Flip or hold?

6 Replies

I'd love to retire but need about 60,000 income a year to be comfortable.

Don't really like the idea of being a landlord,but it seems to be the best plan.

Would love to use a property manager or management co.

Thinking 6 to 8 ,$50 to 60,000 single family homes purchased with cash renting for from 600. To 800. Per month Thinking I'll get better appreciation on homes.

Or is it better in any way to just buy and 8 plex

Thanks,Lisa

Don't forget to count all your expenses. 6 to 8 houses at $800/month RENT will most likely yield roughly from $31,680 (6 * $800 *.55 * 12) to $42,240 (8 * $800 * .55 * 12) per year... pre-tax. Your depreciation allowance will (most likely) greatly reduce your current tax liability, so you can probably treat those numbers as comparable to your post-tax W-2 equivalent. I am using 45% total unencumbered expenses with reserves, but not including mortgage or (non-cash) depreciation allowance.

@Lisa Misuraca  , I agree with @Chris Martin about making sure you calculate all expenses correctly, but I also agree with you that you'll probably get better appreciation on SFH than multi-unit, unless increasing rents more than offset the cap rate and drive prices up..

Good luck!

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@Lisa Misuraca If you are planning on reselling these, then yes, the properties would appreciate better. But it sounds like you'd like to hang on to these for passive income. It really depends on your purchase price. If you find a great deal on a 4-plex, it can have a great yield. When reselling the properties, SFH can be sold to everyone, while multifamilies can only be sold to investors. The SFH vs MF debate has been WELL documented, and it really depends on your area. I know I have only lived in the NYC and LA metro areas. I have personally NEVER lived in a SFH. I know I have been vague, but it is tough for me to know without knowing the area you're investing in, among other factors.

Originally posted by @Joakim Esaiasson :

Chris Martin so you calculate a cash flow of 360$/month (800*0.45)? Thanks Kim

Not really.

On average, your total expenses (with reserves, which are restricted cash) over periods longer than one month will average about 50%, +/- maybe 10%. I used 45% as your total expenses of gross potential rent. Note that I also include reserves for future expenses like replacing roof, hot water heater, HVAC, and other capitalized costs. The "expense" also calculates in vacancy. If you have a month of vacancy, your accountant will say 'your rent isn't $800, it's $733.33.' On BiggerPockets, people would say 'your rent is $800, and vacancy expense is 8.3%'. The term "Rent" represents "Gross Potential Rent". On the expense side, "vacancy" includes rent loss between leases and uncollectable rent due.

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