Multi-family in an expensive market

[Nicole Brites]

I'm struggling to decide whether to get started now with lower capital, or wait to put 20% down.

Prices in my area are so high, most 2-families don't cash flow. 3-4 family units are typically 600,000 or more, and barely cash flow a few hundred dollars per month.  Between the high prices, multiple cash offers, and bidding wars-I'm unsure of whether to start now with a small down payment, or wait to start with a conventional loan?

Curious how others in higher priced market tackled this question. And the minimum cash flow numbers you'd want to see to invest.

[Evan Polaski]

@Nicole Brites, the fact of the matter is, whether you start now or with 20% down, you are still a financed offer.  If you are truly competing with cash offers, you will be at a disadvantage with any financing. Granted, the higher the down payment, the more serious your offer will be viewed.  When I sell properties, if I have a full price cash and full price financed offer, I will take cash all day.  My last flip, I sold for $5k less than highest offer because the highest price offer was 5% down versus 20% down on the slightly lower offer, AND we were not confident in the house appraising at top offer, so the 20% down offer created surety that the buyer had cash to cover shortfall, if the house came in short on appraisal.

I would think about your rationale for wanting to be in real estate.  Are you wanting to build a portfolio of rental properties?  If so, having cash flow negative assets or assets that one unforeseen expense wipes our years of cash flow is not an investment, it is a monthly bill like your cell phone or utilities.

If you are banking on appreciation, that is a different game, and I would be looking at single family flips to get in and out quickly, but there are clearly a lot of risks associated with those as well.