All Forum Posts by: Veronica Giggers

As an experienced property manager, I have no qualms about one-bedroom units. Steering clear of them is outdated advice in my opinion. 

One bedroom units are very popular and easy to keep rented to single people and/or couples, because they are usually a relatively low cost housing option. They experience much less vacancy that a 3/2 home, for example. 

I do, however, have qualms about leasing to homeless or near homeless individuals (veterans or otherwise). Let me be clear: I am a retired military veteran myself with 22 years of service, and I do think it's a noble and honorable idea for you to want to help homeless veterans with housing. 

But I am also an experienced property manager with experience with the VA's VASH program, as well as similar programs for non-veterans. As such, I have grown jaded over the years and can tell you that in my personal experience 90% of these tenants don't work out. Often due to non-payment as soon as their benefits run out, and other times due to drug and alcohol abuse or mental health issues.

Just make sure you aren't looking at it through rose colored glasses, and understand what you are getting into. Managing tenants on these programs requires 2-3 times as much staff time and energy as managing a normal class B to C rental, and these units will very often experience much higher vacancy, collection, and eviction-related losses. 

That doesn't mean you shouldn't do it. These are just the cold hard facts. 

This is a question that a lot of investors ask themselves. My first questions would be, how much is the purchase price and what do the units rent for? Turnover is going to be more on a 1 bedroom, no doubt so take that vacancy into consideration when running your numbers. 

Also, while it is nice to help out the homeless (I love the fact you want to help vets), your units could take a beating and require serious rehab after. Not all homeless will trash your place, just like not all section 8 tenants will but there is a higher possibility then if you were renting to A-B renters.

@Veronica Giggers

It all depends on the market. Small units thrive in some markets. Broadly speaking (as you mentioned), you have more turnover. Smaller units are much easier to rent though since there are fewer options. If you are in an expensive market, these will be in great demand.

I have found that the larger the units, the less turnover there is; which is really the goal of multifamily investing (tenants stay 24+ months). It seems, however, that you have a unique plan for this property. How are you planning on testing the tenant demand?

@Christopher Oliva, insurance will cover the liability with the properties, and is sufficient for most investors. Financing for properties held by LLCs will hinder your growth for some time. For example, I need to submit my State STR license, my operating agreement, the articles of incorporation and show percentages of ownership for the entities. We use a S Corp for holding company, and it manages the LLCs. So I have to show that ownership. Rates on investment mortgages are in the 8% range right now, and often require 25% down, have a 5 year pre-payment penalty.

For mortgage sequencing, I recommend starting with the Fannie Mae and Freddie Mac mortgages, conventional ones. Then non-QM or DSCR. I stopped using conventional mortgages when the amount of reserves became onerous. You could go to 10 mortgages with one spouse and 10 mortgages with the other spouse. And then...LLC and non-qm/DSCR.