Ricky Beliveau didn’t always think of real estate as an investment tool.
“I grew up in a standard house in Connecticut and that was all I really thought of real estate as: the house that you live in,” the Boston-based developer and founder of Volnay Capital told Insider.
His senior year of college, he enrolled in a real estate finance class and started learning about various property-investment strategies. He was particularly interested in multi-family real estate and focused his capstone project around it.
“I actually picked a building that was on the market very close to where I was renting and used that as my example for my capstone,” said Beliveau, who majored in finance and already had a job lined up at Wellington Management. “I ran the numbers, put the financials together, worked with my professor, and at the end of it, I was like, ‘Wow, this could be very lucrative.’ At that point I decided, I want to try to do this after graduation. I’d like to buy a rental property.”
In December 2010, six months after graduating from Northeastern University, Beliveau acquired his first multi-family property. A year later, he bought his second.
By 2015, his real estate investing business reached a point of profitability where he felt comfortable quitting his finance job.
“For anyone who’s trying to find financial freedom, the most important thing is getting that first rental asset,” said Beliveau, who now runs several real estate-related businesses, including a property management firm and brokerage. Beliveau personally owns 94 units. Between Volnay Capital’s portfolio and properties that he owns with partners, he has over 1,000 units, according to an asset sheet viewed by Insider.
Getting into real estate in today’s market is “very hard,” he said matter-of-factly. “It’s gotten harder over the years with interest rates and values being up significantly. But there are still opportunities out there.”
Beliveau shared two strategies that he used to get his start and that any rookie investor can use to acquire their first rental unit.
1. Utilize an FHA loan to buy an owner-occupied property
FHA loans are government-backed mortgages that give people the opportunity to buy a home with down payments as low as 3.5%. It’s how Beliveau and many other investors Insider has spoken to afforded their first properties.
One of the requirements of using an FHA loan is that you have to occupy the property you’re buying and use it as a primary residence for at least one year.
You can still rent a portion of the property, however, to offset your mortgage and live in your own home at a discounted price or even for free.
That’s what Beliveau did: He bought a triplex, moved into one unit with his girlfriend (now wife), and rented the other two.
“The numbers worked out perfectly,” he said. “The mortgage on it was about $4,000 a month and the two other units were paying $2,100 a month.”
Over the next year, he renovated each unit and updated the building from a nine-bed, three-bath to a 12-bed, six-bath. Thanks to a year’s worth of rental income and his finance salary, Beliveau was able to afford his second property: a quadplex that he also financed with an FHA loan.
“This was back when you could still have multiple FHA loans,” he noted. “They changed that rule and now you can only have one FHA per person.”
The major advantage of owner-occupied rental properties is that your home actually becomes an asset.
“Owning real estate is an extremely important part of building wealth but the problem is, when you look at your home, it’s not really an asset,” explained Beliveau. “It’s not creating money for you. You’re paying a mortgage. It’s an expense.”
However, if you’re an owner-occupant and your primary residence doubles as a rental property, “that’s an asset,” he said. “You’re paying down a mortgage with rental income, not the cash out of your pocket. Even if you’re not living rent-free — even if you’re paying $500 a month for your unit, but that unit is $3,000 a month — you’re still creating value.”
To achieve financial freedom, Beliveau stresses getting your first “rental asset” — not just your first rental unit.
2. Raise capital from friends and family
A main advantage of financing a property with an FHA loan is lowering the amount of upfront capital you need, since it allows you to get in with a 3.5% down payment. The difference between putting 3.5% down versus 20% down on a $250,000 home, for example, is significant: $8,750 as opposed to $50,000.
Still, you might not have enough in savings to afford a low down payment.
“So you’re going to need to talk to people to get them to invest in this project with you,” said Beliveau.
The key to raising money is how you approach your potential investors, he added: “The mistake a lot of young people make is presenting the deal in a nonchalant way that’s not detailed or in a model. You need to treat it like a business. You need to show them what the deal is, how they’re going to make money, and what their returns are going to be.”
That’s exactly what Beliveau did when he presented his first deal to his mom, who became his sole investor. He couldn’t afford the down payment on the triplex himself so he showed his mom all the numbers he ran on the property for his capstone project.
“She had just inherited a small amount of money from a family member who had passed away and didn’t really know what she was going to do with it,” he said. “I brought her my paper, walked her through what I wanted to do, and I said, ‘Why don’t you put the money in as an investor. The plan will be to give you cash flow into the future.’ And she trusted me.”
Beliveau still owns the property, which he purchased in 2010 for $930,000.
“Today it’s probably worth $2.6 million. The rents were $2,100 when I bought it; now they’re $4,700 a unit,” he said. “And my mom still is the only partner in it. It’s been 13 years and she still gets a check every month.”