Rochester (Fairport), NY Multi-Family Home. Good Deal or No?

Question

Hi Everyone,

I am brand new to this site, but am really excited to have found this!! From what I have read so far, I've already learned a ton! I have been watching the Rochester market for almost a year now and am moving there in about a month to purchase our first rental property. My goal is to buy an owner occupant that will allow us to live mortgage free and save for the next property. I do want something a little nicer than some rental properties with higher returns (i.e. 19th Ward).

I found the most adorable Victorian MF side by side with 5 bed/1 bath and 4/1, 3100 SF priced at $269k in Fairport Village. The house has been owned and lived in by extended family so has no rental history. It's outdated, garage needs to be torn down and re-done and obviously since there is only 1 bath on each side, another will need to be added. I also have no idea when the house was last renovated so may need updated wiring/plumbing once we get started. The house has been on the market since last Dec and they haven't reduced the price at all; price def needs to come down.

I've heard how desirable an area this is and my mother-in-law wanted to rent there at one time but couldn't find anything available. This to me, and from what little rental history I can find on similar sized homes, seems to indicate the potential for high rents and POSSIBLY a high rental demand since there aren't many?

What I'd like to know is:

1.  Is this a desirable rental area?

2. What can I expect to get in rent for a 5 bed/2 bath ~1700SF, nicely updated home in Fairport?

3. Any suggested pricing tactics for older homes that aren't selling, need updates, and the price should come down?

4. Any contractor recommendations would also be great!

Any suggestions/thoughts would be greatly appreciated! Thanks!!

Chris Vacek · Answer

Chiming in from westchester NY.  Not familiar with the Rochester area but I will answer what I can:

2. What can I expect to get in rent for a 5 bed/2 bath ~1700SF, nicely updated home in Fairport?

• I would say you need to go by what similar rentals in the area are going for.  Be careful with the assumption that your M-I-L's difficulty in finding a rental indicates a "strong" demand for rentals.  It could be the opposite and there is actually very little to no rental activity in the area.  If you have access to a local MLS I would take a look at average days on market and #of rented vs expired rentals in your price range/area over the past 5 years

3. Any suggested pricing tactics for older homes that aren't selling, need updates, and the price should come down?

• I'm not a big fan of "tactical" negotiation TBH.  It leads to the idea that in order to acheive your goals the other party needs to compensate from their end.  This is the emotional angle that most residential transactions end up taking and deals end up dying left and right when people piss each other off and emotions spiral.  
• I would encourage you to instead try and be as dispassionate about this as possible and use that as your negotiation tactic.  You are saying that the price should come down?  Show me the money! You are now a member of BP which means you have access to plenty of investment formulas.  Show the owner how the repairs you are going to need to make and the money you are going to spend on your end and how its going to affect your goals.  Be clear about your goals "I need XX Cap rate"  "I need to pay less than XX month" and show them how the deal as it is currently structured does not allow you to achieve them.  Then make a suggestion as to how the deal could be restructured to meet those goals.
• At this point the owner will either play ball or not.  Remember there is no law that says the owner has to make sense.  He can set the price of his property at whatever he want's (and there are plenty of agents that will do it for him).  If he doesn't then walk away and start searching.  Remember you can't force a deal to happen.  That's why we have the numbers and the formulas.  Stick to your goals and you will be fine.

Any suggestions/thoughts would be greatly appreciated! Thanks!!

• I don't want to sound like a complete negative Nancy here but I would also steer away from the pretty Victorians.  My experience with these is they are a LOT of maintenance.  A lot of them have beautiful intricate woodwork that looks very nice but is a huge maintenance task that from an investment perspective just doesn't make sense.  
• 
• Again this is also going to be your primary home so maybe you are willing to concede a bit of your potential returns in exchange for the "I just love it though" factor but from a strictly investment perspective I would look for something more along the lines of a boring brick flat roofed building.

And lastly:  welcome to BP!!  You are already well on your way to financial success just by becoming a member here :)

Edit for the Italics

Shannon Sadik · Answer

Thank you everyone for your sound advice! This is a great site already. I just can't believe all that I am finding on here! To expand a little, I have been watching the Fairport market for a while but not many rentals seem to pop up. It hadn't occurred to me to have my realtor get a 5 year history of price AND time on market. That would be good for me to understand how long the home might be vacant. I did ask my realtor what she thought it would rent for, but she said she didn't really know until she saw it. (I'm researching everything remotely until I get there).

Account Closed Thanks for your insight on living "with" the tenant. I do need to keep that mind.

The more I think about all of this, the more it sounds as though this isn't the best option for me right now. The size of the house and location may be risky. I was excited because running the numbers with all expenses at an ask price at ~$210K (to cover est. work), the rents tend towards $2000/mo so I could basically live in a big, old home rent free. It cash flows better than most homes I have looked at, even if I rented it for $1800/mo. However, I may not want to live next to my tenant forever, so would need an exit plan if that is the case.

Guess it's back to the drawing board on another location!

Account Closed · Answer

Ok I wrote those out as bullet points but it looks like they didn't show up that way.  Sorry ha.

Account Closed · Answer

@Shannon Sadik Welcome to BP!  You're in the right place, you'll find a wealth of information here.

As for the property, I don't think your return would great here at this price, especially with all the fixes/upgrades on top.  But you can probably expect higher appreciation.  Other areas will cash flow better but may not increase in value much, but it sounds like you're willing to sacrifice some return for a nice home in a nice neighborhood.  If you check out rentometer.com, you can plug in the address and # bedrooms and it'll give you a general range that would be reasonable in the area based on recent rentals.  Are you working with a local agent at all or just browsing online so far?

Some things to consider:

• Are you doing your own management or hiring a company?  If your own, I would at least factor in the cost of hiring it out so that you can be prepared to do that if you find yourself miserable doing it yourself.
• Are the utilities separate or all together?  If together, the landlord is responsible for the whole house.  If separate, you can charge the tenant for their portion.
• Make sure you also factor in reserves for maintenance, capital expenses, and periods of vacancy.
• These are large units, which can be nice to allow you to charge a higher rent, but you're also marketing to a smaller pool of renters.  I would say in Fairport you're probably going to be focusing on families, because I don't see many 20 somethings wanting to go in on a rental in that area.  So not only mainly families, but families that need 5 bedrooms, which narrows your market even further.  You may have lower turnover, but when you do, it might sit a little longer than average.  Add to that the fact that it's a 5/1 and it's an even tougher place to market, so that second bathroom becomes more crucial.
• Even if you reach a point where you move out and rent both sides, your return might not be great.  If you plan on being there for a while and making it a home, then maybe that doesn't matter to you anyways.  But then again, plans change :)

Kent Stauffer · Answer

@Shannon Sadik

Hi Shannon, wanted to give you some feed back.  Fairport is an very nice area and an in demand rental market.  I have 3 properties in the Fairport Villiage.

I actually looked at the house you are referencing before it was listed on the MLS.  The owner had it on Craigslist last summer.

I decided not to pursue it mostly because of the kitchens.  They are outdated and VERY small, especially for the size of each unit.  They maybe okay in a 1 bedroom apartment but when you are talking about a 4 bedroom that means that they are most likely to be too small for the amount of people that would occupy it.  A lot of the square footage was on the 3rd floor also.

I would say the most rent you could get is $1500.  The owner actually wanted to rent his occupied side but didn't want to own anymore because he is out of town for several months a year and doesn't have time for the up keep or to manage the other side.  He offered to pay $1200 / month.  At that rate my analysis said I would loose money.  I think I had figured out that I would have to get it around $200,000.

Being an owner occupant may change the story since you are looking for a Victorian.  But once you get to a certain size the law of diminising returns kicks in.

Generally a 2/2 duplex with 1000 sq. ft. each in Fairport with just cosmetic updates needed will sell fast around $150K and you can expect to rent for between $900-$1100 / month.

Bob E. · Answer

Welcome to BP and good luck with your purchase!  Looks like you will  be getting  out of the heat (my wife and I are realtors here in Phoenix so we know the weather).

For $90 you can upgrade to BP Plus membership and use the rental properties Analyzer tool.  I would try using that and plug in you numbers as if you were going to rent out both sides of the house, then play with the numbers by adding in rehab costs and, finally, lower/adjust the price until you show a reasonable return of 8% or so.

When you are done you will have a very professional looking package showing what you think the property is worth and why.  The tool is very simple to use and you should be able to do all the work in 20-30 mnts.

I would be careful about adding in the cost of adding a second bathroom, it may not be typical for this market so if you over inflate your rehab costs you will lose credibility.  Your realtor should be able to find a contractor that can give you rehab costs and a real quote to include with your analysis and offer.

Good luck.

Colleen F. · Answer

Fairport is a nice Rochester suburb. My husband grew up there and still has family in the area but I don't know the rental market. The best way to get a good idea is to price rentals in the area.  Look for what appears and goes away on craigslist  and listing services. Call relators to find this type of unit and what they charge for it.  If you decide to go for it ook at what kind of rehab would be needed to make the rental work and budget for that. It you are doing the rehab yourself remember the vacancy will be longer in the property.    A two family is a good option for helping with the mortgage but the numbers are different then a straight rental.  You can analyze two ways-see if it works with what you are willing to pay on the mortgage or analyze it as if both units were rented. That being said I know people who have gone into a two family without understanding what it means to be a landlord and then don't like it. Make sure you know what you are getting into. You can't escape your tenants if they live next door. I grew up in a two family and sometimes it can get tiring.

Rochester (Fairport), NY Multi-Family Home. Good Deal or No?

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