All Forum Posts by: Gabriel Graumann

@Shanty Wu Beyond what others have already pointed out, you also need to know the building code requirements for the municipality in which you intend to build. Having lived in the Seattle area for 40 years, there are some dramatically different building, zoning, and density requirements depending which city you are working in. 

@John Clarken ADU's and DADU's will continue to grow in necessity and popularity in the more densely populated areas. This is especially true where the cost to purchase a house is high and the need for affordable housing is abundant. Look to what cities, counties and states are doing in terms of lot requirements and approvals for these, and that will give you an indication of where the best places for them are long-term. For instance, Seattle has been allowing these for years, but this past year the state passed legislation that requires all cities in WA to allow for the addition of ADU's and DADU's to be build on lots of a certain size. In addition, part of the legislation allows for the separating of the lot for the ADU like a condominium lot.

And it's not just large tracts of land, the value is in all of the 5,000-8,000 sf lots that make up the bulk of city lots throughout the state. If the main house is positioned on the lot well, and you can meet the new smaller setbacks, you could add multiple ADU lots on a traditional single-family city lot, then separate them for either raaw land sale, or build the ADU or DADU and sell off that unit as a standalone. I have a local realtor that specializes in helping clients do this primarily in King and Snohomish Counties, and a builder who has been doing this at scale for several years. Hope this helps show where some of the major metros are going with it as well as WA state as a whole.

@Andrew McGuire I believe it's a 2-part answer:

1. Market: the reality is that the local Phoenix market is by in large over-saturated by STR's. While there may be limited pockets that have a shortage, the overall market has an abundance of hospitality options which STR's fall under. The vast majority of people utilizing STR's are coming here during the peak months. That trend changed for a few years during the COVID situation, but that era has ended. We have a STR in the East Valley and saw numbers go to "historical" norms this summer, but our peak months are hitting higher occupancy and nightly rate numbers than last season. This leads to number 2.

2. What was your strategy getting into STR's, and what was your exit strategy? If you were basing your NOI on historical highs created in COVID years, your numbers will never look the same if you can't make substantial changes to your rentals. I believe one person referenced the value of pools (an absolute must for larger properties for summer and swing months from my perspective...and the data supports this). However, if you got into a STR prior to the COIVD craziness, then this past summer shouldn't have been a surprise at all. Assuming your nightly rates aren't dropping significantly in the peak months, then you're simply back to normal occupancy rates in a seasonal marketplace. I would look to what numbers you are trying to achieve and then weight that against how yours are performing under NORMAL conditions, and if they can't hit your NOI requirements then move on to an investment type that can.

I've done everything from fix and flips, buy and hold, STR, land entitlement then wholesaled and/or sold to developers, and commercial value-add projects. There is money to be made in every market, you just need the right plan and know when it's time to enter a segment of the market or when to exit it, and it usually comes back to the numbers of the deal. Happy to connect further if it's helpful.

@Jeremiah Alton welcome to the community. As a few others have shared, having a strategic plan in place before visiting properties is crucial to your future success. Networking and creating your "team" of professionals is one part of it, but also educating yourself on the variety of real estate investments and determining which is the best vehicle for achieving your goals now vs. later is equally important. Making a list of the most important outcomes in the first 36 months is also key.

I've done everything from wholesaling deals, fix and flips, buy & hold, STR's, commercial value-add, land entitlement then assigned off or sold to developers. Happy to connect if it makes sense.

@Scott Barnes I believe what you're trying to do is roll your 2% "commission" paid by the seller into the deal. The most common issue with attempting this is that title/escrow cannot apply commissions to down payment or funds applicable to the purchase as it requires the sale to process in order to make the commission funds available. Furthermore, I'll assume what you are also attempting to do is use the 2% commission equivalent to cover that portion of the down payment needed to close on the purchase, which would give you a larger equity position in the deal.

If the above assumptions are correct, the simplest method would be for your group to front the cash equivalent to the 2%, which will be reimbursed to you through the 2% commission collected at closing. This assumes you have the funds available to do this. A second method would be to add your name as partners in the deal with a percentage of ownership equivalent to the 2% commission you would have earned but is being removed from the acquisition costs by you relinquishing the acceptance of a commission. This lowers the acquisition price to the buyer, which you are now a part of, and your equity in the deal is pre-established. Happy to connect if helpful. Good luck with the deal.

@Jon McEntee My experience in 20+ years brokering and personally investing is that real DEALS never have a short supply of buyers/investors. If you're using all of the methods you mention to create buyer lists, and you're struggling to wholesale your deals to anyone, it's not the lack of buyers but the lack of a true deal. I'm getting called, texted, and PM'd weekly by wholesalers and investor focused brokers stating they have a deal that need buyers, but when they send over the file the numbers simply do not represent the current market reality that most "solid" buyers are looking for. Perhaps the numbers worked in 2021 when interest rates were low, and appreciation was 1% every 2 months, but the market today is very different. Anyone with cash or access to cheap money is demanding more margin than they did 12-18 months ago. Personally, I won't even consider a residential deal that isn't in a strong location and offered to me a minimum of 30% below a conservative ARV value. This is due to my min. requirement of a 20% net ROI (on a resale).

If you're actually centered here in the valley, I'd be happy to connect with you and see what you have.

Investment Info:

Single-family residence buy & hold investment in Mesa.

Purchase price: $450,000
Cash invested: $85,000

Short-term rental that emphasizes on-site amenities, creating an environment that creates an unforgettable experience to each guest.

What made you interested in investing in this type of deal?

We wanted a portfolio that included a residential component that provides for long-term equity growth, while benefitting from the higher-than-average cash-flow that STR's provide.

How did you find this deal and how did you negotiate it?

The property was listed on the local MLS for over 30 days, so we came in with an all-cash offer with relatively short closing window at a discounted price. Offer was accepted with little changes to our terms.

How did you finance this deal?

Acquired it with cash on hand.

How did you add value to the deal?

Improvements included new flooring, fixtures, appliances and paint throughout the interior. On the exterior, we added a huge putting green, extended the covered patio, landscaping updates, added a hot tub and pool heater. Converted the garage into a media room and bunkhouse.

What was the outcome?

Once the property was furnished and created a steady 9 months of bookings, we leveraged the property to recapture 60% of the capital invested and a property management company handles all elements of the day-to-day obligations.

Lessons learned? Challenges?

Have an awareness of local policies that may impact the intended use as a STR. In our case, the large 3,500 lot master planned community we personally lived in was planning to vote to ban all STR's, of which there were more than 40 of at that time. We knew this change would remove 40+ properties in our local STR market, creating an opportunity to pick up additional bookings in a highly desirable area. We selected a property in an area with no HOA specifically for this reason.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

As a licensed broker in AZ, I self-represented in the transaction.

@Yisroel New Knowing how you intend to use the list determines where you should be looking. If you just want to know who holds a real estate license and focuses on commercial brokerage, you could use your local MLS to run a roster report. It would have full contact info for the broker and their firm. However, let's say you are actually trying to find a commercial broker who closes a ton of leases, you could run a separate report on your local MLS or a platform like Costar based on volume closed over a certain period of time. If you are looking to send them marketing information for your service business, you could use the either of the reports above.

 Nothing. We paid cash for the acquisition, improvements, and furnishings. 

Quick summary: I purchased, improved and furnished a single-family home in Mesa, AZ in July 2022 for use as a STR. It came to market in November 2022 and has been leased consistently since then. We now want to pull some of the equity out to have capital in reserves and/or available for future deals. Open to cash-out refinance or HELOC. I've tried several past lenders and I'm running into lending issues due to 2022 total income (personal and business) being dramatically lower than 2021 due to a variety of tax maneuvering we did (accelerated depreciation, rental only drawing income for 2 months of the year, having a huge 6 figure 2021 followed by a "normal" 6 figure year in 2022, etc.). Market value is $550K, bank appraised value is $490-500K. We are open to pulling anywhere from $200-350K depending on loan type and terms. Current credit right at the 700-740 range depending on agency.

If anyone has had RECENT success with a lender for the above type property in AZ, please PM me and/or reply with the lenders contact info. Thanks in advance.