All Forum Posts by: Matt Vogt

I think that if you're cash-flowing, it doesn't matter if the area is growing or not. Your management costs and hassle will be reduced being in close proximity, and you know the market segment. I don't think you have significant risks, and it seems that the ROI is definitely there. I would pull the trigger.

I'm from Rochester NY originally and spent the first 25 years of my life there up until recently. The reason the cap rates are so high are because rent's are reasonable and the property values are very low. I have a SFR college rental and my parents have another, they are making approximately 20% cap rate.

As for areas to invest, down by the U of R is a great area (19th ward) with decent prices (decent duplexes for ~80K). My property is in Brockport NY, however I've been watching the 19th ward for the past several years. 

If you look at some of the 30K - 50K multi-family properties in the NW side of the city you'll probably see decent cap rates there, but you'll be dealing with a much worse part of town. Over by Ave A and Ave D is where a great majority of the shootings and crime is. I would advise against that area unless you cant avoid it. 

Another place worth looking at would be East Rochester. I grew up a few towns over and have had my eye on those as well. The houses are fairly inexpensive, but in good proximity to some of the nicer suburbs (Pittsford, Fairport, Penfield). Best of luck.

Good to know Wayne, thanks for filling me in. I assume that 1200-1400/mo would be a per/unit rent correct? To get into a 600K property with a 5% conventional loan, you'd need 30K plus closing costs, and you'd be making $4800 gross (including rent from the 1 unit that's owner occupied). Run the numbers and see if it's a profitable deal. I'm more of an advocate for buy and hold investing, so bear my bias in mind. 

Do you own the place that you live in? If you're going to have this as a primary residence, it may make the most sense to put as little down as possible (5% conventional or FHA), buy, rehab, rent or sell (depending on the market and how much equity you have).

Another option would be buying a duplex/triplex/quadplex (you can finance it with 5% down on a conventional mortgage), and do the same thing. The thought behind the 4-plex is that you would have both cash flow and potential for capital gains being tax-free upon selling it (if you lived there 2 of the last 5 years). 

Good luck

Cathy, 

The way to make this economically worthwhile would depend on how long you would want to hold the property, if you're buying it turn-key or if you have rehab to do to it, etc. 

In my experience, I talked my parents into buying my college rental house when I was a Junior (2 years off campus to go), it's been 6 years and my parents have done very well with that house. They continue to rent it to college students and are very pleased with the return and relative ease. I love college housing and think it's an excellent way to invest in real estate, however there are certainly drawbacks (shorter lease terms, possibly irresponsible tenants, etc). 

I would do it in your shoes (given the right deal, etc), just have a plan in place for dealing with it after your daughter graduates. 

Good luck,

Matt

Could you convert it into a few units? Maybe it could be turned into a 3 or 4 plex that would be rented by future lawyers. Although you might not make as much as a boarding house, it would be FAR less work intensive once established. I would look into those possibilities before going into a boarding house situation, as I think that would be way too much management and headache for the rewards. 

As others have said, it's probably best to utilize your money buying one or two multi-unit buildings.  When the time comes to get another personal residence, use 5% conventional financing to maximize your leveraging. I would be looking at multi-family properties as you have a good deal of capital to invest with. even 100K of cash could get you a 500K property (@20% down). I would start seeing what kind of multi-families you can find in your chosen areas, then model them for profitability. It's usually good practice to be overly conservative and to retain excess capital for repairs etc, so I wouldn't go out and spend all of your cash at once.

Best of luck.