Fayetteville, NC · Member since 2016 · 6 posts · 1 vote
Hello Bigger Pockets!
My name is Shaquille Turner. I am a recently married Army Lieutenant and will be moving to Fayetteville, North Carolina in January. I am here on BiggerPockets guided by a recommendation from The Book on Investing in Real Estate with No (and low) Money Down, by Brandon Turner.
I have not yet invested in real estate, but I want to purchase my first property within the next year. My plan is to use the VA Loan to purchase an owner occupied, multi-family investment property. I'd appreciate advice from anyone who has already taken that path (or a path similar to it): is there anything I should be looking out for? Where is a good place to search for housing in the Fayetteville area? Are there any property managers that you'd recommend? Is it wise to get a property manager for an owner occupied investment property, or should I do it on my own?
Any advice would be much appreciated!
I look forward to the feedback. Glad I found such an awesome forum.
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
9y
You should be able to buy equity pretty easily if you get a REO. Most of our neighborhoods are old and well established (well, one's with foreclosures are mostly). So just want to make sure you buy and rehab low enough to match the comps. I think you'll find it hard pressed to oversell on comps even with a nice rehab. Our market is SATURATED with flippers and many are doing really nice rehabs, and still selling at neighborhood market comp prices. So again, you can buy equity, but I think you'll find it hard to go over well established comps.
You want to make sure you have a solid plan for what you'll do with the equity though. a 30k spread on a 120k house SOUNDS good, but a 80% cash out eats all that up. Just match your purchase with your leverage plan. If you're looking to capitalize heavily on equity, just make sure there is great spread to do a cash-out. You won't find any appreciation in Fayetteville so if you don't buy equity, you likely won't have any.
Also, there are a ton of fayetteville people on this board, I'm sure some of them disagree with me, so take that into consideration.
Quick Fact: For almost all Agency loans, the maximum loan limit goes up with unit count. That means you can borrow more for a triplex than for a single family residence. For VA loans, alas loan limits do not scale up like that without a down payment. The VA also will not allow the use of future rental income in qualifying you, unless you have landlord experience. This can make using VA to buy a MFR tough.
You can exceed the loan limit, provided you come in with 25% down on the difference. For example if the loan limit is $400k and you want to buy a $504k property, that'll take $26k down.
Fayetteville, NC · Member since 2016 · 6 posts · 1 vote
9y
Thanks for the response Chris!
Your comment pointed me towards a lot of great resources. I believe all the information you gave me above is accurate barring one piece: it is not the FHA loan limit that sets the standard for the VA loan, but the FHFA loan limit (http://www.benefits.va.gov/homeloans/purchaseco_lo...).
One question that I do have, now that I looked at both the FHA and the FHFA one unit loan limits for Fayetteville, NC, is why are the two numbers so far apart? The FHA one family limit being $271,050 and the FHFA one unit limit being $417,000.
Fayetteville, NC · Member since 2016 · 6 posts · 1 vote
9y
Alex,
Can you elaborate a bit more on why small multi family in Fayetteville is brutal? Anything specific I should be in the lookout for?
As always, looking forward to any constructive input!
Can you elaborate a bit more on why small multi family in Fayetteville is brutal? Anything specific I should be in the lookout for?
As always, looking forward to any constructive input!
yeah a lot of people are looking for multi in fayetteville, but for many reasons, there just aren't many around. The ones that are around are old and many are D units, no one is building new ones either.
multifamily sounds good on BP, but in this market, it's unfortunately quite difficult.
Also, multi in this market doesn't command a better price-per-unit cost over SFR. So you aren't really getting the economy of scale advantage that multi usually brings.
Fayetteville, NC · Member since 2016 · 6 posts · 1 vote
9y
Alexander Felice that is really helpful information! I'll do some research and adjust strategy as needed.
How do you feel about the ability to drive up equity in a property through rehab in the Fayetteville area?
Is that something you have experience in? My question is mainly because I want to do an owner occupied investment property to start, and I want to find ways to make money on the first deal.
Thanks for your input!
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
9y
You should be able to buy equity pretty easily if you get a REO. Most of our neighborhoods are old and well established (well, one's with foreclosures are mostly). So just want to make sure you buy and rehab low enough to match the comps. I think you'll find it hard pressed to oversell on comps even with a nice rehab. Our market is SATURATED with flippers and many are doing really nice rehabs, and still selling at neighborhood market comp prices. So again, you can buy equity, but I think you'll find it hard to go over well established comps.
You want to make sure you have a solid plan for what you'll do with the equity though. a 30k spread on a 120k house SOUNDS good, but a 80% cash out eats all that up. Just match your purchase with your leverage plan. If you're looking to capitalize heavily on equity, just make sure there is great spread to do a cash-out. You won't find any appreciation in Fayetteville so if you don't buy equity, you likely won't have any.
Also, there are a ton of fayetteville people on this board, I'm sure some of them disagree with me, so take that into consideration.
Fayetteville, NC · Member since 2016 · 20 posts · 11 votes
9y
Hey @Shaquille Turner! I completely and totally agree with what @Alexander Felice said. While Fayettevillel is a great market for Buy&Hold. As a consumer in our area, you can actually buy cheaper than you can rent. The one benefit that flippers have here in town is that while there is a lot for sale...there is not a lot of choice of stuff that consumers actually want. New Construction aside...which is of very poor quality here...we have a ton of properties available that are class C. The Class A neighborhoods are losing value because of the new construction epidemic. Recommend finding somebody who knows the area well to help you out if you are sure that you want to flip. I'm a local agent myself, so let me know if there is anything else that you need help with!
Rental Property Investor · West End, NC · Member since 2016 · 98 posts · 32 votes
9y
Great points made by Alexander Felice and Philip Suarez. While I have no personal experience with flipping, I would agree that there are quite of few flipped homes in this area. I have seen a few SFHs that I put offers on come back on to the market after being flipped. And like Alexander said, most of them will sit on the market for a while, with a few price drops, before getting an offer. As a landlord myself, I appreciate the surplus of investors coming in and improving the neighborhoods here with flipped homes that would otherwise continue being dilapidated properties.
The only point of Alexander's that I disagree on is that foreclosures come in the new neighborhoods as well as the older ones. My newest SFR was built in 2000. I purchased it as a foreclosure for 70k, and rent it out for $895/month. It required very little rehabing expenses, the most expensive being repainting of the whole interior. A few weeks ago I looked at a foreclosure that was built in 2009, a 3bd/2-3bath SFH. It was listed for 146k, but probably took a higher offer as there were multiple offers on it. Similar homes in that neighborhood are selling for about 30k higher.
I agree with Philip that new construction here is poor quality. This is something I've noticed when looking at homes built after 2000ish. Missing shingles and roofing leaks seems to be a common problem, which is easy to spot simply driving through these neighborhoods. Class A neighborhoods are losing resale value also because of the foreclosure market, not just from new construction. The foreclosure I mentioned above that was built in 2009, I used to rent and live in a home just down the street from it and I know the neighborhood well. I have friends in that neighborhood who have moved and decided to turn their property into a rental instead of listing it for sale. Because if they listed for sale, they would have to drop the price at least 10k to compete with the foreclosures in the surrounding area. And I often wonder if this is one of the contributing factors to the large amount of foreclosures in our area: reluctant long-distance landlords who have a former primary residence as a rental. They fail to maintain the property because they live far away and didn't want to own rental property in the first place, it no longer attracts desirable tenants because of it's rundown state, and the long-distance landlord eventually lets the property go back to the bank so they don't have to worry about it any longer. Just some thoughts of mine!
I also agree with Alexander that small multi family here is few and far between, and mostly only in C and D areas. I think SFH are much easier to get into here, and priced affordably. I have a local friend who has a 9 unit residential building in Colorado Springs and is currently looking at small multi family here in Fayetteville. I'll be seeing him this weekend at a get together and look forward to picking his brain on his experience so far here looking at multi family real estate.