Fourplex - Good first investment?

6 Replies

I have found a fourplex, I'm kind of using as a base to recognize a good deal.

The property is in a prime location, and looks very nice (only seen in pictures so far) and the asking price is $485,000. The seller is a licensed realtor and says the ROI will be 17%, my question is (and again this is in Canada) what are my options for down payments on this specific property. Time and time again I hear about people getting properties for low down payments or lend from places other than the bank. I don't know how to do this and I'm trying to understand it a bit better. Because this would be my first investment, I don't now if the bank would give me the amount needed for a mortgage.

In general does this sound like a good deal? I realize you are not in the same area and don't know the geography of the location but I guess what I'm saying is, given the ROI and price, and being my first investment property, would this be a good idea. Or is the idea to start much smaller and work up to something like this?

@Devon Young  

Are your Spidey senses are tingling?   ... they should be!

Unless Ingersoll has moved since my uncle built buses there 40 years ago, I would be suspect on any quadraplex in that price range (>100K per unit) generating anything near 10% return, let alone 17%.    I suspect the agent's 17% is comprise mostly of "anticipated appreciation" and not on the business operations of the property.

Before worrying about how you are going to finance this 4-plex, let's determine if you should be buying it in the first place and, if so, at what price.    Ask the realtor for the past 2-3 years of operational finances  ... s/he will either try to intimidate you away from wanting/needing them - in which case, walk away - or will provide you with a set of rosy, half-fabricated numbers {accept these with scepticism ... if you get in the territory of a deal, you will ask for corroborating information from his/her accountant or tax returns}.

Once you have the financial data, take a run at analysing it, then bring it here for folks to review and assist you with coaxing the {likely} truth from the numbers.

thank you very much! It's great to get any advice. Even better from someone who knows the area!  @Roy N.  

I always analyze deals based on the unleveraged cap rate. A deal is only good if it's good without financing. The problem is that even if a property has an acceptable leveraged ROI, there are so many types and varieties of financing that a bad deal could look good and vice-versa.

@Devon Young

Good job thinking about investing at a young age. When you figure out a good deal for your first investment , and even if you finance it for 30 years , you'll have your property paid off at an age when some of us are just starting. Kudos for making plans for your future. 

@Devon Young  

Any further news on this lead?  In our last exchange, I believe you had established the Vendor's rosy prediction of a 17% return was based upon leverage - a 20% down payment and 80% mortgage financing.

@Roy N. I have decided to keep looking. I have found a few more deals that are also appealing. I have also found a couple people who are interested in a partnership, so I'll continue to look for my first deal. I'll definitely post on the forums once I do find something, and then I'll post again once I can call it mine.

Thanks for your interest! Means a lot and keeps me working towards my first investment!!



Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here