All Forum Posts by: Nisrine Shehadeh

Hello Nisrine, 

Luckily, having 300k of capital that you don't know what to do with is a good problem to have! Here are some thoughts that I have.

a. If you put 300k into a 600k property just to break even or get a couple % cash on cash return, your return on equity would be terrible. At that point you are way better off investing in a different asset class. 

b. Any property near you that is less than 300k probably needs to be torn down or is going to have the worst tenants, which means a massive headache to manage. 

c. I am an investor in Charlottesville and I can tell you it is not an affordable market. It is impossible to make a long term rental deal cash flow here unless you get the deal of the century. 

An additional point is that self managing properties is hard work and takes a lot of energy. Based on your post it sounds like you may not want this at this stage of life.

Luckily, I am not just here to bring bad news, I think you have several good options. 

a. Invest in a syndication. If you don't know what a syndication is there are a lot of good resources on BP that could help educate you. To put it simply, syndications are real estate groups or companies that find, manage, and operate large scale deals and raise capital for these deals from people like you who become "limited partners". If you pick an experienced operator you will probably get around a 10% cash on cash return and an IRR of closer to 20%, and sometimes the tax benefits of owning real estate pass down to the limited partners. If you are interested, I know some great syndicators who are raising capital and I would gladly connect you with them.

b. Partner with someone who is experienced. This is similar to syndication but on a smaller scale. With this scenario you might partner with someone who is doing short term rentals, flipping, the BRRRR method, house hacking, mid term rentals, etc. These are all methods that take more time and energy than traditional LTRs but offer higher returns. These are great strategies to use in expensive markets like NOVA and Charlottesville. By partnering with someone on a deal like this you could dip into those great returns but without the headache of doing it yourself! I actually do deals like this in the Charlottesville area and am looking to expand into other markets. The deals that I have done are yielding returns for my investors that are in the ballpark of 60-90% cocROI! While not every deal is quite so good, I am typically looking for something that will give my investors at least 25% ROI. If you are interested in hearing more or have any other questions about real estate generally, send me a connection and I'd be glad to help.

c. Enter real estate as a private lender! When rates are high, it makes it harder for investors to find a deal that cash flows. However, private lenders these days are getting a 12% or higher return on their money. I am doing a deal right now using some private money and am paying 12% (with no points up front) and I know that I am getting a great deal. I am always looking for people to partner with in this regard but there are lots of other people on BP who are also looking for private money so I am sure you wouldn't have a hard time. 

I hope this has been helpful, let me know if you have any more questions!

@Nisrine Shehadeh

Since you noted you are a newbie I would not buy multiple properties or lower value properties.

I would look to buy a 500-600k property in areas Russell mentioned (he knows his stuff), keep some cash on the sidelines in case property needs some repairs and get a property manager to manage it.

35% down is currently the break even point where rent and PITI are the same in the DC area.

In your situation Id buy a rowhouse in Petworth, Shaw, Columbia Heights, 16th St Heights, NOMA, or Kingman Park in DC.

@Nisrine Shehadeh

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms. Many believe unrealistic assumptions and often apply those assumptions to the wrong property classes.

In our OPINION (always verify yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenants: Majority will have FICO scores of 680+.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenants: Majority will have FICO scores of 620+, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should often be used to also cover nonpayment & evictions.
Tenants: majority will have FICO scores of 560-600, many blemishes, but should have no evictions in last 2 years. Verifying previous 2-years of rental history very important!

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenants: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

i'm on the sidelines but looking to make a move probably in the winter time when the market should be a bit quieter. I'd opt B, If you really wanted to get into real estate. I know you mentioned your new at this but just make sure you plan out what your getting yourself into. It's definitely passive income if you get a fairly newer place. Check out pand handle of WV along VA border. Numbers work much better, I love this area and have seen massive price value explosion but now the numbers just don't work. If I could go back to 2008-2013 when I really started I would have put down even less if I could and acquire more doors still obviously squeaking out a profit.

@Nisrine Shehadeh

welcome!  i really like the way you've laid out your question - very thoughtful.  and, as a former resident of northern virginia, i understand the challenge you're facing.  the price points are just really high.

since i don't know any more than what you've said in your post, i just want to give you some things to think about, rather than tell you specifically what to do.  what you do is going to depend on your goals, the time you have available, and also what you want.  despite BP being so inspirational... you don't have to invest in real estate if you don't want to.  you could invest in index funds AND real estate.  a lot of us do.

so, with all that said, i don't like a.  you definitely don't want to sink all of this cash into a single investment as a new investor... i just don't think that makes any sense.

and, i like c... but, you said you don't have a lot of time or flexibility in your job.  to find a good deal, buy it and set it up for management is going to take time. there's no rush here... you don't have to spend the 300K just because you have it on the first one or two properties you see. if you have weekends free, you could make trips to some of the markets you mentioned and look at as many properties as you possibly can. and, there might be REIA meetings you could go to in the evenings that would fit with your work schedule. it's tempting to think you'll miss out if you don't buy. but putting in some initial work will pay off.

some of the benefits of real estate aren't solely in the return.  i like the control over my properties that i have, for example.  and, you can use passive losses from your portfolio to offset active W2 income and reduce your taxes, even if you're not an RE professional.  but like i said - index funds are good, too.

i hope this helps, feel free to respond here or DM me if you have more questions.