All Forum Posts by: Jim Hiler

Join other investors interested in multi-family investing for a fun night of networking. Investors, brokers, lenders and others of all experience levels are welcome.

@Jonathan Nixon I've been focusing on Northwood lately looking at multi-family. I spend a lot of time in the area as most of my projects are near by on Palm Beach Island. It definitely has some potential as there is a lot of new development. The Rybovich expansion, Marina Village etc. However you need to be careful as areas can vary drastically block to block. Another interesting fact is that part or possibly all of Northwood is an opportunity zone.

Feel free to reach out if you're interested in connecting and discussing further. 

I would replace the heat pump unit and air handler (potentially adding a heat strip in it). If you already have the ductwork ran etc. a heat pump is the simplest way to heat and cool in a moderate climate in my opinion. If you're in an area that gets below zero a heat pump may not cut it. At which point you may want to add a heat strip in the air handler. If you opt for this just check with an electrician first because a heat strip can draw a lot of power 30 - 50 amps.

Check out this link to an article on Carrier's website.
https://www.carrier.com/residential/en/us/products/heat-pumps/heat-pumps-vs-air-conditioners/

Furthermore if you can find a local HVAC engineer or energy calc specialist to run energy calcs for you they can tell you exactly how many tons of heating and cooling you'll need based on the SF of the house, type of windows, type of construction (wall make up, floor make up, roofing etc.), how much insulation is currently installed etc. You can then have he/she run the calcs and plug in an upgraded type of insulation to say spray foam for example. That should reduce the amount the tons required to heat/cool space therefore reduce the cost of your system.

From my experience spray does a great job but it can be costly. It goes for approximately $2.50 - $3.00 per SF of roof in my area. 

That's a very open ended question. I would say neither but it all depends on your investment goals and strategies. Buy and Hold for cash flow? Buy and hold for appreciation? Fix and Flip? 

Neither market is going to offer much cash flow...however you may experience some appreciation. I would consider that both markets are very cyclical and prices fluctuate a good deal depending on the phase of the market cycle we are in... Furthermore I think all would agree we are closer to the top of the market than the bottom.

I think you need to answer a few questions yourself first before you can ask the question of which market is better...
 

@Forest Williams Yes I was just referring to the overall real estate market in general from a macro economic view. It was not say that can't have success in certain markets it just means you may have work harder to find better deals that you can BRRRR out of.

When we discuss "the market" - in can be discussed as the overall nationwide market or each local market - MSA , City, Neighborhood, etc. Real Estate operates in cycles as a whole and locally. In most areas things are on the upswing, possibly even nearing the top of the cycle - prices have increased, activity is up, demand is up and things have rebounded from the great recession however that's not always true everywhere. There are overall nationwide factors that affect the market - for example mortgage rates, lending programs, the current economy doing well - meaning more people have the money to buy houses and more investors have money for investing, demographics etc. There are also very local factors that affect each market, meaning the local economy, job growth, demographics, local lending, insurance costs, property taxes etc. and these have an equal or greater affect on prices, inventory, rental rates, etc. in each respective market.

For more info on the market cycle and what stage some of the major cities are in check out this article below:

https://joefairless.com/what-stage-in-the-market-cycle-is-your-target-apartment-investment-market/

I agree with @Frank Geiger talk to a local builder and/or even better an architect who has experience with Multifamily in the area. They should be able to help you determine how much you square footage you can build on the lots. Then you need to decide how big your units will be to determine how many units you will build. You will need to research your market and decide which type of product has the most demand. I.e. beds/baths, type of finishes, amenities, upgrades etc. From there you can run your proforma/underwriting just like a standard multifamily purchase.

When underwriting you may be able to reduce standard maintenance and cap ex reserves a bit due to dealing with a brand new product.

I know in my local area basic multifamily construction starts around $100/SF. Check with your local builders to see what the cost is near you.

You may need cash in the form of a HELOC, Private Lender offering to loan you the cash, Hard Money Loan or bridge type financing, partner with cash- but may not need the actual cash in your bank account. As in every case it all depends on the deal, how much rehab is required, who are you are buying it from (wholesaler - definitely cash or hardmoney) traditional seller off MLS financing possible. Typically in order to get the BRRRR method to work you have to buy a deeply discounted deal - which usually means purchasing with some type of cash- and then once rehabbed, rented out and cash flowing you approach a bank to obtain a cash out refinance. If this is done correctly (by not paying too much, completing the rehab, achieving market rent) you should be able to do a CASH OUT refinance of approximately 75 - 80% of the ARV (after repaired value) of the property. At which point you can pay off the higher cost financing (hard money, private loan, other HELOC, pay yourself back) and then take the money and repeat the process.

The caveat is that in that due to the current state of the market it's not easy to find deals where this works. I.E. if you pay too much for the property you may not be able to refinance enough to pay off all of your loans. OR after you refinance you will be left with little to no cash flow on your rental because your new mortgage payment is too high.

Sure it's reasonable if you compensate them in some way. I've heard of people using a few different strategies. 

- Paying a newer RE agent hourly, per site visit ($150 per trip?) a lump sum, or a small percentage of the total rehab budget to oversee it. I would say depending on what you're asking them to do somewhere between 1-3% .Depending on their background they may not be offer to much "supervision" other than progress reports and photos etc.

- Some property managers offer "Construction Management Services" for rehab work on a property that they will be managing but expect to pay about a 10% of the cost of the work as a fee - which I roughly what I charge as a General Contractor. The benefit to this is that the PM should have good relationships with local subcontractors and vendors

- Try to connect with a BP member in the market you choose that may be a newer investor with not enough of his/her own money to do their first deal.

Maybe not so obvious but I would highly recommend making at least two or three trips to the market you select in order to meet and vet not only your "Boots on the Ground" but all of your team members (Agent, PM, Contractors, Lenders, etc.).... in addition to touring properties, driving neighborhoods etc.

There are numerous good markets in Florida due to overall population growth of the state. You'll have to do you're own research and make a decision based on numerous factors. I would start by just googling "growing cities in Florida". In my opinion here are the top considerations when choosing a new OOS market. 

1. Population Growth

2. Job Growth

3. Employers/Industries in the area and the diversity of the local economy.

4. Do you prefer to have more cash flow or better chance for appreciation. Florida is microcosm of the country in that the coastal markets are typically appreciation markets and the inland markets are more for cash flow.

5. Market Size / Inventory - Is the market large enough and have properties available in order to to expand. Also is the market large enough to be able to find a qualified property manager.

6. Boots on the ground - Do you know anyone in the market. You'll need a go to team member in the market to help find, evaluate and manage your properties. That could be your property manager or even your RE Agent, or just another team member/partner/friend that you work with that knows and lives in the area. 

7.  Misc other factors - Hurricane risks, insurance costs, etc.

7. You may want to consider a place you may like to visit. Don't choose the market based on that, but it can be an added bonus.

They do underwrite a HELOC similar to as if you were buying a house but not as in depth. So yes they verify income, debt, credit score, etc.