All Forum Posts by: Melanie Wilmesher

TLDR: I found a seller who is open to a financing an off-market 5 unit multi family home near a major hospital in Denver. I am seeking advice on making my offer compelling but also making sure I'm not missing anything/potential expenses. Open to critical feedback.  

Two years ago, I found a multi family home on the MLS that sat on the market until it was eventually taken down. It was listed as a commercial property; a quadplex that also had a single family home on the back of the property (so two structures on one lot, zoned mixed use). It's a 5 minutes walking to a major teaching hospital in Denver, absolutely perfect for mid term rentals and long term rentals.

At that time, it was listed for almost $800k, more expensive than other comps. I reached out then about the sellers willingness to finance the deal and he was open to it but wanted at least $200k down. He needed a large down payment because he was paying for a home to be built. Today, I know that project is complete and so a big down payment up front is likely not a priority. 

Skipping to numbers; the quadplex has 4 1bd/1bth units, all currently rented for $1,100/per month. The SFH is a 3bd/1bth currently rented under market for $1,000/month. In total, it's generating about $5,500/month. The owner owns it free and clear and it's managed by a local property manager. The best comp I found is listed today at $900k, been sitting a month and is only a quadplex. The second best comp closed end of 2022 for $830k, 3 months after being listed and a price reduction of 40k.

I believe there is huge potential for this property. The SFH today is dilapidated and undoubtedly needs a face lift but because of the cashflow, the owner's not motivated to make repairs. Comps on distressed properties within a half mile that have sold in the last 30 days are closing in the $330-350k range alone and renting for $2,500/m with basic updates (think original kitchens) or $3,000/m for completely updated 3bd/1bths. Beyond that, the mid-term rent potential on the quadplex units is at the very least $1,500/unit per month once the leases are up (Mid term rentals listed today have a higher potential but would require updates to the units). Furthermore, based on it's location alone, this property could be sold to a developer because of the unique zoning that has no limit to the building height built on the lot (!!!).

So, back to making an offer... I want to make a compelling offer but want to make sure I set myself up for success too. I'm thinking about starting at 870k with 10% down and an interest rate of 5% with a 20 year term. This way, the seller gets 87k in hand, won't pay nearly as much taxes up front on a huge cash sale, will still be generating about the same amount of income as he is today, consistently for 20 years without the headache of managing it or insuring it.  

I'm open to any and all feedback regarding how I'm thinking about this, what I might be missing or how to make it more compelling. 

Thanks in advance. 

I have personally always thought of St. Louis to be a hidden gem. Many of the houses are so charming to me. That's a personal opinion of course but I've considered it a handful of times and even more recently. About a year ago, I was exploring the STR market around downtown. I got nervous by watching AirBnB, seeing tons of available properties that had no bookings for months and months at a time. Eventually, I thought there was too much risk (market saturation) and I chose another STR market. I would likely still consider an LTR here and love your insights on growth. I'll be curious to see if other St. Louis investors chime in.

Hey Olivia! So exciting that you're getting started. Reading that you're moving in a year, I'm curious how far away you're moving and if you've already thought about how you might manage a property once you move. It's not so hard to manage an LTR from close by but if you're thinking of being more than an hour away, you might also need to factor in PM costs which might take away from your potential cash flow. 

Other than that, a few other questions that might be worth thinking about are: 
1. If I proceed with a townhome/condo, how likely and how often in the past have HOA costs increased? If they do increase, will this deal still make sense?
2. Assuming you do buy and generate $100-$200 a month in cash flow, will you still have funds left over after the down payment for emergency costs without having to rely on the $100-$200 that will come in? In other words, would you be able to cover unexpected costs that might come up if that were to happen in month 3 or 4? 

3. Is there a way to maximize income beyond your original projections with this idea? Can you rent 1 or 2 of the spare bedrooms to increase the cash flow? Can you rent an additional garage space? Just thinking about how to make it cash flow slightly more might make it more worth while early on. 

Those are just some of the initial things I thought about! Wishing you all the best and hoping you find a deal that works well for you!

Thank you so much to everyone for all of your thoughtful responses! 

 Hi @Lake Lutes thanks so much for your thoughtful response! I appreciate the insight about your area and what you've observed with bookings for 2023. It's logical behavior that rental expenses might be at the top of the list to go in this kind of economic climate. I'll reach out with some additional questions about Pensacola and Destin! Thank you!

I've made it my goal to purchase a second property in the next three months and I've had my sights set on an STR, specifically in Florida, for some time now. Obviously the economy has shifted and the STR market seems quite different today than it did just months ago. I've been watching prices decrease around the Tampa/St Pete/Clearwater areas but I'm wondering in general, has anyone recently purchased an STR in this area or up the gulf coast like in Port Richey or even further north that has had early signs of success? Port Richey is an area that I've seen pop up as a hot spot on STRInsights although I'm not convinced because it's hard to understand the draw to the area!

All and any insight is greatly appreciated! I have so much to learn and am thankful for any feedback! 

Hi Erin, will this event still be going on this evening or will it be cancelled?