All Forum Posts by: Pat Lulewicz

Is all of your full-rehab cash stuck in the deal now? How much was the renovation itself? Given that its operating well as a STR, would it make sense to do a cash-out refi to get some of that cash back?

My macro answer is: it is worth it to get your license if you are active in the industry.

I think Jennifer makes a lot of great points. Totally agree on:
1) the info you learn in RE classes and continuing ed; its entirely meant to keep you compliant, no education.

2) commission can end up being smaller than you think. Most transactions right now are still paying 2.4%-2.5% to buyer-side agent. The split is very firm specific. I know some people who pay a flat fee per transaction to their firm, and keep the rest. Others do a 90/10 agent/firm if its their own lead. Worst I've heard is 40/60 agent/firm on firm-sourced leads. Just do your homework and call around.

The legal and ethical requirements in selling your own property (whether you are listing it or not) are extremely heightened and everyone will hold you to an incredibly high level; that goes for flips or rentals. I will say that if you are buying your own home or rentals, its a nice amount to be able to apply to your closing costs, and most firms give you a few "free" transactions like this is a year where you don't pay a split for personal purchases/sales.

Being able to have a license and throw offers on every and anything you want is also extremely useful. If your investor-friendly-agent has other clients or is on vacation, you may not be able to submit an offer as timely as you would if you could do it yourself. Even having the MLS access to see disclosure documents and agent-only comments could sway you one way or another on moving forward.

Finally - if you don't or can't service someone but want to refer them to another agent (in or out of state), you can get a referral fee back (negotiable % usually in the 20%-30% range) to help offset those fees. Imagine if you brought @Jennifer Cook-DeRosa a $5M warehouse owner, who wants to sell, on a silver platter. Not a bad way to make a living.

No experience with the 2 you mentioned, but I'm a fan of paying the year so I don't forget next month/quarter and the coverage lapses. My insurers reimburse me for what I didn't use; it can take a few weeks for the check to come, but that's just cash flow management then. The amount shouldn't be massive (all things considered) so if that's the case, give yourself the peace of mind.

Even if you're doing a BRRR and your lender will end up "covering" 100% of the rehab costs, its a reimbursement and they don't front it, so you've got to consider your cash flow (liquidity) and make sure you have enough cash for the downpayment, some of the rehab, and then get reimbursed for the work, and then do more work, etc.

@Isaiah Wilson - @Bonnie Low is absolutely right - you essentially just have to take a standard lease agreement like you would have with a LTR tenant and adjust it for the parameters of the MTR tenant. This will include shorter lease term, potentially different utility criteria, etc. Add last month rent in there if appropriate or if y'all agreed to it. Potentially more security deposit given the shorter-term nature of the stay.

Most states, NC for sure, don't differentiate MTR from LTR. Anything longer than 30 days is generally considered "LTR" but I'm not an attorney nor do I play one. Check with the specific county for that language and any ramification that may have.

If your numbers are spot on, I would have felt comfortable around $105k in my markets. Remmeber that your first (couple) deals are great ways to make money but more importantly to learn. If you did this project and ended up going $10k over budget to where you didn't make a crazy amount of money, chalk it up to education U and right-size for the next deal where you have better data points.

Hey @Biswajit Dash - surrounding areas of Raleigh are of course getting attention because of folks getting priced out of the beltline, development costs, etc. However from a tenant-demand perspective, still seeing most people will still spend the extra $50-$100/m to rent close to where they work, family, etc if they have the opportunity to. Especially if the home aesthetics and footprint are comparable, there is still good rental supply available. This is why job growth/fundamentals get talked about so often when choosing a market; put yourself where you have the most qualified applications possible for your home.

With $100k down and assuming 20%-25% DP, you're looking at homes in the $350k-$450k range, with $400k probably being a break-even, at best. You can absolutely find this kind of inventory within Raleigh limits.

To answer your question specifically - all of those cities have development through the rough - residential and commercial, more on the way and swelling buyer demand. These are continuing to spill over even farther out towards Selma/Smithfield, Benson, etc. Majority, if not all, of these newer communities are going to have HOAs and some restrictions on rentals in their covenants. Make sure you review those before buying so you aren't stuck without a, legally viable, business strategy. 

You will have to be a bit more specific about what "opinion" you're looking for. I love NC, only invest here, and think its the best state to do so regardless of goal. I think its the best state to live in as well. But I'm sure you're looking for a different opinion.

As far as where to look, specifically for flipping - there's plenty of articles on this website and across the internet about how to search for the right location: demographics, trends, inventory, etc. I've met people who successfully flip million dollar home in Raleigh and others who successfully flip mobile homes near the NC/VA border. If you look at the top 100 cities in NC by population, people are flipping successfully in all of them. Top 40 will probably give you the most feasible (from inventory and demand perspective) options. Top 20 are the names most people toss around when discussing markets.

Although $90k is a workable number, anything in a reasonably sized metro will require more than $90k for the purchase and renovation in NC. Caveat that with the fact that there are many assets and tertiary markets that could work, but most people take demographics over price when considering where to flip. I'd recommend getting a HML for the acquisition and renovation components; $90k will be sufficient to take on most projects that would be appropriate for a first timer. Name of the game will be speed though, so make sure you have the contractors in place to hit the ground running because that interest expense will start to add up

Great point by @Bill B., most people don't think about the replacement payments when they move-out. If it doesn't rent for as much or rent as quickly as anticipated, then you have 2 payments to deal with.

Depending on location of Durham and cosmetics of the home, STRs do well for large families and should net a great amount than an LTR. But it does then require furniture/staging, photography, supplies and the management. Really just depends on specifics.

Alternatively, if its just him and he feels comfortable doing it, furnished rent-by-the-room rentals can be profitable, especially with shorter team (1-3 month) leases if he wants to keep the home + just take a bite out of the mortgage. With a bathroom for each bedroom, and a lot of space for people to spread out, that option could be lucrative. Curious if other sq ft in the home could be converted to accommodate another (5th, 6th) living space to maximize this opportunity.