Central Virginia REIAs?

Question

I am a new investor looking to use the next year or two to network and build a great team in Central Virginia. I saw there's a Richmond REIA and a Chesterfield REIA. I'm wondering if anyone has experience with either or both and if you could offer a recommendation on which may be of more value?

I am focusing on buying a residential multi-family as my first deal (preferably a tri or quad) in Richmond, so I may be answering my own question having said that, but I also see Chesterfield as a great area for investment and would like to invest there as I build my portfolio.

Also, if there are any other good REIAs in the area, please feel free to share. Thanks!

Matt Carozza · Answer

Thanks for the thorough explanation. These points make a lot of sense and are definitely worth taking into consideration when looking at properties. It's amazing how much there is to learn as an investor just getting started, and while these points seem obvious, they are things that I may not have taken into consideration if I saw a really cheap property with really good cash flow. Thanks for the great learning opportunity and for your insight on that.

Dave DeMarinis · Answer

@Matt Carozza The issue with percentages and low rents is that most costs are not actually a function of the rent you charge. Property management normally is a % of rent but even that starts the problems. $70/mo for a $700 rent is not a lot of money and doesn't justify a lot of effort and skill to management it. Assuming you can get through that, the water heater for a 1200 sqft house is the same regardless of $700 or $1400 rent or $50K or $150K house. Same for HVAC, roof, windows, etc. This means you are underfunding your CapX and Repairs/Maintenance if you use % of rent.

The next issue is tenant quality. Think 3X rent for gross income. A household making $2100 per month will unfortunately tend to have much less job, financial and life stability. That means more turnover and higher economic vacancy (unit is occupied but not paying). At turnover, paint and cleaning (if you are lucky) are a function of square footage - not rent. That means your vacancy costs are incurred more frequently AND are a larger % of your rent.

All that said, there are plenty of investors who are very successful in the tougher property niche, however - they have their own expense and NOI models from their experience. They probably have property management in house and a significant local foot print to be very efficient. i.e. I'm not saying never invest in that type of property, I am saying don't do it without significant operating experience to be able to develop a real proforma that will be reflected in reality.

Trey Kern · Answer

There are a lot of real estate meetup groups in Richmond. Search the word "real estate" on meetup.com and you will find about 10 different groups that range in focus from wholesaling to landlords to general investments. Most meetings have been postponed at the moment obviously but some have online calls still scheduled like RING and REIA.

Adam Hamilton · Answer

Hi Matt,

I enjoy the RING (Richmond Investor Networking Group) meetup.  It's on meetup and does have a yearly fee to help pay for the space.  I like the presenter and usually find value.  I agree with Taylor- go to a few in Richmond and you will see a lot of the same faces!

Taylor L. · Answer

Go to any one you can make. If you want to narrow down to just one of them, take the free ticket they usually offer and check them out. You're going to see a lot of the same faces, but that's a good thing. Richmond is a very small city. We have other meet up organizations here (I run one!) and I've spoken about syndication for the Chesterfield REIA.

Dave DeMarinis · Answer

@Matt Carozza I'm a heavy value add investor and hard/private/bridge lender. I'm mainly in the midwest and Southeast. When my daughter started college in Richmond, I really liked the market dynamics and decided to add it as a focus market. I've been to a few of the Chesterfield meetups and the group is very helpful and knowledgable but it is a different market. I haven't made it to a Richmond one but have networked with a number of investors there and I think you will find plenty of support and help.

The biggest thing I would advise as your getting started is to focus on your cash reserves. A lack of reserves can easily sink a good investor on a good deal. Especially when you are getting started, everything will take longer and cost more than you expect. Second is target rent levels - be very careful with the small multifamily that have rents below $800/mo. All the percentage rules generally break down and the properties actual performance will have little in common with your spreadsheet analysis. (i.e. Spreadsheet will show 14% to 25% ROI and real life will bleed money at least every other year and possibly every year ...)

Matt Carozza · Answer

@Trey Kern, awesome, thanks. I had no idea meetup.com was such a good resource for real estate meetups. I'll join and check them out. Thanks again!

Matt Carozza · Answer

Thanks Taylor, great to hear from you. I'll reach out to them to see about getting a free ticket if they offer one, good idea. And I've actually been meaning to reach out to you about the meetup, I'll shoot you a message.

Matt Carozza · Answer

Great info, thanks! Maybe the best thing for me to do is to go to a couple of the Chesterfield meetings and a couple Richmond meetings and see how they go.

I'm really interested in what you said about shooting for a target rent level of $800/month. Would you mind expanding on how the percentage rules break down and how actual performance would differ from an analysis? Is this in part due to increased vacancy expenses? I'd love to hear more on this.

Matt Carozza · Answer

Awesome, thanks so much! I'll definitely keep in touch and let you know when I'm ready to invest out there.

Central Virginia REIAs?

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