All Forum Posts by: Thadeous Larkin

@Kyle Starkey - You mentioned that you're planning on living in a VA-Loan-acquired home for two years then renting it out...not to be a sharpshooter here, but I don't want you making an operational plan with bad information.

BLUF: There ain't no such thing as a two-year primary residence rule for VA Loans, so you'd have to refinance out if you want to rent it.

You're former military, so you know there's a Reg, PAM, or DODI on any conceivable action you can take in your life. Well, life is apparently no different even when you escape the military, because the VA is governed by the same types of guidelines.

Voila! VA PAM 26-7 covers VA Loans. (INCOMING! HOT LINK! : VA PAM 26-7 ) Chapter three talks about occupancy requirements/IRRRL and whatnot.

The "Primary Residence" rule is often misunderstood and fodder for half-truths. It basically says "Promise us, the VA, that you will live in this house and never, ever use it as an income property...and that you'll move in within 60 days of closing." The idea is that you're being thanked for your service by the generous taxpayers of the nation who can't have you limping around homeless making them feel bad about not supporting the troops. So, out of the goodness of their hearts, they have decided to give you a no-money-down home loan option. The trade-off is that it can't be used for investment. Taxpayers don't like you using their money for the purpose they specifically set it out for, you know.

So anyway, if for some reason you can't live in a VA-Loan-acquired house anymore (say you're PCSing or some other extenuating circumstance), then you can rent it out if you refinance into one of the VA's IRRRL loans. [real talk - I don't know if you can refinance into another type of loan...more to follow...or if someone smarter on this than me can chime in, now's your time to show off your big brain]. The only ways to get out of your VA Loan, according to the VA, are:

1)  Sell it
2)  Pay it off in full
3) Refinance into an IRRRL (in certain circumstances)

But why trust me when you can call the VA and ask them specifically? [I would give you their number, but apparently BiggerPockets doesn't allow me to post it.]

Consider all these things as you start to develop your plan for using your VA Loan...would hate for you to start off down that path only to be disappointed later on.

@Steve K. - Re: the Correction:  An excellent point.  It's always hard to tell if you're at the beginning of the downward trend or if it's within a range of acceptable variation.  Pick your poison when it comes to statistics on it - month-over-month or year-over-year home sales indicate a slowdown in Denver.  Colorado Springs seems to be about the same as it has been (except that it continues to have a higher price per sqft) meaning its harder for people to start out in the market if you don't have the capital.

Cue the attraction of Pueblo - comparing prices there to the hot, hot markets of Denver and CoSpgs over the past five years makes it seem like an easier start.  There are niche pockets that perform very well there.  Anyone looking from the outside might be tempted to think it's naturally next in line for its turn catching some of that Colorado growth.

However, unless you live in Colorado it's hard to tell the difference between the cities.  

In other words - don't just assume that because a place is in Colorado that the popularity of other cities in the same state means that it will translate into EVERY region of the state.  

No offense to @Jerry Burns , because you have a lot of great points and fantastic insight into the market, but the growth of Denver and CoSpgs is largely driven by young professionals with high incomes.  Their moving criteria wish-lists are often driven by in no small part by experiences (places to go out, restaurants, etc.), the presence of other young people, and, when they start to have families, good schools.  Pueblo is generally lacking in that kind of option.  Walmarts and Kohls don't draw in millenial money.

Think of Denver/CoSpgs to Pueblo almost like Columbus, OH to Cleveland, OH.  Columbus is exploding, but Cleveland is declining.  The drivers for both are similar.  

In sum - I personally consider Pueblo a market prone to speculative investment.  Don't assume that Colorado's magic markets will automatically extend to everywhere in the state.  Find correlative statistics that can help you measure your interest or find a good niche in the market (population/population growth between certain age ranges or income demographics, etc.) rather than relying on market anecdotes.

Hey @Brandon Ness - can you define what you mean by "Best" location?  What are your criteria?  

As for the parternship structuring...you're going to want to have an attorney draft that up.  I say that as an attorney.  That can go bad really quickly.

+1.  My guy moved to California, so I'm posting to bump this thread.

@Kiran K. - haven't heard from ANYBODY yet, which is crazy.  Seems like there's an opening in the market for the enterprising attorney.

So the awesome college student who I had doing my AirBnB turnover just moved to California.  I'm looking for a replacement person who can do AirBnB turnover in Colorado Springs.  If anyone has any recommendations, I'd love to hear them!

(By "turnover" I mean that I manage the listing and usually do the turnover myself, but when I'm out of town I had him come and do a quick home-cleaning with sheet-washing, laying out the little welcome packet, etc.)

Seconding @Rene K Nelson

@Seth Ripley There are some good standard books on the topic of CRE. "The Complete Guide to Buying and Selling Apartment Buildings" by Ken Berges is one, "Crushing it in Apartments and Commercial Real Estate" by Brian Murray is another one that goes over all the basics (and he's from Watertown, so he gets a local bonus). Start with those and, if you're serious about CRE, probably invest in a syndication calculator. Those are a lot more involved, produce more accurate results, and as an added bonus they show you how much is necessary for due diligence on a commercial property.

@Seth Ripley - keep in mind that this is a commercial property (over four units in a multifamily) which means that banks treat it differently than a traditional multifamily and it will have its own independent litany of issues you'll want to familiarize yourself with.  Using the BP Calculator is a good once-over (kind of like a sniff test) to see if a property might cash flow, but if you're looking to purchase you'll want to dig a lot deeper.

Commercial properties are valued based on their Net Operating Income (NOI) and Cap Rate. So you'll want that information.

Other considerations include that this is a 12-unit property.  If you're looking for a property manager, you might be looking at someone who is part-time.  Part-time property managers are hard to find, and quality ones are VERY hard to find because they usually have to split their time between multiple properties with lots of potential upkeep.

Also, I second @George Darcy - the property taxes seem way low.

I'm not trying to scare you off the deal. Just make sure you're thinking of this as a commercial property and get smart on CRE.

To answer the original question (if a tad late) - it all depends.

I was born in Utica and invest in the Syracuse area even though I currently live in Colorado Springs, so I'm not the ultimate authority here but have some background in some of the area(s) at issue.

The question isn't a binary "yay" or "nay."  You have to know what you're investing in and for what purpose.

For example, are you investing in single-family houses for buy-and-hold?  If so, your appreciation should probably be flat and/or negative.  Your maintenance should also be higher (the tremendous amounts of snow does a number on roofs and decks/porches), and if you pay the utilities/other expenses you should account for high energy bills during the cold months (typically October - April).  Also, days on market will be longer than other parts of the nation unless you know the neighborhoods and school systems cold.

Are you going for straight cashflow from SFH rentals? You might have some success there, but as others have noted, you have to account for demographic shifts in your vacancy numbers. The numbers are declining in many of the cities and surrounding areas as jobs are lost and taxes/regulation push people out of state. A reliance on single industries (manufacturing) has really disadvantaged wide swaths of Central New York. Deep subsidies are moving some technology industries in, but those folks can buy a house for pretty cheap as opposed to renting something standard. Something to think about.

Are you thinking about 4+ unit multifamily? Is your strategy to BRRRR? To flip? To wholesale?

I'm asking all of these many questions ad absurdum as a long way of saying that your strategy should dictate whether you invest in a certain place, not the other way around. REI is a big world with lots of different niches.

Once you have your set strategy, then people on the forum can provide better feedback that is more targeted.  That'll ultimately help you.

@Debra A. - have you ever visited Utica?  You might want to before you get seduced by the low prices.

Final thought - people from New York City call anything north of them "upstate" and we don't like them very much.  ;-)  But seriously, some people 'round these parts think of being told they're from "upstate" as a pejorative since it implies that the City is the real part of the State. That's a great way for an insular community to immediately identify you as an outsider and someone who shouldn't be trusted.  That's not a hard-and-fast rule (lots of my friends from High School have no problem self-identifying as being from Upstate), it just so happens to be the way some of us think.  Just some free chicken for you.  

Ok, also seriously final thought - the NYS legislature just signed some sweeping new rental laws earlier this month that affect the entire state (most important being you must have "good cause" to evict a tenant, you can no longer just evict someone when their lease is done).  And "statewide rent control" came very close to passing this session.  The NYS Legislature is gaining more members of the Assembly and Senate who are advocating for statewide rent control, so my money is on something like it passing within the next 5 years.  New York also has Home Rule, which imbues localities with certain regulatory powers that are VERY specifically local.  So familiarize yourself with that as well.