Hey BP! So I just added my introduction of myself on the site for anyone interested to check it out.
I'm trying to build my strategies and criteria for long term rental properties. I live in Goodview, VA which is just outside of Roanoke. We (fiancÃ© and myself) are currently looking in the Lynchburg, VA market however which is only 45 minutes or so from our house.
I got some of the basics down so here is what I have so far:
I would like a 8%-10% return on investment for my initial property. I really just need to get this first deal done so I can stop being so scared to move forward!
After that any future properties I would like to be near the 12% mark.
Currently looking at single family, and multi, though we would love multi if the opportunity arises. Single family must cashflow $200, multi must be $100/door
Single family properties I would like to be able to create instant equity with properties that need some repairs, or something I can take from a 2br 1ba to say a 3br 1ba.
Would like any property near some amenities like walking distance to bus stop and or grocery store, train station, etc.
Willing to invest about 20k total, financing the rest, may be fortunate since only my fiancé is listed on our current home mortgage so hopefully that’ll help us out immensely on rates and everything else!
Hiring management company as well for all properties.
I would love any feedback as to any of the criteria I have set and more importantly, what are some things I am missing? I know I’m missing a bunch so I’m trying to get everything organized as best as I can. I’m a freak with having things organized and easily accessible to refer to. Any insight on areas of Lynchburg to avoid, where people want to be, and anything else to expect with the are would be immensfully helpful.
Really any and all feedback would be great at this point. I know I’m just a beginner here so I clearly don’t have it all together. Really appreciate this site and everyone behind it!
Welcome to BP @Austin Rath and good on you for looking into REI! I would say it seems like you have a pretty good idea of what you want which is great. Now narrow it down even more by driving neighborhoods and look at what specific areas you want to buy in. Driving for dollars is really one of the best things you can do. Off market properties are always better than getting them on the MLS so try and find distressed sellers in your area! You are a soon to be husband and wife team which you should use to your advantage with owners/sellers. This will make you seem more likeable and human. you aren't some greedy real estate guy trying to steal their home. Instead you are a charming young couple trying to scrape a living in real estate by helping people. It may seem corny but trust me perception is everything and can make or break a deal. The other thing I can say is I would personally self manage. I think the information and experience you get from doing this is invaluable. You always have BP to look to or ask for information if you don't know something so never be afraid to ask! Good luck!
My experienced advice would be for you to begin by self managing if you are serious about investing in real estate. You will have a difficult time managing a PM without first hand experience of your own. I believe self managing is essential to long term success and growth.
If you intend to own a business you should make the effort to learn it from the ground up.
Step one before buying is to learn your state landlord tenant regulations. Keep a copy with you at all times. Knowing th eregulations is not optional regardless of whether you have a PM or not..
Thank you Michael and Thomas for the replies. Good to know I am on the right path and will certainly take all of your advice in and work on these next steps as well like driving the areas and looking deeper in to self management. Self manageing definitely makes me a little nervous with getting a strong lease structured and screening, etc. However I do agree that it would be important to know that end of the business as well, so it is definitely on my mind And something I think I may need to take further in to consideration.
Hi Austin - you've got a strong criteria thus far and I'd have to agree with @Michael Guzik and
@Thomas S. in that self-managing is probably the best way to go when you're starting out. You'll save yourself more cash flow that way. Once you grow, then consider using a PM and by then you'll have a great filter by which to vet them. Work with a real-estate attorney to make sure you've got yourself covered with your leases and liability. When it comes to tenants, check out BP's ultimate guide to screening tenants. There's a plethora of info here on BP and you can no doubt self manage successfully :)
In terms of numbers, use the BP calculators to evaluate your deals; most newbies don't factor in all the expenses associated with owning a rental (capex, repairs, insurance, vacancy, etc). Prices are historically high, but I think you should be able to get at least 1-1.5% or more (rent to price) deals in Lynchburg. I'd add a rent to price ratio to your criteria as well, like a 1.25% minimum
As far as Lynchburg in particular, I'm not too much help, but I've talked to a few investors out there. What I've found is that the neighborhoods closer to the universities (e.g. Liberty) tend to be higher quality areas, newer construction, but higher prices, so you'll likely give up some cashflow there in exchange for higher quality tenants potentially. I'd set up up some time with a realtor there (filter him/her first and find one who has worked with investors or invests themselves) and drive the neighborhoods.
Keep us posted - looking forward to a future success story post from you!
Awesome feedback @Peter Talbot , Thank you so much I especially like the recommendation of setting the 1.25 percent purchase to rent ratio. Also being closer to the universities makes lots of sense, I can tell just being more familiar with the direct area around liberty that it is a pretty nice area compared to some of the outskirts. Will certainly keep everyone update!
Hey @Jacob Mashburn thanks for the reply! I agree that would be a great idea to be able to save posts in to different folders. Nice to have someone local responding as well!
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