Vermont Investors - Where are Investors Buying?

Question

Hi All,

I just wanted to introduce myself, find out where folks are buying properties, and tell you about a deal I have in the works in Addison Vermont.  I am mainly focused on building some capital through wholesaling with a long term goal of having a rental portfolio.

Right now I have a hot deal locked up in Addison, just southwest of Vergennes on a quiet country road.  It is a 3/2 raised ranch with 3 car detached garage on 1.1 acres.  Town water, septic, oil furnace and farm land surrounding the property.  I am estimating the after repair value at about $150k and am currently selling for $83k.  It needs about $20-30k in repairs.

Now the interesting part, I already have an exit strategy lined up for this deal :)  While I have been marketing the property I found a retail tenant/buyer who is looking to move into the property ASAP.  He is a self employed mechanic and his wife is an RN.  They are currently renting and their landlord just let them know that he is moving back into the state and they will need to move out.  They were pre-qualified for an $80k manufactured home recently and will have no problems getting a traditional mortgage on the property after repairs have been completed.  The kicker is they are willing to move into the property ASAP on a lease option with an upfront 8.5k non-refundable lease option fee and $900/month over 12 months to purchase January 2017 at $113k.  THEY WILL DO ALL THE REPAIRS AND CLEANUP TOO.  How often do you have an exit strategy on a fix and flip before you even close on the property?  Seems like a home-run and I will definitely take this one down myself if I don't have any other investors interested.  Does anyone know any cash buyers in Addison County, VT?

I would love to network and connect with some VT investors or private money lenders.  Let me know if a deal like this sounds like something you might be interested in.  I am doing some marketing in Chittenden County and have some potential deals in the works up there.

Nathan

Darrell Lee · Answer

I've bought 14 properties this year and paid cash for all of them, so I guess I must be a cash buyer. But I require a minimum of 100% ROI but much prefer to shoot for 200% ROI and usually get knocked back as I usually have to buy sight unseen. Several houses have needed new roofs, heating systems, entire replumb and or rewiring. But I still make at least a 100% ROI because I buy right. I buy crappy bank REO's that are un-financeable as rates are so low, most buyers are using leverage to raise their ROI's. I usually pay around 20-25 cents on the dollar i.e. comps indicate a ARV of around $150k I will only pay $30k.

Your deal would cost about $85k to make a share of about $25k is way too skinny for me. It would make sense for you if you bought it on high leverage. If you buy it for 10% dp and use your tenant's money for the DP... oh wait, Vt you are required to put the tenants deposits into a separate account for them, so you can't use that money... VT is better for long term hold than fix and flip, though I know a couple that do exactly that... fast fix and flips in Vt...

Nathan Hill · Answer

Hi Darrell,

Thanks for the response.  I have the property under contract for quite a bit under $85k, which is just my wholesale sell price if another investor was interested in the deal.  I am looking at an ROI of about 80% of purchase price when I close on the deal myself.  The rent will not go toward the purchase price and I have a hard money loan lined up to fund 80% of my purchase so out of pocket cash is pretty minimal and I don't think I will have a problem using the lease option fee which I don't think is considered a traditional rental DP (still need an attorney to look at it all and confirm).

I followed some of your posts here on BP and came across your FB page.  Looks like you have been busy!  Good to see someone else working the more rural communities around VT/NH.  Most of the folks I have talked to so far stick to Chittenden or Franklin county.

My main strategy is to more or less wholesale properties to cash buyers.  I have been doing some marketing but have found calling up FSBOs on CL to be the most lucrative so far.

Nathan

Darrell Lee · Answer

That sounds a little similar to my original Vermont investment strategy. However, my atty advised against Vermont rent to own/lease option plans because in the event the deal goes awry, you have to foreclose... not evict the tenants in possession. But in your case it is probably worth the risk as you are getting a substantial up front money. Also, there's the Vt Land Gains Tax in addition to ordinary income taxes.

Are you applying any of the rent towards the option? Are you buying and closing the deal and then selling to them? If so, then you have closing costs on the buy and closing costs on the sale. Still if you are leveraging the deal, then your ROI should be good with  acceptable risk. I'm not too thrilled with Vt tenant/landlord laws... to me, they seem to favor the tenants too much.

One property I bought in Springfield Vt, paid $19k spent about $16k on repairs so I have about $35k into it with an ARV of around $75-90k. I had planned to do a rent to own until my lawyer torpedo'ed my plan. I cancelled a signed lease deal for $1,200/mo and had the deposit in hand. The town had me jump thru incredible hoops to bring it up to code... When you have a rental property, it becomes classified as a "Public Building" and is subject to a bunch of code requirements. I had to replace a 2nd floor window that had been there for 100 years... modify all the stairways and deck railings... hard wire smoke detectors and on and on... I'm probably the only idiot that applied for permits and did all the work to code...

Next year, I plan to acquire more NH properties and less Vt properties, though I bought a couple of high profile Vt properties in town, (both made the newspapers, the school was the front page headline story) so I probably won't realize my plan to make NH my primary residence as they hove no state income tax... I bought a 12,000s.f. school that I will convert into my residence and company HQ. Should I ever sell, I'll convert the top floor to 3 units and that way it would be eligible for favorable 1-4 unit FNMA/FHA/VA conforming financing...

Good luck on your deal!

Vermont Investors - Where are Investors Buying?

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