All Forum Posts by: Sarah Lorenz

Your primary/primary residence is the home you live in. You don't need as large of a down payment on a primary residence (lenders see it as less risk--you are less likely to stop paying on the house you live in vs. a rental property that you own but don't live in). You can buy a primary with 5% down, or 3.5% down with FHA, or even 0% down through VA/veteran's loans or rural development loans. Now if you are buying an investment property, lenders will typically want 20-25% down and sometimes cash reserves in savings in addition to that. So for example, if you were to buy an investment property, say a duplex, for 300K every year, you'd need $60,000 for a down payment, plus closing costs--say $70,000. If you did that every year for five years, you'd own 10 units in 5 duplexes. But you would need $350,000 to do that. If you bought the same duplexes as owner-occupied and moved into them, you'd only need $15,000-20,000 (5% down on 300K plus closing costs), so you'd get the same properties for $100,000. Moving every year for five years is a pain in the neck, but you'd have a really nice portfolio of properties at that point and could sit back and enjoy the benefits. You'd have to buy smart, of course, and make sure they have good cash flow and allow for capital expenditures. But I'm saying this is something that is much more do-able while you are younger and have less stuff, no kids and schools and kid friends to worry about disrupting, or need more space than a typical duplex will allow.

Also, though someone mentioned that you can get cash back out with a refinance, you have to be careful. That will only be true after some time when a property appreciates in value--IF it appreciates--which might be never, depending on the economy or the area you buy in. Or if you buy a distressed property at a deep discount and improve it, you can sometimes refi after 6-12 months if you search for a lender, but you'll only be able to get 75%-80% of the value back out, so beware. And sometimes the appraisals of the property's value come back low, so there is no chance of getting any cash out at all. 

I would go for it. I wish we had been more aggressive in purchasing properties when we were younger, especially before we had kids. If I could go back, I would buy a new primary residence every year for as long as I could stand to do it. If you pick good properties that cash flow and get in with a really low down payment because it's your primary, you could buy new duplex every year for five years, and set yourself up beautifully for the long-term. Don't worry about moving to a new area. You can always get a property manager or do a 1031 exchange into a better property in your new location.

I also live in an area where there are a lot of high-priced multi family due to the presence of a large university. Keep an eye out for single-family houses that are zoned for duplex and can be converted. If you are also near a university, look for properties that come up for sale after the academic year has started and will be a financial drain until the following year when they can be leased to students again. Don't forget about the cycles of real estate, when you can get better deals, such as over the holidays or in the middle of summer when most people are not shopping for primary residences. Definitely keep an eye out for distressed properties, and if you have a favorite area, select properties that you would like but look a little rough from the edges and knock on the door or send a personal letter to the owner. Since you are looking for a primary residence and have a family, a lot of people will tend to be sympathetic to you as opposed to a investor looking for a deal to flip or wholesale.

 One more thing – I have had rentals in Ann Arbor, and while I don't consider them student housing, I did have grad students on occasion. They liked having something a little bit further off-campus, so that they were not in the undergrad crowd. Most of them were also looking for a place where they could bring a cat or dog. That is a type of niche you could consider--and grad students in a doctoral program sometimes stay for up to five years or more.

This isn't my niche, but I  notice things while living in Ann Arbor. Take a look at the many new student high-rises in Ann Arbor--very, very luxurious and pricey (do a search on M live.com  for her stories about these developments). People are predicting that more of the "student ghetto" houses will be sitting vacant and then be turned back into single family residential housing.  If you are in a different college town that doesn't have options for higher-quality housing for students, you might be able to do a version of this at a smaller level. I'd find a way to target female tenants, myself, if there's a way to do that without violating any laws,  and avoid those college boys. When you do make a move on a property, be absolutely certain that you will be able to rent it out.  I know someone who purchased a student rental and then failed to secure tenants by the start of the academic year and ended up losing it to foreclosure.  I've heard of another landlord in Ann Arbor who has relationships with fraternities and sororities. He rents houses to them for their overflow students who can't be accommodated in their own properties. Good luck!

I can recommend someone in Plymouth.

After renting between houses recently, I realized how important it is to have a nice vanity in the bathroom, with plenty of counterspace, drawers, and a medicine cabinet. I noticed that a lot of landlords skimp in this area or choose cool and inexpensive pedestal sinks, and it was one of the things that daily drove me crazy and made me anxious to move out.

Try Joshua Birk in Plymouth. You can find him on LinkedIn or email him