Looking for advices on my first buy and hold deal.

25 Replies

Hey guys,
New investor here from Vermont, I am interested in buy and hold. I am looking at a multifamily to hold and rent out. The place I'm looking at $166,000 and recently completely rehabbed. All three of the units are rented out for a total of $2700 a month coming in. There is two 1bed/1baths and a two bedroom one bath. All the units are under lease until atleast June next year. I have about 20,000 to put down as a down payment so the monthly mortgage included taxes, pmi, and principal will be right around 1000. Should I work on pulling the trigger on this place?
Thank!

@Shane Brown

Those numbers looks great. 
For a maximum all costs in of 20000 to purchase that multifamily, if you make $1700, that is good return on your cash and a good buy in my opinion (from a number standpoint)
Now you have to be careful, the numbers are one thing, but there are other things that you need to consider such as location, the type of tenants, vacancies, etc
Will you have a high turnover of tenants? Will you have a lot of wear and  tears, vacancies, will you have to be very hands-one managing the property, etc.

@Patricependa
I have taken all of that into account, I would manage and fix the property myself sense I have a background in GC work. One thing that does worry me is that the area in the house is in a smaller town but right on Main Street and close to the city part of this town. The desire is not quite as high as where I live so rent on the two one bedrooms might be a little inflated right now but after these leases are up if I had to drop the rent on the one bedrooms to fill them with good tenants I should still cashflow off from it.
Thanks!

@Shane Brown

Considering that you have relevant skills and it seems you know your market, just do it! Time for action! :-)

@Shane Brown

I agree that the numbers that you provided sound very good.  However, just make sure that you are adding up any additional expenses that the tenants will not pay directly, such as snow removal, lawn care, heat, electric, water, sewer, etc., which can skew the numbers for a multifamily as compared to a single family home (where the tenant usually is responsible for all or most of such expenses).  

If you have not done so already, I would use the BiggerPockets Calculator to analyze the deal.  

Also, you should ensure that you are able to get financing with only a $20,000 down payment, as many lenders require 20%-25% down.  

You likely analysed/thought of these things previously, but thought I would bring them up just in case.  I am from PA, but travel to VT a few times a year and am always on the look out for opportunities when I am up there.

Hi Shane - 

I have looked at this property and actually really like it. If I were you, I would be sure to get several years of previous tax filings and proof of long term leases/vacancy rates for a few years. 

I wanted to buy it as and FHA owner occupied a couple months back, they actually originally refused because they had found a potential tenant for the third apartment (even though they were supposedly all filled) and said I needed to make an offer within 48hrs (I was out of state for the weekend, this was at about 11am on a Saturday, and they required "a very strong offer" by 5pm Monday) I didn't go for it because I wasn't into the pressure. A week later they called my realtor because one of the "long term leases" was ending early and it was now okay to use as an owner occupy if I wanted... I didn't bite then either. I've since inquired about the property as recently as last week to see about owner occupying (from a private email with no association to previous inquiries) just to see what they said - they said absolutely, would I prefer the 2 bedroom downstairs or a one bedroom apartment u pstairs?!

I'm not trying to scare you away from it, and maybe I'm just a little chapped about them not initially giving me more than 2 days to consider an offer because frankly, I would have bought it... but the whole situation just seemed off to me. Make sure the pro forma numbers actually work with data from the seller, if they do, I'd go for it. Good luck!

@Megan Phillips  

One of my good friends actually live in the two bedroom apartment with his girlfriend at this property. I was talking to his girlfriend today about it and she said that they can smell pot in the closet of his daughters room from the upstairs neighbors, also that the girl cursed at his 5 year old daughter. So I'm kind of iffy on this property if the tenants are going to be an issue right off, but finding a decent priced multifamily in northern Vermont in a decent neightborhood seems to be pretty tough so far.

@Shane Brown 

Oh, I know, I'm right there with ya. I've been looking for 3-4 months. Made a full price offer on a duplex in St. A a couple weeks back just to have the seller's agent inform us that when we did our walk through,  they had already accepted a verbal offer,  so it wasn't even available! But that's just a bad realtor in my opinion, could of let us know and would've gotten multiple bidders and potentially higher price,  instead it was just a big waste of time and a big let down. 

Inventory is just low right now, I don't want to buy just to buy. 

That being said - you can always get rid of bad tenants. I've looked at A LOT of properties in Franklin county, that is hands down the nicest and best  maintained that I've seen. I Just decided commuting from that area is too much, but honestly, it's still on my radar as a possibility. 

If the vacancies aren't bad (supported by data) it could be worth going for. Especially if you've got friends there that can keep an eye on it for you! 

@Megan Phillips

I had the same problem I got pre approved through people's trust was looking at a duplex here in st.albans for a good price that was on great condition but ended up being under contract right when I was trying to see it.

Yeah that's what I'm currently trying to get the info on but the realtor listed on the house isn't being to helpful with obtaining the information.

Thanks for all the tips!

hey guys, great commo here, 

I am also new to investing and i have not yet purchased my first yet but always looking and...

So, I am looking at  similar situation and will post my own chat later, but there is an opportunity for 2-quad plexes.  All are 1BR/1BA and 6 are reno and occupied at $475, the other two are still being reno'd. asking $240K. So tot rent $3800. Depending on what I loan for after offers ($200-215K) fingers crossed>  still looking at close to $1700-2000 net mo. All includes PM, and tenant pays elec/water. claims of 14% Pro Forma at 100% occupancy, conservative 25% down with $150-162K mort.

BUT, my question here is how do you guys feel about 1BR/1BA? you always hear 3/1 or 3/2. and also, what about THIS being a first purchase? 

Is it as long as the NUMBERS work and all other factors are good----GO?

thanks

Rob

Wow, potentially going for 8 units at once for a first purchase, that's pretty BA. I think it's dependent on your market, and maybe the size of the apts? It might be better if there was a mix of apt sizes, but as long as vacancies aren't an issue, then there's no problem in my opinion.

Is $475 a month market rent for the area? Seems low especially considering it was just renovated... perhaps it's just because VT is very expensive -  I would try to bring rent up for sure. 

If you are going to go for it with 8 units, I would make sure to really nail down a management plan (tenant screening!!) and have systems that will  be consistently followed and maintained, because with rents that low, you may not have the "best" tenants (unless that really is market rent - either way you still need a solid plan!). I'm reading "The Book on Managing Rental Properties" by Brandon Turner - lots of information! 

@Shane Brown   Yeah - you most likely won't be given any income proof without an accepted offer. I've gotten the idea that the seller isn't very motivated -  in my original post I forgot the mention the most frustrating part of the 48hr offer time table - we had already scheduled my second visit to the property, essentially was just going to do another walk through to look at things a little closer, just to make sure I really wanted it. They would not wait until the showing before requiring that I put in a "very strong" offer. They would've had to wait an extra 3 days. 3 DAYS. Would've sold it. I'm not saying being unmotivated to sell is good or bad, it just kind of is what it is.

Perhaps the owner simply knows that they have a great property and they are willing to wait for the right buyer while cashing in nearly 3k every month (I really think this is the case), or perhaps that will change after it sits on the market for 6+ months.

You can always put contingencies on an offer to get out of it after the inspection - why not do a little digging and at least see what the numbers really say? I would be interested to see what they were before it was renovated, just out of curiosity.

@Megan Phillips  

Yeah I will have not had any contact with the owners yet, just the realtor so far but she doesn't seem to be to motivated to sell. I'll have to look at the place and see if I can dig up the past heating cost and rental vacancies.

@Robert B.  

I do not know the market down there but anytime you can clear that much after everything is accounted for it seems like a good idea, as long as the area it is located in is not an area that will be hard to fill all 8 units. 

Best of luck!

Hey Vermont peeps! Good to see people on BP from the green mountain state 😃

@Shane Brown Was reminded about this property when I saw it on CL -- are you still considering it?

@Tom S. @Megan Phillips I looked at the property for a bit longer tried to get more info from the realtor who kind of made it a pain and gave up on that property partly because I’m worried that area might be a little harder to rent in. Currently I’m looking at a place that is a duplex for  130,000 both units are 1b/1bath so I’m going to run the numbers and see how it looks!

@Shane Brown

Too bad about the Enosburg property - it seems nice, but I pretty much came to the same conclusion for the time being... just too rural. I looked at the duplex at 266 Lake Street also, It's 215k, FSBO, not as flexible as I'd like on price, so I'm not going give another offer for now after my initial verbal offer was below what they wanted. I know they are doing an open house on Sunday the 10th, if it's still on the market after that, I'll probably offer again.

A friend of mine is considering it not necessarily for sole investing, but living there and just using the upstairs as a mortgage supplement. It's the nicest property I've seen in St. Albans by far. I'm checking out the duplex you're talking about tomorrow... I'm hoping it's not a complete dump, haha. 

I went to grade school with a @Shane Brown - are you him? j/k The purchase price to monthly rent ratio passes my napkin test but you're missing a few very important expenses to analyze the deal properly. 

To name a few: utilities, Cap Ex, Vacancy, Insurance, Lawn Care/Maintenance. Happy to help analyze your deal if you have those #s. 

@Shane Brown   @Megan Phillips Thanks for the update.  One nice advantage of the Champlain Valley in VT is that generally you have natural gas there for heat.  Much less for maintenance and I would definitely recommend that heating source for your rental if you can.  In fact I believe VT Gas offers rebates if you switch over.

VT just passed a law requiring inspection and replacement of oil tanks.  Almost of my properties heat by oil and the estimates are coming in about $2,000 each for replacement.  Urrgghh.  

@Megan Phillips yeah the one on lake street is really nice, just certain parts of lake street can be tougher crowd but that one seems to be a nice enough looking place that you wouldn’t have to worry about that, not sure how well you know the st.albans area and what parts are rough and what parts you don’t have to worry about. 

@Jay Helms are you talking about the numbers for the 130k house or the original house I posted about?

@Tom S. I agree with that champlain valley area just seems so expensive to get into for the first time buying/renting. St.albans is general pretty good about natural gas is the house isn’t 200 years old lol. That’s one thing I do try and look for though. Have you had and experience switching to natural gas? If so how much did that switch run if you don’t mind me asking?

@Shane Brown   I haven't switched to natural gas before, but my understanding is that they offer rebates through VT Gas and/or through Efficiency Vermont.  I owned in Burlington before and the places already had natural gas and the tenants always told me it was much cheaper than oil.  Plus a little cheaper to service it each year (I pay for that).

My personal experience is that oil boilers have many more parts and codes that are expensive to maintain. I've also had students that would leave for Christmas holiday and forget to fill the tank, resulting in expensive freezing damage.  Even though they're ultimately responsive for that, it's still a pain to deal with!

@Tom S.

For rebates to switch to gas, is that solely for switching from fuel to gas or includes electric to gas also? I would assume Efficiency VT would be the place to get more info. about all of that?

@Shane Brown

I looked at that 130k duplex last week and had an offer accepted on it. Inspection is tomorrow, we'll see how that goes. 

I don't remember if you stated if you're planning to solely buy for investment or owner occupy? Have you been in the property on South Main Street for 215k, I had gone back and forth on it for a while before this duplex came up. I wasn't sure if I actually liked it, or liked it because there isn't a lot available. 

If you haven't looked, I would. I know they would sell for under 200k because they countered me at 199k a couple months back. I offered 180k. It's triplex, two units are decent can get by with some paint, maybe carpet. One is pretty bad, but I was thinking about living in the worst one and renting the other two, and working on it through the first year that FHA requires for occupancy. They have to be wanting to sell it pretty badly by now.

@Megan Phillips   Yes, check the Efficiency VT site and I believe it's from electric as well.  I think as long as you switch to a system that's 95% efficient (regardless of where it came from, could even be from an older less efficient gas system), then the rebate applies. 

I'm planning for summer 2018 to make some changes, so personally I'll check next month in 2018 to see the guidelines.  I recall they changed slightly each year.

Good luck on your duplex and keep us updated!

- Tom

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