$800k Multifamily - Top cashflow? Best area?

19 Replies

Hello Everyone,

I am working with my parents to 1031 a property that should go for around 800k with an 300k outstanding loan.  This will leave me with around 500k in equity on a new 800k+ investment.  

Is it realistic to find a property that grosses 8k a month?  I've been watching Reno, NV (Tesla & Google), Austin, TX, Sacramento, CA and none of these seem like realistic markets to have 1% returns.

My question is, on a multifamily (ideally fourplex) what are the best markets to look into for a cashflow property.  I would like an 800k multifamily to cash flow at least 4k, after ALL expenses.  Is this realistic?  If so, where do I need to take my search?  To have a successful 1031, it seems that you need to have a property that is sitting on the market or an area that isn't as hot, to do within 45 days.  Any suggestions would be great.  

My last purchase was a duplex in Austin for $435k with 110k down that only cashflows $515/month after mortgage and property management expenses but nothing else. I do not want to make another mistake like my first property.  Thank you!

Originally posted by @James Piercy :

Hello Everyone,

I am working with my parents to 1031 a property that should go for around 800k with an 300k outstanding loan.  This will leave me with around 500k in equity on a new 800k+ investment.  

Is it realistic to find a property that grosses 8k a month?  I've been watching Reno, NV (Tesla & Google), Austin, TX, Sacramento, CA and none of these seem like realistic markets to have 1% returns.

My question is, on a multifamily (ideally fourplex) what are the best markets to look into for a cashflow property.  I would like an 800k multifamily to cash flow at least 4k, after ALL expenses.  Is this realistic?  If so, where do I need to take my search?  To have a successful 1031, it seems that you need to have a property that is sitting on the market or an area that isn't as hot, to do within 45 days.  Any suggestions would be great.  

My last purchase was a duplex in Austin for $435k with 110k down that only cashflows $515/month after mortgage and property management expenses but nothing else. I do not want to make another mistake like my first property.  Thank you!

 James, I'm not sure those numbers would work on a 4 plex. You would need some really high rents to be able to get that much money coming in, let alone NET after expenses. 

I've been watching a 6 Plex here in Connecticut that NETS a tad over 3K a month, but it also costs a lot less than 800K. Feel free to PM me if you'd like. 

Have you considered other cities where you can get many more units for a ~$500k down and cash flow more? Are you stuck on those cities you mentioned? I'm not sure if you're looking at those cities for the appreciation advantages they generally have but if I were you I'd be looking for a 12 unit or more somewhere else. 

@James Piercy I can just speak for my experience, but in Austin that doesn't not likely a realistic expectation for gross rent in that price point for a single property.   In the last year, the highest I've see is a handful of properties sold that brought mid-high $5000's in that price point.

You also may want to consider taking a look at what your returns and cash flow would look like if you took the existing equity and purchased a couple smaller properties. Depending on what your goals are (COC return, cash flow, etc) that might be another option? Or what @DougWoodville is suggesting...

Originally posted by @Doug Woodville :

@Filipe Pereira I think his numbers might work on some places around the bay area in CA. One other thing to consider is with that high of a down your ROI and COC will not be what most consider an "investment."

 Yes, I think you said what I was thinking! LOL!

I also second your comment above...I'd be looking into more than 4 units....maybe the 1031 is limiting him? 

@James Piercy Just my initial thoughts:

1.) If you go for 4-plex you get a standard 30 year loan, etc. but if you go 5+ units you get the fun of a 20 or 25 year amortization period.  It's not the end of the world but you do end up with a higher mortgage payment than if you shove deal points into a standard calculator.  And you might pay a little bit more in terms of an interest rate.  But you'll stand a better chance of hitting your 1% desire with $50K/unit apartments than $200K/unit apartments (i.e. a quad for $800K).

2.) Taking Reno, NV out of it you're picking a couple of the "hottest" markets since the crash.  If you're looking for 1% deals you probably have to take any "Top 10" or "Top 25" list of markets that have appreciated the most in the last 5-10 years off of your list.  You'll see the same markets in there:  Seattle, Nashville, Bay Area, Sacramento, Austin, etc.  I'll over-generalize but the appreciation rate in those markets is going to increase faster than the rents.

@James Piercy I just did a search on the Sacramento MLS and I was shocked to see a very low inventory of 4plexs for sale. The lowest priced pending sale is at 315k in the del paso heights area. Gross rents at 3500 per month. That area is known as the rough area. The 2nd lowest pending is in Rancho Cordova at 479k. grosss rents at 3200 per month. The prior owner purchased it at purchased it at 330k in August 2014. Just to show you the large increase in price. The lowest active not in the hood is 449k. 2br units rented at 800 each but one vacant. Those rents are low. They should be 1000 to 1100 per month.

You might need to expand your cities to find something in that 45 day time frame. The problem with Austin is the high property taxes so that lowers your cash flow. 

You might want to think about a mid west city like Kansas City. I located a duplex for my sister in law for 125k where the rents are 1500 per month. You can purchase 6 duplexes that get 9000 per month gross income for 800 easily with lower taxes that Texas.    Good luck in your search. 

Why not buy an apartment building in be Midwest or southeast for that and actually get some cashflow?

You seem to be focused on hot markets that everyone knows are hot markets and have poor price to rent ratios.

What is your goal? Is it cashflow or potential appreciation?

Originally posted by @James Piercy :

Hello Everyone,

I am working with my parents to 1031 a property that should go for around 800k with an 300k outstanding loan.  This will leave me with around 500k in equity on a new 800k+ investment.  

Is it realistic to find a property that grosses 8k a month?  I've been watching Reno, NV (Tesla & Google), Austin, TX, Sacramento, CA and none of these seem like realistic markets to have 1% returns.

My question is, on a multifamily (ideally fourplex) what are the best markets to look into for a cashflow property.  I would like an 800k multifamily to cash flow at least 4k, after ALL expenses.  Is this realistic?  If so, where do I need to take my search?  To have a successful 1031, it seems that you need to have a property that is sitting on the market or an area that isn't as hot, to do within 45 days.  Any suggestions would be great.  

My last purchase was a duplex in Austin for $435k with 110k down that only cashflows $515/month after mortgage and property management expenses but nothing else. I do not want to make another mistake like my first property.  Thank you!

 I just wanted to comment on the Austin purchase...as it maybe be the best investment you made still, it is too early to tell. Idk the area but what if it appreciates in value and rents due to stellar location? My point is initial cash flow alone is not normally how real estate investments are entirely evaluated. If it is Detroit has your name all over it. I can't recall how many LA duplexes were 400k with $500 mo cash flow and now are 800k with $1000 mo cash flow...but it is in the hundreds or 1000s. I don't have to mention the super location ones that were 400k and now are 1.5 mil as you likely can see that stuff like that close to you. 

Another thing, when a property appreciates, to measure return on equity annually, one is to add the appreciation, as if they were going to sell minus taxes and commissions to arrive at a ROE. For some reason I don't see that RE math used on this site much but that is how it is properly accounted for. When looking at that number many discover why appreciation and location really matters. 

Good luck! 

Have you looked into corporate housing? I’m in the SF Bay Area and some investors around here have been successfully doing it to get more cash flow than median rents have to offer.

Thanks everyone! To confirm I am looking for markets outside of; Reno, NV (Tesla & Google), Austin, TX and Sacramento, CA.  Those are the only ones that I am familiar with and they don't seem to support sufficient cash flow to make sense for me.

Hello @James Piercy , I would have to agree with @Filipe Pereira and @Katie Hanner

4k Gross after "all" expenses, is this including your debt coverage?

If so, you are needing to gross approximately10k per month. This would be $2500 a month rents for a multi family building. The only areas that can justify this would be SF Bay area, or another trendy high end downtown. Like others have mentioned, in order to get that gross monthly amount in such an area, expect a purchase price of 2 million approx.

Hey @James Piercy , I would agree with some of the previous comments on this thread and look at larger apartment complexes specifically in the South and Midwest where you will see substantially greater cashflow than out west where you are currently located. All of my apartment complexes are in Macon, Ga where I see double digit COC returns, but they do take tougher skin to deal with the property/tenants. At the end of the day it all boils down to your goals and where do you see your investing career 10, 20 or 30 years down the road. For me, cashflow is king, which is what it looks like you are searching for, so just be careful in those highly speculative markets that have seen substantial growth overnight. Best of luck!

Originally posted by @James Piercy :

Hello Everyone,

I am working with my parents to 1031 a property that should go for around 800k with an 300k outstanding loan.  This will leave me with around 500k in equity on a new 800k+ investment.  

Is it realistic to find a property that grosses 8k a month?  I've been watching Reno, NV (Tesla & Google), Austin, TX, Sacramento, CA and none of these seem like realistic markets to have 1% returns.

My question is, on a multifamily (ideally fourplex) what are the best markets to look into for a cashflow property.  I would like an 800k multifamily to cash flow at least 4k, after ALL expenses.  Is this realistic?  If so, where do I need to take my search?  To have a successful 1031, it seems that you need to have a property that is sitting on the market or an area that isn't as hot, to do within 45 days.  Any suggestions would be great.  

My last purchase was a duplex in Austin for $435k with 110k down that only cashflows $515/month after mortgage and property management expenses but nothing else. I do not want to make another mistake like my first property.  Thank you!

 Hi James, 

Have you looked at the Midwest?  Columbus, Ohio has some great opportunities for investment properties with good cash flow.  There is a tremendous amount of growth going on in Columbus and Columbus has the strongest population and job growth outlook of any city in Ohio and most in the Midwest.  Columbus is where I would focus if I was trying to accomplish the cash flow goal you laid out above.  Good luck with everything!