Just completed first deal. Tips on how to leverage/Scale?

Question

Hey everyone. Just bought my first property in Rochester NY. The plan is to rent it out in August of next year for the 2023-2024 school year. want to carve out a niche in the student housing market going forward.

Some details about the property:

Purchase price 91k, monthly payment with taxes/insurance is $770. 3 bedrooms 1 bath, 7 minute walk to the university of Rochester. Rents for students in the area are about $500-$600 a bedroom so I think the thing will cash flow pretty well at $1500(modest)-$1800 a month. I really think I can get 1800 a month ($1030 gross profit monthly) but worst case I'm looking at $1500 ($730 monthly). I know there's other costs associated with this but those are just rough numbers.

House is relatively strong structurally as a lot of the bigger things (roof, furnace, etc) are taken care of. It mainly just needed some work on the interior. Renovations are about halfway complete and estimate it will come out to about 15k total give or take (Paint, vinyl flooring, appliances, cabinets, etc). I bought the place with 5% down as owner occupied so I don't really have any equity on it right now although it did appraise for 100k in its beat up condition initially. Total with closing costs was about 13k so I'll have about 28k sunk into it.

Now the problem is I do have some money tucked away and I project that I will be able to do this the exact same way again about a year from now but I definitely am looking for some advice on what your next step would be to scale/leverage if you were me going forward. I'm ok with going slowly and house hacking yearly but I am wondering if there's anything I can do to leverage quicker. I am not scared to take risks as I am still pretty young (24)

My ultimate goal is to have 10 of these by the time I'm 30 and then start paying off Principal 1 by 1 over the next few years (While still working my w2). Potentially get into something bigger after that but I'm trying to be realistic for now. I think once I get a few under my belt it will be a bit easier but the challenge is going to be getting the next 2 deals done. I am ok with the high turnover and potential risks of student rentals and know what I'm getting myself into as I was a pretty big partier in college myself lol.

Any help is appreciated. I always love hearing how other people got their start. Thank you!

Sidney Duquette · Answer

@Charles Brucato Congrats on your househacking deal! Sounds like you got a great deal during this crazy Rochester market. I'm actually from the Rochester area as well and just got my first duplex in early May of this year and am currently househacking the residence.

I'm not sure if you have looked into it, but being near the U of R, I am actually planning on buying another duplex to do Short Term Rentals (STR)s like Airbnb or VRBO near the University of Rochester in the next year or two.

On your next deal, if you're interested in purchasing in a similar area and potentially doing some short-term rentals, I'd be willing to see if we could partner up if not just networking to meet other real estate investors in the Rochester area. Another benefit I should mention is that with short term rentals, they usually cash flow much more than a single-family residence or long-term multi-family rentals and this would also allow you to scale faster.

Again, congrats on your househack and feel free to reach out if you're interested in networking and potentially partnering!

Charles Brucato · Answer

Thank you very much! To be honest I’m not really interested in short term rentals at this time but I’m definitely interested in talking about potential deals and what not. Feel free to reach out any time.

Charles Brucato · Answer

Thank you for the response. I appreciate the advice. I was planning on setting something up with a different account for the rental income and using it strictly to reinvest into the business.

River Sava · Answer

Hi Charles -

Congrats on your first property! Smart niche you are aiming for as well. I am with a private nationwide lender than focuses on investment properties. We specialize in DSCR loans for STRs and would love to connect to talk more about building your portfolio to increase cash flow.

Charles Brucato · Answer

Thank you I’d love to. I’m definitely interested in working with a DSCR lender however I’m not interested in short term rentals. If you do DSCRs on long term rentals I’d love to talk more.

Charles Brucato · Answer

Thank you I’ll go check it out. If you ever want to connect or talk just hit me up I’m always interested in hearing how people got their start and scaled especially on the Rochester market.

Charles Brucato · Answer

Hey thank you for the response I really appreciate it. I do have 2 roommates on this deal that will help me out so that’s definitely a plus.

Martin Grizzanti · Answer

I run the Upstate NY REI Group here in Rochester--join the facebook group!

Nicholas Coulter · Answer

@Charles Brucato Great first move! My wife and I built up to scale by separating the tenant rent into a completely different account while we live in our Househack. So we are paying our mortgage and saving the income to allow us to buy another property every year! After 2 I think youll be surprised at the time to scale.

Heath Thomas Jr · Answer

@Charles Brucato congrats on your first deal! The first step is usually the hardest. Since it sounds like youre living in the property now and intend to stay local, student rentals can be a very profitable asset class. It just takes some more hands on work than your typical rental. A good tip I have heard is make sure you are not at the property when the students and their parents move in, otherwise they will find something to complain about and have you right there saying you will deal with it.

I think your thought process of house hacking your second deal next year probably makes the most sense (and mayyybe your third deal), but if you really want to speed up the process, you should make your goal to have that third/fourth one be purchased outright as an investment property to get the snowball rolling. Do whatever it takes to get as much cash in the meantime. Try to get some roommates to help reduce your monthly expenses. Possibly by the time youre ready for your third deal, you will have enough equity from your first deal to pull some out for your down payment.

Continually house hacking to acquire rentals is certainly a viable strategy, but if you want to leverage quicker, debt will be your friend, unless you can convince some family/friends to invest with you going forward.

Just completed first deal. Tips on how to leverage/Scale?

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