Avondale, AZ · Member since 2017 · 65 posts · 8 votes
Hello everyone my first post here!
I have been doing a lot of research on real estate investing reading books, podcasts and of course bigger pockets! multi family properties is something I want to focus on.
I have made a nice amount of money in music production and currently have 200k just sitting in my bank account ready to be worked.
I live in the suburbs of Southern California but as most of you know it's one of the most expensive states in the country.
Investing out of state is very enticing since it is way cheaper to find a fourplex for half the price I would find here in California.
I don't plan on using all my money on one property. But I'd like to know how I can use my 200k to get 2 fourplexes or 1 fourplex and 1 duplex.
Could I just put 2 down payments and let the units pay them selves out?
Are there any investors out there that can give me any advice on how to go about this and any cities/areas you recommend I look into?
Thanks a lot!!
@Kenny Oliver BRRRR. In fact, I can show you how to buy 100 fourplexes with 200k cash with BRRR. Here it is. Buy a fourplex cash. Renovate the fourplex. Rent out the fourplex. Refinance the fourplex. Repeat times 100. Done.
Of course. Nothing is that simple, but that's the strategy. Let's talk a little about the different phases. Buy: Here is the rule of thumb; buy a property at 70% ARV (After repair value). This can be done several ways. Occasionally, you may find MLS properties (or other retail websites) listed at 70% ARV, though they are generally listed higher and you need to negotiate the price down. Other sources could be pocket listings, wholesalers, REOs, etc. Too many to list. Now the 70% ARV rule of thumb is just a number to get you in the door, if it's close to that start looking deeper. Figure out the actual costs to repair and see if it matches your 70% ARV figure. Also, you need to be able to figure out what the ARV is. Make friends with some realtors and ask for a BPO (broker price opinion), use zillow, and even better, go to realtor.com and click Sold, then look for duplicate properties in the same area, same sq ft, etc, that recently sold. This is really the most important phase. There is an old saying "You make money when you buy, not when you sell." Way more can be said about this phase... but this is the jist of it.
Repair: Make repairs that lowers your maintenance costs and raises rents.
Rent: So again, here is a rule of thumb, and you should be looking at this rule of thumb during the buy phase. Rule of thumb: Rent should be at least 1% per month of purchase price. But here we need to modify it a bit: Rent should be at least 1% of planned refinanced amount. If you are planning to refinance at 80% LTV then that amount is 80% of ARV. Also this is just a rule of thumb to get ya in the door. You should carefully examine the numbers for cash flow. Numbers to include: management fees, Cap Ex, repairs, debt service. Does it have laundry machines? Is owner paying water customary in the area? Tax rate in the area (this can be wildly different in some states, counties, and cities)?
Refinance: So consider your cash flow before going too high on LTV, but remember after you refinance and buy another property with the capital, you can use that property's rent money to help cover the previous property's debt service too. The idea here is to pull out what you put in, recovering your capital. The reason why this is even possible is the value added by the renovations. Also, consider seasoning requirements. Most banks make you wait 6 months to refinance, though I hear there are banks who are investor friendly that can wave this requirement.
Repeat.
It seems complicated and honestly we could talk for hours about each one of these subjects, but the concept is really quite simple. Here's an example to give you an idea of how it works.
Buy a property at 100k that the ARV is 250k. Make 100k in repairs. Rent it out. After repair rent is 2k/mo. That's 1% of the 200k loan. Refinance at 80% LTV, 200k loan on 250k value property. Now you have your money back and can do it again.
There are deals out there better than this one, but there are far, far more that are worse than this one. Just run your numbers and find an investment that works for your goals.
Kenny Oliver - Start in your own backyard. Join your local REIA and meet some real estate agents. Get an agent to start sending you auto emails for multifamily properties to consider. If you like some, schedule some tours. You can research expected rental prices on craigslist>housing>apartments>maps. With 100k down, you could buy two $400k properties at 75% ltv.
Look at deals for at least 30 days before you do any. Get a sense for what might be a good investment.
You could also be a private money lender at 6-12% to people in your new real estate network.
Natalie Vane yea I'll have more free time to start going to meet ups and meeting local agents investors in my area. Putting down 100k on 2 400k properties seems like a good idea but I would still want some money left over for security purposes.
Maybe two 50k down payments on 2 properties?
Thanks for the response!
It might be more wise to use the 100k for 2 down payments on 2 properties, it might seem scary at first because there went your hard earned 200k dollars! But you can always do a cash out refinance if your numbers are right and the properties cash flow after your exspenses are paid. You can wait 6 months or a year to allow what the banks call a (seasoning) period, build a little more equity into the properties by paying it down and do a cash out refinance on both properties and get your 200k back to reinvest in another 2 properties and now you have 4 multifamily properties, and as you can see, you can scale up really quickly and multiply. Rinse and repeat. Hope you make wise descisions and have a successful realestate empire!
@Kenny Oliver BRRRR. In fact, I can show you how to buy 100 fourplexes with 200k cash with BRRR. Here it is. Buy a fourplex cash. Renovate the fourplex. Rent out the fourplex. Refinance the fourplex. Repeat times 100. Done.
Of course. Nothing is that simple, but that's the strategy. Let's talk a little about the different phases. Buy: Here is the rule of thumb; buy a property at 70% ARV (After repair value). This can be done several ways. Occasionally, you may find MLS properties (or other retail websites) listed at 70% ARV, though they are generally listed higher and you need to negotiate the price down. Other sources could be pocket listings, wholesalers, REOs, etc. Too many to list. Now the 70% ARV rule of thumb is just a number to get you in the door, if it's close to that start looking deeper. Figure out the actual costs to repair and see if it matches your 70% ARV figure. Also, you need to be able to figure out what the ARV is. Make friends with some realtors and ask for a BPO (broker price opinion), use zillow, and even better, go to realtor.com and click Sold, then look for duplicate properties in the same area, same sq ft, etc, that recently sold. This is really the most important phase. There is an old saying "You make money when you buy, not when you sell." Way more can be said about this phase... but this is the jist of it.
Repair: Make repairs that lowers your maintenance costs and raises rents.
Rent: So again, here is a rule of thumb, and you should be looking at this rule of thumb during the buy phase. Rule of thumb: Rent should be at least 1% per month of purchase price. But here we need to modify it a bit: Rent should be at least 1% of planned refinanced amount. If you are planning to refinance at 80% LTV then that amount is 80% of ARV. Also this is just a rule of thumb to get ya in the door. You should carefully examine the numbers for cash flow. Numbers to include: management fees, Cap Ex, repairs, debt service. Does it have laundry machines? Is owner paying water customary in the area? Tax rate in the area (this can be wildly different in some states, counties, and cities)?
Refinance: So consider your cash flow before going too high on LTV, but remember after you refinance and buy another property with the capital, you can use that property's rent money to help cover the previous property's debt service too. The idea here is to pull out what you put in, recovering your capital. The reason why this is even possible is the value added by the renovations. Also, consider seasoning requirements. Most banks make you wait 6 months to refinance, though I hear there are banks who are investor friendly that can wave this requirement.
Repeat.
It seems complicated and honestly we could talk for hours about each one of these subjects, but the concept is really quite simple. Here's an example to give you an idea of how it works.
Buy a property at 100k that the ARV is 250k. Make 100k in repairs. Rent it out. After repair rent is 2k/mo. That's 1% of the 200k loan. Refinance at 80% LTV, 200k loan on 250k value property. Now you have your money back and can do it again.
There are deals out there better than this one, but there are far, far more that are worse than this one. Just run your numbers and find an investment that works for your goals.
Kenny Oliver , a few key pieces of detail are missing.
How actively do you wish to manage these properties and tenants?
Are you looking for short term income, longer term appreciation or a combination of both?
Depending on the answers above you can look at investing via a syndicate in apartment complexes, commercial projects, etc.
Also don't be afraid to go outside your area. I am in california, and IMHO california doesn't make a great place for rental investing. I invest out of state too, in Utah. I haven't even seen those properties myself, but I don't care what they look like as long as I keep collecting rents! One of these days I am gonna go visit Utah on a vacation and check them out. Hawaii first though, lol. I have looked at so many places, many of them really great, across the country. Texas, kansas MO, Tennessee, florida, georgia, Illinois. Just what I can come up with out of my head but there are so many good places.
Some tips for buying out of state: Find a good property manager and use them to be your real estate agent for the purchase. The property manager has a vested interest in your property (he/she has to rent it out and manage it!) and will steer you clear of bad deals. Many of them have their own contractors too that are ready to repair your rental.
That doesn't absolve you of due diligence though. Have an inspector prepare a detailed report. Use contractors to estimate repair costs. Call the local housing authority to find complaints against the property. Many rental properties get complaints, that is to be expected, but if you get the complaint: sewage keeps backing up, multiple times by different tenants, you know there is a problem and the owner wants to dump it on you. Get an estimate of that work and ask for a reduction in price based on that. These are just some basic tips. Due diligence is a huge topic. It would be a good usage of your time to google it and read through articles on it.
@Kenny Oliver congrats on your successful music business!
A couple of things:
1) @Natalie Schanne wrote 100K down for two 400K properties at 75% LTV it means 100K for EACH (I had to read it twice myself).
2) @Percy N. asked the right question: how involved do you want to be?
In my mind out of state is a gamble. I heard of many people that do great and many that lost their money. If you plan on investing out of state, expect to be MORE involved so you can make sure no one is ripping you off and that the property is well maintained. Too much headache and risk for me.
This is the MF channel so I'm surprised no one suggested it yet but did you look into invsting in apartment buildings? You can be as active as a group sponsor or as passive as a limited partner. I like it better because of the reduction of risk and as a passive investor it's literally mailbox money.
Full disclosure: I have done singles, duplex, small MF and now larger Apartments deals both as passive and as group sponsor.
$200k could be a 25% down payment on a commercial loan for a property selling for $800,000. Go on LoopNet.com and search for multi-family property near larger cities in the Midwest or Southeast U.S.A. Once you find a property, the hard part is getting the listing agent to actually answer the phone. Put it under contract contingent on getting financing, then shop banks that are local to the property. CA banks will likely not want to loan you money on a property out of state.
@Kenny Oliver...Learn as much as you can before spending $$$...Read and ask a lot of questions. I started investing without spending $$...Yes, I made mistakes, but you can do the same spending a lot of money on courses...BP is a great Resource!!!..GL!
Percy N. I would prefer having property management for out of state rentals. Although I'd be flying out to meet with agent, bank, property management and due diligence. So I know what I'm getting
And I'd just be looking for cash flow
Some consistent income.
@Kenny Oliver If you are looking for quick turn around and some points I could use the about 100K for 60 days. Wouldnt put you out of the game in the long term but would put a dent in your immediate need if you already have something in mind.
I suggest you join @Mark Robertson 's investor group, where he negotiates better terms for the group as a whole on syndicated deals. He also runs crowdDD.com where he reviews crowdfunding deals.
Investing is about returns. If you buy and operate yourself, you bought a job.
Joseph Hennis thanks a lot Joseph you really explained in detail the brrr process. I would love to pm you and talk more ! Im a newbie on this website so idk how to pm you.. could you send me a message?
Kenny Oliver
I am buying a triplex in Utah and a Fourplex in Boise right now. The cap rates and overall returns are way higher than most other areas. I'm buying a 6.8% and 7% cap rate NEW multi units is great locations. FIG has some great properties for you to look at and consider, let me know if you'd like some more info
Amy Kendall
HI @Kenny Oliver if you’re looking to take a more passive role in your real estate and want the benefits of diversification there are funds available to accredited investors that are designed to allow investors the opportunity for ownership of institutional investment grade property that is occupied by regional, national, and Fortune 500 credited companies.
Kiyosaki advocates GOING SLOW (look at lots and lots of deals) I get instant alerts on redfin and then do additional research on propertyradar ($50 month) the equivalent of ABC (always be closing) in sales is ABE "always be evaluating"
honestly, I think it becomes rather OBVIOUS over time what a good/great deal looks like.
Building/Buying 4 plex out of state could be a reallly good move though... as new construction attracts better tenants and would have little maintenance/headaches
Good luck...and remember... the most inexpensive house/houses could be the EXPENSIVE house.
If you go the crowdfunding or syndication route, I would diversify as much as possible. You now have the options to diversify not only with multiple sponsors, but across different asset classes and geographic regions. The key advantages to crowdfunding are the lower minimums and deal flow. Take advantage of both.
I have been investing in out of town multi-family properties over the past year as a syndicate member and am currently sourcing off-market opportunities in Jacksonville, FL, Cincinnati, OH and Atlanta, GA for purchase as a personal holding. As someone who also has her own capital to invest, I would recommend that you are get very clear regarding your investment and lifestyle goals before making any investment. Sourcing multi-family properties that make financial sense is very time consuming (I've reviewed over 100 deals in the past 6 months) because demand has been high in major and secondary markets. In addition, unless you want to spend time in hands on management (which doesn't seem to be the case due to the fact that you seem to have a music career), you need to purchase/invest in a property that generates sufficient cashflow to hire professional management. If you decide that you would like a more passive approach to investing, then I would recommend that you consider the full spectrum of ways to get involved in real estate and the relative returns that they offer before deciding how to commit your capital. Your options are varied - REITs, bridge lending, buying through turnkey operators (who will find/fix/manage properties for you), investing through syndications and various crowdfunding platforms - equity, as well as debt. As someone who has explored most of those options, I'm happy to give you suggestions offline on platforms that I subscribe to as well as the process that I use for out of state investing, if you like. All the best!
I have been doing a lot of research on real estate investing reading books, podcasts and of course bigger pockets! multi family properties is something I want to focus on.
I have made a nice amount of money in music production and currently have 200k just sitting in my bank account ready to be worked.
I live in the suburbs of Southern California but as most of you know it's one of the most expensive states in the country.
Investing out of state is very enticing since it is way cheaper to find a fourplex for half the price I would find here in California.
I don't plan on using all my money on one property. But I'd like to know how I can use my 200k to get 2 fourplexes or 1 fourplex and 1 duplex.
Could I just put 2 down payments and let the units pay them selves out?
Are there any investors out there that can give me any advice on how to go about this and any cities/areas you recommend I look into?
Thanks a lot!!
Which markets are you looking for out of state? There are a few markets where you can see some AMAZING returns with that kind of investments.
I am assuming you will be looking for Turnkey since you will not be there very often. It is a good strategy since it allows for you to be hands off.
Hi Tom Ott what markets do you recommend?
I was looking at Las Vegas, Kansas City, or Tucson/Phoenix areas.
I am mostly leaning to multi families but flips and buy and holds are something I'm considering only because there isn't much multifamilies out here in my area. Thanks for responding!