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re: Information for my fellow Real Estate Investors
Posted on 4/26/16 at 10:32 am to Fat Bastard
Posted on 4/26/16 at 10:32 am to Fat Bastard
quote:
That's fabulous. so roughly 35k profit after all rehab costs/labor and closing you helped on?
That is about right. We still have another estimated high $6,000 or so for our closing cost/realtor fees as well. We just got back their inspection report and I think we are going to spend and extra $1-2K fixing a few things but nothing serious.
This will not be all profit for us though. We have cleaning up to do with our LOC. When we have bought homes on our LOC and then rolled them into a more fixed product, we have had a few grand left over due to appraisals not giving us high enough to cover 80%.
This was an REO and we did inspect. We did know about the termite damage and knew it was going to cost around $6,000 to fix and get an exterminator contract. We have seen a few cash only deals but I want my inspector to look at anything we buy.
This post was edited on 4/26/16 at 10:37 am
1
Posted on 4/26/16 at 10:53 am to stevengtiger
Sounds Great! Are you doing the renovations yourself? Would love to see some before and afters to see what adding 23K looks like. It sounds like you guys are very intentional and smart about your improvements.
Posted on 4/26/16 at 11:02 am to AUjim
quote:
Are you doing the renovations yourself?
We have a contractor that works for my dad's employer. When we get him on a project, he and his guys are fast, do a great job and are reasonably priced.
I do have a few pictures but nothing that would really do it justice. Putting $23K into a 1,200 sqft house can make it look brand new.
ETA: We try to be smart about the improvements. We probably spend too much on some things. We bought brand new stainless dishwasher, frig, microwave, etc.. We have done that on both flips with the goal of making it the nicest house on the street. There are homes in the neighborhood that have been on the market for 60-90 or longer days and we had a full price offer within 8 days of getting on the market. We may make a few grand less than we should but we feel it's worth it.
This post was edited on 4/26/16 at 11:07 am
Posted on 4/26/16 at 2:03 pm to stevengtiger
That is fantastic margin especially in that time frame. If you can keep finding deals (easier said than done) just increase the volume of aquisitions. I know an old guy who was happy with 4k a flip.....as long as he was able to do 100 of them. true story. all based on volume. I don't have the time to mess with that right now. Wish i did.
Posted on 5/6/16 at 2:56 pm to Fat Bastard
Has anyone here jumped feet first into REI with a large multi family property 8-10 unit? Assuming the actual numbers work, of course, is there anything that should sway us away from looking at this as opposed to starting with single family or small MF properties to cut our teeth?
We're looking at one and would like any pros/cons/advice.
We're looking at one and would like any pros/cons/advice.
This post was edited on 5/6/16 at 3:04 pm
Posted on 5/6/16 at 7:36 pm to poochie
No way id buy a multi family as my first. Are you paying cash? It better be under $30k a unit and rent for $800 or more IMO. It has to be over 2.5% rent/ month to purchase price IMO. Multi family you are generally talking about a higher risk and higher turnover. You have multiple hvacs, multiple kitchens, etc.
Posted on 5/9/16 at 10:57 am to poochie
quote:
Has anyone here jumped feet first into REI with a large multi family property 8-10 unit? Assuming the actual numbers work, of course, is there anything that should sway us away from looking at this as opposed to starting with single family or small MF properties to cut our teeth?
We're looking at one and would like any pros/cons/advice.
Lots of chinese investors invest in nothing but MFH because that is what they are used to in china's urban areas. Go through all your checkpoints as laid out in my original post. is it a high rental area percentage wise? are the normal rents good enough? would you need to do work to raise rents? is raising rents doable? comparables? occupancy rate? decent area? Then run all your numbers and see what the PCF would be per unit.
Yes, MFH are better per unit than SFH. also they help you with exposure. If you buy right you can have some vacancies (depending on number of units bought) without causing you negative cash flow. Yes you will pay more down (if not a cash buy) and you SHOULD pay higher taxes on MFH. A con is with MFH your exit strategy is pretty much selling to investors and not people who rent a SFH from you and offer to buy one day. That's happened to me aplenty. Now with multi you've got more furnaces, A/c's, water heaters, etc. have all that inspected closely before you buy. It's more maintenance but with more cash flow it should even out over time. If you are doing 1 year and 2 year leases that's no different than SFH leases so I do not see it being any riskier turnover wise. You are actually less exposed for reasons I've stated above. When a SFH is empty there isn't any cash flowing. not so with MFH depending on units. I would be more careful and vigilant though before buying a MFH. You want great renters who can fulfill their leases and renew leases and spread the word about your units.
Bottom line is you have to get the cash on cash return and the monthly PCF that you want but being realistic. Are you planning on managing this yourself?
This post was edited on 5/9/16 at 11:05 am
Posted on 5/14/16 at 10:27 am to baldona
quote:
No way id buy a multi family as my first. Are you paying cash? It better be under $30k a unit and rent for $800 or more IMO. It has to be over 2.5% rent/ month to purchase price IMO. Multi family you are generally talking about a higher risk and higher turnover. You have multiple hvacs, multiple kitchens, etc.
buying a multi-family would be way better starting out than a single house. If you can find something with a decent cap rate, and room to move rents up in the next couple years and get a 7 year 20 year am loan you'd come out way ahead. you could have your cap rate up in a couple years and flip it and make that money as well if you flip it. I've never understood why anybody would mess with single rent houses seems like way to much work.
take on a partner for the down payment pay them 5% on their down payment money and let them own a % and you can walk in with no money down.
This post was edited on 5/14/16 at 10:31 am
Posted on 5/14/16 at 10:57 am to buschlitepapi
I'd be very weary investing in multi-family right now. Cap rates are about as low as they can possibly get and most in the know don't expect it to last very long.
Also $30k a unit or under? Seriously? If you want a bunch of tenants that are going to kill each other or don't speak English fine. You're slumlording it at this point. You can do this fine in SFR because you only need to find one tenant and you can be very selective. If you're trying to fill a 10-15 unit apartment complex you're not gonna be able to be as selective.
I think a much better price point to get into is the $50-75k a unit. The tenant base on this would be people who live nice normal lives, can afford rent, but don't necessarily want to live in ridiculously priced Class A apartments.
My plan would be to get in with somebody who has experience buying MFH and try to invest with them. You're better off owning 10-15% of a $1,000,000 property than you are owning 100% of a 8 unit $20k per unit complex.
Also $30k a unit or under? Seriously? If you want a bunch of tenants that are going to kill each other or don't speak English fine. You're slumlording it at this point. You can do this fine in SFR because you only need to find one tenant and you can be very selective. If you're trying to fill a 10-15 unit apartment complex you're not gonna be able to be as selective.
I think a much better price point to get into is the $50-75k a unit. The tenant base on this would be people who live nice normal lives, can afford rent, but don't necessarily want to live in ridiculously priced Class A apartments.
My plan would be to get in with somebody who has experience buying MFH and try to invest with them. You're better off owning 10-15% of a $1,000,000 property than you are owning 100% of a 8 unit $20k per unit complex.
Posted on 5/14/16 at 10:57 am to buschlitepapi
You very rarely can 'flip' mfh, the play there is for rent and the only people that will buy them are those that plan on renting them. Therefore your market cap is whatever rent is going for. Maybe if you get it dirt cheap.
The big money on single family houses is made on resale. You rent them out, get your tax breaks, pay them off, and then sell them after 10-15 years. It's very hard to make great money on resale with multi unit buildings so that idea is a wash.
Furthermore, it's much harder to get multiple good or even decent tenants in multi unit buildings unless you are in a college town or downtown area where the location allows it. But take your typical medium size town or suburb and the tenants that you will get are either too lazy or otherwise unable to rent something better. Just drive by most 4 plexes.
Then again, if the price is right compared to rent and you don't mind the work then the money can be good. Most of the time on say a 4 plex it takes somewhere between 2 and 3 to pay your bills/ mortgage. So you want to make money with 3 tenants and having the 4th should be pure gravy. The other issue with a 4 plex is many banks won't do a traditional mortgage so your rates may be higher as they are often a commercial loan type of thing.
The big money on single family houses is made on resale. You rent them out, get your tax breaks, pay them off, and then sell them after 10-15 years. It's very hard to make great money on resale with multi unit buildings so that idea is a wash.
Furthermore, it's much harder to get multiple good or even decent tenants in multi unit buildings unless you are in a college town or downtown area where the location allows it. But take your typical medium size town or suburb and the tenants that you will get are either too lazy or otherwise unable to rent something better. Just drive by most 4 plexes.
Then again, if the price is right compared to rent and you don't mind the work then the money can be good. Most of the time on say a 4 plex it takes somewhere between 2 and 3 to pay your bills/ mortgage. So you want to make money with 3 tenants and having the 4th should be pure gravy. The other issue with a 4 plex is many banks won't do a traditional mortgage so your rates may be higher as they are often a commercial loan type of thing.
Posted on 5/14/16 at 11:08 am to baldona
i'm talking more of a 40 unit plus type complex. Those low price per door places usually have the best tenants imo. they pay cash and usually are to broke to move anywhere else, just make sure your property manager keeps the place picked up and clean on the outside. we make a good clip each month just on late fees as well.
of course the key is to buy it right and make sure the majority of the units need to be price increased to be at or a little below market for their class.
if the place is at that 80k per door range, chances are it's already stabilized and being run good and not much room to add value. at that point you are just buying cash flow.
i'm always shocked when i see some of these type places rent rolls they'll have the same tenants for years and haven't had their rents increased so they are paying way below what they should.
the thing i see a lot of lately is these retail centers with super cheap leases left over from the recession days when owners were dying to get tenants they'd sign them up for cheap , now the 5 year leases are coming up and they are having shell shock from going paying what they were to what rents are doing now. you'll lose some tenants but in the end you'll be making a lot more money kicking them out.
of course the key is to buy it right and make sure the majority of the units need to be price increased to be at or a little below market for their class.
if the place is at that 80k per door range, chances are it's already stabilized and being run good and not much room to add value. at that point you are just buying cash flow.
i'm always shocked when i see some of these type places rent rolls they'll have the same tenants for years and haven't had their rents increased so they are paying way below what they should.
the thing i see a lot of lately is these retail centers with super cheap leases left over from the recession days when owners were dying to get tenants they'd sign them up for cheap , now the 5 year leases are coming up and they are having shell shock from going paying what they were to what rents are doing now. you'll lose some tenants but in the end you'll be making a lot more money kicking them out.
This post was edited on 5/14/16 at 11:15 am
Posted on 5/14/16 at 3:43 pm to buschlitepapi
Most of my replies were to something like a 4-plex or 2 4-plexes together for a 8 unit regarding someone with little to no experience with this type of thing. Once you go past 4 units though you are talking a lot more of a commercial operation than the average guy that just owns 5-10 rental properties as a side gig.
Theres a 4 plex foreclosure by me for $149,000, two story each unit is a 2/1.5. It'd rent for like $700-800/ unit. Neighborhood is about a C. Next door is a dental office so that's a plus, but the rest of the street is way downhill from there. In 6 months i'd jump all over it, but I just got done with a couple big projects and it would require a lot of work by me for 30-60 days. After that though, it would be a pretty good machine I think. Even loaning 100% of the money at 6% which I could do better, you are looking at probable cash flow with 3 rented. If its around in a month or two which I doubt it will be then I'll take a serious look.
How does insurance work with these? I don't have any experience with MFH so its small details like that that could make or break you.
Theres a 4 plex foreclosure by me for $149,000, two story each unit is a 2/1.5. It'd rent for like $700-800/ unit. Neighborhood is about a C. Next door is a dental office so that's a plus, but the rest of the street is way downhill from there. In 6 months i'd jump all over it, but I just got done with a couple big projects and it would require a lot of work by me for 30-60 days. After that though, it would be a pretty good machine I think. Even loaning 100% of the money at 6% which I could do better, you are looking at probable cash flow with 3 rented. If its around in a month or two which I doubt it will be then I'll take a serious look.
How does insurance work with these? I don't have any experience with MFH so its small details like that that could make or break you.
Posted on 5/15/16 at 12:00 am to Fat Bastard
And if you live in Texas, I suggest a tech startup from Austin called Listing Spark. Sold my house with no listing commission which saved me almost $9,000, only cost me a few bucks a day to get on the mls. I learned about them from the Investor Underground group here. Everyone there uses them.
This post was edited on 5/15/16 at 12:09 am
Posted on 5/16/16 at 8:47 am to baldona
quote:
How does insurance work with these? I don't have any experience with MFH so its small details like that that could make or break you.
You have to shop the insurance, but the last few deals i've done Nationwide is far and away ahead of everybody else on price for some reason on MF.
Posted on 5/17/16 at 5:02 pm to buschlitepapi
I've been reading a lot about REI after this thread. Have a few questions:
- How much capital did you start out with?
- When do you recommend using a management company?
- How hard is it to get a loan with student debt, really good credit, and a decently significant salary?
- Are there any good links to tax blogs about REI?
- How much capital did you start out with?
- When do you recommend using a management company?
- How hard is it to get a loan with student debt, really good credit, and a decently significant salary?
- Are there any good links to tax blogs about REI?
Posted on 5/18/16 at 1:21 pm to TheOcean
quote:
How much capital did you start out with?
50k
quote:
When do you recommend using a management company?
any out of state investments OR something outside of a 50 mile radius of your home. I invest all over and i use property managers. With more properties in your portfolio they lower your management expenses. It is all written off anyway at tax time. If you buy right to begin with in GOOD markets all across the USA you will still make good cash flow just maybe not what it was a couple years back. Anyone saying the property management is killing all their monthly PCF bought wrong in the beginning. Now would it be nice to get that % for management back each month? sure, but do you want that headache? Are you close enough to do it? All factors to consider. Make sure you vett them and have backups just in case.
quote:
How hard is it to get a loan with student debt,
IDK
quote:
really good credit, and a decently significant salary?
shouldn't be a problem. You should be able to get plenty conventional loans of course following fannie mae rules once you get over 4 as restrictions tighten. You are allowed 10 conventional. After that it is private lending or cash buys unless you roll everything into an S-corp(which i just found out about).
quote:
Are there any good links to tax blogs about REI?
here is a link
LINK
This post was edited on 2/8/17 at 9:52 am
Posted on 5/18/16 at 1:45 pm to TheOcean
quote:
- How hard is it to get a loan with student debt, really good credit, and a decently significant salary?
My wife and I both went to law school and the student debt wasn't a problem when we bought our first house. I had only been working for 2.5 years and she only 6 months.
It all depends on what your debt obligation is on that debt.
This post was edited on 5/18/16 at 1:47 pm
Posted on 5/18/16 at 3:01 pm to Teddy Ruxpin
Going look at a MF property tonight. This will be the initial visit. What are some things to look out for/questions to ask? Is it acceptable to ask the tenants questions (like if have they had any issues with the property)?
After this visit, we will request rent rolls, current leases, and maintenance records
After this visit, we will request rent rolls, current leases, and maintenance records
Posted on 5/18/16 at 3:43 pm to yellowhammer2098
quote:
I think a much better price point to get into is the $50-75k a unit.
Even if he makes no money? lots of markets are over priced and don't cashflow at all. plenty markets do cashflow. markets are different price wise. Don't just issue a blanket statement for every market in the USA.
As a matter of fact the best times are over for SFH now in most markets that were hot(at least that i've seen and per many others at Think Realty). it was shooting fish in a barrel in 2013 and 2014. not so much now. now home prices in plenty previously hot markets have risen substantially and some markets have flat petered out now as far as cash flow. Wait til the next crash and scoop up a bunch at rock bottom prices. buy right or do not buy at all. That's how so many lost their arse in 07 and 08.
now there are still plenty cities with good cash flows but not like a couple years back. I wish i could have bought even more back then. I'm still looking but the cash on cash returns have dwindled in many markets. I cannot see spending 40k 0r 50k more than i ususally spend to make LESS cash flow than i get on cheaper properties.
This post was edited on 5/18/16 at 3:52 pm
Posted on 5/18/16 at 3:51 pm to poochie
quote:
Going look at a MF property tonight. This will be the initial visit. What are some things to look out for/questions to ask? Is it acceptable to ask the tenants questions (like if have they had any issues with the property)?
After this visit, we will request rent rolls, current leases, and maintenance records
I think most things were covered up top. You might want to scroll up. come back and tell us what's the asking price and for how many units. Then run your numbers and see how much PCF you would get per unit monthly. WIth a lot of units sure it will be less MAYBE than a SFH(depends) but SHOULD be more % wise based on COC return per unit. Over 4 units and you will need a commercial loan. Good luck.
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