All Forum Posts by: Van Lam

Hey @Van Lam, I’ve actually seen a few folks in Gainesville work through a similar scenario. A buddy of mine who invests out in Phoenix once had a client facing a similar timing mismatch on a rehab project.. they ended up working closely with a local credit union who was more open to interim valuations. If your property’s rehab isnt wrapped up until 2025, your current rent roll might look a bit different than what your lender expects when they run the numbers. Generally, lenders base their refinance valuations on the property’s in-place income and existing condition, not future projections. So, if your current rent roll is still on the lower side, it could limit the amount you can borrow right now.

However, if you have even a partial track record showing improvements.. say a few of the units are already updated and attracting higher rents.. a lender might take that into consideration when underwriting. Some local lenders familiar with Gainesville’s market (from what I’ve read in Bloomberg) like SunState Federal Credit Union and Ameris Bank have been mentioned favorably latley and might be a bit more flexible if they understand the repositioning story behind your property. Keep in mind, though, that each lender has their own criteria for how much future potential they’ll factor in, so it might come down to some skillful negotiation and presenting detailed projections that don’t feel like puffery.

Just be careful not to come off as overly speculative…lenders tendd to shy away from what sounds too good to be true.

Anyway, I’m curious.. have you spotted any other investors in Gainesville facing a similar refinance puzzle and what kind of terms were they able to secure?

 I would say vinyl or laminate.. Carpet is no go with water, and tile costs a lot with the labor/time to get it into place.  

What is the rest of the house outside of the kitchen and what is in the kitchen now? Since you are in Florida, there is usually a lot of tile and carpet and less wood floors. If the kitchen is already something different than the living room and dining room, you want to find a tile complement to what is in those rooms. Tile can go low to high and a kitchen is not a big job to just tile it.

Tenants that rent in those areas would not be looking on Zillow. List it on Facebook Marketplace and affordablehousing.com or maybe .org? It’s ~$99/year but you’ll get many more leads. Also Facebook marketplace. I own rentals in Gainesville and know there is a huge waitlist for section 8 currently. I have people calling me all the time looking for units to rent. Or call ACHA and let the case managers know you have vacant units if any of their clients are still looking. 

 15% vacancy rate is high.  How many units are there in your property?   This could be a challenge, maybe a big challenge.  To be blunt, I have zero experience at this high a vacancy rate.

You did not indicate the number of inquiries?  Number of people who have seen the units?  Number of applications received? How many applications received?   how many units have you placed tenants?  Trying to determine if there is little interest based on the ad or after seeing the unit.  Another choice is that you have the level of interest that should be expected at a 15% vacancy rate.   My area vacancy rate is below 5% and iusually only receive 1 or 2 applicants (sometimes 3) at my open house  i suspect if my vacancy rate was 15%, I would expect to need to have multiple open houses to rent and that it would take a while to get a decent qualified tenant.   You have both the high vacancy and rough area working against you placing qualified tenants.

There are literally dozens of reasons one unit rents and another does not even if the unit not renting is the better looking unit.  It could be the marketing.  However it could be location,  Common area, size, laundry, tenant qualifications (in rough areas you are not going to get many tenants with unblemished credit), parking, look of surrounding properties, etc.   

I am tagging someone that has a lot of experience in cheaper units.   I am not sure the vacancy rate of the area of his units, but at his price point I believe he has experience in rough areas.  He may have suggestions that are more applicable to your situation.  @Bob S.

good luck

We are in a very difficult rental market. To put something on for a week and start to worry shows that you may not know the market very well. It is taking 1 - 2 months to find qualified tenants. 

The first step is to make sure that you are marketing the property properly and on all platforms. After that you need to question the rehab and pricing. I am definitely not confident in owner's abilities to determine proper pricing. The market is decreasing, and yesterday's rental prices are not today's rental prices. You will have to get ahead of the price drops as what you are seeing is a lag metric.

What is the vacancy rate in the area your unit is located?   There are plenty of areas that you could be lowest rent and still find it hard to place a tenant because of how many units are available.  

where do you have it listed?  I do Zillow rental manager (which posts to a handful of sites) and FB marketplace.  I get more responses from FB marketplace but the quality of the responses from Zillow rental manager is stronger (judged by who views the property).

how many people have responded to the ads listing it for rent?  How many have come to see it?  

i suspect this will vary by market ….  I have about 8 people inquire for every one that actually views the property.  Even if everyone that views the property states they are going to submit an application, only about 1 in 4 or 5 do submit the application.  Fortunately we have about 75% acceptance rate but some who are accepted have found another place so maybe 50% of applications become tenants. 

If I had 50 people express interest I likely will get 6 to 9 people show to the open house. I will get 1 or 2 applications (sometimes 3).  I virtually always fill the unit at the 1st open house.

note if you find it hard to rent in September, imagine the difficulty in Nov, Dec, Jan, Feb.  you need to get it rented soon (move in before Nov).  You may consider paying a professional to get a tenant fast because I fear that if a tenant is not in by Nov, that you will have more difficulty getting a tenant before spring.  That is a long time without rent.  

by the way how did the refinance go?   Did you achieve significant sweat equity?   If you have, your cash flow can be more modest and you still can achieve a good return.   My last value add achieved enough equity gain that even with $0 cash flow (but it has some modest cash flow), the return would be outstanding.

in general, bad neighborhoods or close to bad neighborhoods do not make decent STRs or MTRS.  I would be leery of going this route unless you are very confident of your numbers.

good luck