Buying First 4 Unit Investment Property With No Money

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Buying First 4 Unit Investment Property With No Money

Account Closed
Chambersburg, PA · Member since 2012 · 1 post · 0 votes

I am new here but I would like to share my story. I am 28 years old and have never owned any property before. I am scheduled to close on a 4 unit property real soon. I did my time in the military and am now eligible for a no money down loan.

I was scheduled to close on a brand new home two weeks before I backed out. The reason I backed out was because a saw the opportunity I was waiting for. The house I was going to buy was a cookie cut house 3 bed, 2 1/2 bath for 149K. It was a fairly nice house for the price.

So I was Drawing closer and closer to closing when I saw this place. It was a 4 unit older, much older place. I thought about it over the weekend and could not believe what I was about to do, I was going to pull back and go for this 4 unit place.

I called to see the place. It was very clean and very well maintained. I did not expect anyone to be living in the place but there were already three units renting! Quite a pleasant surprise. I knew this was the place I neded to get.

I had the place inspected and put an offer on it. I offered 165k with 4% from seller's for closing costs and they accepted. So now I am scheduled to close in a few weeks.

So here are the numbers:

New house
Built on May of 2012
Price - 149k
Mortgage $1,000 including insurance and taxes.
Apr 3.35%

4 Unit Place - Much older place
Price 165K
Mortgage - $1,100 including insurance and taxes. Taxes are high in this county.
Each unit renting for $550.

My plan is to owner occupy this place and rent the other units. If and when the other units are rented all my bills will be paid including mortgage and utilities. I plan to "pay rent" the first year and keep that money in a account to cover expenses for surprises and anything that needs fixing. After that use all the money I will save for three years and purchase my next property and rent that place for $750 - $1000 a month. After that keep saving and every 2 to 3 years purchase another property, keep doing that for about 15 years until olI can retire with the rent money I receive.

Let me know what you guys think of this plan. I am interested to hear what you guys have to say. Iam also open to networking.

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  • Marc Therriault
    Landlord · Sudbury, Ontario · Member since 2012 · 17 posts · 1 vote
    13y

    Your are definatly better off doing that than buying a home with not income. But if you looking for someone to tell you your deal is good , that is not going to happen, talk to someone that has rentals in your area and that is successful and not a wingnut, just because the numbers are good on paper doesn't mean it's all good. There's many factors like is the building going to attract low income bums? That will have pets smoke and not pay rent half the time? Is the building falling apart? Meaning tenants will move out because the old windows make it unaffordable to heat or cool or the walls are not sound proof and you will alway get complains about noise. Our area is booming right now , shiny new apartment are being built all over the place. What happens when you buy an older place , when the market is not so hot? Yours will be vacant and the new places will lower rents. Not trying to discourage you at all just sorta feel like you are looking for a (yes it's a good deal). But it depend a lot on where and what and you. Keep us posted

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  • Tim Delp
    Real Estate Investor · Jacksonville, FL · Member since 2012 · 109 posts · 22 votes
    13y

    The numbers sound like you can acheive a lot of what you want here. Not knowing your area can't speak for the value of the property but assuming you have done your homework on the values. If you were easily able to afford the $1,000 payment you were going to have you should be able to put some money back in to this property making improvements as necessary.

    I'd suggest making the necessary improvements you want to make to the unit you will be occupying. I would suggest that although you will be living in that particular unit do make the repairs taking in to consideration that most likely you will be renting it at some point so make them to appeal to the majority and take into consideration low maintenance.

    As your current renters move out you might then move in their units, make similar type improvements and rent your other unit and slowly over time make the right improvements to increase your rents and make the property low maintenance.

    Good luck and congrats on your first upcoming purchase

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  • Thom H.
    Investor · Central Virginia Area, VA · Member since 2012 · 80 posts · 28 votes
    13y

    Marvin,
    There are lots of threads on BP that explain the 50/50 rule, so I won't belabor explaining that philosophy here or try evaluate your deal with limited info. I'm sure many others will chime in and attempt to crunch the numbers for you. Just remember, every deal is unique and has it's benefits. Sometimes those benefits are in the way of great profits, sometimes in the way of life lessons. The first purchase is almost always the latter, and if you're really fortunate you stumble into some profits along the way. Congrats on taking the 1st plunge. You're a winner already for recognizing the opportunity of investing in RE. Deals can always be better, but it's about the particular gains for you personally that result from each deal. Trust me you will learn a ton from this 1st deal in the coming year(s), hopefully with hard work you may realize some profits, but you will definitely gain experiences that will make your next deal better than the last. Being new to the site, I'd recommend searching the site and read about the 50/50 rule. It's a great read and will help you self evaluate your 1st deal and will provide some high level guidance for your next deal. Best of luck, welcome to BP, and to the world of RE investing!

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  • John C.
    Investor · Suwanee, GA · Member since 2010 · 104 posts · 22 votes
    13y

    I see that the OP's account is closed so this is just for general discussion. I noted that the OP did not include other costs like water and trash. In multifamily if the water bills are not separately metered they can really hurt your cash flow and trash may or may not be included in the property taxes. As always do your due diligence. It's that one unknown that can turn a good deal around. That being said in this market 165k for 13k net not including vacancies, repairs, credit loss, etc per year is not a good deal.

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