Looking at an investment property in Huntington, never been to WV but the figures look good, almost too good, whats up? (Morgantown: apartments)

[athimble]

Heya, this is going to sound really ignorant as I don't know much about the state except it's in the bottom rungs economically, and it's one of the only places where house prices haven't fallen significantly...
But whats the go with rental returns there? For eg: Multi-Family Home - HUNTINGTON, WV, 25705 - Realtor.com

The mortgage is $229 per month but the rent is $975 between the two units. Thats out of control.. the rent is 4 times higher than the mortgage! Either of the two units renters could pay the mortgage off for half of their current rent... How do you get into a situation like this? I understand the properties like this aren't classy stuff.. but from a rental return persective.. I'm almost holding off because it sounds too good to be true.. like the agent is lying.. I guess $100/wk rent isn't so bad.. and I guess people find it hard to save, even the 5-10k for a deposit on a 50k house, but it's pretty crazy.
There is a uni in town, would it be uni students living in "multi family houses" or does that apply more to something like this: Multi-Family Home - Huntington, WV, 25701 - Realtor.com

Is it a bit of a silly idea to invest in WV this way? What aren't I seeing from a locals perspective? Why are rents so high but mortgages so low?
Any help much appreciated.

[snorpus]

I'll take a couple of guesses on this.

1. Yes, a lot of the rental demand is from university (Marshall) students. They wouldn't want to make the commitment to a mortgage, even if they had the money. By the way, in figuring returns, you might have to account for the property being vacant 2 or 3 months every year.

2. It's probably originally a single-family dwelling, converted (legally or illegally) to multi-family. The mortgage might have been taken out years ago (hence the low payment) as a single family; rather than refinance when the property was converted, the owner just kept the original mortgage, since the rates, terms, conditions, etc. of a commercial mortgage are probably less favorable than for a single family house.

3. If it's old, it might need a lot of repairs (or the current owner sees a roof, a furnace, etc. looming).

[tbailey1138]

Huntington is RIPE for investment right now. There are many properties currently being renovated downtown like some of the really nice old buildings and they are turning these into apartments/condos for downtown living. There are also many other properties, such as the ones that you listed, that are very cheap and have good structure to them, they just need some upgrades and to be well maintained. A lot of times, land lords will rent out properties at rates like you listed but they bought the property cheap and they don't maintain or improve them. This makes for maximum profit but then when it comes time to fix the place up, they unload it on someone else rather than putting the money in it themselves. If fixed up, these properties would still be inexpensive but they would be more attractive to renters based on visual appeal and you could still easily turn a profit on them. There are also several properties close together that could be purchased rather cheaply, torn down and new apartments/condos built in their place. There is some of this going on now and those doing this are seeing quick returns and they are filling up quickly. With Marshall University's current growth and the new growth going on downtown, Huntington could definately use more investment like this. I would LOVE to be able to do some of this right now but I'm not at that point in my life yet. Maybe in the next few years though. Hope this helps with your question and let me know if you have any other questions.
Tim

2008: What to look for in the year ahead - Huntington, WV -- The Herald-Dispatch
Downtown Huntington bustling with activity - Huntington, WV -- The Herald-Dispatch
Downtown apartments, lofts becoming popular - Huntington, WV -- The Herald-Dispatch
Downtown Huntington is Booming in Business

[Christi_in_WV]

If you would like, I could refer you to a Realtor in the Huntington Area.
Christi

[David Kennedy]

athimble: Please call Christy..her number is 304-BR-549....ask for Junior...

Congrat's Christi on getting your license...hope you have a great career.

[harborlady]

Originally Posted by tbailey1138

Huntington is RIPE for investment right now. There are many properties currently being renovated downtown like some of the really nice old buildings and they are turning these into apartments/condos for downtown living. There are also many other properties, such as the ones that you listed, that are very cheap and have good structure to them, they just need some upgrades and to be well maintained. A lot of times, land lords will rent out properties at rates like you listed but they bought the property cheap and they don't maintain or improve them. This makes for maximum profit but then when it comes time to fix the place up, they unload it on someone else rather than putting the money in it themselves. If fixed up, these properties would still be inexpensive but they would be more attractive to renters based on visual appeal and you could still easily turn a profit on them. There are also several properties close together that could be purchased rather cheaply, torn down and new apartments/condos built in their place. There is some of this going on now and those doing this are seeing quick returns and they are filling up quickly. With Marshall University's current growth and the new growth going on downtown, Huntington could definately use more investment like this. I would LOVE to be able to do some of this right now but I'm not at that point in my life yet. Maybe in the next few years though. Hope this helps with your question and let me know if you have any other questions.
Tim

2008: What to look for in the year ahead - Huntington, WV -- The Herald-Dispatch
Downtown Huntington bustling with activity - Huntington, WV -- The Herald-Dispatch
Downtown apartments, lofts becoming popular - Huntington, WV -- The Herald-Dispatch
Downtown Huntington is Booming in Business

Tbail if huntington is anything like charlestons situation (and I don't know for sure because I haven't physically gotten past barboursville yet), they don't need outside investors, they need owner occupied investors. Outside investors don't take care the way a true owner does. The difference between being a slummy flip this house mgmt vs doing the honest maintenence required.

To the OP; Despite being affordable mortgage vs rent, my ear to the ground heard local renters saying they didn't have confidence that they wouldn't be laid off from work. They're reluctant to be tied into a mortgage. They also weren't in the position to shoulder a massive financial strain like replacing a roof or a furnace. They prefer to stay flexible with the economy, retain the ability to migrate for higher wages due to gas prices, and not carry the liabilities of ownership. Should housing prices jump to $800/mo, easy math would change their minds. The $975/mo is likely some sort of gated community or condo setup for upscale living. Well maintained garden apartment setups are at about $650/mo with modest ammenities and aren't having the vacancy rate the lower part of the market is having.

[David Kennedy]

Morgantown saw this problem bite them in the butt last year...great rental market potential for the distressed properites..investors began coming in from Pittsburgh, Columbus and Cleveland...bought up a lot of old shacks and rented them out...Lawsuits and pressure on the landlords remedied the problem in about 1 year.
Renters sued the hell out of the Landlords and the City of Morgantown added 5 inspectors to quell the pressure from the mom and dads who were paying the rent for those fire-traps.
City Hall prevailed and a lot of housing was condemmed and torn down...going green?

These same lessons need to be learned elsewhere...Huntington is ripe for this type of renewal.
There exists entire streets in Huntington near Marshall Universtiy that need to be removed. I'm for emminent domain exercises to add to this great campus.

Morgantown gave the owners a choice...tear them down and build new or we will tear them down and charge you for the demolition...ask the W##ners...they tore down their firetraps and built new structures...certainly an improvement for the city.

The average rental cost per bedroom in Morgantown is about $1000 per month...

[tbailey1138]

Originally Posted by harborlady

Tbail if huntington is anything like charlestons situation (and I don't know for sure because I haven't physically gotten past barboursville yet), they don't need outside investors, they need owner occupied investors. Outside investors don't take care the way a true owner does. The difference between being a slummy flip this house mgmt vs doing the honest maintenence required.

To the OP; Despite being affordable mortgage vs rent, my ear to the ground heard local renters saying they didn't have confidence that they wouldn't be laid off from work. They're reluctant to be tied into a mortgage. They also weren't in the position to shoulder a massive financial strain like replacing a roof or a furnace. They prefer to stay flexible with the economy, retain the ability to migrate for higher wages due to gas prices, and not carry the liabilities of ownership. Should housing prices jump to $800/mo, easy math would change their minds. The $975/mo is likely some sort of gated community or condo setup for upscale living. Well maintained garden apartment setups are at about $650/mo with modest ammenities and aren't having the vacancy rate the lower part of the market is having.

You are definately right about needing local people who care about the area to own properties that have been converted into rental property, especially around the University. There are a few areas in Huntington though that need the resources of an outside developer to come in, tear down a few blocks and build a nice new development. Pullman Square is an example of this as are many of the new buildings at Marshall. Outside people come in and build a new structures and get them going and then they revert to a more local owner once paid off. This has been a good investment and has helped to make Huntington a nicer place. Finding a good balance of local and outside investment is the key.

[harborlady]

Originally Posted by tbailey1138

You are definately right about needing local people who care about the area to own properties that have been converted into rental property, especially around the University. There are a few areas in Huntington though that need the resources of an outside developer to come in, tear down a few blocks and build a nice new development. Pullman Square is an example of this as are many of the new buildings at Marshall. Outside people come in and build a new structures and get them going and then they revert to a more local owner once paid off. This has been a good investment and has helped to make Huntington a nicer place. Finding a good balance of local and outside investment is the key.

Sounds right to me. I think I'll add upgrading the landlord/tennant laws to prevent decay from occuring in the future. I've seen wonderful homes brought back to life, in keeping with historical flavor of the area. Nice to see those listings stand tall.