All Forum Posts by: Russell Holmes

@Nicholas Leslie I live about 5 mins from Rock Springs in Apopka and know the market here very well. What would you like to know?

@Andres M. in response to whether I email multiple investors with deals or work one at a time, I honestly do some of both. For buyers that I know are pre-approved and ready to actively buy in the next month or two, I'll set up auto searches and discuss those results separately.  

For others who are looking into my market to get a feel for it while watching other markets too,  an auto search would be overwhelming so I'll have them on a contact list to send over only the few properties that I feel have good potential as investment properties. It may be a few one week and none the next depending on what's happening in the local market. I don't email bomb a huge list when I find something promising, but I will send it to anyone on my contact list who I might think is interested.   

@Nick Khemlani both of the deals I mentioned are being financed conventionally and will cash flow positively. Even if buying with cash I'd suggest making sure a property would cash flow with a mortgage in case an investor were to want to refi cash out to buy something else.  Owning free and clear in order to cash flow isn't true cash flow. Cash flowing enough to cover all expenses including reserves was important, but these were long term wealth-building purchases, not necessarily those to cash flow a huge amount in the first year.

  I don't run the numbers directly for my buyers since every investor has different ideas on what to set aside for maintenance, repairs, capex, vacancy, etc, and different goals on cash flow vs appreciation vs up front cash needed. Differences in down payment, interest rate, loan type, etc can also vary the cash flow numbers as well.  However, running them based on my assumptions produces a positive cash flow after reserves.  Neither of the buyers need massive cash flow for income sake, but instead they are looking for solid properties in the path of progress with positive cash flow and very little rehab/repair/headaches up front. Since each property is fully rehabbed to include new roofs, new HVACs, new flooring, cabinets, etc, the monthly reserves for repairs/maintenance/capex can be significantly lower than they would be for a property with a 5 year old HVAC and a 10 year old roof.  That's not to say they won't be setting aside any reserves, with full life expectancy out of these big ticket items, they know they won't need to have enough for a new roof of HVAC in 3-5 years.  With minimal reserves needed to build for long term rather than short term, no rehab to be done while carrying an empty property, and strong rental markets with increasing rents, low vacancy, and low rental property inventory, these were purchased as long term holds more than for immediate cash flow.

Each investor has different strategies, and I have several buyers who said each of these properties didn't produce enough cash flow for them to pursue. It's perfectly fine to run numbers conservatively and wait on the ideal property to come along.  However, with that said, they've been sitting on capital for 6-8 months at least, saying the same thing about every property that others have purchased to hold as rentals.  If rents and property values keep climbing steadily and the market stays strong like it has been for 4+ years (while everyone has been warning of impending recession since 2016), it might be quite awhile to continue to sit on capital while these properties get paid down, appreciate, and rents increase.  Meanwhile a decent deal bought today could very likely be a phenomenal deal in 3 years when the roofs, HVAC, etc still have plenty of life left in them, properties have appreciated 10%+ and rents have climbed 10-15%.  Its all relative and every investor has to decide on their strategy relative to the current market.

@Nyanciel Morales there's an Orlando meetup the first Saturday of every month in Winter Park. It's all Bigger Pockets folks, but we aren't allowed to officially call it a "BP Meetup".  Lots of great people attend, no sales pitches, good networking.  @Bernadeau C. and @Shawn G. run the meeting.  I couldn't find the next one listed on the network tab, but it's from 9:00-12:00 the first Saturday of every month at: 1133 Louisiana Ave #101, Winter Park, FL 32789

They've also got a Facebook group for the members that attend, "Central Florida Real Estate Investment Hub" 

@Craig Gaydas that's great, I can definitely see the potential there.  I'll have to look into Ocala more now too!

@Craig Gaydas that's very interesting, thanks or the info!  Are there large/stable employers in the Ocala area or do many folks commute to Gainesville, Umatilla/Eustis, The Villages, etc for work?  

I think it's somewhat of a 'stigma' that I'm trying to shake personally, but I feel that Ocala is still a bit removed from the employment market as a whole.  If you're saying tenant demand is increasing there must be jobs for these tenants.  

@Craig Gaydas are you finding some good deals in Ocala?  Where is the equestrian center going, and is it going to have any residential/commercial growth around it as well?  I'm not incredibly familiar with Ocala but it is intriguing. 

Marion Co was just recently added to the ORRA MLS network I'm a part of. My in-laws live in the Lake Co side of Umatilla and I see a lot of potential there, that little town is growing like crazy and is only a short way from Ocala to the North with Eustis and Mt. Dora just to the South. I'm just beginning to research areas in Marion north of Umatilla now that I've got access to Marion County MLS Data and Ocala is just over an hour from me in Apopka. Umatilla rents are still a bit low to cash flow well on some deals, partially because home prices have swelled faster than rents for now, home prices rivaling areas much closer to Orlando. I've seen several entry level new construction 3/2 homes sell in Umatilla for $230-240k on small in-fill lots, not too far behind prices in Apopka/Longwood at all. Plop the same house on a lakefront acre off a back road in Umatilla and it's $320k+. As recently as 2016 my in-laws bought 10 acres in Umatilla for $69k and then picked up a 1900sf house nearby on 14.5 acres for $200k. Now 4 years later their house and land is worth over $400k and the 10 acre parcel likely north of $200k, and their purchase was years after the 'bottom' of the market.

  The SR 453 toll road that currently splits from 429 in Sorrento and ends at SR46 in Mt. Dora is slated to run up through Umatilla and to Ocala connecting with I-75....that could be 15 years before we see it come to fruition, but I can definitely see Ocala continuing to grow preceding that much needed thoroughfare.  The longtime Umatilla residents have their torches and pitchforks out to protest the 'city folk' and 'greedy developers' spoiling their town, but with proper planning I think it's a positive, allowing more people to enjoy FL without seeing California style prices.  I'd rather see outward growth of the metros than a geographically confined area forcing prices sky high. Definitely interested to hear more on the Ocala developments

@Gavin Welch I didn't realize you were on Bigger Pockets, just sent a colleague request.  I guess I'm not surprised to find you here since I first connected on BP with the investor/client who referred you to me for Lakeland.  

Anyone on this thread looking in Gavin's market around Lakeland, I've heard he's a great go-to Realtor for the market there.  Too far a drive for me to know the market as a Realtor, but Lakeland is seeing a lot of positive growth and development not to mention being located right between Orlando and Tampa.  I know several Orlando area investors who also keep tabs on and invest in Lakeland... It's somewhat of a secondary market to the larger metros, but I'd imagine in 20+ years Orlando/Lakeland/Tampa will pretty much be a solid spread of dense population. 

@Kayla Pronesti I'm on quite a few wholesalers lists locally in Orlando and despite looking at every deal they send, most aren't anything appealing at all. Many times they are wholesaling MLS properties for just about what they weren't selling for on-market and pretending it's an off market deal. Other times the rehab numbers are far too low, ARV is overly optimistic. The 'great rental home' is in a neighborhood you'll get carjacked in or they base the ARV on a straight $/sf sold price of homes that don't compare in size or bedroom count.

I keep looking at their properties hoping to find deals, but honestly motivated sellers on the MLS are more appealing since they aren't inflated by wholesale fees and hounded by flippers who have no business launching bidding wars with each other only to be stuck doing DIY rehab for free labor to avoid losing money.

Some properties do sell over list price, I had buyers outbid on a property recently despite going $11k over list on a mildly distressed house, but I've also closed deals $10-20k below list. It really just depends on how well the list agents did on pricing strategy and how desperate the sellers are. Sellers who started at a list price that was far too high a few months ago are the best when you can find them and get a sense of desperation. I feel like the wholesaler and flipper gurus have driven the distressed housing market to slimmer and slimmer margins aided by hard money rates coming down as well. You're often better off finding a well maintained house that needs basic single trade updates like roof, HVAC, flooring, bathroom remodels, etc. I've seen bank owned properties listed at $70k where there would be decent margins that wind up selling for $121k with easily $60k rehab needed and $195-200k ARV, it's nuts... I walked an identical house to the one I mentioned above that we're closing on for $175,500. It was the same exact house without all of the upgrades. Old electrical, old roof, needed a full cosmetic rehab of at least $25-30k and it was listed at $174k. Passed on it to offer on a better deal and saw it went pending the next day. Maybe they accepted an offer below list, but it would have needed to be $135k to make it worthwhile to rehab it compared to the fully rehabbed one able to be rented on Day 1 for $175,500 across the street.

@Matt Banahan I'm a Realtor in the 'other' less-cool but also substantially cheaper Orange County...Orange County FL.  The Orlando and surrounding areas are a great market to invest due to many of the reasons you list. 300k people per year are moving here, there are more tenants than there are available rentals, and finding qualified tenants for nicely rehabbed properties is a quick process. I'm personally in Apopka, which is in Northwest Orange County, but cover Seminole and Lake counties as well.  While '1% deals' are few and far between, there are solid rental deals to be found. Central Orlando is almost completely priced out of cash flow.  Rents just simply aren't high enough to justify what prices have climbed to.  But travel about 20-30 minutes in any direction from Downtown Orlando and there are great deals to be found.  Prices drop faster than rents do and there are deals to be found in Longwood, Winter Springs, Sanford, Altamonte Springs, Apopka, Mt. Dora.  The infrastructure of toll roads and development is putting previously rural areas 'on the map' so to speak.  Being inland FL instead of near the coast, insurance isn't astronomical, property taxes aren't too bad, and tenants can commute easily throughout the Orlando area.

  I'm closing one house tomorrow that's in Longwood (Seminole Co) for an investor from Monterey CA. He offered based on my walk through video, flew out to see it after inspection, and is closing with a mobile notary.  I'll bring the keys to his PM on Friday after it funds and I throw a couple GFCI outlets in the place for him as a closing gift.  It's a freshly rehabbed 3/1.5 with a carport: new roof, new HVAC, new kitchen cabinets with granite, LVP throughout, etc etc.  It's just over 1000sf and closing at $175,500, beating three other offers to get it for that. It appraised at $178k and market rent is right at $1495/mo, PM is set to list it for rent this weekend.  It's a mile to the SunRail commuter train station, a short drive to two different corporate hubs: Maitland and Lake Mary, even closer to a large regional hospital, and the neighborhood is seeing quite a bit of rehab and development. Insurance (dwelling and $500k liability) is about $770/yr, property tax should be right about $3k/yr after the sale hits records. 

 I'm under contract on another house in Sanford (Also Seminole Co) for a US investor living abroad closing in March. It, too, is a freshly rehabbed house, this one just under 1300sf, 3/2 with a two car garage, screened porch, and back yard on a several acre community pond, closing for $225k. Convenient to I-4, SR 417 Toll, and right on the border of Lake Mary, walking distance to a great Elementary School.  It'll rent for $1650/mo, insurance quote of $707/yr due to being built a few decades more recently than the Longwood property.  Taxes about $4k/yr.  Progress Residential (hedge fund group with 30k+ single family homes) owns 5+ houses in this neighborhood setting a high bar for market rents and keeping them moving up. 

Neither of these homes would be considered a 'home run' deal like a 2015 BRRRR property might be, but they are rock solid homes with new systems, high tenant demand, and in rapidly growing markets. Distressed houses are being bid up sky high by newbie flippers paying too much, but deals can be found on rent-ready homes or those needing basic updates.

I have a handful of out of state investors I'm working with to find single family properties and a few looking at multis.  Multis are few and far between with good numbers in Orlando, but there are some new construction duplexes in Poinciana/Kissimmee (South of Orlando) being built and sold for just over $300k with $2700-2800/mo gross rents and crazy low $4k annual taxes (Polk Co taxes are low) and $540/yr insurance due to being new.

Some of these buyers I'm working with are jumping on deals and throwing in offers, getting some accepted and most out bid, but it's part of the game.  I've got other investor buyers who keep asking me to find 1% deals and saying everything I send them is overpriced. I'll send a property and walk through video to 5 investors.  One won't respond, two will tell me it isn't a deal, and two will throw in offers.  I can't force the market to produce 1% deals and I can't force buyers to understand the market....  1% deals can be found elsewhere in Florida, but there's a reason Orlando is mentioned more frequently than Lakeland or Jacksonville....it is a stronger market long term.  Cap rates go hand in hand with risk.  When investors in general view a market as being more stable, you aren't going to see cap rates like they were in 2014 or 2015 when the market future was more unknown and risky.  Move to a less stable and riskier market and you might find 1% deals with better 'on paper' cap rates.  However, which market is going to play out better in 10-15 years....my money is on the Orlando market.  These 0.7-0.85% deals with low maintenance, new systems, and in growing markets are going to soldier on to become phenomenal deals in a few years when entry level houses start north of $250k and you can't touch a 3 bedroom rental for less than $2k.  With the level of population growth and tenant demand, even if prices soften market rents won't.

I just saw some stats published by the Orlando Regional Realtor Association that median price climbed 8% from January 2019 to January 2020, Inventory of homes for sale dropped 15%, Sales increased 16%, $ Volume increased 24%. Meanwhile population has been growing for decades, unemployment is low, hundreds of millions of dollars worth of infrastructure and development is going on and mortgage rates are low.