New Richmond OH rental property

[Mohamed Okasha]

Hey Guys, I am a beginner investor from Louisville, KY. Very excited to join this community.

I am looking for a multi family property to buy under $150k. Looking in Louisville Metro, Southern Indiana, and Cincinnati area. I found a property in New Richmond OH. Does anybody know anything about that location? The property is 6 units. All studio and 1 bed rooms. Curious about growth and vacancy rates in the area. Also it’s in a flood zone.

Much appreciated.

[Raphael Collazo]

Hey Mohamed!

Welcome to the BP community. I'm a big fan of multi-family investing and I actually bought my first investment property (4-plex) last November. My girlfriend and I renovated the property and currently live in one of the units while renting out the others to tenants. This strategy, "house-hacking", is talked about in detail on the forums and in many of the BiggerPockets books. Are you looking to do something similar with your investment or are you purely buying the property for investment purposes? One of the benefits of being an owner-occupant is that you may qualify for better mortgage terms with your lender. If the property is 4 units or less, you may qualify for an FHA loan that only requires a 3.5% down payment at closing. Along with that, you may also be able to utilize a 203k loan which allows you to finance the renovations of the property, roll those costs into your home loan and amortize them over 30 years. This can be a great way for a new investor to get into an investment property without a large up-front investment (20-25% down payment + potential renovation costs).

As far as your potential investment property, I would be careful about buying any property near a flood zone. Currently, the federal government is subsidizing the cost of flood insurance but the government has made it clear that they plan to phase out the subsidies over time. This could significantly increase flood insurance prices across the US and if not properly accounted for in your calculations, could cause a positively cash-flowing property to go in the red. 

Along with that, properties that have more than 4 units are considered "commercial" properties by lenders. This means that you won't be able to qualify for conventional loans to fund the investment. Instead, you'll have to apply for a commercial loan which has different terms and conditions than conventional loans. Prior to doing your calculations, I would talk to a mortgage broker to determine what your monthly out of pocket cost would be for a commercial loan with the mortgage you're looking to take on. I'm in no way saying that this is not a great deal, it's just important to consider all the variables when making such a big investment decision. Hope this information helped and I'm excited to see you around the forums!

All the best,