All Forum Posts by: Kenneth Garrett

@Max Gradowitz

I get that we are looking for smoking deals and as an investor the deal is never really sweet enough. I think a lot of us wonder if we could have gotten a better deal. It sounds to me the offer came from an investor who figured you were in a bad spot and you needed to unload the property or get out from underneath it.

Clearly it’s a ridiculous offer. Seems to me he threw it out there to see what sticks. I would counter at 10% interest an equally ridiculous offer. Maybe I want to see what sticks.

@Randy Smith

I agree with both concepts. Initially I was all about cash flow, but I didn’t spend the cash flow. I banked the cash flow for more cash flow properties. I used my W-2 to take care of daily bills. In the process I was creating growth which became generational wealth. Generational wealth was always my goal.

@Gina Shumway

I like to use small local banks and credit unions near your rental property. I would definitely get your property rented prior to the refinance. I have used a number of DSCR loans and having the property producing income is a plus. Without a tenant in place then only projected rents are calculated versus actual rents.

Based on how well your rehab went, I was always able to out pace market rent by my actual rent. This increased my DSCR ratio. My goal was always 1.25, but generally I would be in the upper ones and a few times I hit 2.0 or better. This gave me way better terms at the bank.

@Jace Perez

This is definitely economic market driven. When prices were not so inflated a SFR might bring in $500 a month cash flow with a mortgage. While today that number might be under $300.

Some count on appreciation and aren’t so worried about cash flow. Most of my rentals are in the midwest so appreciation is fairly modest. You would definitely want to look at cash flow.

A $100 cash flow for a property today is not something I would do without having some other value driving the property as in appreciation. $100 would get all eaten up over a furnace/air conditioner replacement or some other large expense. It’s just not enough to make it worth the investment. I would wait for better opportunities.

@John Carbone

I agree John.  This is why when it comes to zoning you need to review each section in its entirety and each jurisdiction has a different set of rules. This should be part of everyone’s due diligence.

Let's be clear on this. Some jurisdictions have multiple commercial zoning districts. You have to understand the district you are in. Zoning is divided into different uses within different categories. An apartment building might be allowed in C-1, but not in C-2 or C-3. STR's typical don't have a category necessarily, but when you read the zoning definition of a hotel or motel it is similar. This is how some jurisdictions are prohibiting a STR in residential district because are using the hotel/motel which is a commercial use.

@Eric Sebast

If it is zoned Commercial I, go to that zoning district in the zoning code and take a look at the permitted uses. If hotels and motels are in the list you are probably ok.  Look at the definition of those uses, which most likely will say Residential of 30 days or less.  If it’s only allowed through a conditional use or special use then you’ll need to go through a public hearing.  Saying it’s in a commercial district is vague.  You need to look at the specific allowed uses.  If you are calling the city you will need to get a response in writing before you make such a large investment.  I was a Zoning and Building Official for many years.  Due your homework first and then you can ask relevant questions.

@Jacob F.

As others have said, you can't control what you can't control. I would say if you buy a STR in a tourist area where the economy is driven by tourism then there is a good chance you'll be fine. Even if they decided to license or enhance licensing of STR as long as your not the problem and you keep your property up to date without parking issues, parties, etc., I think your fine.

If the neighbors don't even know it's a STR then you should be good and that's the best scenario. Unfortunately, a few bad operators gives the whole industry a bad rap.

@Jianlan Sheng

I always go a little conservative at this time of year.  If my property shows way better then the others then asking for the top end can make sense.  Here is my philosophy; if I price myself too high and it takes 30-60 days to secure a tenant and if I would have adjusted my price by 5%-10% I’m actually ahead even if I am under market.  In your case, if you offer the rent at $9000 instead of $10,000 and it rented in two weeks you could actually be ahead depending on market time.

Each time I put a property on the market, I reevaluate the market rent and see where I stand.

Best of Luck.

@Nikko Tountas

Private money is a great way to fund BRRRR deals. After my first BRRRR deal one of my investors funded my projects at 100% of purchase and rehab.