 1095 without. Tenants in the pass have been mostly students/international students whose parents are not of high income. HOA includes internet water and sewer. The condo needs a paint job for sure and maybe a few small renovations and will be rent ready. I see potential in this property providing great cash flow in the future after renovating, leasing to students covering all utilities, and make leases to individual doors to increase revenue. I plan to offer 20% less of the asking price to a motivated seller. I have creative ideas of financing but open to new ones and to any ideas, advice, etc.

Thank you,

Welcome @Julian Maze !

I'm not sure I'd pick a condo as my first property, let alone a college rental.  The repairs and management hassles can be insane which will eat up your profit/cashflow.


And then you have to factor in the hassles of the condo and HOA. They can raise costs on a whim and it's hard to compete with a normal SFR after those HOA costs. I have a few friends who focus on condos and even as good as they are, they can still get burned and lose $50K in value if the condo board makes one stupid decision.

My advice, avoid a condo as your first unless you're flipping it quickly and moving on.  For a long term play, there are better options.  

Good luck!

How much is the monthly hoa?

I would disagree that a condo is a bad choice for your first deal. Sounds like the place is old and kinda set in its ways, so you might not be subject to the whims of the newer hoa BS.

I recommend you meet with (or at least call) the hoa rep to find out what life is like as a non-resident owner. Look at the performance history, service history, what the future assessments look like - they usually know at least a couple months in advance if they have to make some big improvements.

Ultimately it’s all about numbers and risk - and how comfortable you are with how those factors shake out, and keeping in mind that whatever you project may not end up actually happening.

Hi @Julian Maze Is this property located in miami? Rent seems awfully low for a condo near university in a miami neighborhood? 

The word "condo" makes me cringe so my opinion on that matter is biased.

However, just a thought regarding the concrete walls:

I am going to assume this means no insulation in the walls?  This may be an after thought to some tenants but if the heating and cooling isn't sized to accommodate the lack of insulation there may be a a comfort issue in the house that would lead to a constant turnover in tenants.  Or it would just give them something else to complain to you about.  Just my opinion..

Originally posted by @Bryan Blankenship:

Welcome @Julian Maze !

I'm not sure I'd pick a condo as my first property, let alone a college rental. The repairs and management hassles can be insane which will eat up your profit/cashflow.


And then you have to factor in the hassles of the condo and HOA. They can raise costs on a whim and it's hard to compete with a normal SFR after those HOA costs. I have a few friends who focus on condos and even as good as they are, they can still get burned and lose $50K in value if the condo board makes one stupid decision.

My advice, avoid a condo as your first unless you're flipping it quickly and moving on. For a long term play, there are better options.

Good luck!

 I understand your point of view. Would you say that diving into small multi-family rentals such as a duplex or triplex and house hacking that is pretty established, would be a better place to start off?

Originally posted by @Blair Poelman :

How much is the monthly hoa?

I would disagree that a condo is a bad choice for your first deal. Sounds like the place is old and kinda set in its ways, so you might not be subject to the whims of the newer hoa BS.

I recommend you meet with (or at least call) the hoa rep to find out what life is like as a non-resident owner. Look at the performance history, service history, what the future assessments look like - they usually know at least a couple months in advance if they have to make some big improvements.

Ultimately it’s all about numbers and risk - and how comfortable you are with how those factors shake out, and keeping in mind that whatever you project may not end up actually happening.

The monthly HOA is $130

I agree that it is ultimately about the the numbers and risk and my comfortability with those factors. I am pretty confident in those factors, but like you said it's great to stay conscious that everything may not go as planned. Thank you for the advice I will definitely check into speaking with the HOA rep.

Originally posted by @Jack V. Ospina :

Hi @Julian Maze Is this property located in miami? Rent seems awfully low for a condo near university in a miami neighborhood? 

No sir, it is in Baton Rouge, La. The rents are pretty low compared to market rents. 

Originally posted by @Yashar E. :

The word "condo" makes me cringe so my opinion on that matter is biased.

However, just a thought regarding the concrete walls:

I am going to assume this means no insulation in the walls?  This may be an after thought to some tenants but if the heating and cooling isn't sized to accommodate the lack of insulation there may be a a comfort issue in the house that would lead to a constant turnover in tenants.  Or it would just give them something else to complain to you about.  Just my opinion..

Correct! This was something I was concerned about as well, not so much in the winters because the temperature does not drop very low often, but the summers can be very hot, and if I choose to assume all utilities this can cause high electricity bills in summer months. Which in a sense, isn’t too major but something still to consider

If you do buy a condo style unit, concrete dividing walls is fabulous. Way better sound proofing that a couple 1/2” drywall sheets.

Originally posted by @Caleb Heimsoth :

Julian Maze how is there only a 5 dollar rent difference between furnished and unfurnished?

 I’m sorry 1005.

This is just a hunch, but I am very wary of the rental market near LSU. There are a ton of new apartments/condo's that have come online in the past year, and I worry that they will saturate the market. The numbers may still work out; I would advise a slightly higher vacancy rate in your calculations. Have you run the numbers yet on this opportunity? If not, the calculators on BP are a great place to start!

Originally posted by @Byron Davis :

This is just a hunch, but I am very wary of the rental market near LSU. There are a ton of new apartments/condo's that have come online in the past year, and I worry that they will saturate the market. The numbers may still work out; I would advise a slightly higher vacancy rate in your calculations. Have you run the numbers yet on this opportunity? If not, the calculators on BP are a great place to start. 

That was another issue that bothered me. As I recently went to take a tour of the property I noticed that it was almost as if there was an overflow of apartment complexes within that area. After talking with the property manager, she pretty much informed me that many of the investors were basically competing by adding as many amenities as possible such as tanning beds, and things along that sort to maintain high rents. I do believe there’s a chance you could be right, which such an overload of apartments it could force market rents down eventually. I have run the numbers on the property though, but I hadn’t got a chance to use the bp calc. This will be a good opportunity to do so! Thank you. 

@Julian Maze Don't just write an offer. Talk to the seller to see if they are truly motivated. If they are, you both should be able to come up with something that works for you. Only thing I see that can be an issue with this deal is the HOA. Even if you get it at a rock bottom price, HOA fees can creep up. Knew an investor who bought condos for 50% of the value but the HOA fees kept going up every year. Had to sell since the fees kept eating into the monthly cash flow. Just something to be aware of. Good luck!

@Julian Maze - it depends...it depends on your purpose, goals, and criteria for investing. I talk about identifying these and how they support one another in my 10 Step Guide. My advice is spend some real time figuring your purpose, goals, and criteria things out first (and be comfortable a course correction can happen after you start) before you invest. 

With this particular opportunity, I would want to know why is it vacant and how long has it been vacant for? Right in the middle of the winter/spring semester, shouldn't it be occupied?

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