All Forum Posts by: Gil Segev

Here are some updated numbers from a property I saw today:

4/2, 1600sqf

PP: 520k, 25% down, 6.5% interest

MTR: $4000

PITI: $3500

Rehab: 0, property just finished a high end rehab

CapEx: 2%, all major systems are new: roof, water heater, HVAC, electrical

MTR PM: $330 (8%)

Utilities: $300

Vacancy: $200 (5%)

Overall sightly underwater. Last year's comps were 25% higher so there's definitely room for appreciation.

@V.G Jason Austin was still very high on the list of fastest growing cities 2023 so I don't think demand is going away anytime soon.

@V.G Jason north near the domain in a B neighborhood actually.

@Carlos Ptriawan it's hard to say what 2024 holds but my expectation is that interest rates going down will revive the market.

Quote from @Axel Meierhoefer:

@Gil Segev I don't think you are rationalizing a bad strategy.

What is missing is specificity.

That's fair. I am looking at several 3/2 ~1400sqf properties requiring minimal rehab that are listed between 420-450k. In this market I am hoping to close under asking but don't know for sure yet.

My numbers:
PP: 420k, 25% down (105k), 6.5% interest rate already pre-approved
PITI + HOA: $3100
MTR managed by a 3rd party: 8% / $300
CapEx: 8% / $300
Vacancy: 5% / $175
Rent range provided by trusted 3rd party: 3.5-3.8k

At the lower range of income and higher range of expenses I will end up $300 in the red, unless I manage buy lower. I could try taking up managing MTR myself but this company has relationships with renters and insurance companies that I assume bring higher rents than I can get myself with Furnished Finder. I could add STR to cover some of the vacancy cost but honestly I'm not ready to this this on as a job rather than semi-passive investment.

Quote from @Mike Dymski:

Extended stay hotel rooms can be built or purchased for under $200k per room and generate $3,500 per month in revenue.  I'd want and expect more than $3,500 for a stand alone home.

Do you have an example to share? I've honestly never heard of this strategy but willing to learn.

Quote from @Glen Wiley:

Most of the experts that I respect say that a deal should cash flow from day 1. This is about risk mitigation. My own criteria is a minimum monthly cash flow after debt service of $300 on a typical B class SFH.

I was educated by the same experts. $300 cashflow from a B property in this market is extremely challenging and could require buying a large off market rehab project with a new contractor which I've had bad experiences in the past.
This is one of the reasons I'm having such a hard time changing my mental model around investing a lot of money and effort in a non casahflowing asset.

After several less-than-stellar experiences with OOS investing, I've decided to try to invest close to home in Austin. LTR cashflow in today's market and interest rates is extremely difficult so I am looking at MTR which my conservative numbers show will roughly break even. We say we're not supposed to time the market but I do believe the Austin market will appreciate in the coming years due to recent price drops, reductions in interest rates and influx of tech jobs.
Am I just rationalizing a bad investment strategy here? Is banking on appreciation, refi (if and when rates drop) or potential rent increases wrong?

PP: ~420k, furnishing: 15k, no rehab, projected MTR rent: ~3.5k

140K a year isn't going to be enough to live comfortably in the bay area unfortunately. Maybe if you choose somewhere >1.5 hours away you'll be able to make it work :(

Quote from @Karl McGarvey:

Cashflow anywhere is tough right now. I continually remind my clients that right now the play should be long term. Year 1 numbers may not look great, but you also should analyze 5yr and 10yr numbers. The hedge on inflation is powerful, especially if you hold for a long period of time. I am currently purchasing in League City Texas, which is an area that has a great market for renters and no shortage of opportunity to keep people moving to the area.

 Thanks. I had this discussion with several realtors in Austin last year who recommended buying for equity and long term play in Austin. Many of these realtors promised prices would never fall here. Since then, prices dropped noticeably and property taxed went up to a level that'd put me underwater had I bought. I absolutely believe in Austin's long term growth but I won't go underwater in the short term in an equity gamble.