An Amazing Property in the Heart of New Orleans
I would like to share a success story that outlines the importance of networking and the careful selection of location for real estate investing. Two years ago; my wife and I made the choice to move to New Orleans in the hopes of creating an airBNB within that city. We had previously lived in the town of Lafayette, which was 2 hours away from New Orleans but we frequently visited that city. We had already started our real estate investors journey in Lafayette with 2 single family homes and 1 4-plex that were being used as long term rentals. Part of the reason for me wanting to move to New Orleans was because I missed living in a large, vibrant city with constant action and part of the reason was I saw more opportunity for real estate ventures within New Orleans as well.
When we began looking for properties, we were very selective in our criteria regarding the location. While the most popular section of the city for tourists was the French Quarter, STRs are not allowed in that section of the city. As a result, we targeted the Uptown section of the city to make our move. We also wanted to ensure that any property we selected would be close to the street car line that connects Uptown and the French Quarter. By targeting Uptown, we knew we could appeal to our target clientele due to the fact that we would be located in the safest area of the city while still allowing for quick and easy transportation to and from the French Quarter due to the street car line. We eventually found the perfect property that was located 1 block from the street car. The property was a 3 story former Victorian mansion that had been converted into a 4-plex. In addition to being near the street car, we were surrounded by historic buildings such as the Anne Rice Estate House and a variety of the city's highest ranked restaurants that are regularly featured on travel channels such as Shaya. All of these were within walking distance of the property. We knew that this was a property that was worth our attention. After acquisition, we had gone on to discover that this property was even more ideally situated than we had previously realized. The property was located in the very heart of the city's annual Mardi Gras festivities; 1 block from the event's most revered parades. We were also situated near houses that were featured on magazines for their architecture and holiday decorations. We were even on the film set of The Crossover: a show made by Disney and can be seen on their streaming channel. The location of the property was so ideally placed, that we were able to charge substantial premiums per night for guests on airBNB. Not only did we have no issues booking the property during Mardi Gras once we listed, we had received Mardi Gras inquires for the property for the next 2 years on airBNB.
While the property has demonstrated tremendous potential for us to this point; acquiring it came with many hurdles. The first hurdle was financing. At the time, our funding was limited so we had intended to use an FHA loan in order to acquire the property which would have allowed us to have a 3.5% down payment. Unfortunately, we found out that we could not use this option since the property used window units for A/C which was not accepted for FHA financing. This was the first instance where we demonstrate the importance of networking. We had began reaching out to our network, primarily through our real estate agent. We were fortunate enough to be in the hands of an amazing and well connected real estate agent who we were able to find from referrals from a Lafayette real estate agent we had developed a decade long partnership with. The New Orleans agent was able to connect us with a local lender. Although that lender was not able to provide a loan product for us, due to our connection with the real estate agent; she did want to find a way to help us and connected us with another lender who was able to find a portfolio loan that would suite our needs. Although we were not able to get 3.5% as a down payment, we were able to get a 10% loan requirement as well as financing for the property remodel rolled into the same loan. We were fortunate enough to have parents at this point who were willing and able to help with the down payment for the property as well. The remodel financing itself was an unexpected but extremely welcome windfall. One reason that the property was listed within our price range at all was due to the fact that the previous owners performed limited deferred maintenance on the property and were eager to unload the property due to a dissolving partnership. While we made sure that there was no structural damage in the property with a very in depth inspection; there was a lot of cosmetic issues with the properties curb appeal that was greatly dragging down the properties value. Examples included missing paint and rotting siding. The renovation budget from this loan allowed us to replace the siding of the property and repaint the property as well as make other changes to greatly enhance the curb appeal of the property.
Obtaining a general contractor that would be able to make these renovations was another hurdle that needed to be overcome as well. The requirements of the portfolio loan were for a general contractor to be assigned to the financing and be able to begin the renovations shortly after closing. Normally finding general contractors within a large city is not a difficult undertaking; however, we were trying to obtain this property shortly after Hurricane Ida had destroyed the city and the country was just coming out of the pandemic. The combination of hurricane damage, supply-side issues, and labor shortages at this time made finding a general contractor extremely difficult. We had made nearly 100 phone calls asking for estimates and had even walked the streets of the city and began to talk with every repair team we encountered. All of these effort resulted in only 3 returned phone calls, 2 estimates, and 1 who was willing and able to do the repairs in the time window we required. This proved to be another amazing turn of fortune since not only was this general contractor able to complete the work at a fair market value; the work itself was extremely high quality and we couldn't have been happier with the outcome. We have also been able to use his sub-contractors for additional work on the property in the time since.
There have been many challenges that have needed to be over come since, including challenges we are still working to overcome. Chief among them is the soaring price of property insurance within the New Orleans market and the second obstacle is the city's political environment that does not favor STRs. Both of these are on-going issues we are battling but we are view these as more challenges for us to overcome to be able to reach our end goal and intend on meeting these challenges head on. It has gotten us involved in the city's government and has directly resulted in us quickly growing our network within New Orleans in a relatively short period of time. We had also been aware of the political environment of the city and had taken steps to protect ourself from the possibility of not being able to function as an STR. The prime defense that we used to hedge our bets was to ensure that any property we looked at would be able to function as a long term rental. This further showed why we performed so much research prior regarding selecting a location for this venture. Not only were we located in a prime tourist area, but we were also located in between three major hospitals and walking distance to two major university, including the extremely popular Tulane University. This allowed us to not only tap into the tourism market but also gave us access to traveling medical professionals and students as well that would provide long term tenants if we were prevented from continuing with the STR model.
Although we still have a long ways to go to meet our goals, we are excited for the foundations we had setup for this property to this point. We owe what have achieved so far to the careful research we conducted on the properties location as well as the network we had developed and have since expanded. I believe this story demonstrates that real estate is not an easy game. There will be challenges that need to be overcome throughout the process but with persistence, drive, and education; any obstacle can be overcome and the outcome will prove worth the effort. This last statement is what I really want to emphasize to anyone who has taken the time to read this story and I hope it provided you with some inspiration and encouragement for your own real estate journeys.
I know this post was made several months ago, but I currently live in Lafayette too and would like to invest in NOLA. Would love to connect and if you don’t mind, providing the names of who you used (or who we shouldn’t) would be super helpful.
That's awesome, congrats Konstantin!
