BiggerPockets

Welcome to BP! Apartments are the hot market at the present time, predicting 7 years down the road that'll tough to predict. With more easing as the Fed announced earlier today there will be a major drop at some point. The drop will hit everything when the Fed stops printing money. In the mean time good luck!

I appreciate it Brandon. Your plan is a good layout, and although I may not follow it step by step, the principles as far as buying up will be very helpful.

@Brandon Turner, congrats, you are famous! I am going to have to check out this PDF now.

@Brandon Turner would the numbers change if we see taxes increase on capital gains/dividends etc? I am assuming this was written in the 2000s when rates were much more favorable compared to what they might be going forward. Thanks!

Hey @Marc Bodinger (And everyone else!)

Like @Jon Klaus said, a lot of my strategy hopes in using 1031 exchanges. Sure, the government might end that someday - but I doubt it, since it is essentially the government partnering with successful investors. They know that good investors, in the long run, will make more money for them than T-bills or other investing opportunities.

I actually wrote the eBook last January or February when I started my old blog. I did, however, develop this idea over the past 5 years. It actually works much better today than in the past, because (in a lot of areas) cashflow is so strong. This could change.

For those reading this thread - I'll give a brief outline of my strategy so you don't need to read the whole book:

Buy cashflowing properties, preferably a 4plex, for $100,000 that cashflows $200 per unit (total of $800 per month) with a 20% down payment. Property should be bought 20% under-value and have room for a 10% appreciation during year one (starting amount and only contribution: $20,000)

Save all cashflow for two years, which is about $20,000 (a little less, but close). Use that as a downpayment on another cashflowing property with the same numbers as above.

Rinse and repeat once more.

Sell all three four-plexes and use the proceeds to buy an apartment building - using the same ratios as above (20% down, $200 per unit cashflow, 20% undervalued, 10% appreciation).

Hold for a few years, saving cashflow. Rinse and repeat.

Million dollars.

Of course, this plan is purely "ideal." However- all the numbers are not unreal. Every property I buy, and many others on BP would agree, have to work out like this.

Is it hard to find these properties? YES.

is it hard to find these properties if you only need to find one property every two years across the entire US? I don't think so.

Anyways, I'll post the PDF in the FilePlace, @Karin DiMauro, for a free download, but this is basically the idea!

The important thing is - this is just a guide. It's not fact, or a "guru" plan. It's just my philosophy, put to real numbers. I think this is important for people to do when they begin - create a plan. It might not work out the exact way planned - but that's okay. If it takes 7 years - awesome. If it takes 10 - awesome. 20? That's ok too.

Hope that helps sum it! Thoughts?

hey @Ryan Nguyen, thanks for the question. If I understand your question right, the monthly income on the hypothetical 4-plex is $2400 per month, but the payment is going to be much less. The payment is actually only about $400 per month. And of that payment, only a very small portion goes toward paying the loan down. The way loans are paid off is kinda strange, called "Amortization" which basically means the beginning half of the loan you pay more interest, and the latter half you pay more of the loan amount down. I can go deeper if you want on this, but I won't bore you :)

Hope that helps and I didn't just completely misunderstand your question. Thoughts?

can anyone tell me where can i get this book?

@Vaishal Patel
http://www.biggerpockets.com/files/user/brandonatbp
or
http://tinyurl.com/amwjh2l

Brian Hoyt

Very plausible and like it says you don't find them that way you increase the property value by 10% it's first year which in turn can increase rent prices. I have 3 quads I am looking at from 99k-119k that rent for 550-650 that I am unable to pull the trigger on yet.

Originally posted by Ryan Halverson:
Brian Hoyt

Did some very brief looking in the area and found these properties

http://www.realtor.com/realestateandhomes-detail/4309-Vinson-St_Fort-Worth_TX_76103_M77694-82961

http://www.rentometer.com/results/es_IVh0z

http://www.realtor.com/realestateandhomes-detail/805-Blandin-St_Fort-Worth_TX_76111_M76104-74075

http://www.rentometer.com/results/HpWxNIhE

http://www.realtor.com/realestateandhomes-detail/329-Blandin-St_Fort-Worth_TX_76111_M76440-12201
^^ Duplex unit 1 has 2 living rooms, convert to 3bd and profit.

http://www.rentometer.com/results/vsBfMvsR

I don't know your good and bad areas but from a quick 30 second assessment these properties all get 200+ per unit with you doing PM duties. If you put a little money in to make them nicer they could get more im sure...Then again I don't know the area.

Ryan,
The first deal is a single unit for sale within a multi-unit building. This is flat out a bad deal for an investor.

The second deal is very likely a duplex converted from an old house and then a second house on the same lot (as apparent from Google Earth). I'd be willing to bet the water and electric are not separately metered, lots of deferred maintenance and total rent would be around 900-1000 per month. I actually own a rental in this area. The price is too high. It would need to be closer to 50K to even consider, and even at that, I will not own properties that require me to pay utilities because they are not separately metered. You are also assuming these are each 3 BR units where I would bet you they are 1 BR units. Rentometer is a terrible indicator for that area because it is near a historic district...

The third is two separate units - not a 4 plex. This thing has been on the market forever and is certainly not worth 70K, probably not 50K. This has all the same issues as the above discussed property.

Notice that not one deal you have found on the MLS come even close to Brandon's example. At best, we are looking at a property that generates about a third of what Brandon is using for his example. If you want to look at multi-plexes in my area, this is the best internet source I have found: dfwincomeproperties.com. I don't know if that link will post, but you can google "dfw income properties" and there you will see the reality of multi-plex listings on the MLS. A decent 4-plex will run you about 200K in a sort of crappy part of town.

You need to do WAY more than briefly looking. Don't think you are going to do a quick realtor.com search to educate a local investor in his/her local.