All Forum Posts by: Dan Maciejewski

My 2¢:  You may want to re-fi if the numbers work, but I wouldn't pull any cash out of this.

1. Shop around and talk to a few (more than 2) lenders to get a feel for rates and costs and payments.

2. You're probably going to save around 1% on your 6.5%.  Given that you got 6.5% when prime was 4-5%, you're in almost exactly the same boat right now.  That's like 100-150/month in payments

3. A re-fi will incur closing costs again. You will probably roll those into the loan but they'll be there, raising your loan and your LTV.

4. You definitely want to cash flow if you move out and rent it out. It looks like you'll do that as-is, so it's not a big deal if you don't get this done, although I would try to lock in a lower rate for a 30 year if you're planning to hold.  The rates are not going to be as low as they just were again in our lifetimes.

5. I would rather drop any PMI than pull cash out. Dropping the PMI would give you more cash flow and probably make up for the minimal cash you would pull out in a year or so. And do that while saving you that much in future PMI payments. Judging by the property appreciation we've seen, it looks like you were maxing out LTV and are probably paying PMI at purchase. The PMI itself is probably equal to the interest savings.

Wherever you end up buying a vacation / short term rental, keep in mind that location is the number one concern.  

If you have a better location than a comparable home that is updated, you WILL get better occupancy and ADR.  Obviously you don't want to try to rent out something that needs repairs, but outdated is fine as long as your location is tip top.   This won't completely apply if you buy in the areas like Orlando that have a lot of competition in the same location / community.   

So, outdated can work very well, as long as it's clean and functional.  You don't need a brand new kitchen and bathrooms as long as they are in a great location.  My market in Florida wants to be as close to the beach as possible, but there are other locations that can work, too!

Your number two concern is cleanliness.  All the bad reviews will feature a cleanliness or functionality complaint.  And you can recover from a broken coffeepot, but nobody will forgive you for hair in the sink or stuff under the bed!

Staging for prospective renters?  Personally in my market, I wouldn't bother, but if you have more units than tenants in your area and you need to:

For low-cost staging, I have used Rent-A-Center.  They use Ashley furniture, and do weekly rentals with free delivery and pick up.  Make sure you use the stuff that has been in houses before -- they will be MUCH cheaper and the manager won't mind them going out for a short period -- they won't lose him value.  Talk to the GM and tell him your plan -- he/she will show you your options.

Keep in mind that you really only need to stage living rooms and dining room.  You should not need to stage bedrooms unless you are going all-out.

For decorations and the TV, I have used my stuff and spare televisions.  

For a high-end staging, you can call a staging company.  See what Realtors in your area use staging (higher than average priced listings, usually) and either ask them or look at the company's info in the house.  They usually leave a sign.

But since you say you're a new investor, I would try a clean, white-boxed unit for your initial showings and see if you can rent it out before spending time and money on staging.

 I am Not a lawyer, but I'm pretty sure that's fraud.  If it's not fraud, then the terms of the contract survive.  I don't think you can have it both ways.  There's no "Auctioneers hate this one secret trick," to buying at auction.

I don't think anyone here know exactly what's going on -- most auctions I know require non-refundable earnest money and the sales are caveat emptor.  You usually do due diligence prior to the auction.  YMMV.  ¯\_(ツ)_/¯  Only you know what the contract says.

I think you're well into r/legaladvice / ask a lawyer territory.

There's no real benefit to getting your license for one purchase.  The only reason to get your license is to sell real estate.  Even most flippers I know partner with a salesperson, even if they are licensed themselves.  Flipping and sales are two different jobs.

As a buyer, it will be next to impossible to save any money by not being represented.  The seller is paying the same amount no matter who brings the buyer in most cases.  And most Realtors aren't shady enough to push your offer above the rest just because they are double ending it.  Many will, but I wouldn't bet saving a few bucks or locking in a deal on the shadiness of a salesperson.  That shadiness will definitely carry over to the rest of the transaction!

The other reason may be to negotiate on your own behalf, but you probably aren't going to be the most savvy on your first purchase (or sale as a Realtor).

And if you want the knowledge that a license can bring -- it's al out there.  And honestly, the info you get for pre-licensing is next to useless in most situations.  I don't need to know how many square feet are in an Acre (although I do remember - 43,560).  I can just look it up in a few seconds if I ever need that info.

 Yes, short term rentals or vacation rentals are often called AirBnBs.  That's just one advertising platform, but it's kind of like Kleenex or Bandaid.

If bought right, they make way more than a long term rental in this market. For the area most of my clients buy in, a once 3/2 pool home would rent for about 2500-3k a month. That house as an STR, very conservatively, would be grossing an average of 7500 a month. And if you self-manage, you save an extra 15-25% in management fees plus all the costs of the handyman repairs if you do the work yourself.

Definitely not stepping on your Realtor's toes, but I get cautious the farther from Tampa you get for rentals.  A lot of people got screwed the last few years buying in ______ for long term rentals and got smacked by trying to set their rent 50% above market and having a lot of vacant competition.  Most people want to live closer to work, or city life, or the beach.

I suspect they are telling you to look there because 50k is 20% of 250k, and you can't get a lot for that when you get closer to the more desirable areas. Except for the condos that they are suggesting. Just make sure you do your own due diligence as to rents and your own personal ROI goals.

Whether you're looking at long term or short term, the rules for vacancy are always location driven.  Bedrooms don't really affect vacancy (or occupancy) rates -- at least here, but they will affect the rent rates you can get.  

When you look at condos (almost every townhouse you see will be a condo) make sure you check the HOA fees, the new taxes, and the rent restrictions -- some places require 1-3 years of ownership, and I've seen Realtors help investors get in trouble and not be able to rent their new purchase.

Also, at that price point, I would probably buy a duplex (if I could get one) in an area with a little less demand, than a SFR/Condo in an area with a little higher demand, but that's another story!

I like to reverse engineer business.  

Start with who your ideal tenant is.  Or start with your ideal return which should back you into the rents you're looking for (based on cap rates in the area you're looking at).

If you think of who your ideal tenant is, which will give you a target rent, you should come up quickly with the areas they want to live.  You'll be able to tell what's important to them.  Is it schools?  proximity of nightlife?  Organic stores nearby?  Closeness to work?  Etc. . . .

The you will vet the areas that your tenants want to live and look for deals there.  This way narrows down your search significantly while allowing you to search wider.  You know where in any given location the area you want to buy.

I also use metrics like cap rate, but you really don't determine that -- the market does.  If you do it the way I said above, you CAN find areas that fit your criteria with better or worse cap rates.  I like to know what I'm looking for before I start looking -- I go into car dealerships knowing what I want.  I don't let the car salesman tell me what I want.  Others are different, though.

To answer your specific question, here are some metrics that are important to me. Cap rate (current at purchase and after stabilization). ARV vs cost to improve. Current rents vs ARV rents. Job markets in a given area (I don't like places with one or two sources of jobs). Types of prevalent crimes (personal vs property). Will an economic swing affect my ideal tenant in this area (will they move in/out/up/down)?

Depending on how much you're buying / developing: What's in development for the city -- do they have any plans for improvement?  What businesses are moving in or out?  Who is the big developer in the area and what are they buying or selling?  What are the biggest property owners and businesses doing?

Pay cash or put more money into the deal until it cash flows is the easy answer.

Another answer would be to look in another area or to get ahead of rising rents in the path of progress.

There's always money to be made in value-add vs turnkey.  That's my favorite play.

The amazingly low interest rates have spurred the crazy housing (and everywhere) appreciation that we've been seeing. That has made (a lot of) prices shoot out of most people's buy boxes for cap rates or cash on cash or whatever ROI metric you want to use.

Interest rates aren't anywhere near the roof. They will rise more this year, for sure. They are coming off of what are sure to be lifetime lows. A lot of people have decided that the past few years of basically free money are the normal and anything above 3% is usurious!

The real answer is that, while it may be harder to find a deal, there are still deals that work in almost every market.  Whether you are poised to grab them in any particular market is another story.  I tend to see locals, or people that have investments and connections in any particular market having a better chance that the people across the country browsing Redfin or LoopNet on their lunch break.  That is to say that the locals are usually faster to the deal than others.

But the real answer is to keep saving and making yourself better prepared to jump on the deal when you see it.  A few weeks is nothing for analyzing, although it can feel like a long time.  There really isn't a ton of inventory in any market, so you're not looking at a lot of stuff.

Keep running numbers on everything.  99% of it will look like crap.  For each, decide what number would make it look good.  Then make an offer at that number (probably not the best idea if off by 50%) or move on to the next.  Do that a few hundred times and you'll know a good buy as soon as you glance at it!  Then make the offer and lose to the cash buyer with no contingencies and rinse and repeat until the market shifts or you score a great buy.  This applies in every market, BTW.  

Also, keep in mind -- the easier it is to buy, the more buyers there are.  The harder it gets, the less buyers.  Adversity can weed out competition.  Like Warrent Buffet says, "Only when the tide goes out do you discover who's been swimming naked."

 Lol -- all this is spot-on!

The ROI seems great up there, although it's definitely the "South" and not "tropical."

Although, the locals here kind of demand the bath-water!  Anything below 80° is too cold!