Working up Details on Possible investement

I know that I need to know purchase price, gross monthly income, I'll determing expenses per 50% rule, my loan payments to determine cash flow, and what else?

Thank you for being patient with me.

Edited: 06/26/2010 at 08:37AM

Josh Green

Banker · Tampa Area, Florida

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Jun 17 '09, 01:46 AM

know the market you are purchasing in and the demographics.

say for instance you had rentals in a city where manufacturing was huge. what happens to your rental when/if the factory were to close?

what may be an awesome rental today, may not be tomorrow. look at the overall picture for longterm holding.

Edited: 06/26/2010 at 08:37AM

Daniel Denig

Title Representative

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Jun 17 '09, 01:55 AM

Thank you for that, I didn't even think about that (ooppps).

What is the difference between a MFR and SFR? What qualifies a property or unit as a MFR (are apartments multi-family resedences?)? And, how do you determine Expenses for a MFR?

I've seen the 50% rule for SFR but would that apply to a bunch of 1 bedroom apartments?

Edited: 06/26/2010 at 08:37AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Jun 17 '09, 02:02 AM

Yes, the 50% rule applies to apartments. I assume you mean an apartment building, though the way you say that is a little unclear. Owning a "bunch" of anything will put you closer to that number each year. With one, you can get lucky or unlucky and be pretty far off 50% in any particular year. With 50, you're going to be very close, overall.

A duplex could be considered multi-family. For lending purposes, 1-4 units fall into the Fannie Mae type conventional loans, where 5+ requires a commercial loan. For building codes, 1-2 may be under one code (e.g., the International Residential Code) while anything larger falls under a different code. For tax purposes (depreciation), they're all "residential".

Expenses on a poorly operated multi can be much higher, even over 100%. Those are turn around opportunities, if you have the experience and financial ability to do it.

Edited: 06/26/2010 at 08:37AM

Jon Holdman, Flying Phoenix LLC

Daniel Denig

Title Representative

17 posts
50 influence

Jun 17 '09, 05:03 AM

Originally posted by Jon Holdman

Yes, the 50% rule applies to apartments. I assume you mean an apartment building, though the way you say that is a little unclear. Owning a "bunch" of anything will put you closer to that number each year. With one, you can get lucky or unlucky and be pretty far off 50% in any particular year. With 50, you're going to be very close, overall.

A duplex could be considered multi-family. For lending purposes, 1-4 units fall into the Fannie Mae type conventional loans, where 5+ requires a commercial loan. For building codes, 1-2 may be under one code (e.g., the International Residential Code) while anything larger falls under a different code. For tax purposes (depreciation), they're all "residential".

Expenses on a poorly operated multi can be much higher, even over 100%. Those are turn around opportunities, if you have the experience and financial ability to do it.

Would you be willing to talk about the Colorado market with me? That is actually where I want to go and I would love to hear any advice you could give me.

Edited: 06/26/2010 at 08:38AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Jun 17 '09, 05:20 AM

Sure. Send me a colleague request. E-mail is on my profile, too.

Multi-family is not great, though. Most sellers are completely nuts. The areas where prices are in the range where you might negotiate a deal appear to have high vacancies. Good SFRs are VERY competitive. May have better luck outside the Denver area.

Edited: 06/26/2010 at 08:38AM

Jon Holdman, Flying Phoenix LLC