Has anyone done the modeling or experience determining which investment strategy is best.
For modeling purposes lets use 600K self directed IRA funds would be made available.
B) ~$150-200K (25-30%) down or less and the rest financed for each of 3 multi unit rental properties
C) ~600K down on a single $2M multi unit rental property
There's various factors to consider such as no loan, 3 loans and rates, one large loan/potential lenders, cash flow for each scenario, exit strategy (hold for 10 yrs, less, longer) and property appreciation etc...
Q1- What key factor(s) would you use to make this decision?
I.e. The deal that provides the maximum monthly cash flow
Q2- has anyone gone the rental path and the moved to buy/improve/flip or straight to buy/improve/flip and found this a better path to building earlier/faster profits then moved to larger rental deals?
Buy and Hold is inherently different than flipping. The first is a form of investment, the second is a form of a job. That's not to say that one is passive and the other is not but rather to say how the IRS treats each.
Flipping will help to create capital.
Buy & Hold will help to create equity.
Howdy @Rick Eicon
First you must decide what your ultimate goal is. Are you looking for higher ROI than your currently achieving? How much risk are you will to take? How active or passive do you want to be?
You also could be a private money lender to other investors.
Personally I would try to leverage the money to acquire as many apartment units as possible.
leveraging your money will create a much, much higher return. 1 building vs 3 buildings can be argued both ways. I like the 1 building because it takes less energy and resources. If the numbers and opportunity is the same I would go with 1 building. That being said, I would be looking at all opportunities in order to be able to make the best decision.
Hey Rick! This article doesn't hit your specific scenarios exactly, and may be a bit basic, but might help with some considerations-
I'd say the biggest thing for your to focus on first is the numbers in each scenario. Use those to ween out anything with smaller returns and then go further into your considerations from there.
All things being equal from a valuation/ROI perspective, I would always go for the bigger building.
Apples to apples, it has less capex & management cost due to consolidation. Also, in 1M+ loan world, you can leverage non recourse loans and rates tend to be as attractive as conventional.
Agree with @John Leavelle --what are you goals? That will guide your decision.
IMO, the advantage of real estate vs other investments is the ability to leverage your money. I would opt for option C for all the reasons stated above--easier to manage, single loan, efficiency of multiple units, etc.
I just posted an article outlining why we focus on bigger complexes--the moral of the story is to go as big as you can.
Excellent feedback and support from all thanks most helpful!!