All Forum Posts by: Mary Bailey

@Faye Omar Thanks so much for the advice! Those are definitely all things I'll be sure to consider before taking action. I want to be able to sell the property eventually! 

Geneseo is also about 30 miles south of Rochester. There are commonly weddings/business events held in the area. Plenty of people to market to! It's 10 mins off 390-S (for those who know the area)

I plan on holding for years, if all goes well! I plan on living there for only a year or two, though. My other exit strategy would be to sell to someone else interested in renting to students.

And the college in question is a SUNY (State University of New York). And in NY, state schools just announced  that they will be doing this whole "free tuition" thing. And as soon as I heard that, I kind of assumed that people would begin taking more interest in the area. So I'm hoping that that helps keep vacancy rates LOW!! :)

Hi everyone, new investor here. Been learning a ton from BP. Haven’t purchased my first property YET, but want to do so asap. I want to lay out a scenario for anyone looking to give some advice to a newbie! I’ve decided that if I’m going to make it in real estate investing, I’m going to have to get creative. I’ve picked out a market I’m extremely familiar with; Geneseo, a college town in upstate NY. It’s EXTREMELY safe, fairly inexpensive, and quiet. I went to college there, and although some people say it’s “in the middle of nowhere,” the town itself has grown considerably in recent years and I’ve ALWAYS seen the potential for real estate investing there. I want to know if you would think the same.

A typical student can expect to pay at least $2800 per semester for a room in a house off campus (within walking distance). However, let me just say that the houses that rent for $2800 are usually the grossest ones. For something that feels more like a “home,” something clean and well cared for, a student would unquestionably pay about $3200.

I would occupy the property. I know that occupying the property would give me the freedom to rent without permits (I think? please correct me if I'm wrong, I'm still learning!), and it will also help me qualify for better financing (FHA loan most likely). Also, with me living there, I am pretty confident that things would rarely get "out of hand" or that my tenants would cause excessive damage/wear to the property. I'll be sure to screen carefully.

I would probably give the tenant the option to either a) pay $3200 per semester upfront (x3 units x 2 semesters = 19,200 annually) or b) $550 a month for 12 months (19,800 annually). There are pros and cons to each: if the tenant pays per semester, it costs less for them in the long run and it’s better for me because my rent is guaranteed, but I also lose out on a few hundred bucks and run the risk of summer vacancy; if the tenant pays monthly, it costs them more in the long run and it’s riskier for me if they don’t pay, but this way I don’t have to worry about vacancies during those summer months since the lease will be year-round.

Also… parents as co-signers. Very helpful.

The property/properties in question are around $140-150k, 4-bedroom, 1+ bath. I haven’t selected a specific one. They’ve all been on the market for a while. Taxes in this area average around $3-4k annually. Because it’s my first place, I’m less concerned about making a banging return by purchasing a house for dirt cheap, and more concerned about getting some positive cash flow and getting some experience in home-ownership. So for me, buying something turn-key (or something that requires VERY little work) just seems like the best option at this time. 

One property in particular, listed for $139,900. I've been estimating a purchase price of $130k, 0% down (with down payment loan assistance from FHA).

Following are my estimations:

P&I: $700 (calculated from FHA low interest loan, $5.22 per thousand dollars of loan amount): 5.22x130 = 678 (but I rounded up in case I can't get a purchase price of $130k)

PMI $75

Insurance $50

Taxes $274 (annual TOTAL (city, school, village) tax on this property is $3294)

Cap ex/replacement reserve $200

Utilities:

Water $45

Gas/Electric $170

Garbage/snow removal $50

Total: $1564

So overall, the monthly income from my student tenants SHOULD cover my operating expenses and give me a little extra each month (which will, of course, be divided and saved/re-invested).

Now here’s where I want to get a bit more creative…

AirBnb. We’ve all heard of AirBnb and how profitable it can be in tourist cities. BIG cities. But what about tiny small towns in western NY? I checked their website, and there are literally TWO AirBnbs in this town. There’s been hardly any competition. And please note: there’s a Quality Inn about a mile down the road, and they just recently (within 5 years) built a brand-new Hampton Inn because of the heavy traffic that comes to town for school events. I checked the two AirBnb rentals that do exist: one of them has hundreds of reviews (since it’s the only one around) but it’s still MILES away from Main Street and only a private room! And it’s completely booked up. So in my mind, I’m thinking, if I were to get a property closer to Main Street, I should see even better results. Not only that, but I’ve reached out to students/alumni that I know from Geneseo, and they have all expressed to me that there’s an incredibly high demand for AirBnb in the area. Our only big competition is that Hampton Inn down the road, and most everyone agrees that staying within walking distance to Main Street is much more desirable than staying in the commercial area (there’s a Walmart, a few fast food joints, etc) a few miles away. My feeling is… there’s a need for more AirBnbs in this town, for people who don’t want to stay at a hotel. I want to provide the service before more people realize there’s a need for it and they start popping up everywhere.

I suppose there’s nothing wrong with testing it out, since that really IS the only way I’m going to know if it’ll provide some great returns. But it sounds good in theory, right? I’m imagining all of the parents (and I’d probably provide discounts to alumni) visiting from out of town who would check AirBnb just to see if there’s an alternative to staying at an overpriced hotel far away from the school/nightlife (that part is key.. the nightlife in this town is in the village. People are looking for accommodations they can safely walk to).

I know it isn’t a “typical” market, and the house might not go up in value at all.. but the numbers have always made sense to me. Do they make sense to you?

And with the connections I’ll make to people in the area, who knows, I might be able to sell the house to one of my renters (when they graduate!) a few years down the road. That way they can rent out to future students as well!

Thanks for reading! 

Hi everyone,

Is Rochester a city where I should consider an AirBnb? Does anyone have experience with one around here? What sort of returns do you see each month? What neighborhoods/towns in Rochester get the best returns? 

I've been looking at different properties in the area, some in the city and some in neighboring suburbs. I've considered Irondequoit, based on its proximity to SeaBreeze and other summer attractions near the lake. There are a lot of properties being remodeled in that area that I've noticed, yet they're still selling for about $115k. Is it wrong to assume that an AirBnb in that area could generate positive cash flow over the summer? Based on my calculations, the potential for profit could really go up if I were to, say, rent a 4-bedroom property to students for 10 months, and then rent it on AirBnb for the summer. I would love to hear about anyone's experience doing this!!! 

For other student housing options, I'm looking at East Rochester/Fairport for Naz/Fisher students (I attended Fisher so I know what those students are looking for and how to market to them), the 19th Ward for U of R students , and Henrietta for RIT. 

I've also considered long-term rental properties in the Farmington/Victor area (among others), where taxes and prices are lower but the school district is pretty good. 

Like most other new investors, I don't yet have the means to finance a property, but what I DO have is time, knowledge, and drive. I grew up in the area and know Rochester like the back of my hand. I'm trying to learn as much as I can so that when I finally do secure financing, I'll be 110% ready to take action. I'll most likely end up with an owner-occupied FHA loan for that first property and build up from there.

I know I'm all over the place. But I'm looking forward to hearing from those with more experience! 

I'm a newbie too! 

Something that helps is the 2% rule. They talk about it a lot on BP, just because it's so easy to remember.

In a nutshell, a "good" deal is one where gross rental income is greater than or equal to 2% of the purchase price. 

So on a $100,000 purchase, you'd wanna rent that for $2,000 a month. Of course there are many other variables dictating whether or not a deal is "good." But for a purchase price of $245,000, a rental income of $1900 seems a bit low. Then again, I'm also a beginner, so I could be way off. We will learn together! 

Got it! Thanks everyone!

Wow @Andrew Postell thanks so much for that clarification. That makes a lot of sense. Let me make sure I fully understand: let's say (for convenience sake) you have a 4-unit property appraised at $150k, and the rental comparisons suggest that each unit can rent for $600/mo, totaling $2400 potential gross monthly rent. So a bank would, in theory, use $1800 (75% of gross rent) as the potential qualifying income. Do I have the basics down? Is it common, even for small/local banks, to offer financing like this? It seems like a great idea in theory. I'm sure each bank has its own loan regulations and terms though, so my next step will be to shop around and educate myself a bit on overlays. I had never even heard of overlays before! Thanks for spreading the knowledge. 

One additional question: will banks require that each "unit" is its own apartment? In other words, could this method be applicable to a single-family residence, where individual bedrooms are rented out, as opposed to a multi-family? 

Hey everyone! My name is Mary and I'm preparing to purchase my first investment property. My plan is to "house hack" my way up the ladder, starting by purchasing a 4-bedroom house and renting out 3 of the rooms to local college students. However, I have a question about financing: I've been looking around a bit at different lenders, but due to my lack of an extensive credit history, I'm not sure I would qualify for terms that would be in my favor (or qualify at all). But I seem to remember being told by a representative recently that if I ALREADY had tenants lined up to occupy the home with me, then the bank would use that information (the expected rental income I'm assuming) to make their decision of whether or not to finance the purchase. Is this true? Would getting approved for financing be easier if I already had tenants ready to sign a lease?

I live in NY, and because I'm a first time homebuyer, I was hoping to go the FHA route with 97% financing, potentially down payment assistance (I have a comfortable savings but would rather save it for holding costs/emergencies than spend a chunk on a down payment).

Any advice is appreciated. Thanks!

Thanks for your response, Steve! Those are all really helpful tips. 

If you don't mind, I do have another question: I've been shopping around a bit for different lenders, but as I mentioned briefly before, I'm not sure I would qualify for terms that would be in my favor (or qualify at all). But I seem to remember being told by a loan representative recently that if I already had tenants lined up to occupy the home with me, then the bank would use that information (the expected rental income I'm assuming) when making their decision of whether or not to lend the money. Do you have any experience with this? Getting approved for a loan more easily when you already have tenants ready to sign a lease?