Losing Liquidity on Multiplex Purchase

[Howard Montaque]

We flipped 3 houses last year. It was a long hard battle and we did well. Now I have money in the bank and flips have become harder to find in this market. I found a new construction triplex for $670k where there are older properties that need work at this price point. I put in an offer and started looking for a lender. Then I found out that multiplex properties are now 25% down. Thats $167500 not counting the closing costs ect... WOW! Thats going to be all my cash money. The property should net me about $4k a month but that will take a long time to recuperate. How are you dealing with it?

My goal is $8k to $10k per month

[Greg Scott]

You have discovered the key problem with new construction.  You basically have to make your money on the cash flow or hope appreciation occurs and you can cash out later and usually it requires a lot of money down. On the positive side, you get a property that is perfect and you should have very low maintenance for the first few years.

If you buy a junker and fix it up, you can force appreciation.  This gives you the option to use hard money up front or get it out later with a cash-out refi.  Either way, you can minimize the out of pocket.

Given your experience flipping, I'd suggest you find a junker to fix up to rent.  You'll make a lot more money than buying new.  Also, because you are not flipping you are taxed at a much lower rate so you do not have to buy as deeply as you did when flipping.  In other words, it is easier to make the numbers work.