Buy and hold strategies that are working
Member since 2022 · 14 posts · 5 votes
Hello all,
In my past year of experience networking in Richmond, VA and growing knowledge in REI I'm finding many investors in the area seem to be wholesaling and flipping in low barrier to entry areas (Petersburg, Hopewell, East End, south of the river along Hull St) and also running Air BnB's (yet legalities here seem to be a pain with recent changes).
What areas would be recommended for lower barrier to entry price point for long-term buy and hold? It seems that most lower cost areas I'm finding correlate pretty high with section 8 or higher crime stats. Getting started my goal is to have a first property that ideally has less headache potential.
Thanks!
Grant
Owner occupied qualifies for 5% down conventional. When I was buying my primary the mortgage required owner occupied for the first 6 months. So you can aquire almost 2 properties per year at 5% down this way. You’ll still need closing costs so you are probably looking at 25-30k
You can have roommates and house hack as the kids these days say or you can buy a house that needs cosmetic updates only, flooring bath kitchen these things are relatively easy to do so you can build some extra equity before renting out and repeating.
@Peter W. "as the kids these days say" haha that made me laugh Lol
Hello all,
In my past year of experience networking in Richmond, VA and growing knowledge in REI I'm finding many investors in the area seem to be wholesaling and flipping in low barrier to entry areas (Petersburg, Hopewell, East End, south of the river along Hull St) and also running Air BnB's (yet legalities here seem to be a pain with recent changes).
What areas would be recommended for lower barrier to entry price point for long-term buy and hold? It seems that most lower cost areas I'm finding correlate pretty high with section 8 or higher crime stats. Getting started my goal is to have a first property that ideally has less headache potential.
Thanks!
Grant
Grant, welcome to RVA investing! Investing for the long-term hold in SFH is getting harder and harder because financed terms well exceed LTR income. Some are forcing income with STRs, but the crackdown has started and only a matter of time before that could go away.
A few ways to buy and hold if you are needing it to cash flow:
1) 5% down conventional loan on a 2-4 unit. Live in it for at least a year and rent the other units out. These are hard to find in RVA that arent already 70 years old and prone to expensive repairs/rehab
2) Buy with creative financing like subject-to or seller financing. Those are much more likely to be potential cash flow.
3) Research Pad-Split. That forces some high rental income. Proximity to bus lines seems to be important, from what I have gathered.
Hey @Peter W. I certainly wish the young kid house hack option was one that made much sense but currently not so much in the cards. With a wife and 5 month old I think we are a bit pickier about a roommate and the duplex options in Richmond are a bit lean and quite high priced. Not impossible. I have considered the primary route with low down payment. This is the first I've heard of only having to live in the property for 6 months vs 1 year. What institution offered this type of loan or is it still a feasible option to this day?
Hello all,
In my past year of experience networking in Richmond, VA and growing knowledge in REI I'm finding many investors in the area seem to be wholesaling and flipping in low barrier to entry areas (Petersburg, Hopewell, East End, south of the river along Hull St) and also running Air BnB's (yet legalities here seem to be a pain with recent changes).
What areas would be recommended for lower barrier to entry price point for long-term buy and hold? It seems that most lower cost areas I'm finding correlate pretty high with section 8 or higher crime stats. Getting started my goal is to have a first property that ideally has less headache potential.
Thanks!
Grant
Grant, welcome to RVA investing! Investing for the long-term hold in SFH is getting harder and harder because financed terms well exceed LTR income. Some are forcing income with STRs, but the crackdown has started and only a matter of time before that could go away.
A few ways to buy and hold if you are needing it to cash flow:
1) 5% down conventional loan on a 2-4 unit. Live in it for at least a year and rent the other units out. These are hard to find in RVA that arent already 70 years old and prone to expensive repairs/rehab
2) Buy with creative financing like subject-to or seller financing. Those are much more likely to be potential cash flow.
3) Research Pad-Split. That forces some high rental income. Proximity to bus lines seems to be important, from what I have gathered.
Hey John, I haven't heavily considered pad split. I have only looked some at mid term rentals. What kind of clientel do you know of that utilizes pad split? And I am thinking seller financing might be the best route once I get a solid foundation of this strategy.
Lastly, what thoughts do you have on RVA and surrounding areas that are lower cost barrier to entry but less prone to high crime? I'm not convinced I want to be in the lowest cost area or manage section 8 properties at the moment.
Very little is intrinsic nowadays, and I am not sure it'll ever be what it was. It's kind of a different game now in REI.
Cash or eat OTM for a few years, is the best bet. The barrier to entry for an intrinsic property is someone willing to sell that. Think about that-- with cash tight, someone is willing to sell it. It's usually cause the headache of it isn't worth it(low tenant quality, crime, deferred maint, etc.).
Subject to is trash. Seller financing is hard, and impractical, if the seller does not own the house outright.
I know nothing about Richmond, but I have confidence its lower class areas are 1) going to be a lot of work 2) not as profitable as projected.
House hacking is an option. Alternative rent options other than LTR (rent by room, STR, MTR) is an option, alternate finance options (owner finance, subject to, lease to own, etc) is an option.
Value adds are an option. Do not limit options to rehabs; everyone can see a rehab, no creativity involved. Look at lot splits, co-ops (TIC), converting non-living space (workshops, out buildings, etc) to ADU, mixed use (retail/residential), converting non residential to residential (I know of someone that recently converted a church to residential but office space is currently battered (cheap)).
Avoid the lower class areas and look for other options.
Good luck
Hey @Peter W. I certainly wish the young kid house hack option was one that made much sense but currently not so much in the cards. With a wife and 5 month old I think we are a bit pickier about a roommate and the duplex options in Richmond are a bit lean and quite high priced. Not impossible. I have considered the primary route with low down payment. This is the first I've heard of only having to live in the property for 6 months vs 1 year. What institution offered this type of loan or is it still a feasible option to this day?
It’s very likely I misremember. I had a conventional 20% down loan. That’s what I remember the lawyer saying.
I know nothing about Richmond, but I have confidence its lower class areas are 1) going to be a lot of work 2) not as profitable as projected.
House hacking is an option. Alternative rent options other than LTR (rent by room, STR, MTR) is an option, alternate finance options (owner finance, subject to, lease to own, etc) is an option.
Value adds are an option. Do not limit options to rehabs; everyone can see a rehab, no creativity involved. Look at lot splits, co-ops (TIC), converting non-living space (workshops, out buildings, etc) to ADU, mixed use (retail/residential), converting non residential to residential (I know of someone that recently converted a church to residential but office space is currently battered (cheap)).
Avoid the lower class areas and look for other options.
Good luck
Appreciated insight here Dan. Section 8 here in Richmond has some pretty appealing rent and cash flow but I do think avoiding some of the challenges is worthwhile for the time being and my level of risk tolerance. This validates my interest in wanting to learn more creative financing.
Hi @Grant Smith, great question!
I think it depends a little on what you qualify as low barrier to entry price. Now, till the end of the year I think you'll see more opportunities because of less competition. I think if you can find a rental in a good area that needs some work (preferably cosmetic), you can get in at a lower price. People in our area definitely pay a premium for move-in ready.
I'm happy to suggest some areas based on your price point. Also, I'm seeing some great returns on MTR in some areas as well. If you are thinking about that as an option. Feel free to message me!
In my opinion, areas around RVA with low crime and affordable prices include:
Montrose, Sandston, Lakeside, East Highland Park, and Chesterfield County
All areas are ideal for a tenant who might work downtown but need a little more space than an apartment would provide. I would not be surprised if they all see long-term appreciation as well.
Let me know if there's anything I can help you find!