I have $200,000k - How to Invest?

Question

Hello all! I recently relocated from NY to VA and sold my home in NY. Had it for 5 years and made $200,000 profit off a SFH. I am interested in small multi-family (2-4). Want to use the VA loan again as I used it once for my home in NY that I just sold. What is best course of action here also where should I look for these multi-families? Thank you - Eric

Helen Lowery · Answer

Congratulations on your profitable sale!  That's awesome!  I agree with Twana Rasoul, you will want to find a real estate agent / investor to help you locate the right multi-family.

I recommend looking for a mulitfamily that meets or beats the 1% percent rule for cash-flow.  When buying, remember to keep the end game in mind.  Will this be a buy and hold?... or do you plan on selling it down the line?  Knowing that investors usually buy multifamilies (and not homeowners) means you will be selling at a price based off of cashflow or the cap rate and not as reliant on comps.

Knowing these numbers for each deal will help you to determine if you are buying right.  They will also help you understand what kind of rehab budget you might have for a value add property so that you don't over spend.

I also recommend learning about commercial lenders. In my region Lindy Pond with Finance of America has some fantastic programs for investors for both buy and holds and for flipping.   With that amount of capital, you are off to the races for starting a nice flipping businesses or growing your buy and hold portfolio! Leverage that capital over a number of projects.  Use the experience and connections you gain when purchasing your first multi-family to get started.

I am located in southeastern VA (Williamsburg, Hampton, Norfolk/Suffolk/Portsmouth) is my region... so I'm a ways away from you.  However, please do reach out if you want to chat more about any of this.

Tim Jacob · Answer

The 2% rule properties are harsh in Baltimore as well as most places.  There is some good inventory depending on your goals though.  I have a small multin Charles Village I got on va.  I sunk about 160k into it.  It cash flows about 2700/ month with expenses included into that.  Tenant base is college students to Hopkins, MICA, Towson, rtc, amd some young professionals.  I am a pm so I dont count that.  If I did it would be around 2000 with all the leasing from turnover.  Still thats 15% coc.

My part is decent for 3 and 4 unit buildings my part of the city is good. Northeast can be good.  Hampden and Remington have some good deals.  Let me know if you have questions.

Twana Rasoul · Answer

Congrats! looks like you did quite well.  Use your VA loan to purchase a 4 unit to move into with 0% down and get sellers to pay for your closing costs.  Save the $200k and figure out what you want to do with it after your make your purchase.

Best of luck! :)

Stephen Kehoe · Answer

I'm glad to see you utilizing the VA loan. It is a great product for those who can use it. Your nearest large market for multifamily properties is Baltimore. There are normally a couple available in Winchester VA & Frederick too. The 1% and 2% rule states that rent should equal 1 or 2 % of the purchase price. Be careful however as these rules are often only met in the war zones.

Chinmay J. · Answer

Snobs up here don't live in MF houses.. LOL.. Just kidding.. You will have to go down south towards Richmond, VA Beach... South Central VA basically to find any good inventory of MF houses

Eric DeVito · Answer

@David Fernandez hello sir. Yes well looking to use VA loan to house back 2-4 unit property. I realized after some research not much in NOVA area. Where should I look? Baltimore I was thinking? Any other options? Also how do you calculate the 1-2% rule?

David Fernandez · Answer

Hi @Eric DeVito, the inventory of MF properties in Northern VA is VERY limited. The few that come to market usually sell around $500k/unit. They will not meet the 1 or 2% rule. Generally, in this market, the rent/purchase price ratio is more like 0.5-0.6%.

What are your investing goals? Are you open to house-hack? There are strategies in this market that will help you buy properties and get you up to the 1% rule, rarely more than that though.

I am a local investor as well as an agent. I invest in some areas outside of NOVA that meet the 1.5%  (sometimes more), but they involved more risk, tenants that require more work and that don't take as much care of the properties, and distressed properties that need to be renovated after purchase. Also, appreciation in those areas tends to be less than in NOVA, where we have a strong (secure and high-paying jobs) workforce, a shortage of affordable housing (or housing in general, inventory is very low), and a constant influx of people coming to the area that need a place to live.

Eric DeVito · Answer

@Helen Lowery thank you for the tips! So is their or a guide or something in regards to how I can find if a property will cash flow or meet the “1% or 2%” rule?

Twana Rasoul · Answer

@Eric DeVito I don’t know your area. I’m sure if you match up with a investor/agent they can give you some guidance but definitely try to make the most of VA loan before spending any of your own $

Eric DeVito · Answer

@Twana Rasoul Thank you! I was thinking that but hard to find 4plex near me. Any recommendations where to look? I’m in northern Virginia?

I have $200,000k - How to Invest?

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