All Forum Posts by: Ashley St. Gelais

Hey Mecia,

Depends on what type of property you are looking to buy. If you want a single family home to live in, the best option with 0% down payment and flexible credit requirements is USDA/Rural Development.

Andrew is right for low money down options for multi family financing FHA is the best option. It does require 3.5% down payment but they also have some what flexible credit requirements. Compared to other lending programs that require 25% down on a multi family, this one is a great option with little down payment. This is a great opportunity to buy and manage a home that you live in to learn the ins and outs of investing and management.

If cash is an issue, wondering if you have any creative options... Such as borrowing the money from a family member or friend, borrowing against your retirement plan, cashing out part of a retirement plan, taking a loan out on an asset you already own outright, such as a car, or even taking out a personal loan at a bank or credit union.

Hope this helps!

Hey Phillip! Great to meet you on here.  
I have a few questions for you.  Do you own any other rental real estate? Or would this be your first go at it?

I own a property management, but our service area is just around Burlington.  That being said, all of our current investments are in the same area because it's the market we know well and feel comfortable investing in.

Over the years, we have looked at investing in other areas of the state and even country.  We've decided to invest locally because we can manage it ourselves and because we know the area and are confident on the returns.  The local market for housing is strong in the BTV area and we've been nervous about that in other locations.

What we have found to be helpful to attract quality tenants in our area is to improve the units to attract people who can afford to pay a little more. We tend to attract the cream of the crop and we take good care of both the tenants and the buildings.  Not sure if that would work in Windsor, but thought I'd put it out there.

All real estate deals come down to analyzing the risk verses reward. I'd suggest running your numbers with at least a 20% vacancy rate (just to be safe) to make sure the deal still cash flows even if someone stops paying rent for a bit or you have a vacant unit.

Also, researching local management companies, their rates and their average vacancy rate/turn over should help to provide some additional insight into the area and what to expect.

I hope this helps! If you have any other questions feel free to ask. 

Ashley

BTW, Thanks Nick for the mention.  : )

Hey @Zach Parker,

Super exciting that you are getting into real estate.

As an FYI with conventional financing - it may be difficult to use the rental income from a property to help you qualify with your debt to income ratio, if you don't have 2 years of experience as a landlord.  A way around this however, is to use FHA financing to purchase a multi family when you'll be living in the home. This program allows you to use 75% of the income from currently rented units to qualify for the home.  Typically lenders can lend any where in a state or sometimes more than 1 state. So the lender doesn't have to be in your hometown, but look for someone in your state.

I'd suggest starting off with your friend to give him a chance and see if he has knowledge about and offers FHA loans... Start off by asking him about the FHA program that allows a down payment as low as 3.5% for a multi family home. Closing costs and monthly MI are higher - but that seems to be a small price to pay to get into a home that produces income and grows in value over time.

The cool thing about starting off this way is you can get the 2 years history of being a landlord so if/when you are ready to buy your next place you'll already have a few years under your belt.

Let me know if you have any other questions!

Ashley  : )

Is this available in Vermont as well? What are the rates and terms?

@Christopher Triolo

Hey Chris,

I read your post last night and had a few thoughts for you.  @Aaron Montague had a great idea about requesting a variance from the association. I'd suggest showing them this has been a 'hardship' for you and put a time limit on the amount of time you'd like to use it as a short term rental. Also - maybe you could offer to do rentals of no less than 1 week to avoid turning it over every few days.

Secondly, wondering if you could structure some sort of rent to own situation where the monthly rent is increased and a portion of that goes to the buyers  downpayment (maybe an extra $200/month so rent it out for $1,400) if they end up purchasing it within a certain period of time.  (That way you'll get some help up front with the cash flow, and you might be able to avoid paying Realtors fees to sell it.)  Worst case scenario if they don't buy it they forfeit the extra they paid in rent and you are free to sell it on the market then...

Not sure if this would work for you - but wanted to put it out there.

A

Hey Sandra,

I am in VT and am a past mortgage lender. The traditional financing options typically require a 20-25% down payment on a multifamily even if you are living in it. I might suggest researching state specific housing authorities to see if they offer a different program.  (In VT it's called Vermont Housing Finance Agency.)

I bought a duplex in 2009 and didn't have the option of borrowing from a retirement plan. So I used FHA and got a pretty good deal on the place. A few years later I refinanced into a 15 year fixed rate mortgage and reduced the rate and dropped the monthly PMI costs because at that time we had 20% equity in the property based on a new appraisal.

I know looking at the bigger picture can be scary - but any loan you get will have interest. Luckily that interest is helpful on your taxes at the end of the year. Just remember, you don't have to be stuck in an FHA loan forever.

Do you think the price on the house is below market?

A

 Hey Jim,

We use Buildium as a property management tool and through this they give us access to run credit and background checks through SmartMove. Tenant pays $12 and it's upload to our system almost immediately.  For folks who don't have internet access - you could bring an iPad with wifi to showings for folks to apply online while at the property.  Or you could bring printed applications with you to showings. Have them complete it and give you the $12 check or cash. Then you enter the information yourself into the system.  Only catch is that this system requires the tenants to give approval for the credit/background check via an email address.

Buildium also allows tenants to pay electronically via a bank transfer and creates your very own best site with your current listings.

Hope this is helpful.

Hey Jerry,

Congrats on buying this place! Often time the first purchase is the hardest.  You had a lot more foresight that I did when I started out... My first purchase was a condo that I thought I'd live in forever.... Ended up selling it for less than I bought it for 7 years later...

I'd suggest taking a look at a few things to see what your next steps should be:

1)  Evaluate the market rent of all 3 units. Are the rents under market? Is there a need in the rental market that isn't being met?  (For example: In our location dog friendly housing can be very hard to find. So tenants are willing to pay a premium for a dog friendly home. We do charge an additional $500 refundable pet deposit on top of the regular deposit just in case...)  Can you do anything to increase the rents?

2)  Have you thought about renting out the 3rd unit and managing the property yourself to build experience and work to possibly increase rents?  This way you can keep costs low and create a positive cash flow situation?  Just be sure to check out the property management advice on there for selecting tenants.  And be sure you understand your state laws about renting.

3)  In the future, a firm game plan with your goal for each property is ideal.  Your end target goal may change over time but getting there could take many different avenues.  : ) That is the fun part.  

Keep on keeping on! And congrats on being a real estate investor!

Ashley

Hey Marvin,

A few thoughts for you... If you are going to start a campaign to find properties in your area - why wouldn't you target multi families instead of single family homes?  Maybe you can even score a few with owner financing if they are ready to get out of the game and don't own anything on their homes.

Also - wondering if there is a multi family agent in your area that focusses solely on multis. There is one here in Vermont and he sells a lot of places before they even go on MLS because he has a buyers list. Maybe have your agent contact him or you contact him directly to get on that list so you can be in the loop about opportunities.

Lastly, are your singles cash flowing well? How do you plan to use the equity? With a line of credit or a HELOC? Or sell? HELOC's can be a great way to use the equity over and over and over again.

May not have answered your question directly, but some food for thought.

: )

Hi Ming,

Great question! I think it really comes down to what each partner is bringing to the table. I am under deposit on a new buy and hold 4 unit rental and am working to find a partner. In this scenario the partner would bring the money to the table (25% down payment and closing costs) and then basically be a silent partner. I am looking for a 50/50 slip on both the ownership of the home (through an LLC) and on the revenue.

We bring:

>Proven property management (though our own company)

>Sourcing the deal

>Expertise in this market and in real estate buy and hold

They bring:

>Cash

We create value and an excellent returns that our partner may not have been able to find some where else.

Hope this is helpful!

Ashley