New Buy and Hold Investor soon to be in MS

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New Buy and Hold Investor soon to be in MS

Zachary Lowe
Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes

Hello BP,

As modus operandi with my Facebook account, I have been stalking BP for a few weeks and decided to introduce myself and stop being the resident creeper, lol.

In a few months I will be moving to Meridian, MS from Virginia. I am active duty military and have new orders to the area. I have decided that the buy and hold strategy is more to my liking in the real estate world. The game plan is this: Buy a duplex/triplex using an FHA loan and living in it until I move again in three years time. Sounds so simple.... The duplex has yet to be found, I have an agent friend scouting the area for me already though. However, I have located a potential second investment property I could purchase *after finding my primary residence for me and my family*

Deal looks like this:

6 2br/ 1.5bath Unit w/ Brick Veneer Two-Story

Asking price: 171,000

Income: 2300/month

NOI:13,800

CAP: 8%

Remarks: Roof 6 yrs old, all units occupied. I would offer 140,000, building on market for 320+ days. Rent could be increased to 2550 IMO with a little elbow grease.

My worries are that this city is pretty much entirely a warzone. Crime rate is one of the highest in the nation, 6% for safety. Most if not all neighborhoods appear to be D+. I've even seen "move-in-ready" houses selling for less than 15k!!

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
12y

Welcome to BP and getting out of Lurker mode

If the entire city is a war zone why are you considering this deal? I presume this is in a nicer area of the city. The question is not whether the city is down right now but what direction is it headed.

Is population growing or shrinking? Are jobs coming or going? Does the area rely on the military and will that continue. Jobs drive population and population drives values. Good luck - Ned

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    12y

    Welcome to BP and getting out of Lurker mode

    If the entire city is a war zone why are you considering this deal? I presume this is in a nicer area of the city. The question is not whether the city is down right now but what direction is it headed.

    Is population growing or shrinking? Are jobs coming or going? Does the area rely on the military and will that continue. Jobs drive population and population drives values. Good luck - Ned

    1Reply
  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y

    Considering the deal because it's where I 'll be.

    The city is stagnant, no worse, no better in the foreseeable future. Hard to go much further down though ;-) This building is near the hospital with several businesses across the street, not the worst area, and I figure even if it's in a bad location, if the numbers work, why not pull the trigger? Isn't a 9 CAP in a warzone as good as a 9 CAP in Hollywood?

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  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y

    I have read several articles evaluating the pros and cons of buying lower end properties. In this case, I don't see it as an appreciation market. However, the numbers do meet the standards, it becomes an awesome deal to me with seller financing, just a thought. Besides, under my way of doing business with this unit I hope to change the whole neighborhood for the better. I'm making money, these people who can only afford to spend 450 a month rent still deserve a decent neighborhood to live in. They're helping me and I help back! At least this is all in theory ;-)

    This isn't a post about the potential buying this property, more of an explanation of how I want to use real estate investing to help myself and those around me.

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  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    12y

    Isnt Meridian MS a military town?

    According to the 2000 Census, of the 17,890 housing units inside city limits, 15,966 were occupied, 10,033 of them by families. 31.1% of occupied households had children under the age of 18, 36.2% were married couples living together, 23.3% consisted of a female householder with no husband present, and 37.2% were non-families. 33.2% of all households were made up of individuals, and 14.0% had someone living alone who was 65 years of age or older. The average household size was 2.39 and the average family size was 3.06.[59] The average household size has steadily decreased since 1970 when it was 3.04. On the other hand, Meridian's median age has increased from 30.4 in 1970 to 34.6 in 2000.[58]

    The median income for a household in the city was $25,085, and the median income for a family was $31,062. Males had a median income of $29,404 versus $19,702 for females. The per capita income for the city was $15,255. About 24.6% of families and 28.6% of the population were below the poverty line, including 40.8% of those under age 18 and 22.0% of those age 65 or over.[59]

    http://en.wikipedia.org/wiki/Meridian,_Mississippi

    1Reply
  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y
    Originally posted by @Brian Gibbons:
    Isnt Meridian MS a military town?

    Thanks for being inquisitive! To answer your question: Yes and no. Military population foot print is small, income from Military big. The base is located in Lauderdale County north of the city. This is the 'burbs with the nice properties. The "City" is low income neighborhoods mostly. The economy is dependent upon the military, but the city's housing market is not.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    12y

    No Your risk is higher in a war zone. Your return should be higher to compensate for the risk.

    Let me give you an example. In a war zone if you property goes vacant it may take longer to rent because it is a less desirable area. That adds to your cost. While it is vacant it is at risk of a break in and appliances, copper, furnace etc being stolen. A really nice area will likely rent more quickly and less risk of break ins when vacant.

    Whose standards? Not mine! Don't buy becuase it meets someone else' standard for being a good deal. Buy because it meet YOUR standards for being a good deal. Each investor has different risk tolerance, resources (knowledge, time, money) and goals. I am not there, and I am not you, but I would not be concerned about the war zones nearby. I would expect a better return. Good luck - Ned

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  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y
    Buy because it meet YOUR standards for being a good deal. Each investor has different risk tolerance, resources (knowledge, time, money) and goals. I am not there, and I am not you, but I would not be concerned about the war zones nearby. I would expect a better return. Good luck - Ned

    I understand what you're saying. I was trying to apply the concepts I've learned here to any property to determine if it's worthwhile. Can I ask why you say you would not be concerned about warzones?
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  • David Jayne
    Real Estate Investor · Stuttgart, Germany · Member since 2013 · 40 posts · 5 votes
    12y

    Welcome to BP! I'm active duty as well. I have a few properties in lower income neighborhoods in Kansas City (wouldn't call them war zone, but you can see it from their backyards).

    I think there is a sweet spot between the war zone and a middle class neighborhood that makes more sense, especially for your first investment property. If this was a location you knew in and out, already had a property or two, and planned to stay in the area for a while, I think it would make more sense.

    Personally, I would go for the duplex/triplex/quad, learn the area, then be ready to pounce on an even better opportunity. You can probably move after a year (might have to coax the family a little) and keep your first property as an investment. Less risk, and very solid returns if you buy right.

    1Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    12y
    Originally posted by @Zachary Lowe:

    I think @David Jayne answered it well. I do not want to be in war zones but I do not mind being near them. Sometimes in Baltimore you can't help it, because almost no matter where you are in baltimore, war zones are not far away.

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  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    12y

    Hey @Zachary Lowe welcome to BP! Great that you took the leap and join the site. If you haven't checked out the The BiggerPockets Podcast yet, I highly recommend it!

    Seeya around!

    Podcast Guest on Show #92
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  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y
    Originally posted by @David Jayne:
    I think there is a sweet spot between the war zone and a middle class neighborhood that makes more sense, especially for your first investment property.

    My inclination exactly, which is why I was leaning closer to the warzones for my first property anyway. I truly appreciate the "backyard" standard, it seems to be a useful qualifying metric. Thanks for that bit of encouragement!


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  • Zachary Lowe
    OP
    Investor · Meridian, MS · Member since 2014 · 28 posts · 3 votes
    12y
    Originally posted by @Ned Carey:
    Sometimes in Baltimore you can't help it, because almost no matter where you are in baltimore, war zones are not far away.

    I certainly appreciate your experience over the millions of theories I could read. Especially after listening to Podcast 54 today, this seems a route that feels solidly comfortable to me.
    0Reply
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