All Forum Posts by: Jaysen Medhurst

Hey @Joshua Handlarsky, NYC is definitely expensive, but if you're a buy-and-hold investor the appreciation will most certainly be worth it.

For less expensive options take a look upstate (Ossining or Albany), central CT, Western MA, and central PA. They all have their pros and cons, but they're affordable and an easy drive from the city.

Hi@Steve Mcdonald, I used to live in Manhattan and know how attractive in-unit laundry is. I think you need to go big or go home. Shared laundry probably doesn't make sense for only 3 units.

Individual hook ups would be a big selling point to new tenants, but you can't cheap out by not having a HW hook up to the w/d. That won't fly, people will feel cheated.

A few other things to consider. 

1. Combo machines suck and are way too small for families. 
2. Ventless dryers tend to be only available on high-end (Bosch / Meile) machines, which are very expensive. The upside is that they are very reliable, efficient, and quiet.
3. What about a point-of-service HW heater in each unit that only feeds the w/d? Then the tenant is covering the electricity to run it.
4. Lastly, don't be afraid of a vented dryer. Modern dryers are much better at eliminating lint and if you make sure to vent using straight runs (no flex pipe) and use a secondary lint trap, I doubt you run much of a risk.

@Adam Hutchison, I would repave / reseal the parking lot. White shutters and trim. Paint the stucco a grey / slate grey. Don't paint the brick. This usually only causes maintenance trouble down the line because the paint traps water up against the brick.

Also, landscaping trim up the bushes, maybe some plantings along the bottom of the buildings.

Lastly, what about a low white fence in front of the grass extending from each building to the center walkway. Maybe even put in some kind of arch / pergola to frame the entrance to the courtyard. Might also consider not allowing parking where the red car is. That way the courtyard always look welcoming whenever someone drives up.

Hi @Rick Hernandez, I see a few places where I would be more conservative with your expenses. E.g. 10% for vacancy and 7.5% each for repairs and CapEx. I would also factor in some cash for initial repairs / improvements. There's always something that needs to be fixed / painted / upgraded when you buy a place.

That being said, there's no reason you can't have the tenants paying there own electric. I would deliver that letter on the day I closed.

What about the gas and water/sewer expenses? If there's only 1 boiler, you'll probably have to continue paying for heat and HW, but if you can charge back the water/sewer, that's another $2k/year.

Do all that and I think you could be ~$4k/year in cash flow or ~$84/door/month, which for me it way too low. 

Hi Daniel, I've been thinking about the viability of this myself. Although, in a small 4-unit property. I don't have any clear-cut answers, but here's what I've found during my research.

1. I'm also in the NE so heating is the main need. An older building with poor insulation and a lot of air leaks will be challenging with a mini-split. So, you may need to consider some additional upgrades there.
2. You have to consider the layout and number of inside units. Bathrooms especially are difficult since their small size makes it hard to justify a separate inside unit. I'm considering using this product from Schluter to heat the bathrooms, but it requires installing a new floor.
3. A mini-split will require a 240-volt line. If you don't have capacity in the current circuit box, that means upgrading 40 units.
4. What's the real ROI? You'll easily spend $3-8/unit to buy and install mini splits, depending on the size/layouts of the apartments. Might be able to leverage some bulk pricing, but you're still probably looking at ~$200k. That's at least a 5-year pay off period. Now if you know the boiler will also have to replace soon, that may just make it worth switching to mini splits.
5. What about hot water? That will still require a central boiler. Sure, a smaller one that would be less expensive to run for just HW, but you won't see a full $40k/year reduction in your utility costs.
6. On the plus side, having A/C will probably be a differentiation point for your complex. Possibly justifying higher rents and lower vacancy.

In the end, it may be worth pricing out a deep-energy retrofit to super insulate/air seal the property and drop your costs.

Good luck and please let me know your thoughts / what you decide.

@Michael Yan, you can make money through real estate in 4 ways

1. Cash Flow
2. Appreciation (rent increase in the case of 5+ unit properties, as well as forced appreciation)
3. Depreciation
4. Mortgage Paydown

A more sophisticated tool for determining a property's investment potential is Internal Rate of Return (IRR), which takes into account the above, your timeline, and compares to other investment vehicles. There's a ton on BP about IRR.

You're not going to find a 12% Cap Rate property in a thriving city center. That's more likely to be found in C properties or lower.

Hi @Kayla Stalley, there's a lot to think about. Not dissimilar from a smaller property. I'd want to know:

1. All of the current owners financials for at least 2 years.
2. Financial occupancy (not physical occupancy) and how that compares to the rest of the market.
3. Foreseeable CapEx
4. Required repairs/updates
5. Value-add opportunities (e.g. sub-metering utilities, adding coin laundry, renting out garage space, upgrades like a fenced-in yard)

That's jus the tip of the iceberg. Good luck! Let us know how it goes.

@Frederic Babeux, regarding further analyzation of the deal. I recommend analyzing the Internal Rate of Return (IRR), which takes into account all the ways a property can make money over time, how long you plan to own it, and compares it to other potential investments.

There's a lot on BP about IRR.

Cashflow positive isn't a must in every deal, as long as it fits your investing strategy. There are a ton of investors in San Francisco and NY accepting minuscule Cap Rates, because they've been seeing so much appreciation.

Since depreciation is out (BTW no depreciation on land in the States either) you're really only left with appreciation (assuming no CF) and mortgage pay down. 

Your point about population growth is well taken, but remember farming has been increasing yield per acre over time. If that continues, less land is required for the same output, which would drive down agricultural land prices...in theory. I'm certainly not an economist or agriculture expert, so please don't take this as any more than the rantings of an uninformed fool.

@Mark Smith, this is very market-specific. What do the other rentals in the immediate vicinity offer? Are you competitive?

Probably not too big a deal to put in a w/d hook up, but no off-street parking could be a real deal breaker for some people.

@Frederic Babeux, interesting topic. I've never seen this on BP before.

At 1st glance this look like a 17% cash-on-cash return, which is pretty good. Where I think this deal starts to look less attractive is:

1. There's no depreciation on land (I don't know Canadian tax laws, so take this with a grain of salt). 
2. Appreciation is likely to be lower than on developed land, as population/housing is what drives demand in RE.
3. Appreciation itself is speculation, NOT investment.