My wife and I just found out that we will be returning to our alma mater Virginia Tech next academic year and are super excited! I am active duty Air Force and will be an AFROTC instructor for the 2022-2024 academic years. We have been looking at homes in the local area and the market seems pretty brutal right now. However, we are working with a local realtor to hopefully find something that fits our wants and needs. More importantly, we are looking for an investment property that we can use to offset our mortgage payments and help build equity faster.
We have been exploring the ideal of finding a property with an ADU (essentially a detached mother-in-law suite) that we could rent out to a grad student or small family. Skimming through Zillow and Realtor.com is not looking promising for availability. We are curious how other investors are doing in the area, and what strategies people are using for this market.
Currently we only invest in syndications, so doing a rental such as an ADU would be new to us. We have done our research and have confidence that we could be successful, but we are looking for tips and tricks regarding this REI strategy.
Thanks! Adam
We host Airbnb at our house for football games and graduation, and its really enjoyable. Its been very short lived so far, but all the guests have been great.
Before mortgage rates dropped in the last two years, rental rates would just cover costs, so having a house in Blacksburg was more speculative--- relying on appreciation. Rents have gone up since then and interest rates have come down. In the case of this particular house we bought, we didn't bother looking at it until seeing how long it sat on the market, since offers have been so aggressive in the market overall.
I personally am not interested in student rentals. Per room rates are higher, but I don't want to deal with the hassle.
You're headed to a great area! VA has a number of successful investors, including in the Roanoke/Blacksburg area.
Check on Meetup.com if you can find local real estate investing events. You can usually meet people at those events who can help you get off-market deal flow going.
I'd also look into short term rentals, and whether your ADU could be used as a short term rental to bring in more revenue. I've stayed in plenty of STRs in Roanoke and folks seem to do well with them there.
@Adam Cade welcome back! Just worked with a Hokie coming back via the Navy a few months ago.
Not a lot of ADU-type dwellings in the area. I've heard rumor that there's some discussion among Town Council as to how to address that, but for now there really aren't a lot of these unless they've been grandfathered in. Make sure that your Realtor knows which apartments are grandfathered and which are subject to the Town's accessory dwelling rules; that'll bite you if they're not aware.
@Taylor L. thanks for the advice on STRs in the area. I think we would see if we could get a long term lease (1 yr) in place as our primary course of action. But, the STR route seems viable to, considering all the events in and around Virginia Tech that are constantly happening. First goal, find a reasonable property with an ADU that is even rentable!
@Jeremy Hart thank you for the insight! I was not even aware that the Town Council frowned upon these types of properties. I'll definitely keep that in my hip pocket when looking at various properties. How would you determine if a property can be used for a STR or rental in general? Is that on the deed somewhere or would you have to go to the courthouse and find the data on a specific property? Again, this is new territory for me regarding purchasing a house with an ADU to rent out separately.
And yes, we are very excited to get back to the Hokie Nation!!
@Adam Cade no, your agent should be able to tell from the tax record. Some communities are going to have it written in to the Covenants & Restrictions that an ADU (won't typically be called that since it's a relatively new term) isn't allowed on a subdivision lot, but again, your agent should be able to navigate that. If not, then give me a shout and I can tell you what to look for (or stay away from). Most of your opportunities are going to be in-unit accessory apartments.
@Jeremy Hart more great info!! Thank you! We are soo pumped to get back to Blacksburg and try our hand at the STR strategy. I spoke with @Philip Bowling recently and he mentioned that there isn't an active REI group in Blacksburg. We should definitely try to revitalize that!! Granted we will only be there a short 2 years, the closest REI group to us is over 2 hours away, so if we could chat and mingle with fellow BP and REI enthusiasts in Blacksburg for our time there, that would be awesome!! Even if it's just grabbing a pizza at PKs or a drink at Sharkey's or Hokie House and casually chatting about REI, it's all about spending time with others in the REI community and making each other stronger!
@Taylor L. thanks for the reply!! My wife and I love syndication!! With me being active duty and long days as a helicopter instructor pilot, and my wife in a full time position with the local community, syndication has been awesome for us! We hold a LP position in 3 different syndications. We are in a Class C value-add in Columbia SC, a Class A new development in Huntsville AL, and a Self Storage new development in Sandy OR. We love it! That being said, we understand the power of REI and want to expand into STRs. We think moving to Blacksburg for a few years will allow us to dip our toes into the STR game and see if is something we would want to do long term. We are super pumped!
Back to syndications...any projects in your neck of the woods in self storage or multifamily? We like those 2 niches due to the constant need for both, regardless of the economy or other outside factors. We have also looked into Assisted Living and NNN industrial niches.
@Taylor L. thanks for the reply!! My wife and I love syndication!! With me being active duty and long days as a helicopter instructor pilot, and my wife in a full time position with the local community, syndication has been awesome for us! We hold a LP position in 3 different syndications. We are in a Class C value-add in Columbia SC, a Class A new development in Huntsville AL, and a Self Storage new development in Sandy OR. We love it! That being said, we understand the power of REI and want to expand into STRs. We think moving to Blacksburg for a few years will allow us to dip our toes into the STR game and see if is something we would want to do long term. We are super pumped!
Back to syndications...any projects in your neck of the woods in self storage or multifamily? We like those 2 niches due to the constant need for both, regardless of the economy or other outside factors. We have also looked into Assisted Living and NNN industrial niches.
Multifamily in Richmond is a no-go for me at this point. There's too much big money swimming around the city, paying a lot for properties. I prefer other markets. I'm also expecting Richmond City to get even worse for property owners from an eviction standpoint.
The City of Richmond just announced that they're not reducing property tax rates, despite the massive increases in property values and the fact that the city is consistently running a surplus. Taxes and insurance are two quiet deal killers that a lot of people don't see coming.
Storage I'm looking in other markets as well, mainly because the Richmond area is largely overbuilt IMO. At the end of the day, one of my favorite things about syndication is that it allows us to go beyond our home markets.
@Adam Cade go Hokies! I'm an investor and have a house in the NRV but my investments are mostly elsewhere. Still happy to connect and can potentially get you connected with some investors in the area
@Caleb Bryant thanks for the reply! I would definitely like to link up with some investors, both who are physically located in the NRV and also those who invest, but are geographically separated. We will be living in close proximity to Virginia Tech, so that may limit my options, but I still think it provides a good area for some STR action, or even long-term annual leases. Excited to see and hear other people's strategies!!
@Adam Cade I know you guys were actively looking, have you found something yet?
@Jeremy Hart not yet... We look several times a day. Not a whole lot to pick from on realtor and zillow from what we can tell. We're not really interested in a new build or being in a HOA, and we want to try to find something that has the ability to produce some passive income. I would love a separate structure, but I think the more common, yet hard to find, option is a finished basement with a separate interest.
On a separate note, there was an awesome property for sale recently that I completely fell in love with. It's sold now, but if it went back on the market, I would strongly push to get an offer in. If you get a chance, check out 970 Magnolia Ln in Christiansburg. It has 2 homes and a horse barn on the 26 acre lot. I think that would be an awesome AirBnB opportunity. Additionally, with the horse barn I would think you could rent out stalls to local equestrians at VT or the surrounding area. It has an enclosed pin or rodeo. It looks pretty sweet!! But...it's sold.
@Adam Cade yes, I know it well. Took forever to sell years ago, then they dropped it into this market and it just closed, significantly over asking, in three days.
It's tough sledding - I was just looking yesterday at a $250k price range in Blacksburg, and of the 11 homes for sale, 8 were new builds. There'll be some more inventory coming - not a lot, but a little, and all it takes is one. Hope you guys are getting great advice and guidance.
@Jeremy Hart ya it looks rough out there... We're hoping for the best and not getting to the point of having to settle.
@Adam Cade I'm also in Blacksburg with one rental here and two in Radford. I'd be happy to meet up with you whenever you come through the area. The Blacksburg house was just purchased a month ago after sitting on the market here for 6 weeks-- pretty unheard of in the area, because it was in such poor shape cosmetically and asking price was too high. We're currently working on it and plan to have it available for January. Rentals in Blacksburg don't usually make financial sense, but this one seems to, particularly with mortgage rates so low, though I'm not valuing my labor in the calculation.
@Craig McNally thanks for responding! It sounds like there is a good group of investors in the Blacksburg area that would make for a nice REI meetup! We will be arriving in May, but hope to have something locked down prior to that. We plan on doing the AirBnB strategy and capitalize on the high rental times (football games, graduation, etc). Sounds like that is a good strategy for the area, considering the town of Blacksburg has restrictions on rentals. We look forward to continuing to learn from other investors in the area and hope to join the ranks of the successful investors in the area!
Regarding your statement of rentals not making financial sense in Blacksburg, what are you referring to? Long term? STR? Student rentals? We will only in Blacksburg for 2 years, so we are thinking the STR route will make the most sense. Plus, if it doesn't work out and the market keeps going up, we could sell at the end of our tour. Or, hold if it makes sense, and continue to rent out the property as a long term rental. We are obviously still in the beginning stages of this plan, but are all ears to both positive and negative experiences in the area.
We host Airbnb at our house for football games and graduation, and its really enjoyable. Its been very short lived so far, but all the guests have been great.
Before mortgage rates dropped in the last two years, rental rates would just cover costs, so having a house in Blacksburg was more speculative--- relying on appreciation. Rents have gone up since then and interest rates have come down. In the case of this particular house we bought, we didn't bother looking at it until seeing how long it sat on the market, since offers have been so aggressive in the market overall.
I personally am not interested in student rentals. Per room rates are higher, but I don't want to deal with the hassle.
@Craig McNally is on the right track - we do the same. Graduate/Professional renters have fewer good options, and we've found they typically pay more, and take better care of the property, when you vet them well. Undergraduate housing is a dime a dozen, and there's too much competition - it's a race to the bottom when you're competing only on price (think Pheasant Run - hundreds of units, all exactly the same. You can only see so much variance in rents). It's easier to see higher rents on the grad/pro track.
Adam, there's a good deal of oversight on the STRs, so make sure your agent knows those. We do it on a couple of our units and it's fine, but the recent homestay rules were put in play a couple of years ago are something to be familiar with. Historically, a long-term hold (10+ years) has played out very well for owners, as it's a slow and steady market (the last couple of years aside) that has held value in most of the asset classes, with condos in 2008-2011 being the exception.
@Craig McNally and @Jeremy Hart thanks for the follow-up. Having been a student at VT for 5 years, and dating my wife who lived in off campus housing for several years, I have no intention of getting into the student housing game. As you mentioned, and through anecdotal evidence, college students are on the lower end of the spectrum when it comes to respecting a living space. That being said, not all are bad, but regardless we'd target grad students or local professionals if we did a long-term lease.
We host Airbnb at our house for football games and graduation, and its really enjoyable. Its been very short lived so far, but all the guests have been great.
That's great to hear! We look forward to being an AirBnB host. It seems like a fairly lucrative strategy if you get certain factors correct (location, amenities, layout, separate entrance, parking, etc, etc, etc). Again, with us only being physically in Blacksburg for 2 years, we'll have to come in swinging. This will be our first attempt at an AirBnB (if we end up going with that strategy), and allow us to figure out if it's a REI strategy we want to pursue in the future. We've listened to lots of podcasts and follow various STR groups, along with doing our own research and learning from others. I feel that we are armed with the right knowledge, and now it's time to execute. Thanks again for the response and advice!
There's all kinds of Airbnb ways to host. It sounds like you're looking to set up a separate suite. In my case, we just rent out the 2 extra bedrooms while we're at home. I cook a nice breakfast, offer them a ride downtown for the football game, and they have their own bathroom to use, so its not particularly awkward in that regard. There are plenty of other people that rent out their whole house for football and graduation, then go camping for the weekend to get out of the craziness in town. If you want to make it a more ongoing routine, then yes, a separate suite would be preferred.
I'm a little late to this thread, but I also live in Blacksburg. My wife and I have two rentals in the area (both SFR), but investing for cash-flow locally can be tough in the current market.
The right short-term rentals seem to make decent money given the proximity to Virginia Tech events but the restrictions in Blacksburg and Christiansburg mean you cannot build a STR portfolio in the area. We have looked into it, but (as far as I can tell right now) they only allow you to rent out your primary residence. We have started the process of converting our unfinished basement into a functional living area to rent out for games, graduations, move-in/move-out, etc. It will be our first attempt at short-term rentals and the regularity of local events should help make it a decent return on investment.
Let me know when you get to the area and we can grab a beer.
@David Woodson most definitely! We'll be in town in May. It's coming quick! We're still actively looking for a home. We are holding on to the idea of using the AirBnB strategy to offset our mortgage. Since my assignment is only 2 years (hoping to extend to 3), we really need to get into something that is ready to go on day 1. The idea of simply offsetting our mortgage is what drives us. I have a housing allowance, but in standard fashion, the military lags substantially behind everyone else in making adjustments. It'll be years before we see a reasonable housing allowance increase unfortunately, but nothing I can personally do about it now, except find a way to offset the mortgage. As others have mentioned in this thread, the only way to do that in Blacksburg is through a primary residence. That doesn't bother us, but the prices make it challenging. We're excited for the journey! Look forward to meeting up with others in the local area!
Blacksburg is a tough market to break into. A lot of old houses owned by older investors who let the properties deteriorate. There are some deals to be had but it’s all about your network because there are a couple large players in the area that like to gobble it all up.
Most of the rentals we manage are folks who are renting out the house they’ve been living in for years or maybe their parents have. Not many detached apartments. Most of our activity comes from Christiansburg.
Blacksburg definitely does not like STR. They want the money from the visitors to go to the local hotels and Virginia Tech inn.
Huge generalization, Jake. I studied this extensively when I was providing input to the Town re: the STR Homestay program in 2015/2016; let's call a hotel institutional lodging - a community needs a certain percentage of available institutional lodging, per capita, in order to have a viable tourist/short-term stay ecosystem. Without it there's no wage growth, job growth ... growth. If Blacksburg opened their arms carte blanche to STR then they're restricting growth along multiple sectors of the economy. You think the Blacksburg real market is tight now? Try opening it up to those doing STR as a business model, arbitrage, etc. Charlottesville has gone through this very thing, as well, as have countless secondary and tertiary markets around the country - I spoke with your dad about this very thing when he was coming in to the NRV market several years ago.
It's easy to point the finger at the Town - believe me, I know - but on this one they got it right, and I'll support them on their handling of the Homestay . Blacksburg and the NRV are constrained by the same supply and demand factors that every market in the country is going through, but they're doing so in a smaller pool, with fewer options.