Rental Property #7 - Melbourne, FL

Rental Property #7 - Melbourne, FL

Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes

Just closed on our 7th rental on 2-14-2020. The property is in Melbourne, FL. For the last year, I was having a hard time justifying market prices in our area and how thin the margins would be on properties I was analyzing. In January, I stumbled upon a For Sale by Owner in Melbourne, FL that was listed at $99K. This really caught my eye because its really rare to find properties in Central Florida under $130-150K that aren't in a terrible area or really bad shape. However, this property was in surprisingly good shape, with not much work needed other than an inside paint job. We offered $95K and the seller accepted. I was planning to list for $1200, so we were well above the 1% rule, which has worked well for us in the past. However, when I called the Brevard County Housing authority, they told me they would approve my rent for section 8 at closer to $1400! On top of this good news, I found a local credit union through a friend that offered us a 30-year fixed rate mortgage at a very low interest rate, 3.75%! When I ran my initial numbers to evaluate the deal, I ran them conservatively at 6%. So, this low rate approval was awesome news! In then end, we are listing our new property at $1375; and after setting aside 5% for vacancy, 5% repairs, $150 capex, and paying PITI, we will cash flow about $450 per month on this property. Over a year's time, that is above 15% cash on cash on our capital invested.

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Real Estate Agent · Satellite Beach, FL · Member since 2014 · 65 posts · 42 votes
6y

@Kerry Baird Hello Kerry. I have not used portfolio lenders. Both my wife and I were in the military (she still is), so we were each able to qualify for 10 financed properties/conventional loans using various lenders (Dyer Mortgage Broker, SunTrust now Truist, etc). We also paid off a lot of properties from cash flow, or others that we had just purchased cash from savings. So we got about 10+ HELOCs and HE Loans for 10+ other properties. We used GTE Financial (limit 1 product per person, so each of us had 1 HELOC/1 HE Loan), each of us have 3-4 Space Coast Credit Union HELOCs, and we each have a NFCU HELOC (which has higher interest, don't recommend very much). Last year I had a few more properties I owned free and clear but getting HELOCs was getting tougher due to DTI limits, but we found a workaround when we did a commercial loan. I bought a portfolio of 4 duplexes + half duplex, and then used the equity of 2 properties I owned free and clear as collateral. This allowed me to basically cash-out refi 2 more properties at I believe 80% LTV, using that equity to cover the downpayment requirement of the commercial loan. So I was able to take down the package deal without any money down, just a few closing costs. I still have a few more properties free and clear, will likely tap into their equity same way again in the future by moving to an LLC as part of a commercial deal/commercial financing. The bank I used for the portfolio loan with collateral is CoreVest Financial. If you know of a good portfolio lender, let me know. I was just talking to CenterState Bank which has good rates, but their DTI requirements for Portfolio loans is even more strict than conventional at 43%. So they don't seem like they are the best for that. Their recommendation was to move a bunch of our properties/wife's debt to an LLC that my wife doesn't own, and then freeing up her spots again to do more conventional financing. Personally, I don't really like that idea very much because we worked really hard to get a bunch of really nice low interest loans, so moving all that to a commercial loan means we would be increasing our interest rates and shortening our terms (basically worse debt) just so we can buy more residential real estate. Instead, I'm going to go bigger as soon as I move to Florida this summer and focus on commercial that is actually supportive of growth and doesn't care about DTI. But a portfolio lender that will go 10+ loans without strict DTI requirements would be great to have...

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  • Indian Harbour Beach, FL · Member since 2018 · 92 posts · 99 votes
    6y

    Wow, that's a good find! What neighboorhood is this in?

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Nicole Marshall it’s off E Florida Ave near FIT. Probably a C+ neighborhood, but my street is in the furthest corner away from University Ave, so it feels closer to a B-. Plus I have no rear neighbors. I actually have a lakefront view in the back, which all of my prospective tenants have really liked. Really pleased with the amount section 8 will pay, too!

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    6y

    Which lender did you have success with?

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Kerry Baird Mid FL Credit Union. They were amazing to work with. I honestly thought I was getting toward the back end of the allowable # of loans and it might be difficult to get another mortgage. Turns out they were able to write me my second lowest interest rate yet @ 3.75% and close pretty quick in 32 days. Wish I would’ve found them earlier. DM me if you need my contact who I worked with over there.

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    6y

    @Matt Leber, yes please. I keep a list of local lenders to share with my real estate group. Thanks for sharing a great referral!

  • Contractor · Melbourne, FL · Member since 2018 · 8 posts · 4 votes
    6y

    Nice job @Matt Leber

    Not too far from my neck of the woods. Would love a referral for your contact in Mid Florida Credit Union, sending you a DM now.

  • Real Estate Agent · Satellite Beach, FL · Member since 2014 · 65 posts · 42 votes
    6y

    Congrats @Matt Leber!  Glad you're finding success in Brevard County.  I use to live there back in 2011-2013, then the military relocated me and family to Arizona and Hawaii, but I always continued to invest in Brevard County where I call home.  I just completed my 35th buy and hold deal there, and now averaging about 1 residential acquisition per month.  2019 was a busy year, with 17 units acquired there.  Now I'm out of the military, and getting to invest in real estate full time which is awesome.  Looking forward to moving back to Melbourne this summer and taking on some larger deals and opportunities.  Keep it up!

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    6y

    @Jonathan Paz, big congrats on your acquisitions! 
    Would you contribute to my local lenders list, as that is an integral part of your success? You had used SeaCoast and SCCU...any portfolio lenders? 

  • Real Estate Agent · Satellite Beach, FL · Member since 2014 · 65 posts · 42 votes
    6y

    @Kerry Baird Hello Kerry. I have not used portfolio lenders. Both my wife and I were in the military (she still is), so we were each able to qualify for 10 financed properties/conventional loans using various lenders (Dyer Mortgage Broker, SunTrust now Truist, etc). We also paid off a lot of properties from cash flow, or others that we had just purchased cash from savings. So we got about 10+ HELOCs and HE Loans for 10+ other properties. We used GTE Financial (limit 1 product per person, so each of us had 1 HELOC/1 HE Loan), each of us have 3-4 Space Coast Credit Union HELOCs, and we each have a NFCU HELOC (which has higher interest, don't recommend very much). Last year I had a few more properties I owned free and clear but getting HELOCs was getting tougher due to DTI limits, but we found a workaround when we did a commercial loan. I bought a portfolio of 4 duplexes + half duplex, and then used the equity of 2 properties I owned free and clear as collateral. This allowed me to basically cash-out refi 2 more properties at I believe 80% LTV, using that equity to cover the downpayment requirement of the commercial loan. So I was able to take down the package deal without any money down, just a few closing costs. I still have a few more properties free and clear, will likely tap into their equity same way again in the future by moving to an LLC as part of a commercial deal/commercial financing. The bank I used for the portfolio loan with collateral is CoreVest Financial. If you know of a good portfolio lender, let me know. I was just talking to CenterState Bank which has good rates, but their DTI requirements for Portfolio loans is even more strict than conventional at 43%. So they don't seem like they are the best for that. Their recommendation was to move a bunch of our properties/wife's debt to an LLC that my wife doesn't own, and then freeing up her spots again to do more conventional financing. Personally, I don't really like that idea very much because we worked really hard to get a bunch of really nice low interest loans, so moving all that to a commercial loan means we would be increasing our interest rates and shortening our terms (basically worse debt) just so we can buy more residential real estate. Instead, I'm going to go bigger as soon as I move to Florida this summer and focus on commercial that is actually supportive of growth and doesn't care about DTI. But a portfolio lender that will go 10+ loans without strict DTI requirements would be great to have...

  • Bernadeau C.Pro Member
    Rental Property Investor · Orlando, FL · Member since 2014 · 540 posts · 230 votes
    6y

    @Matt Leber that is awesome! i am on the hunt for my 2nd property right now. would love to get your contact at mid-florida. sent you a DM!

  • Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Matt Leber nice!! What are taxes like there? Are your other investments in FL as well? 

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Kiera Underwood the tax millage rate for Melbourne FL is 18.9 so I take the millage multiplied by the property valuation in thousands (call it 95-105k) to arrive at an estimated tax amount for my analysis. That puts me at 1800-2000 per year depending on what the county tax appraiser values it at. This year will be much lower because we’ll be on the sellers previous tax schedule. It seems like the tax appraisals, in reality, end up lower than sales price. So, I’m usually on the conservative end while doing my due diligence.

    Yes, our other properties are in FL. We have our primary in Lake Nona Orlando area that we plan to make a future rental. 3 single families in Melbourne, West Melbourne & Port St John (Brevard County) & 2 duplexes in Jacksonville (Duval County).

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Bernadeau C. Sure thing!!

  • Investor · Orlando, FL · Member since 2020 · 11 posts · 2 votes
    6y

    @Matt Leber This is great! I am currently looking for deals in Brevard county. 95k on the deal is an awesome find and there are plenty of deals here! Can you send me your Lender contact info for me as well. Much appreciated!

  • Rental Property Investor · Palm Bay, FL · Member since 2016 · 58 posts · 20 votes
    6y

    @Matt Leber Way to restore my faith in the area! I've been looking for any deal in the area that I could make work. I'm up in Port St. John myself.

  • Rental Property Investor · Orlando, FL · Member since 2018 · 301 posts · 354 votes
    6y

    @Matt Leber that’s awesome! Good find and great bonuses from having conservative numbers!

  • Tampa, FL · Member since 2017 · 4 posts · 0 votes
    6y

    Hello all! I am new to the forum and very interested to get started. I have one question how were you guys able to qualify for that loan rate on an investment property? 

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Joshua Wilson yes, we are always looking for deals in those areas. I’ve never met someone on here from PSJ! Our first ever investment property was in PSJ, a house near the Circle K station. Prices have gone up since then, but rents have followed up quite a bit too. I would buy another there again in a heartbeat if I found another deal.

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Jeff Andre you just need to start talking to lenders to see what they can offer you. Everyone is different situation. Since we started investing in 2016, rates have been low - gone up - and the come back down. Today they’re at historic lows so 3.75% could have probably even been lower. All my loans are between 3-6% and I consider it all cheap money. Getting on the lower end of that bracket is just icing on the cake.

  • Lender · Orlando, FL · Member since 2018 · 173 posts · 66 votes
    6y

    Congrats @Matt Leber!  That is a great find.  Happy to hear you are still growing and finding new deals.  

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Robert Kirkley thanks man! Hope all is well with you and your investing/business endeavors!

  • Lender · Orlando, FL · Member since 2018 · 173 posts · 66 votes
    6y

    @Matt Leber Things are going well, thanks so much!  Closer to getting into an investment property and have several different business opportunities.  This year has been a great year so far!

  • Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Matt Leber understood. So as a generalization you could say around 2% of the purchase price annually is a safe conservative number to plugin? 

  • Developer · Orlando, FL · Member since 2019 · 9 posts · 0 votes
    6y

    @Matt Leber When you're underwriting taxes in Florida are you assuming a reassessment come January 1st of the following year and then growing the millage rate and non-ad valorem taxes of the prior tax bill by a certain assumed growth rate?

  • Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    6y

    @Adam Frocione I haven’t quite figured out how to estimate the non-ad valorem part so that’s why I added about $200 bucks to my yearly tax number to account for it. The non-ad valorem tax rate “varies” according to the county tax bill but was only $101 in 2019.

    Yes, I am assuming value reassessment at year end each year and am assuming a constant millage rate based on county tax records for the municipality @ 18.9. I don’t think the millage rate moves too much, just the value assessment and the non-ad valorem. I figure by paying in November I can pretty much wipe out the non-ad valorem amount. I also am planning to pass on any future tax increases (via assessment increases) to my tenants in their monthly rent.

    Have you experienced the millage rate moving in your area or do you have a better way to project non-ad valorem tax other than just adding a bit of cushion for the year?

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