All Forum Posts by: Bob Oliver

I have rented to students in Williamsburg for 10 yrs now. Fortunately, I lived 3 blks from the college (Wm&Mary) and bought near my house until it too became a rental 5 yrs ago. I am fully leased 6 mos prior to lease starts in 6 properties with 8 units, so essentially I have zero vacancy and always have had. Leases run 6/1 to 5/31 with sublets allowed. Knock on wood, I have had few serious problems with students. I read them the riot act about partying, they pay on time, appreciate the opportunity to live off campus, and we generally get along fine. Most of the problems are with being messy but they clean up before they leave or lose the deposit. i manage all the properties and we pay ourselves.

My question is: is it a stretch to consider the 50% rule to actually be closer to the 35-40% under these circumstances or is the reality that it is 50% over the life of the investment pretty much no matter what?

Thanks Jon. i didn't make it clear that the asking price was not even under consideration. I can get it for less than $200k but probably not $140. I don't see how we can ignore the fix up because the rents aren't there until the cottages are rehabbed and rented and it definitely won't fly at $1400/mo.
I will keep looking.

Here is what I have. 1200SF, 3BR, 1BA brick ranch on 1.3Ac in the Williamsburg, VA area. it sold in 04 for $105k and was a rental then for $1250/mo. Owner took off the market, gutted, new wire, copper, insul, flooring and rock and moved in for 3-4 yrs. for sale now at asking of $250k. Property also has 2 out-units cottages needing rehab that have kitchen and baths. i estimate $10k to rehab, $5k each, to make occupy-able.
By the numbers:
Rents: $2300: House $1400, Cottages: $450 ea
vacancy at near 0.0% because it is another student house that leases 6 months before start.
loan: 25% dwn conventional, 6%
3% closing
$10k improvements
I come up with about a $160,600 1st D/T
Taxes are $0.77/100
insurance about $300/yr.
I can see offering a max of $195k.
By the 50% rule I get about $185 positive monthly.
does anyone else see this as a potential deal? Obviously, by the 2% rule it is a walk-away, but isn't that better suited to $1000 GOI or less?
My analysis software has this deal at about a 15% C/C. Are there other finance suggestions?

Excellent thread. My concern with the solo401k is non-recourse financing (NRF) as it seems it is fairly difficult to obtain. i see at least one option to that from David's responses with seller held NRF. other tips are appreciated, as i am looking for rental sfr to purchase through my i401k. nothing identified yet but i am looking.

Jon,
Typical rents are currently averaging at $400/bedroom. Minimum bed count in my units is 4. All my leases are for 12 months with renewal options so it behooves me to rent to sophomores who will be there 3 years. I encourage subletting, especially during the summer when the lessee might be at home, although many are gone all summer and send me a check Jun-Aug. just to insure they have a house in the Fall. after reading about the 2/50 rules, I feel like I have bought poorly on some of my units, but I bought for appreciation because in Wmbg we are done. There is no more room for more housing or construction so what is there is what you get. Prices have been insulated, even after 2008, although they have suffered slightly. The first of the 7 was bought in 2001 for $124,000, rents today for $1550, and appraises out at around $250,000 today. We have refied it once to finance unit 6, although my last 3 purchases have been bought low enough that i was able to appraise into my equity so to speak, with only closing costs out of pocket.

Thank you everyone for the warm welcome. Your interest is greatly appreciated.
A little about my market. Williamsburg is unique in many ways. If you have been here you know how beautiful it is. But the political climate is something else, especially as it pertains to the relationship between the City and the College. Love-hate almost sums it up. Flash back to the '30s. Colonial Wmbg (CW to the locals) and Ole JD Rockefeller, made the town with the restoration. With that came their influence and control over the appearance of the town, entry corridors, preservation districts, code restrictions, etc., etc. Flash forward. College rentals have become the thorn in the side of the City. Not enough on-campus or off-campus housing, students disturbing the neighborhoods, the usual. Hence, rental restrictions were developed that included a max of 3 unrelated per dwelling unit (a unit essentially defined as a metered unit with a kitchen). Next came a rental inspection program. Landlords fought it tooth and nail, but the City got it passed, albeit watered down. It began with annual inspections and passed with every 4 years and a $50 permit fee. Inspections are for 'code violations' such as peeling paint, locks on windows, ingress/egress, grounded outlets, smoke alarms, AND too many occupying the place!, etc, etc So, while the fun has not been entirely removed from the market here it has been made more interesting. Kinda like dodgeball.

Having said all that, Mr Shah's suggestions are excellent but unfortunately not quite doable, at least 3 blocks from campus, in the City limits, where my units are. The code and inspections were intended to prevent this type of house stuffing and has been fairly successful (but not entirely). The surrounding County is another thing altogether, but that is part of my breaking out of my comfort zone. For 5 years I have been able to stand on my street corner and see all 7 of my units. That is comfortable, needless to say. I like college rentals and have begun to research other college towns as possible markets. As to the suggestion of going with the IRA, I chose the i401k because with only $77k in my 401k, I expect to have to leverage my investments through it. My understanding was that income and gains/losses leveraged through an i401k is not subject to UBIT, where they are in and IRA. Am I wrong? Perhaps the tax benefits of the Roth SDIRA and UBIT outweigh the i401k and I should delve deeper into that.

Hello to the BP Community. I am a newbie to the forum and very excited about and interested in what I have read, as I can see there is a lot of experience out there that I know I can benefit from. I am a REI, civil engineer and Broker in Williamsburg, VA. I got interested in real estate and RE investing through my Mother who helped raise 3 sons with the extra income from having rentals and putting us on renovations from about the age of 9. She was a high-end interior designer with 3 built-in installers, so I saw all types of houses and grew to appreciate their value. I bought my first SFD in '87 and now have 7 units near the college of W&M. It is a good niche for me that offers zero vacancies, about standard maintenance and until recently, excellent appreciation. I don't have to rent to what I call 'professional tenants', there are no evictions, and rent is almost guaranteed by the parents because they want their precious to have a house.
I came to join BP because the RE development company I am currently employed by is terminating the 401k plan and I am taking control of my 401k funds through a solo401k. My fund assets will be distributed in mid-January and I am looking at breaking out of my comfort zone by possibly investing out of my market in good cash flow rental areas, or learning about wholesaling or investing in promissories, mortgages or D/T.
That is me in a nutshell on Christmas day. I look forward to working with all the talent I see on this forum and learning a great deal along the way. Any insight into some of the opportunities I have described will be appreciated.