Two College Seniors Navigating First Investment

11 Replies

Hi Everyone!

Before we introduce ourselves, we’d like to thank the BiggerPockets community. You all have been invaluable resources for us as we’ve begun the process of investing in our first property and we hope to connect with some of you as we embark on this exciting journey.

Our names are Reed and Collin and we are seniors at Bowdoin College. We initially had the idea to purchase a four or five bedroom house near campus (Brunswick, Maine) that we could rent to students. This struck us as a prudent first investment because we knew the area well, had a vast network of future tenants, and the model had proven to be highly profitable for landlords in the area -- including our own. However, as we began the process of sourcing potential properties and organizing financing, we ran into two major roadblocks, the likes of which are common across many geographies in today’s market: 1) bargains were scarce and 2) properties were selling fast. Recent listings are above market averages and only stay on the market for a few days, if that. For example, a friend of ours in the area who purchased a home pre-covid has already received multiple offers for his house, all $50,000 more than what he bought for just months earlier. This has us worried that we will likely overpay if we choose to invest in a single-family home in the market we have been targeting.

Where we stand now

Due to these obstacles, Collin and I have pivoted to two alternates: 1) buy a multifamily property in Brunswick, ME, or 2) house hack in New York City, where we are both starting full-time jobs in finance in July. From what we have learned so far, multi-family homes don’t appreciate as quickly as single-family homes. This leads us to assume that multi-families in Brunswick are less likely to be selling at the premiums we are seeing in single-families. As for New York, we will both be moving there in July to begin full-time jobs. Property values there have fallen dramatically, as opposed to most markets, where prices are skyrocketing. Furthermore, in purchasing an owner-occupied property, we would likely only put around 5% down as opposed to the 20%+ needed for an investment property. Our goal would be to live in the property for a few years and then rent it out. We believe this could give us an early leg-up in the real estate investing game while capitalizing on relatively favorable market conditions in NYC.

We would greatly appreciate any advice from, or opportunities to connect with, members of the BiggerPockets community who jumped into the real estate investing game in college, or shortly thereafter. Do you think it makes sense to purchase an owner-occupied property immediately upon graduation, or should we go the traditional route and rent for the first couple years of our careers? We greatly appreciate all of your time and would welcome the opportunity to connect with any members of the BiggerPockets community.

Thank you,

Reed and Collin

@Reed Baker , congratulations on surviving Bowdoin and being thoughtful about real estate investing. I'm a real estate investor and accountant in Brunswick and think it's a good market. Here's a couple thoughts:

1) The large single family homes near the college get bought up quickly (sometimes by the college). You're right in your assessment.

2)  I've been watching multifamilies in town for a couple of years and most of them seem priced pretty high. Can't even hit 1% of the purchase price on rents. For this reason, we're focused on Lisbon and Lisbon Falls, neither of which are great if you're targeting Bowdoin students. Even if you did find a good deal on a multifamily, you'd have to give up 10% of your rents to a property manager as you'll soon be living in NY.

3) Buying a quad as your first investment might be a good way to go. 30 year terms with a low down payment. You'll need to check with a loan officer, however, as to whether that can be done as a partnership. I doubt it.

4) Have you considered individually buying properties? You could each buy a 2-4 unit multi-family in NY, and rent out the other units. If you each buy and live in a quad, you would each have the other three units covering the mortgage and other expenses. You could use the cash flow towards improvements or a down payment on the next property.

Hope this helps,

@Bob Langworthy, thank you for this helpful response! Collin and I will certainly check out Lisbon and Lisbon Falls. We have mostly been using Zillow and Coldwell Banker to find properties but realize that there are more creative ways to source deals. Is there a best strategy for sourcing investments in Maine that you've used?

 @Reed Baker try loopnet.com if you are looking into multifamily. As finance/business minded people, you may find some interesting commercial real estate opportunities on loopnet. Nothing says you can't buy a mixed use property with commercial first floor and rentals above that. It's probably not going to allow the owner occupied super low down payment option, but you can make it happen with creative financing.

@Reed Baker Are you guys on campus now? I am in Auburn and have been active at Bates in the past, I know that may mean we are now enemies ;). Love to hear you guys are thinking about this now and setting yourselves up. I think what @Bob Langworthy said above about buying individually could be wise... Lisbon and Lisbon falls is a very hot market. People like both of those towns due to closeness to coast, and Portland, pretty good schools, and prices aren't where the Durham or Freeport prices are. 


Even in this market there are deals to be found, just have to dig harder and beat the bushes more. If you are in the Auburn area, I'll treat ya to a drink sometime. 


 

@Reed Baker I found my office building in downtown Brunswick just driving buy and happened to see the sign. The residential properties in Lisbon Falls we found through the MLS. We check daily. I get a FlexMLS email from a broker that I work with. That doesn't show listings any earlier than Realtor.com, but it does provide more information. For multifamily properties, for example, it will have the current rents for each of the units, lease status, etc.

Hi Reed and Collin, Congratulations on your senior year at Bowdoin! My family has spent a lot of time at Bowdoin because my husband is alumnus, Class of '94. He was still playing in the basketball alumni game until the coronavirus. We use to own a co op apartment in NYC before moving back to Maine. Just over the few years that we owned, we had enough equity to be able to buy a much larger home in Maine. 

Your observations of the current Maine and NYC real estate markets are on point!

Just something to think about....with the significant decrease in values in NYC, I wonder if you could buy low, maybe even renovate while you live there and then when values go up again do a cash-out refinance to purchase an investment property down the line in Maine. And if you're lucky you'll hit the market right when it's more of a buyer's market here.

If you are interested in getting listings from the MLS, just let me know and I can set up a subscription for you. I'm a licensed Realtor with Coldwell Banker.

GO U BEARS!!!


@Jen Whitehead

Hi Jen - thanks a lot for your thoughtful reply. That's awesome to hear your husband is a Bowdoin alum! It's a small school but an even smaller world it seems at times. Your advice is super helpful and that is definitely a path Reed and I are considering. We are very interested in an MLS subscription and very much appreciate your offer to help on that front. I will send you a PM. Thanks again for taking the time to respond to our post!

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