All Forum Posts by: Jon Deavers

@William Lee

Hi William. I second Dan's advice about local banks. If you'd like a referral to the small business lender I work with feel free to PM me and I'll send over contact info. 

A couple of notes: when talking to the lender, you'll want to be able to back up your numbers so be prepared to show how you arrived at your after-repair value, your rehab costs, your holding cost budget, profit margin or income expectations, etc. 

Best of luck!

Hi @Randy Frederick

Richmond is a pretty specific market for small multi's. They tend to only exist in a handful of neighborhoods and fall into one of two main categories: prestige location driven or income driven. Examples of each would include areas like the Chamberlayne Ave corridor which are almost entirely driven by income or income potential. Prices there tend to reflect that dynamic as there are very few owner-occupied properties along Chamberlayne (south of Azalea anyway). 

The prestige locations would include areas like Church Hill (near Broad), the Fan, and Museum district to name a few. These are valued more like a single family home would be using comparative analysis. Because of this, multi's in these areas will never line up with the "rule of thumb" analysis criteria most investors are looking for. People who invest in multi's in areas like this typically have a different strategy in mind than pure annual cash-on-cash returns. They are interested in the "evergreen" nature of the Fan market where demand is less affected by macro-economic trends. Basically, these areas can be more liquid and are more likely to appreciate. There are legitimate reasons for taking this route, like if you are a high-earner and just need to "park" cash in a safe investment in exchange for lower returns or perhaps as a hedge against vacancy, rental market fluctuations as the rental demand in these areas is limitless even in challenging economic environments. 

Something to consider would be two single-family rentals that generate the same amount of rent. So for $200k you could realistically find a couple single-family homes in a suburban section of the Richmond market that would each rent for $1700/month and generate the same revenue for a $100k lower acquisition cost. That would also put you at a lower cash outlay since most residential lenders are going to want %30 down for a quad that is non-owner occupied. So $150 down for the quad or $80k down for two singles at %20. 

That's just some food for thought. Feel free to connect if you'd like to discuss the multi-family market in more detail. Best of luck!

Hi @Amy H. 

A lot of what the lender will be able to do for you will depend on what kind of projects you will be working on. Most residential lenders (i.e. traditional mortgage lenders) only have a couple options for non-owner-occupied loans. Generally these would be %20 or %25 down conventional loans. Some lenders offer rehab loans but those are typically geared towards owner-occupants who need to escrow funds to complete rehabs in order to live in the home. 

Traditional mortgages are great options for more or less turnkey rental properties because the rates are low but if you are financing rehab deals you will want to find a different loan product. 

I would suggest exploring starting a relationship with a local commercial lender. Commercial portfolios are infinitely more flexible. They are able to analyze a deal as a business transaction and will make decisions based on profitability and security of the asset as opposed to a Fannie Mae backed residential mortgage which is more concerned with preserving the property's market value. I work with a small business lending team at Xenith bank in the Richmond area. Feel free to PM for contact info to the loan officer. 

I would suggest talking to @Daniel Harnsberger with Steadfast Property Management.

@Colin Eilts

Welcome to BP! I'll extend an invitation to Richmond as well if you're ever in the area and would like to catch up and learn more about the city and surrounding areas. We've seen the market heat up over the last year but there are still far better deals here than the DC area. Like you said it all comes down to having a working knowledge of the area and what it has to offer. Best of luck with your investing career!

@William Stinson

Hi there and welcome to BP! You may find it difficult finding a lender to lend against raw land without a plan to develop it. Where is the lot located? Depending on location and zoning (or potential for rezoning) have you considered building a multifamily on the lot? It may be helpful in a couple of ways: now you have an owner occupied property so you can accept gifts for downpayment, the land itself can be part of the downpayment/collateral for the build, you'd still be able to subsidize your mortgage with the other unit(s) and if you own your current home you'd have another built-in rental property. I know some local builders I could introduce you to if you'd like to explore that option. Best of luck!

Hi @Patrick Merone

Welcome to BP from RVA. I would second the recommendation for the book on estimating rehab costs. It's available through the site here under the education tab. Feel free to reach out if you want to chat about the local market. Best of luck!

Hi @Welton Needam

Locally, the folks at Richmond Mortgage, LLC have a great reputation.

@Chase Schmidt

Hey Chase! Check out Xenith bank. Text me if you need a loan officer. I have a couple good relationships with their small business portfolio officers who have written several loans for SFR's. They can fund commercial, development, land, etc.

Hi @Chris Messersmith

Some helpful tips for buying 2-4 units are to make sure you have your agent write some additional terms into the contract. A lot of purchase agreements make no mention of existing leases or security deposits conveying. If you're going to be the new landlord you want to make sure you write it contingent upon review and satisfaction of existing leases and that you make mention that existing security deposits convey. Not all leases have a security deposit attached but if they do you would rather that money come from the landlord who originally signed the lease so you don't come out of pocket when the lease expires. 

Most of the standard language around condition and inspections will work the same but you will want to make note in the personal property paragraph (or bill of sale/addendum) that you note each individual appliance that conveys. So stove X2, refrigerator X4, etc.

Other than that, the transaction will look very similar to a standard residential transaction. One further note: make sure to get keys to every unit! :)