Monthly Rental Income Profit I Should Expect From a 2-3 MF
I will be buying my 1st 2 MF with a VA NO MONEY DOWN LOAN as a 100% Disabled Veteran ... ( will have 6 months reserve in bank for mortgage pymts, and $15k for unexpected major repairs )
What should be reasonable goals to set, as far as pure profit from each unit on a monthly basis, based on what newbie rental property investors typically clear as profit from each unit after expenses monthly, so what do newbies like myself typically clear as profit on a duplex or triplex ...
Any other advice would be appreciated I am sure I am not thinking of everything I should be thinking about.
Attend one of the many BP Webinars that cover "How to Buy your First (Second, Third) MF". It's free, and doesn't advertise getting the "Pro" membership too much. (that is, they do, a lot, but the solid information is well worth it).
As I recall, they will also cover using the BP Calculator for working out whether a given deal is worth the investment. You must become comfortable with working the numbers.
Quote from @Alvin Sylvain:
Attend one of the many BP Webinars that cover "How to Buy your First (Second, Third) MF". It's free, and doesn't advertise getting the "Pro" membership too much. (that is, they do, a lot, but the solid information is well worth it).
As I recall, they will also cover using the BP Calculator for working out whether a given deal is worth the investment. You must become comfortable with working the numbers.
Ok, give me a link to a webinar you are recommending where do i find many Webinars that BP offers ?
It completely depends on where you're buying it- both in the broader market and in what neighborhoods of that broader market. They can range from negative cash flow to super high cash flow on the riskiest MFs. Your profile says NY... is that where you're buying it?
Will you be living in one of the units of the MF? As far as I know VA loans only work for owner-occupied properties. Having the 100% financing will cramp your cash flow as well since the mortgage payment will be higher, but whatever you get is basically infinite returns if no money in!
Quote from @Edwin De leon:
Ok, give me a link to a webinar you are recommending where do i find many Webinars that BP offers ?
They’re listed on https://www.biggerpockets.com/... I’m not seeing any upcoming installments of the Dave Meyer multi family webinars right now but you can catch a replay on the podcast show 694: https://www.biggerpockets.com/...
Quote from @Nathan A.:
Quote from @Edwin De leon:
Ok, give me a link to a webinar you are recommending where do i find many Webinars that BP offers ?They’re listed on https://www.biggerpockets.com/... I’m not seeing any upcoming installments of the Dave Meyer multi family webinars right now but you can catch a replay on the podcast show 694: https://www.biggerpockets.com/...
I am glad you were able to point the OP in a direction to find those webinars. I've been on BP for a number of years, and my experience is that particular webinar comes up at least once a month. Always advertised on the Home page. How could could anybody miss it? I mean, it's like I trip over them every time!! :-)
Quote from @Nathan A.:
Quote from @Edwin De leon:
Ok, give me a link to a webinar you are recommending where do i find many Webinars that BP offers ?They’re listed on https://www.biggerpockets.com/... I’m not seeing any upcoming installments of the Dave Meyer multi family webinars right now but you can catch a replay on the podcast show 694: https://www.biggerpockets.com/...
Hey Nathan followed link thanks
Quote from @Ali Boone:
It completely depends on where you're buying it- both in the broader market and in what neighborhoods of that broader market. They can range from negative cash flow to super high cash flow on the riskiest MFs. Your profile says NY... is that where you're buying it?
Will you be living in one of the units of the MF? As far as I know VA loans only work for owner-occupied properties. Having the 100% financing will cramp your cash flow as well since the mortgage payment will be higher, but whatever you get is basically infinite returns if no money in!
Thank Ali.... I am not sure if I will buy in NYC, I am still in analysis & research phase trying to decide if I should buy in CT, PA or Bronx
Both CT & PA have high taxes ... not sure if I should make a high taxes an issue for me, as a 100% disabled PA may allow BIG exemption on property taxes where CT just a small discount on property taxes as a disabled veteran, I may go with Pennsylvania because of possible lower taxes on property I am retired so that savings would be nice to use for travel purposes what do you think should I run away from higher taxes in CT or take it on ?
What do you mean by " negative cash flow or super high cash flow on the riskiest MFs " are you referring to poor undesirable areas when you are telling me ............... " that it can range from negative cash flow to super high cash flow on the riskiest MF's " Yes or No also when you say super high cash flow on riskiest of MF's ... give examples of what you are referring too for riskiest of MF's not clear on this at all LOST
What is your area of specialization as an investor is it buy and hold, out of state rental properties, fix and flip or hold ?
Quote from @Edwin De leon:From the information I'm seeing, you'd definitely have to occupy the property to gain that exemption. If you get serious about baking this into your assumptions you should also call a county Director of Veterans Affairs and verify that it applies to multi-family properties -- I'm not seeing a clear answer to that.
as a 100% disabled PA may allow BIG exemption on property taxes
Quote from @Edwin De leon:
Most investors are hoping to get $200 a month cashflow per unit or a 12% annual return. It all depends on your goals.
Here's a guide that describes what good cash flow looks like and how to analyze a property.
https://www.biggerpockets.com/...
Quote from @Edwin De leon:As a general rule, nicer areas tend to have lower cash flow than undesirable areas. This blog post on property classification might help explain why. The worst areas tend to look great on paper but come with a ton of problems.
What do you mean by " negative cash flow or super high cash flow on the riskiest MFs " are you referring to poor undesirable areas when you are telling me ............... " that it can range from negative cash flow to super high cash flow on the riskiest MF's " Yes or No also when you say super high cash flow on riskiest of MF's ... give examples of what you are referring too for riskiest of MF's not clear on this at all LOST
If you plan on living in one of the units of the MF, then a VA loan might be a good option for you as it offers 100% financing. However, this could cramp your cash flow since mortgage payments will be higher compared to using other financing options. On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! That being said, there are still other factors to consider when deciding what type of financing to use such as the location where you're buying it and the riskiness of MFs in that area which can affect its overall cash flow. So make sure to do your research before making any decisions! Good luck!
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Real Estate Agent Texas (#005416)
- 832-889-5607
- http://www.buywithjaythomas.com
- [email protected]
Quote from @Jay Thomas:Thanks .... can you clarify further the following " On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! " When you say I will unlimited returns give examples more clarification what u mean by unlimited returns ...
If you plan on living in one of the units of the MF, then a VA loan might be a good option for you as it offers 100% financing. However, this could cramp your cash flow since mortgage payments will be higher compared to using other financing options. On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! That being said, there are still other factors to consider when deciding what type of financing to use such as the location where you're buying it and the riskiness of MFs in that area which can affect its overall cash flow. So make sure to do your research before making any decisions! Good luck!
Quote from @Nathan A.:
Quote from @Edwin De leon:As a general rule, nicer areas tend to have lower cash flow than undesirable areas. This blog post on property classification might help explain why. The worst areas tend to look great on paper but come with a ton of problems.
What do you mean by " negative cash flow or super high cash flow on the riskiest MFs " are you referring to poor undesirable areas when you are telling me ............... " that it can range from negative cash flow to super high cash flow on the riskiest MF's " Yes or No also when you say super high cash flow on riskiest of MF's ... give examples of what you are referring too for riskiest of MF's not clear on this at all LOST
Thank you Nathan ... checked out links already
Quote from @Edwin De leon:
Thanks .... can you clarify further the following " On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! " When you say I will unlimited returns give examples more clarification what u mean by unlimited returns ...
That's just a way of saying that if you are using that kind of financing, you have no down payment. And therefore you acquire all the upside return of the property for nothing out of pocket. Mathematically, that's the highest return possible because what could be a higher return than something for nothing?
Quote from @Nathan A.:
Quote from @Edwin De leon:
Thanks .... can you clarify further the following " On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! " When you say I will unlimited returns give examples more clarification what u mean by unlimited returns ...That's just a way of saying that if you are using that kind of financing, you have no down payment. And therefore you acquire all the upside return of the property for nothing out of pocket. Mathematically, that's the highest return possible because what could be a higher return than something for nothing?
Thanks now understand
Quote from @Jay Thomas:
If you plan on living in one of the units of the MF, then a VA loan might be a good option for you as it offers 100% financing. However, this could cramp your cash flow since mortgage payments will be higher compared to using other financing options. On the bright side, if no money is invested upfront and all financing is done through VA loans, then you will have unlimited returns! That being said, there are still other factors to consider when deciding what type of financing to use such as the location where you're buying it and the riskiness of MFs in that area which can affect its overall cash flow. So make sure to do your research before making any decisions! Good luck!
Thank you, if you were in my shoes what research would you do to maximize decisions and minimize costly mistakes ... please clarify the actual research steps to take
Quote from @Edwin De leon:I would focus less on the taxes to start and more on the numbers. The taxes will play into the numbers. If a property looks like it will cash flow well or the profit potential is strong, then you can double-check any possible risks on the taxes (like if they're scheduled to jump a tremendous amount, which would kill your projections). But don't start with those, as they won't give you the bigger picture.
Thank Ali.... I am not sure if I will buy in NYC, I am still in analysis & research phase trying to decide if I should buy in CT, PA or BronxBoth CT & PA have high taxes ... not sure if I should make a high taxes an issue for me, as a 100% disabled PA may allow BIG exemption on property taxes where CT just a small discount on property taxes as a disabled veteran, I may go with Pennsylvania because of possible lower taxes on property I am retired so that savings would be nice to use for travel purposes what do you think should I run away from higher taxes in CT or take it on ?
What do you mean by " negative cash flow or super high cash flow on the riskiest MFs " are you referring to poor undesirable areas when you are telling me ............... " that it can range from negative cash flow to super high cash flow on the riskiest MF's " Yes or No also when you say super high cash flow on riskiest of MF's ... give examples of what you are referring too for riskiest of MF's not clear on this at all LOST
What is your area of specialization as an investor is it buy and hold, out of state rental properties, fix and flip or hold ?
A high-quality property in a really nice neighborhood is likely going to offer you a lower cash flow projection than a sketchy property in a rough neighborhood. The difference between those two property types is risk. The lower the risk, typically, the lower the cash flow. The higher the risk, the higher (hopefully) the cash flow projection. Keyword there- projection. You want to be careful buying riskier properties because those risks can kill off any profit potential you were expecting.
Don't feel bad about being lost... everyone is when they get started!
My area of specialization is with buy and hold. I'm big into turnkeys and out-of-state properties. I do REI coaching with people doing all sorts of strategies, but buy and hold (not including rehabbing) is my definite area of specialization.
Quote from @Ali Boone:
Quote from @Edwin De leon:I would focus less on the taxes to start and more on the numbers. The taxes will play into the numbers. If a property looks like it will cash flow well or the profit potential is strong, then you can double-check any possible risks on the taxes (like if they're scheduled to jump a tremendous amount, which would kill your projections). But don't start with those, as they won't give you the bigger picture.
Thank Ali.... I am not sure if I will buy in NYC, I am still in analysis & research phase trying to decide if I should buy in CT, PA or BronxBoth CT & PA have high taxes ... not sure if I should make a high taxes an issue for me, as a 100% disabled PA may allow BIG exemption on property taxes where CT just a small discount on property taxes as a disabled veteran, I may go with Pennsylvania because of possible lower taxes on property I am retired so that savings would be nice to use for travel purposes what do you think should I run away from higher taxes in CT or take it on ?
What do you mean by " negative cash flow or super high cash flow on the riskiest MFs " are you referring to poor undesirable areas when you are telling me ............... " that it can range from negative cash flow to super high cash flow on the riskiest MF's " Yes or No also when you say super high cash flow on riskiest of MF's ... give examples of what you are referring too for riskiest of MF's not clear on this at all LOST
What is your area of specialization as an investor is it buy and hold, out of state rental properties, fix and flip or hold ?
A high-quality property in a really nice neighborhood is likely going to offer you a lower cash flow projection than a sketchy property in a rough neighborhood. The difference between those two property types is risk. The lower the risk, typically, the lower the cash flow. The higher the risk, the higher (hopefully) the cash flow projection. Keyword there- projection. You want to be careful buying riskier properties because those risks can kill off any profit potential you were expecting.
Don't feel bad about being lost... everyone is when they get started!
My area of specialization is with buy and hold. I'm big into turnkeys and out-of-state properties. I do REI coaching with people doing all sorts of strategies, but buy and hold (not including rehabbing) is my definite area of specialization.
Thank you, I was initially thinking of investing in rough neighborhoods, where I can pick up 3-4 MF cheaply, many members here discourage me against this, the questions how are slum landlords making money in undesirable areas not only in NYC but OHIO, Philadelphia etccc so it it worthwhile investing in rough area where I can pick up multifamily' very cheap, and do section 8 in them or something like this. I wish to hire a property mgr whether it is in a good area or bad area, but leaning more in the C + areas of CT to buy and invest in, higher rents there, I am tempted to buy in rough neighborhoods because of the lower entry point in prices for 3-4 family properties, I am not just sure, so you mention the higher the risk ( hopefully ) the higher cash flow projection, if I wanted to pursue the rougher areas of CT, upstate NY or PA how should I approach it if I wanted to pursue it, and what do I need to do figure out if it is worth ... i am sure there are a lot of variables that I must weigh out and working out the numbers as well, is there a way to invest in rough areas more cautiously, I am sure if others are making money from well so can I ;>) but not sure If I want the headaches or give the headaches to someone else who manages HEADACHE PROPERTIES :(
Quote from @Edwin De leon:Rough area investing can work, for sure. I know people who have done it. But you're right about the headaches. But more importantly than that though, the key to making those properties work is in being crystal clear exactly what risk factors about a rental property cause loss of income. You have to be crystal clear on them because rough neighborhood properties are going to have the highest chance of those things being an issue. Once you know those risk factors, you have to know strong risk mitigations for them. In theory a property manager who specializes in riskier properties will know these and be able to do it. The potential glitch in that perfect world scenario is in finding a really legit PM who is actually good at it. That can be tough to do sometimes. I would find that PM before I buy a property. You don't need to worry about giving a PM those headaches, but more importantly finding a PM who actually knows how to handle them is key.
Thank you, I was initially thinking of investing in rough neighborhoods, where I can pick up 3-4 MF cheaply, many members here discourage me against this, the questions how are slum landlords making money in undesirable areas not only in NYC but OHIO, Philadelphia etccc so it it worthwhile investing in rough area where I can pick up multifamily' very cheap, and do section 8 in them or something like this. I wish to hire a property mgr whether it is in a good area or bad area, but leaning more in the C + areas of CT to buy and invest in, higher rents there, I am tempted to buy in rough neighborhoods because of the lower entry point in prices for 3-4 family properties, I am not just sure, so you mention the higher the risk ( hopefully ) the higher cash flow projection, if I wanted to pursue the rougher areas of CT, upstate NY or PA how should I approach it if I wanted to pursue it, and what do I need to do figure out if it is worth ... i am sure there are a lot of variables that I must weigh out and working out the numbers as well, is there a way to invest in rough areas more cautiously, I am sure if others are making money from well so can I ;>) but not sure If I want the headaches or give the headaches to someone else who manages HEADACHE PROPERTIES :(
Quote from @Ali Boone:
Quote from @Edwin De leon:Rough area investing can work, for sure. I know people who have done it. But you're right about the headaches. But more importantly than that though, the key to making those properties work is in being crystal clear exactly what risk factors about a rental property cause loss of income. You have to be crystal clear on them because rough neighborhood properties are going to have the highest chance of those things being an issue. Once you know those risk factors, you have to know strong risk mitigations for them. In theory a property manager who specializes in riskier properties will know these and be able to do it. The potential glitch in that perfect world scenario is in finding a really legit PM who is actually good at it. That can be tough to do sometimes. I would find that PM before I buy a property. You don't need to worry about giving a PM those headaches, but more importantly finding a PM who actually knows how to handle them is key.
Thank you, I was initially thinking of investing in rough neighborhoods, where I can pick up 3-4 MF cheaply, many members here discourage me against this, the questions how are slum landlords making money in undesirable areas not only in NYC but OHIO, Philadelphia etccc so it it worthwhile investing in rough area where I can pick up multifamily' very cheap, and do section 8 in them or something like this. I wish to hire a property mgr whether it is in a good area or bad area, but leaning more in the C + areas of CT to buy and invest in, higher rents there, I am tempted to buy in rough neighborhoods because of the lower entry point in prices for 3-4 family properties, I am not just sure, so you mention the higher the risk ( hopefully ) the higher cash flow projection, if I wanted to pursue the rougher areas of CT, upstate NY or PA how should I approach it if I wanted to pursue it, and what do I need to do figure out if it is worth ... i am sure there are a lot of variables that I must weigh out and working out the numbers as well, is there a way to invest in rough areas more cautiously, I am sure if others are making money from well so can I ;>) but not sure If I want the headaches or give the headaches to someone else who manages HEADACHE PROPERTIES :(
Thank you, makes sense, I know I can pick up a 4 family much cheaper in a rough area then I can in better areas, very tempting, if I can a good PM that has experience dealing with MF in bad areas, then this is KEY otherwise not worth the headaches to me personally unless I have great PM with experience dealing with MF in these rough neighborhoods.
Quote from @Edwin De leon:
Thank you, makes sense, I know I can pick up a 4 family much cheaper in a rough area then I can in better areas, very tempting, if I can a good PM that has experience dealing with MF in bad areas, then this is KEY otherwise not worth the headaches to me personally unless I have great PM with experience dealing with MF in these rough neighborhoods.
Just remember with PMs, many PMs start out great and eventually turn terrible. If you find one who specializes in those types of properties, make sure you have a contingency plan in mind should something happen to that PM. Those types of properties will be much harder to sell if you ever needed to too, so just...again...know all of the risk factors. Don't rely on the PM, even if you get a good one, to know them for you.
Quote from @Ali Boone:
Quote from @Edwin De leon:
Thank you, makes sense, I know I can pick up a 4 family much cheaper in a rough area then I can in better areas, very tempting, if I can a good PM that has experience dealing with MF in bad areas, then this is KEY otherwise not worth the headaches to me personally unless I have great PM with experience dealing with MF in these rough neighborhoods.Just remember with PMs, many PMs start out great and eventually turn terrible. If you find one who specializes in those types of properties, make sure you have a contingency plan in mind should something happen to that PM. Those types of properties will be much harder to sell if you ever needed to too, so just...again...know all of the risk factors. Don't rely on the PM, even if you get a good one, to know them for you.
Thanks Ali... have you done any rent by room rental strategies in your career
PROS To Investing In Rough Areas am i missing anything here:
1 get higher rental income for apartment rentals
2 will be able to pay mtg off sooner and do upgrades to increase property value
3 if i go with rent by room strategy will make even higher income that can be used to buy another property, go on more vacations and enjoy my retirement
Am I Missing Any Risk Factors:
1 I will buy with VA LOAN will put myself, safety at higher risk by living there for 1 year
2 MF property value may remain flat no appreciation - will just cash flow
3 harder to find a PM company to manage in rough areas
4 if i find good PM co. to handle PM they may fail at mgt, or quit leaving headaches to ME
5 harder to sell property if I decide to sell because of headaches managing it or whatever
6 will be specializing in rent by the room strategy whether in rough area or not so rough area concern about how this strategy will work for me
Quote from @Edwin De leon:PROS To Investing In Rough Areas am i missing anything here:Well I'll add in an additional risk by responding to your pro #1... the projected income will be higher. Keyword being projected, because when risk factors come into play, they can kill off that projection. The risk with rough areas is the tenant quality. If you get low-quality tenants, you risk: late payments, missed payments, high expenses for damages/repairs, high turnover costs with those potential damages, eviction expenses, and extended vacancy periods... whether due to tenant non-payment, squatters, eviction processes, or finding new tenants. During those non-payment months, you're paying out of pocket on that mortgage. Aside from the potential for the property quality to be low, meaning more maintenance expenses, bad tenants are... in my opinion... the #1 most costly thing to a rental property owner. And in rough neighborhoods, you're maximizing your chance of having bad tenants. Won't always be the case, but the risk is expontentially higher. So that's the major con you left out, and the thing that can cause your #1 pro to not actually happen.1 get higher rental income for apartment rentals
2 will be able to pay mtg off sooner and do upgrades to increase property value
3 if i go with rent by room strategy will make even higher income that can be used to buy another property, go on more vacations and enjoy my retirementAm I Missing Any Risk Factors:
1 I will buy with VA LOAN will put myself, safety at higher risk by living there for 1 year
2 MF property value may remain flat no appreciation - will just cash flow
3 harder to find a PM company to manage in rough areas
4 if i find good PM co. to handle PM they may fail at mgt, or quit leaving headaches to ME
5 harder to sell property if I decide to sell because of headaches managing it or whatever
6 will be specializing in rent by the room strategy whether in rough area or not so rough area concern about how this strategy will work for me