All Forum Posts by: Steve W.

@Dan DiFilippo Although Fayetteville has the USG presence, COVID has made me wonder how much of a safety net that will really be if services are shut down or are experiencing limited/restricted capacity, putting civilians out of work even if the military personnel are stable and have the money to otherwise spend. I don't know the situation there so I'm curious what the boots on the ground are seeing (despite rising house prices, that is happening everywhere, and although there *should* be a correlation, housing prices are not the economy).

A thousand foot view datapoint: Fayetteville has the worst unemployment rate out of all NC MSA (which I got from the BLS at this link), which seems to validate my concern. 

@Zachary Rymarcsuk I know you asked @Scott Rivers, and I am interested to hear his take. But some data points to consider:

• The state of Alabama has had a net migration near 1% 2010-2019. Compare this to North Carolina which has 6.7%. In other words more people are moving to NC than AL.
• Secondly, within AL, Birmingham has seen population loss in 7 of the last 9 years. Huntsville on the other hand is on track to surpass Birmingham within 2-3 years, to become the largest city in AL. Source
• Birmingham job growth over the next ten years is predicted to be 29.2%, which is lower than the US average of 33.5%. Source
• Depends on what your goals and strategies are, and what is your competitive advantage, but currently looks to me like not much momentum behind Birmingham.

@Zachary Rymarcsuk Thanks for posting, very cool :)

Would you mind sharing the deal breakdown, namely the rent - expenses (vacancy, PM, maintenance, capex, taxes, insurance) showing how you arrive at that cashflow? Thanks and best wishes!

@Meghan McGill Thanks for posting, very cool. Congrats to you and Dan. Would you mind sharing the deal breakdown, namely the rent - expenses (vacancy, PM, maintenance, capex, taxes, insurance) showing how you arrive at $296? Thanks and best wishes!

@Scott Gaspar First things first is to check your "Why." What are your goals with real estate? We should use that to drive our investment decisions forward, and you may find out that your risk aversion is steering you the wrong way. It is possible when trying to be too risk averse you end up doing something more risky. For example, like @Tucker Cummings said, $40k purchased for cash may give the illusion of fools gold, with the reality being lower quality tenants and financial loss due to cap ex, than if you put $40k/20% down on a $200k house that is in a better neighborhood with better tenants and still cashflows. 

To this regard here are a few BP posts that illuminated this issue for me.

Investing in Cheap Real Estate: Is a $30k House Always a Pig? (biggerpockets.com)
- This also has good follow on discussion comments. For an against low priced housing.

CapEx: How to Estimate Real Estate Capital Expenditures | Blog (biggerpockets.com)

The Math Proves: You Can't Make Money on $30,000 Houses. (biggerpockets.com)

I just used the Realtor.com monthly payment calculator at 91.5k purchase price, 4.5% interest rate, 20% down. Says $485.

The house was built in 1928. Without knowing much else about the house (except that it is 90yrs old), I'd assume 10% maintenance and 10% capex. The vacancy rate at this link says 7.4%. It is a 1 bedroom though, so maybe there will be higher turnover. Plus there is additional cost like getting it rent ready and paying PM placement fee, and bumping it to 10% might not even cover that. Then 10% PM puts total expenses to 40%.

Your rent estimate is $700. Even if you bumped that to $800: ($800 * .6) - $485 = -$5. So doesn't look like a slam dunk to me. Maybe if you finesse the numbers you can get cashflow positive but probably not a whole lot.

What is your plan for the house in Kentucky? Are you wanting to make renovations or keep as is? How much investment are you wanting to keep in the property (20% down, or as little as possible?).

@John Mocker @Matthew Rolf

Makes perfect sense, I think that is the missing link for me.

So impressed by the responses by all, thanks so much!

I did a search on the forums here for "cost effective rental renovation." I didn't have much luck, so starting a thread here to crowdsource information for the community.

This post was inspired by the Book on Estimating Rehab Costs by J Scott, where he mentions this about carpet: "Higher-density padding can make lower-end carpet feel like upgraded carpet, and pad is considerably cheaperthan carpet; choosing a nice pad can improve the feel of your low-end carpet considerably."

Investors: What strategies have you successfully employed to balance cost and quality in your rentals?

Contractors: What are things investors do that they don't realize are having an impact on cost? What can they do differently to get more bang for the buck?

Property Managers: What are cost effective methods investors should be using to maximize rent?

Looking forward to the discussion!

Thank you for the reply @Wale Lawal. Houston is assuredly a strong market, lots of investment and growth, so I am trying to educate myself in the right perspective, what I am missing as far as how investors navigate the particular risks of the given geography. Thanks again :)