Rent to Retirement?

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Rent to Retirement?

Eduardo Barcena jr
Los Angeles, CA · Member since 2020 · 2 posts · 10 votes

Does anyone have any experience working with Rent to Retirement? I have been looking into it because they’re a frequent sponsor on the podcasts and wanted to get some feedback. Thanks!

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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
4y

@Pretty Khare

Great, thanks for sharing.  You are 100% correct that the various loan options you use will affect the cash to close needed, but closing costs should not be factored into long term cash flow analysis.  Just the first year acquisition analysis.  I'm not sure about what is being included in your insurance quote.  We run the pro forma at $850, but most quotes we see are $600 to $700.  I can send you those insurance providers that quote those amounts if you reach out directly.  I think $1,800 if far too high.  My personal builds in the area have a $640 annual premium.  This is definitely affecting your analysis.  I can confirm we can get mngt to do better than 8%.  That is the benefit to working with our network where we have negotiation power based on volume.  The septic treatment will also be less expensive than quoted.  I understand the want to be conservative in running analysis, but it's important to consistently be refining the analysis investigating all areas to lower expenses like with insurance.  One other point to look in the first couple of years is property taxes.  We show tax amounts above $3k which would reflect a full taxable value.  It will likely take 2-3 years to be fully assessed to reflect that tax amount.  Your first year the taxes likely will be less than $1k allowing quite a bit more cash flow than projected.  The taxes will go up over time, but so will rents so that must be factored in to a proper analysis.  Just some things to consider as you run some various analysis on this.  Either way your slice it the equity is there to make this a great investment with plenty of options.  In my experience it is very difficult to find new construction in a growing market, good neighborhood class that still cash flows & has significant, immediate equity.  Side note, we are about to release some TX builds are in high demand. They are completed now, or will be soon.  Not as much equity as these, but still cash flow well & obviously TX is one of the hottest places to invest currently.  Stay tuned for those.  Great discussion here that many people will benefit from reading.  Feel free to reach out to me directly if you want to set up a time to go through this in greater detail.

[email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
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  • Kevin Harrison
    Middletown, DE · Member since 2017 · 13 posts · 9 votes
    5y

    @Patrick Bavaro

    @Zach Lemaster I'm curious how insurance is handled on these. The insurance premium posted on your listings look like basic insurance, but aren't these builds (or basically any Florida properties) in an area with high probability of flooding/hurricanes? Wouldn't flood insurance cost an additional $2-3k per year? Or am I mistaken? thanks

    0Reply
  • Deb S.
    Investor · Punta Gorda, FL · Member since 2010 · 154 posts · 128 votes
    5y

    @Kevin Harrison Flood insurance is only required if your home is in a flood zone.  I live in Florida about 30 minutes from Cape Coral and pay just over $1000 for home owners insurance - but my house is not in a flood zone.  When you look at a RE listing (for homes in Florida) you want to see Flood Zone X which means no flood zone - so no flood insurance required.  So you can ask RTR what flood zone these homes are in.  Hope that helps.

    2Reply
  • Account Closed
    Specialist · Orlando, FL · Member since 2021 · 64 posts · 113 votes
    5y

    Here is a simple way to check to see if you are in a flood zone and if so what is the rating. FEMA FLOOD ZONE SEARCH

    Once you enter the address, the click on GO TO NFHL VIEWER.  If you are buying a property with financing, checking on if the property is in a flood zone is done by the lender but if you are paying cash or just doing your due diligence.  This is helpful in getting estimates for insurance.

    9Reply
  • Kevin Harrison
    Middletown, DE · Member since 2017 · 13 posts · 9 votes
    5y

    @Zach Lemaster

    Thanks for explaining this for me. I love the numbers on these properties and hope to be speaking with you or your team in the near future.

    3Reply
  • Anthony Ng
    Member since 2021 · 5 posts · 23 votes
    5y

    In the process of closing on 2 right next to each other!

    4Reply
  • Hans Baldau
    New to Real Estate · Las Vegas, NV · Member since 2020 · 23 posts · 7 votes
    5y

    @Zach Lemaster

    Are these homes subject to the assessments? Are they paid off or is that an additional cost that can be expected? I know Cape Coral has large assessments for homes being built not on city water and sewer.

    0Reply
  • Blake Rumley
    Rental Property Investor · Northern/Central NJ · Member since 2018 · 5 posts · 9 votes
    5y

    @Zach Lemaster I closed on my Cape Coral new build with R2R and Zach’s team. Permitting is completed and looking to break ground soon. I’m happy to answer any questions that anyone interested may have. I’m excited to see the cash flow, equity build and appreciation this should bring. As Zach mentioned, leaving multiple options in 3-5 years. R2R and their partners have been great and extremely responsive throughout the entire process.

    6Reply
  • Stetson MillerBusiness Member
    Real Estate Broker · Fort Myers, FL · Member since 2019 · 576 posts · 423 votes
    5y

    Hi @Blake Rumley,

    How was this deal financed? Heard from a few other people that R2R's lender is recommending a second home loan over a traditional construction loan, which isn't really applicable to the end goal of the project

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  • Blake Rumley
    Rental Property Investor · Northern/Central NJ · Member since 2018 · 5 posts · 9 votes
    5y

    @Stetson Miller I used traditional financing, 20% down as a rental property, not second home. I used the construction loan product through LMCU.

    2Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    5y
    Originally posted by @Blake Rumley:

    @Zach Lemaster I closed on my Cape Coral new build with R2R and Zach’s team. Permitting is completed and looking to break ground soon. I’m happy to answer any questions that anyone interested may have. I’m excited to see the cash flow, equity build and appreciation this should bring. As Zach mentioned, leaving multiple options in 3-5 years. R2R and their partners have been great and extremely responsive throughout the entire process.

    Thanks for the kind words Blake!  Great to see this build progressing along!

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
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    8Reply
  • John Dahl
    Investor · Member since 2021 · 18 posts · 11 votes
    5y
    Originally posted by @Stetson Miller:

    @Patrick Bavaro Is it within the R2R process that you have to refinance this deal for it to legally be rented through annual leases? Obviously with the second home mortgage, you would have to occupy the property, or have it available for occupancy (vacant) for over half the year to stay in compliance with the loan you're getting on the property. The lender is aware of the intentions, yes, but they're not the ones required to enforce the compliance, they're only required to provide you all the rules that come with that mortgage type, which you acknowledge at closing.

    Those terms sound great at first glance, but I always assumed this was a non-conventional loan. Unless I'm missing something, it looks like you're suggesting this is a Freddie Mac loan. In that case, it would be considered mortgage fraud to rent the property annually, or even have a full-time property manager in place per those loan guidelines

    @Stetson Miller I share your same concerns with the second home mortgage. It was presented as a financing option but I don't see how it would work if the end goal was an investment property with a year round tenant, even if you did occupy the property for a few weeks upon completion.

    @Patrick Bavaro Would you mind sharing your plan? The second home mortgage was suggested to me also, but the guidelines clearly state:

    https://guide.freddiemac.com/a...

    "The Borrower must keep the property available primarily (i.e., more than half of the calendar year) for the Borrower's personal use and enjoyment" - This seems hard to do if you have a full time tenant in place.

    "The Borrower must occupy the second home for some portion of the year." - Wouldn't you have to stay in it each year? How could you do that with a tenant in place?

    I see a lot of comments on this thread of people just starting the process, but is there anyone here that has completed the build and has a tenant already in place?

    2Reply
  • Chintan Sheth
    Member since 2019 · 10 posts · 9 votes
    5y

    @Zach Lemaster Who is giving construction only or construction to perm loans on investment properties these days? I did my first deal through R2R/LMCU and bought a 2nd lot additionally. I'm looking to build on the 2nd lot but outside of private financing, I can't find anyone to give me a construction or construction to perm loan (it's not that they won't give it to me, they're saying they're not doing them right now). 

    0Reply
  • Chintan Sheth
    Member since 2019 · 10 posts · 9 votes
    5y

    @Zach Lemaster Thanks for the prompt and detailed response! I'll reach out to my RTR rep tomorrow and get more details. You guys are awesome!

    6Reply
  • Michelle Moe
    Rental Property Investor · San Diego, CA · Member since 2020 · 12 posts · 14 votes
    4y

    Hello! Does anyone have any insight on Rent to Retirement’s Vacation rentals in Orlando?

    I’d love to have a hands off stvr that cash flows and I can use occasionally!

    Any feedback is greatly appreciated!

    2Reply
  • Don M.
    Member since 2021 · 135 posts · 203 votes
    4y
    Originally posted by @Patrick Bavaro:

    @Kevin Harrison sorry for the delay! I didn’t get notified of the tag (spelling error in my name). Anyways, sure! Bought the land for $26.5k cash, closed that in a week. Financing $238.5k and 3.5% right now. I have It on a float but will probably lock It tomorrow as the lender said he was expecting about 60 days to close which would be the length of my rate lock.. trying to gamble the timing to not have to come outve pocket for an extension.

     Any updates with your overall build and process?  Thanks!

    1Reply
  • Patrick Bavaro
    Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes
    4y

    @Don M. Sure! There isnt much to update, sadly. We closed on the land in Mid May, closed on financing in Mid July (took 45-60 days...very long), and then after that survey and septic design had to take place which took about another month and a half or so which puts us towards end of August. Once those items were completed, the package was submitted to the city permitting in the first week of October. Earlier this week we received a few rejections on some of the reviews for permit which need to be corrected before a permit is issued. I am told this will take 7-10 business days, so we will see. Im hopeful that we will start construction once the permit is issued, but I also wouldn't be surprised if we have to wait a few weeks since its so busy. All in all, this will definitely take a year (hopefully not longer) to complete. 

    For my feedback on the process, it has been neutral. The folks at R2R were helpful during the initial consultation, but are very hands off on the process. This is not their fault however as they act as the "middleman" making the connections to the builders and lenders. I decided to go with the 4/3 build and I will say that my main contact (Brad, not employed by the builder or R2R.. More of a wholesaler) on the ground of helping acquire the land etc. had spoke sweet misinformation to me telling me that the builder will begin submitting to the city for permits (which requires the survey and septic design to be completed $$$) while financing is being completed to shave 1-2 months off the typical timeframe. I found this to be surprising that the builder would take on that amount of risk so I filed it away in my brain that its likely to not happen, which is exactly what happened. 

    At this point, would I do it again? Probably if the market holds until the build is complete and for the future (which I think it will). Just expect a full year process to take place. 

    1Reply
  • Don M.
    Member since 2021 · 135 posts · 203 votes
    4y

    @Patrick Bavaro I appreciate you taking the time to explain your experience so far!  I definitely understand the delays with permitting and otherwise (particularly in today's climate).  I think we are okay with the timeframe if we go this route because we do believe in the area.  We also believe in R2R from our research and their reviews

    One of our biggest concerns as new investors would be potential unexpected costs along the way, which also seems like a big possibility with a new build in today's climate with labor costs, material costs, etc. 

    In your experience thus far, have you run into significant additional costs from what you originally anticipated or do you anticipate additional costs?

    Thanks again,
    Don

    1Reply
  • Patrick Bavaro
    Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes
    4y

    @Don M. Not yet. The builder contract stipulates they can increase if cost of material rise by more than 5%. This has not happened to me yet, and the same Brad told me "this builder never does that", so we will see if it is true. Only out of pocket expenses have been closing costs for the construand land acquisition ($26.5k for land with closing costs for the land). 

    1Reply
  • Don M.
    Member since 2021 · 135 posts · 203 votes
    4y

    @Patrick Bavaro We're about 5 months out from making our investment decision; if it's okay with you, I'd like to reach back out in a couple months to ask about your progress again.   My fingers are crossed for you for a quick and smooth build from here.

    Thanks again for the information!

    0Reply
  • Patrick Bavaro
    Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes
    4y

    Update to this post* I have been corrected on time timeline specified above regarding survey and septic plan design. This process started a few days after my land closed on 5/28/21. I was under the impression that survey and plans took 1-2 months POST financing closing (late July), when in fact It actually takes 3 to 4 months. The Delta Build team and Brad did in fact start in June to shave 1 to 2 months off the timeline which is a great testament to their professionalism and confidence of their product as not many builders would float that risk/cost. I hope this helps clear this up!

    2Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @Patrick Bavaro

    Thank you for the clarification to your post about timeline.  I can assure you that all surveys, permits, etc. have been scheduled with a timely manner & are in progress.  It just takes some time unfortunately.  Every builder is experiencing this, especially in areas where there is a lot of building happening due to housing demands.  Unfortunately we are at the mercy of the government to issue permits.  Thank you for your patience as this progresses through the normal steps of construction, and we will continue to keep you updated.

    Here are a few clarification points to clarify based on our post to ensure anyone reading this fully understands expectations.

    -Yes, the build likely will take a year.  Permitting being the big variable, which is outside of everyone's control.  We've seen this take up to 4 months.  Surveys and permits are ordered immediately upfront before your loan even closes to expedite this process as much as possible.  I know Brad clarified this with you today.

    -We are partnered with the builder. I have a large LOC out with Lima One as we are actively involved on the build side ourselves. The model you are building is exclusive to our clients, and we have committed to a certain number with the builder allowing you to achieve the below market pricing that you did. That would not be possible otherwise.

    -Brad is a land broker that assists with acquiring lots.  That is his role.  He can also assist with the retail sale of the home if you decide to sell the home upon completion.  He is part of one specific building team we work with.

    This is most definitely a waiting game as with most new construction.  Yes, it takes some time, but we all know that going into it.  I think it would make more sense to see evaluate if you would do it again once the build is actually completed, the home is rented out & you are able to see what kind of immediate equity you have available.  That will allow you to see the process start to finish.  Someone that is doing multiple builds with us & is further along in the process to speak with would be @Trevor Fleck.

    Please just understand building takes time, and there are many steps involved.  I think you will be very successful in your build & be very happy you decided to participate in new construction in this area.  Just to give you more insight, this same 4/2 model we were advertising a year ago we anticipated rent to be $1,850 along with about $20k of immediate equity.  Now that these are actually getting completed we are seeing them actually rent out for $2,200 to $2,300, and have roughly $50k+ of immediate equity due to the housing demand/market conditions.  We way over delivered on those properties from what was initially projected & those investors are in a very solid position!  Yes, there will be small issues with builder delays, communication, etc.  I think when it's all said and done when you evaluate the performance of the investment it will be hard to argue it wasn't worth it.  I have been investing across the country professionally for over 10 years now.  I have not come across a new construction scenario that compares to what we are seeing currently in SWFL.  I am most definitely not aware of any new construction under $300k that has this type of opportunity right now.

    @Don M. Feel free to reach out directly with any specific questions you have, and we are happy to walk you through the process whenever you are ready to take the next steps on new construction.

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
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    12Reply
  • Patrick Bavaro
    Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes
    4y

    @Zach Lemaster Totally agree with all you've suggested and stated! You guys definitely have a great product to choose from. My comments were not to present any pessimism to that fact, as it is actually the complete opposite. I am happy with my purchase and where we are in the build process as I went into this with the mindset that it would take time, as stated. My comments may seem blunt or to the point, but it is only to paint an accurate picture of the timelines compared to what some people may have in their minds. Your team, along with the Builders and Brad have put together a great product and I am thankful for the opportunity to be able to go through the learning side of new home development. Even after a misinterpretation of some of the information/timelines on my behalf, your team still operates with integrity and grace which shows a lot! If I had more capital I'd do another! 

    Good to know about Brad on the selling side as well, should it come to that! I know we have been toying with the idea. 

    Thanks Zach! 

    Patrick 

    10Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @Patrick Bavaro 

    Thanks Patrick!  We appreciate you!

    We look forward to progressing with this build & assisting you in scaling your portfolio over time!

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
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    14Reply
  • Don M.
    Member since 2021 · 135 posts · 203 votes
    4y

    @Patrick Bavaro Thank you for continued information!

    @Zach Lemaster Absolutely!  I did talk with David briefly a few days ago just to get some initial information, and I am looking forward to getting much more in-depth in a few months when we are closer to making a move to getting some significant capital to hopefully begin the process.  Thank you for your clarifications as well; it is good to have a picture painted on multiple ends

    10Reply
  • Patrick Bavaro
    Fort Lauderdale, FL · Member since 2018 · 289 posts · 342 votes
    4y

    Hi all, for those of you asking for an update, I wanted to share where I'm at. While I am still in the permitting process waiting on approval, I can tell you that I am still very positive in my feelings on this build. The team at R2R and the builder are both working as fast as they can, but it seems like there is a bottleneck at the city permitting office, which is the main reason for delay. I am hopeful we will be approved right after the holidays. I will also say that Zach and Scott at R2R and the entire build team have been very responsive and understanding with my concerns. I would recommend anyone on the fence still thinking about these new builds to reach out to me if you'd like to connect offline. Projections are looking extremely nice as is the equity position. Hope this helps anyone to evaluate the opportunity. Will update more once approved!  

    2Reply
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