All Forum Posts by: Victor Steffen

Really interesting! I think it would take the right kind of buyer willing to close 6 months from now. Also- the option fee is typically credited to a buyer at close so would take some additional negotiations to make everything play out as you outlined.

regarding prices rising considerably and giving up the upside- "you won't go broke making money"... let us know if this plays out! 

I invest in high growth markets (central TX mostly) and still use a 5% vacancy factor. Maintenance expenses will be a function of the quality of the asset, not a function of the income collected. For an "A" grade asset with zero deferred maintenance I would set aside as little as $50 per month. Sounds like your units have some wear and tear and will be more "C" grade. $200 per month may be a more appropriate maintenance reserve for you. Management pretty much across the country falls between 8-10% of gross income.

GROSS INCOME minus PITI, Vacancy, Maintenance, Management, Utilities, Reserves = cashflow.

since your piti is already more than the gross income there's not much to analyze from a cashflow POV. The deal won't work for a cashflow focused investor. 

You will need to lean into the appreciation potential of the asset and future development in the area. 

good luck!  

Ignoring all of the obvious caveats- the short answer is YES. Adding square footage is one of the most efficient ways to increase ARV.

Hey my wife and I own a few LTRs and STRs in san marcos, converse, austin and san antonio. I'll PM you. 

Hi Arun, welcome to BP! 

candidly- it sounds like you're trying to force a square peg into a round hole. The builder doesn't care about your numbers- they are selling at market rate to retail buyers, not investors. It seems some are negotiating small concessions to get inventory moved but not at the discount you would need in order to make this thing cashflow. Leases in Denison are at $1.20 per foot (this may change for your specific neighborhood). At $1800 per month income and a 325k purchase price you can do a lot better in a resale home OR a new construction in the 250k range. 


 

@Chris Seveney Very helpful and interesting! Thank you for the share

In other words, what asset type would you buy to hedge against real estate? 

congratulations!! Tell us about the asset type and what the numbers look like? 

@Jeff T. we've connected on a few 1% deals over the last 6 months in san antonio. They are almost always lower price points (150-175k), need updating and are typically in some of the rougher neighborhoods. OR we use a more esoteric management strategy (rent by room, STR, travel nurse etc).

I know this isn't your question, but worth noting: we've seen stronger returns from ".65-.75 % Rule" deals. You'll land in nicer neighborhoods with a higher quality asset. Less tenant issues and lower maintenance expenses. The returns on paper don't look as nice, but in reality we've done much better sacrificing COCR for IRR.

Good luck!