$ 500K , What should i do . Multi Family Investing

$ 500K , What should i do . Multi Family Investing

Member since 2020 · 51 posts · 9 votes

I figured the Subject line would catch  your attention lol so lets get to it 

26 Year old , Passive investor with a few retail commercial buildings ( $700K average price tag )  all rented out  and a couple business i run , all owned by me . 

What is my goal - Build Wealth but more importantly build an array of cash flowing properties that are recession proof . honestly , i want to reach a point where I can cash flow $100,000 Monthly from my properties by 45 , i know that may come off as unattainable or unrealistic but it is doable for sure  . I've taken into consideration 3-5 years for a recession or dip . And i would invest business income  and cash flowing properties back into the next one to try to achieve that goal quicker 

Resources - I have decent income yearly from personal businesses but i want to supplement it . 

Education - Ive remodeled some retail buildings and rented them out but nothing fancy like a 30-60  unit apartment complex or bigger . The resources i have , the team is what i would like to solidify 

What team members i need - Professional real estate Tax accountant , that knows how to reduce taxes to $ 0 little by little . ( tom wheelwright ) Mortgage brokers who can get loans for me at decent rates with good amortization . I have decent credit and i would put the loan in my name , i qualify . I could use another solid lawyer who knows the ins and outs . solid Plumber , Electrician and Engineer that are quick , reasonably priced , and do thorough  work . Of course , a few commercial brokers , property managers or mortgage brokers  who can find me the deals . Thats important . I don't want to do syndication , im trying to steer away from that unless thats the only option i have . 

This is the Preferred Property im looking for or similar  . And please comment or suggest i'm an idiot if you like or recommend something i may be missing . Either or works 

Well just use this as a simple example 

24 Unit apartment Complex ( B-  or C +  type  property 

Purchase Price - 1,920,000 ( $80k Per Unit ) may be low in this market 

Down payment - 25% = $480,000 

Rehab - $ 6,500 per Unit ( some units  more than others ) = $ 156,000

Common Rehab - Water Heater , laundry room if it has one , Paint of building , landscaping , windows , parking lot  , roof ( 10k - 70k ) This ranges a lot depending on the property 

Closing cost - 20-30k 

tax - 7,000 / year 

insurance - 12,000 ( wind n hail , general , fire  ) / per year 

Property Management ( 10 % ) = 2,160 / per month 

vacancy - 10 % = $ 2,160 per month 

Cap X ( fridge , window , curtains , doors , paint , roof , pavement ) - 1,080 / per month 

Landscaping - $ 800 per month 

simple repairs - $ 500 -900 per month 

common area electric - $ 300 per month 

Mortgage $ 7,500 ( 30 year amortization  , 4.75 % rate  ) 

Income - $900 per unit = $21,600 , this varies based on area . 

Total expense = roughly $ 16,000 

Profit - $ 5,550  X 12 = $68,000

ROI = Roughly 9-11 %

A lot of fat to trim here . on top of that , a refinance in 18-36 months down the line 

Thoughts , ideas ? help ? 

im ready to do deals like this . 

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Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
6y
Originally posted by @Mike B.:

@Greg Dickerson

Good point . I have considered reinvesting in my business and myself but I want to lower my taxes and be able to produce income while not working or minimal work ( maybe 20-25 hours a week ) . By no stretch will I force a deal and over leverage myself when it’s not a good deal .

 Remember good times never last and bad times never last. We are in a boom economy right now and it will not stay this way forever so if I were you (and I was 26 years ago) I would work as much as you can and earn all you can right now and ride this wave (which I did) so you can do whatever you want whenever you want in the future (like I do now).

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  • Rental Property Investor · Lake Hallie, WI · Member since 2015 · 292 posts · 144 votes
    6y

    Water metered by unit?

    Trash service?

    Local inspections, licences?

    Accounting, legal?

    Caretaker unit?

    Miscellaneous?

  • Member since 2020 · 51 posts · 9 votes
    6y
    Originally posted by @Joseph Hammel:

    Water metered by unit?

    Trash service?

    Local inspections, licences?

    Accounting, legal?

    Caretaker unit?

    Miscellaneous?

    All good points  , I will need to take those into effect. 

  • Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y

    @Mike B. what about focusing on growing and scaling your existing businesses and continuing to build your cash? 

    Sounds like you've done pretty good for 26 so I would think whatever your business you should be able to double triple or more if you ficus on maximizing that right now. Real estate take time and focus and is at a peak right now so it's more of a yield play. If you're looking to park cash and play the debt pay down game is a great time for that as rates are low but it's difficult to find significant upside right now and will require a lot of time and effort on your part. 

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Greg Dickerson

    Good point . I have considered reinvesting in my business and myself but I want to lower my taxes and be able to produce income while not working or minimal work ( maybe 20-25 hours a week ) . By no stretch will I force a deal and over leverage myself when it’s not a good deal .

  • Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Mike B.:

    @Greg Dickerson

    Good point . I have considered reinvesting in my business and myself but I want to lower my taxes and be able to produce income while not working or minimal work ( maybe 20-25 hours a week ) . By no stretch will I force a deal and over leverage myself when it’s not a good deal .

     Remember good times never last and bad times never last. We are in a boom economy right now and it will not stay this way forever so if I were you (and I was 26 years ago) I would work as much as you can and earn all you can right now and ride this wave (which I did) so you can do whatever you want whenever you want in the future (like I do now).

  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    6y

    Very attainable goal. You have 19 years to hit that mark. With focus, you can attain it in a few years. Continue to educate yourself, stay patient and jump on the right opportunities when they come. When a recession hits again, be in a position to act fast and take full advantage. 

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Greg Dickerson

    Very true . Wise words to follow

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Todd Dexheimer

    Patience will be my biggest test . I’m trying to soak in and learn what I can now so I hit the road running when this cycle comes back

  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    6y
    Originally posted by @Mike B.:

    @Todd Dexheimer

    Patience will be my biggest test . I’m trying to soak in and learn what I can now so I hit the road running when this cycle comes back

    Don’t just sit on the sidelines - that’s not a strategy, but being patient and finding good cash flowing deals should be your focus. Save up money now, build relationships and get educated. If you can buy During a recession with money, a network and education, you will hit your $100k in a very short time.  

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Todd Dexheimer

    Very true ! I haven’t been bought in a recession so I’m not sure how lending rules change during recession , if less lending or tighter restrictions . But overall , your concept is true . A 1,000,000 investment should bring a way higher return than now

  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Mike B.:

    What is my goal - Build Wealth but more importantly build an array of cash flowing properties that are recession proof

    In my opinion there is no such thing as debt-financed real estate that is recession proof.

    It's true that real estate pricing is often tied to the financial cycle which can be independent of the business cycle/recessions. But vacancies and rent are tied to the business cycle/recessions and experience some amount of stress every time (which varies depending on the type of recession, the location of the asset, the type of asset etc.). If it's a severe enough recession and you experience severe enough conditions for long enough, then at some point there is a risk that you can't service your debt. And if that happens then the whole thing blows up.

    If you want something recession proof then you need to be investing in an asset class that is uncorrelated with business cycles (litigtion finance, life settlements, royalties, etc) and even then usually you're only getting at best "extremely recession resistant".

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  • Rental Property Investor · Phoenix, AZ · Member since 2015 · 68 posts · 235 votes
    6y

    I've also been looking for very similar deals over the past 3 months, as I work with investors and have roughly the same amount of cash as you to work it. Would love to combine forces and get a deal done.

    One piece of advice: rather than starting with a laundry list of specific criteria, you may have more luck starting out with 3-4 criteria and then looking for all deals that meet those criteria. Then you can evaluate each deal and see which ones are the best. Each deal is super different, so it's not likely you'll find something that fits into an exact bucket.

    Just as an example, my criteria for searching for deals is as follows:

    - Must be located near the Orlando MSA, Atlanta, East Memphis, Las Vegas, or Phoenix

    -Must be between 4-25 units and a max price of $2 million

    -Must have rents below market

    I then look for everything that fits into those buckets and can then evaluate from there. Yes, I have a specific IRR, profit multiple, and NOI Yield on Cost that I must attain, but there is always a purchase price that makes the deal worth it.

    Also, I wouldn't worry too much about finding all your team members right away. First focus on getting a deal under contract and then put the rest of the team together. I'm sure your broker will refer you to a property manager, who will refer you to a contractor/plumber/electrician, and so on. Also, it's very easy to quickly find any of these team members online and interview them over the phone in one day.


    Please feel free to message me if you'd like to connect.

  • Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
    6y

    @Mike B. I'm with @Greg Dickerson. Focus on what is making you money right now and maximize profits. If you're looking for ways to reduce taxable income, focus on passive investing. I tell busy professionals this, almost daily, that you don't need to reinvent yourself as a "real estate investor" if you don't want to. You can get a lot of the benefits by selecting the right deal for you and passively investing. 

    My philosophy is that the highest and best use of your time is doing what makes you the most money. Don't slow down now that you have momentum. 

  • Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Elijah Brown:

    I've also been looking for very similar deals over the past 3 months, as I work with investors and have roughly the same amount of cash as you to work it. Would love to combine forces and get a deal done.

    One piece of advice: rather than starting with a laundry list of specific criteria, you may have more luck starting out with 3-4 criteria and then looking for all deals that meet those criteria. Then you can evaluate each deal and see which ones are the best. Each deal is super different, so it's not likely you'll find something that fits into an exact bucket.

    Just as an example, my criteria for searching for deals is as follows:

    - Must be located near the Orlando MSA, Atlanta, East Memphis, Las Vegas, or Phoenix

    -Must be between 4-25 units and a max price of $2 million

    -Must have rents below market

    I then look for everything that fits into those buckets and can then evaluate from there. Yes, I have a specific IRR, profit multiple, and NOI Yield on Cost that I must attain, but there is always a purchase price that makes the deal worth it.

    Also, I wouldn't worry too much about finding all your team members right away. First focus on getting a deal under contract and then put the rest of the team together. I'm sure your broker will refer you to a property manager, who will refer you to a contractor/plumber/electrician, and so on. Also, it's very easy to quickly find any of these team members online and interview them over the phone in one day.


    Please feel free to message me if you'd like to connect.

    You could also combine resources and invest passively in a syndication as @Luke Miller mentioned. This would allow you to focus on making more money to invest in more deals. 

  • Lender · United States · Member since 2020 · 1k+ posts · 499 votes
    6y

    If done correctly, your $500k can generate $100k/yr in cash flow + appreciation value. I'm not sure of your market, but I'd seek investments that offer at least 20% COC return. That's $100k if you end up investing the full $500k. That's a good start to your $100k/month goal.

  • Lender · United States · Member since 2020 · 1k+ posts · 499 votes
    6y

    I've seen investor portfolios that get as high as 40% COC. However, it's rare. I did meet someone that had 7 or 8 properties with an average COC of 24%. That's some good stuff right there.

    You invest in a market that generates 24% cash flow + 4% appreciation and the tenant paying down the mortgage every month. Now that's gold.

  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    6y

    @Greg Dickerson breaks it down best and @Luke Miller explains how to use what you have now to reduce those tax burdens. You state that you want to avoid syndications but investing in syndications might be a way for you to build your nest egg by investing passively through other operators. You might learn through that experience that you may like syndications or it could also validate your means to not want to do them. Either way, focusing on your business and making your dollars chase you sounds like the game you already want to play so find other ways to get it to happen so you don't have to take too much focus away from your day to day businesses that have gotten you to this point. Once you build that nest egg and you experience any market disruptions, you'll be ready to pounce. 

    Happy investing!

  • Investor · New York City, NY · Member since 2016 · 155 posts · 105 votes
    6y

    @Mike B. What markets are you focused on?  Building a team becomes much more straight forward when you know what markets you're looking at.  I recommend looking at 2-3 to get started.  I would also say that if you're looking for 24+ unit apartment buildings, the property manager is the most important member of the team.  I would start interviewing PMs in your focus markets.  Let me know if you want a list of interview questions I use.

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Mark A. Kenny

    Currently looking in Caroina coast market , wilmington ,Nc exactly . But valid points throughout the entire thread . Maybe I should start vetting some syndication companies that can yield a high CoC and depreciation for taxes . Are there companies that are able to do 20-25% coc return with depreciation for taxes ?

  • Investor · New York City, NY · Member since 2016 · 155 posts · 105 votes
    6y

    @Mike B. 20-25% CoC is a lot higher than what I'm seeing right now. You can def find multi-family syndications with an IRR of 20-25%. But the CoC is closer to 8-10% on average. Would you say you're mainly looking for cashflow and wealth preservation? i.e. Is cashflow more important to you than equity or a large payoff from a sale/refi? Most of the deals I look at are value adds where equity is the focus. But there might be other syndicators out there who are focused more on cashflow.

  • Member since 2020 · 51 posts · 9 votes
    6y

    @Mark A. Kenny

    Honestly I would say I’m more focused on cash flow at the moment , somewhere to park cash and have a decent return until Market comes down a bit and I find deals to invest in . That’s the ultimate goal , have around 500-1000 units or an array of properties that bring in 100k net profit a month to live on . Nothing crazy lol

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