All Forum Posts by: Axel Meierhoefer

My home is valued at $400K and I owe $140k. I want to buy a long term rental for about $300k. Should I get a HELOC for the down payment and also use it partially to speed up paying my home mortgage?

Here's a typical "Buy-Box" from an Institutional Investment Firm I know.  Disregard the markets and focus on the other criteria.  Should be helpful!

I personally think that most people would appreciate inherting a bunch of SFH's but they may be overwhelmed, especially if they don't have experience with real estate.

I think seller financed notes would be better to hand off or investments in bonds / securities.

Inheriting real estate has issues such as
1) What is the value of this real estate?
2) Who do I need to contact? Is there a property management company involved?
Do I have to contact the tenants?
3) There is potentially a delayed transfer upon death if done through probate
4) They may not want to deal with the 'time' it takes to manage the property

 I would definitely say that there hasn't been an overbuilding problem in the single family space that I'm in. Possibly in multifamily in the short term, but with interest rates where they've been there haven't been any new deals started, so we may see a short term increase in vacancy rates and lower rents, before being massively undersupplied in the mid-term. For over a decade we've had vacancy rates in the 1-2% range before increasing the past year or so to around I believe 5% now. 

But as far as my niche, in single family infill... we still have a lack of supply. There are definitely buyers sitting on the sidelines due to high prices and high interest rates. 

You're right about Boise being a hot market...really in the top 5 from 2013 to 2021 consistently as far as price increases and population growth, as well as ranked places to live. We have dipped since mid 2021 in prices because many locals have been priced out of new homes. And, the 1% rule hasn't really been a thing here since probably 2015 or so, and even then it was hard to find. It's physically impossible to build to the 1% rule right now and for the past several years, unless someone is doing MT or ST rentals. 

I know that in general we need the housing in the single family space. But it's definitely good to hear from people how they analyze their plans for rentals. I guess in comparing to what my buyers have already been , to what people have been saying in here... most of my buyers have been using my new builds for ST or rent by the room and finding cash flow that way. I do have some townhomes I'll be building coming up that may make more sense for LT rentals so this is a good start to see what I can make work.

I'm a builder and investor in Boise, ID. I'm currently designing my next builds, and want to make sure they are the most appealing and can make financial sense to investors. So, I have a few questions for those of you still buying single family homes as rentals. 

1. How are you analyzing your deal and what is your goal when you are buying a SF home? Is it cashflow still(and how much?), or more for long term benefits and try to break even? 
2. What is your strategy for renting... is it LT, MT, ST, rent by the room, or something else? 

3.  How do you value new construction as opposed to an older home that may look nice, but still older? Do you take into account that you shouldn't have any mainenance for at least 10 years or not really? 

4. Is there anything that you have really wished you could find in homes that you don't see often that would increase your return or lower your expenses? 

5. When you see a listing, does it help when the remarks are tailored toward investors? Such as ease of maintenance, durability, return on investment, etc?

6. Is there any other suggestions you have for me to adapt to the current market? 

Any feedback is greatly appreciated!

A few of my ideas so far, that I'm starting to implement...

1. On houses that have small yards I have done artificial(but real looking, they've come a long way) grass. People have mixed feelings but it seems that investors love it at least. 

2. My most recent floorplan has private bathrooms attached to each bedroom. This only increases my cost by maybe 5k(added a bathroom), but seems like it will be much more marketable as a rental. But, this did eliminate a family room upstairs, so the only living space is on the main floor. 

3. HUGE primary en-suite with walk in showers and soaker tubs. 

4. Model my homes and design after $1M+ dollar homes, but they are in more up-and-coming neighborhoods. 
            - So basically they are the nicest homes in the neighborhood, but the neighborhoods are very much improving around them. 

5. I use upper mid-level finishes. Better than builder grade but not top of the line like on the high end custom homes. The result is a very upscale feel compared to other comparable price points typically. I.E. Good quality LVP flooring, Upper mid level appliances, energy efficient furnaces and tankless water heaters, semi-custom and now custom cabinets, quartz counters, and each home is professionally designed. 

There's a lot to unpack in your questions but I like that you're giving it a lot of thought. Personally, I am always buying for cash flow. That's usually hard to get with a new build, however, a lot of builders have been offering interest rate buy downs so that makes the new build product a little more (or a lot more) attractive than existing construction in some cases. I do like that new homes won't have major maintenance required for a long time. I find that a lot of new homes are built in neighborhoods that have HOAs. That's a no-go for me. It's just too much hassle, added expense and you never know when they're going to change their rules.

Correct, it's a myth that the longer you hold a house, the better the return in the end. I bet investing that money in the market would have returned the same without the hassle and worries they have now. Constant renovations needed to maintain rents and the house itself and 25% of recapture will be insane after 50-100 years plus the house may not be worth more than the land it sits on since homes are not designed to last that long. Also, demographics change and constant 1031 exchanging into newer homes will ensure that you never pay off that mortgage before retirement. 

Hi Axel!

JWB and Yellowbird both do a good job in Jacksonville.  Links are here: 

https://www.jwbrealestatecapital.com/
https://yellowbirdre.com/

Good luck in your search!

From a tax perspective, its best to "buy, borrow, and die". If you can gift your heirs cash flowing real estate they can rely on, I would think that is practically better then a massive stock portfolio. 

@Axel Meierhoefer

So what is your target refi?  What sort of delayed satisfaction are your targeting?