All Forum Posts by: Jaysen Medhurst

@Angel Moreno, sounds like you're closer than you think you are to a multi-family, which would be my recommendation.

3.5% of $150k is only $5500. Figure $2500 for closing costs and that's your $8k. I think another few thousand as a cash reserve.

I don't know your market, but multi-families are nearly always a better investment.

Hi @Matthew Paul, you can do a 1031 exchange and avoid the taxes altogether. Another option is to offer owner financing. That would give you an on-going income and reduce your taxes.

Hi @Dolores Waldron, start with the laws around a condo conversation. I very briefly considered it as an exit plan for a MA property I was considering. Lots to it and a pretty long timeline.

Also, ask yourself the tough questions around ARV. Will 2 condos definitely go for more than 1 duplex. If the neighborhood is mostly rentals, you'll have a hard time convincing buyers to move there.

Good luck!

@Virgilio Garcia and @Omar Sanchez my thinking on a cool down--and let me be clear I'm talking about property values rising more slowly, not a reversal--is based on a couple of factors. Manhattan real estate drives NYC/Metro-NY RE, and Manhattan real estate is driven by the luxury market. Over the last several years the top end of the market has been driven by low borrowing costs for builders and very low bond yields for investors. It's relatively cheap for developers to build and wealthy investors are looking for a safe place to stash cash. 

As the Fed inches up interest rates, investors will have more options with better returns (bonds), which will lower demand for NY RE. Meanwhile, there are A LOT of luxury units about to come on the market (rental and condos). There are only so many uber wealthy people around the world willing to pay $3k+/sq ft.

Add on to that, the Justice Dept.'s new rules that any cash sales over $5mm must submit the names of that actual owners. This again, will lower the demand for luxury units.

Follow your supply curve: a glut at the top lowers prices allowing the not-quite-uber wealthy to move up a segment and everyone below follows suit. This ripples out across the city/area as few middle/upper-middle class folks are forced to look further outside the city.

My $0.02.

@Chance Johnson, I don't think you could do a conventional mortgage. Some banks (usually local/regional) do portfolio loans, where several properties are bundled together in one loan. That's relatively sophisticated and reserved for clients that have a track record/relationship with the bank. Not realistic for a 1st time deal.

I would look at owner-occupied 3-4 unit multiplexes for your 1st deal. Do FHA, live in one unit for 2+ years, then turn it into a pure investment property.

Hi @Shaun Palmer, a few things to think about with the numbers:

I would figure 8% for CapEx, especially for a property that's almost 40 yrs. old.

You need to figure in vacancy. 8% is pretty standard, but check for your area.

What about owner utilities, like electricity for hallway lights, outdoor lights, etc.?

Lawn care, trash removal?

If your monthly cashflow is $1099, how to you get to an NOI of $21,939? Your NOI is $13,188 ($1099*12), right? Did I misread something above? Is the $1781 Monthly Expenses including debt service? With my numbers I show a CapRate of 7.3%. Meh...

Also, NOI is usually calculated before CapEx.

More importantly, because this is 5+ units this will be a commercial loan, not residential (like a normal SF house). Typically a lender wants 25-30% down, amortization is 20 years (not 30), which means a higher monthly debt service. Also, insurance policy is slightly different (read more expensive), if I'm not mistaken.

If this is your 1st deal (sounds like it is), you might have a tough time convincing a lender that you're ready for a commercial property.

@Vani S., my stomach is churring just thinking about this. Why do your 1st RE investment 6000 miles away in a country where you don't understand the laws? Your risk appetite is much larger than mine.

Hi, @Chad G., what about lawn care or shared electricity?

I usually estimate 7.5% each for maintenance and CapEx, then adjust based on age of property, current condition, and tenant class.

As far as insurance, but call up a few agents and tell them what you're looking for. They should be able to give you a ball park. Is flood insurance required in this area?

Some people include advertising (getting new tenants) and legal costs (e.g. yearly LLC costs) in their analysis, but that usually isn't very much.

BTW: would like to know how you settled on Lehigh valley. I live in NYC and my in-laws are outside Harrisburg, I've driven through there a hundred times.

Hey @Omar Sanchez, I live in Manhattan and I'm not looking at anything near by. It's just too expensive, with low cap rates. If you have a ton of cash and don't mind speculating on appreciation, you have a lot of options.

IMO: NY-metro is getting ready to cool down (a little), so I'd be cautious about jumping in unless I had a long time horizon. The lux market is on the edge of a glut and that will roll down through the market over the next 12-24 months.

Look at some other nearby markets. Personally, I'm looking at Danbury, CT and the Berkshires in MA. Won't see great appreciation, but cashflow is a lot better and prices are approachable.

@Account Closed, Houston's a pretty hot market, right? It will be tough to find good deals on the MLS for flips. Your competing with retail buyers who aren't building in profit to their offers, so they can pay more.

I don't think you'll have much luck wholesaling properties like the ones you describe above. There's no margin for the flipper's profit, let alone yours as a wholesaler.

Are you doing any direct-to-owner marketing? or driving for dollars?