All Forum Posts by: Alex T.

Hi guys, there is a 4/2/2 SFR (1978/1900 sq.ft.) in Crosby, TX I'm looking at. Based on a quick glance on rentometer and craigslist, it seems like the rental for it would be around $1400, do you agree with that estimate? The after-repair cost is around $110,000, so it seems like a good deal based on the current prices in Houston area.

I've been trying to wrap my head around rental price differences and what determines the price, since not all comparables are... comparable. How do you guys decide when it's worth it to put granite countertops in the kitchen and when it simply won't pay off for the rentals?

For example, I recently had a wholesaler show me a property where dated comparables fetched $1200 rent, yet updating the kitchen and baths would bring the rent up to $1400 based on other comparables he showed. This was a typical 3/2/2 property in Texas, otherwise. I was shocked by this, would people actually pay such difference?

I've looked at another property, in what seemed like a better neighborhood (similar school reviews, much lower crime, based on my research I'd actually say this is a more desirable place), that initially looked like it had more meat on the bone, but my property manager said otherwise. It was a dated 3/1.5/1 with more square footage and he suggested not to even bother with the rehab if I was to buy it since I would be unlikely to get more than $1100 for it, regardless of cabinetry. He did mention that what limited this property is the half-bath and a 1-car garage, but I don't understand why the same luxury premium wouldn't apply to this house if it's in pristine condition. I also don't understand why the house gets such a severe penalty for not fitting a second car in a garage in Texas (where it barely snows) and only having a half-bath (it's usually not the shower/tub that two people need to use at once).

How do you decide when updating the kitchen/bath is worth it and when it isn't? At first I thought it was all dependent on neighborhood (B- or above = granite), but apparently that's not the case. How do you judge what kind of premium the updates would bring? Is it a gut feel from experience or is there a formula to it? Is it the fact that 2nd house is already at a disadvantage by not being the standard cookie-cutter 3/2/2 build? Do you recommend staying away from irregular builds altogether since they diminish the effect of luxury improvements? Do you find that despite the lower price, the tenants still treat the property better, reducing repair costs?

Hi guys,

Does anyone know if any conventional lenders allow double-closing? I know many of them get confused by the concept, but is it just another hurdle I need to explain or is it a no-go for the lender? I'm working with aimloan at the moment, I was wondering if anyone successfully bought a double-close property with them in the past.

Thanks

I'm looking at a 3/2/2 SFR in Kingwood, TX (near Village Springs Drive), I plan to put in quite a bit into the rehab and after-repair-cost would be around $126k (I'm using hard-money lender funds with a plan to refinance for a conventional mortgage after repair). According to my estimates, the rents in this area would be around $1400. It's hard to estimate exact CAP/C-o-C given that this will go through a hard-money lender first, but it looks like I'd be getting around 6.8% cap and a little over 8% C-o-C with a high chance of appreciation due to area.

Could you guys provide your feedback on this deal, whether you think my estimate on the rent is accurate and whether I'm being overly naive here? Thanks

@Account Closed 

 net $2130 for all 6 units according to my estimates

@Aaron Montague 

Yes, I would be doing 2 loans + closings. If I can do 10% with PMI that I can drop, I would do that (the more of my money I can keep for other deals, the better). So far 2 separate banks have told me that triplexes are not eligible for less than 25% downpayment even for primary residence, so I assumed that was the case with all of them. As far as the 8.16% I figured above, that is based on all 6 units continuing to rent for the same price, so that would actually go down with primary residence loan (I actually do not pay rent now). I was actually considering the condo idea as well, not sure how hard it would be to do a condo conversion.

Many of you probably know that meeting 1% rule in good parts of Boston is all but impossible (0.5% seems the norm). One of the areas I've started researching more here is Chelsea/Everett/East Boston/Revere, since the property values are still depressed compared to the rest of Boston and the rents are not. They're also relatively close to downtown in terms of transportation.

Just this weekend an interesting deal came on the market in an area that I've researched to be improving. The price was already 20% lower (100k) than comparables so I was immediately suspicious of the condition. This was a triplex, and it actually meets 1% rule (at least if the rents are raised to match the current market). What makes this deal even more attractive is that it's attached to another triplex, also being sold by the same owner for the same price.

I visited the houses and while the common area seemed like it needed a bit of maintenance, the units themselves were a completely different story. All of the units have newly renovated kitchens with steel appliances and granite countertops, each triplex has 2 3-bedroom units and 1 2-bedroom (bedrooms are not awkwardly small, which seems common in that area). One of the triplexes has all new bathrooms as well, also with granite countertops. Both buildings got a new roof last year, the basements are spacious and one of them (building with older bathrooms) has coin-operated washer and dryer. All units have separate utilities and meters, including a separate boiler (4th boiler) for the washer and dryer. Owner pays water, tenants pay all other utilities. The owner clearly didn't skimp out on maintenance and repairs.

All units are currently rented (TAW), and based on my research via craigslist/rentometer they're about $100-200 below market rents. Current market rents for the area are about $1500, and tend to be in worse condition. I'm also speculating that the rents will go up over the next few years based on city's plans to add more transportation and other nearby developments to the area (but that's a bonus). Additionally, these buildings are 2 blocks from the waterfront (on a hill), and the city is discussing plans for improving the waterfront, although no plans have been made yet so I'm not expecting anything in the next few years, but this is a buy and hold.

The reason these two properties are priced so well is because the owner wants to sell all his real estate as soon as possible (these are not the only properties he's selling). There is also another interested buyer and from what I hear they're struggling with financing as well.

Here are the numbers (these are my own calculations, not pro-forma):

Asking price for both: $800k

Actual rent total: $7,700/mo

Actual taxes: $5,585/yr

Estimated CAP (10% vacancy, 5% repairs): 8.16%

Now here is the current situation with financing:

- Asking price for each triplex is $400k, seller is very motivated

- If I was to buy this, I would want to buy both buildings for several reasons, but the main being that they're attached, so it gives me a lot more control in the future regarding updating the property, or even improving these lots (which may be an attractive option if the city improves the waterfront nearby), or even selling them to a developer later.

- Conventional financing requires 25% downpayment on a triplex, regardless if it's investment or primary residence

- My savings are barely enough for the 25% downpayment for both, and I won't have funds left for closing + 6 month reserves

- I do not currently own a primary residence, but with rents added on would not qualify for MassHousing

- All units are occupied, all tenants are TAW, so in theory I could tell one to move and occupy a unit for half-a-year to qualify for primary residence benefits (I spend 90% of my time at work anyway) (is FHA a good option for one? It seems like PMI is now for the life of the loan)

- I inquired about seller financing for one of them from seller's agent, he said the answer would most-likely be a "no", although I have no idea whether he actually plans to ask the owner

- Another option I've considered is borrowing from my 401k, 50% of which would be just enough to cover the extra requirements due to 6 month reserves + closing

One of my worries with the financing I mentioned is stretching myself thin, I originally wanted to buy a property in Boston and then a few more in remote areas.

@Daniel Miller What is it that one should be aware of in the Florida multi-family market that makes it unique? I don't see a lot of turnkey offers in that area compared to other places, so I wanted to understand it better.

Congrats and great video!

@Justen Ashcraft Here are my calculations:

Are you seeing better returns in Humble/Spring/Katy/Cypress areas of Houston? I'm not, but perhaps I'm doing something wrong.

For my calculations I assumed 30 years at 5% with $5000 closing costs (no points, 25% downpayment since it's a multi). That's the default I use in my calculations, although the actual interest rate will probably be a bit lower.