Hello! and where to find Cash flow 4-Plexes?
Hello!
I'm just getting started on BP. Love it! It's great to be connected to a community of like minded RE investors. So much to learn, so much to do!!
------ THE PLAN ------
I plan to purchase $3 mil of small Multi-Unit properties by the end of 2016. The general goal is to purchase *** FIVE *** 4-Plex's worth $600K each, where I put %20 down (so $120K down on each).
The stretch part of the plan - I'd like each 4-Plex to cash flow $2K a month. OK, well, if that's not realistic, I'm open to reason.
Ideal property is a C property in a B area (using an A,B,C,D area scale).
I live in LA but think the market is too overheated here to get anywhere close to the cash flow goal so am actively investigating & number crunching external markets (Atlanta, Tacoma, San Antonio, Charlotte, Austin, etc.).
------ THE HELP I'M LOOKING FOR ------
I'm looking for help locating these small Multi's that can cash flow.I'm also looking for input regarding the cash flow goal. What's a realistic cash flow goal for a $600K 4-plex if I put 20% down? I'm willing to work, search, direct mail market, submit 3 offers a day, etc. etc. I've got 17 years experience with software so am very capable and actually really enjoy number crunching & analysis part of this. Really interested in your input/experience/guidance on confirming my cash flow goal or setting a more realistic one.
Great to meet ya's,
Daniel
Greetings and welcome. Well you certainly are ambitious. Im experinced in the Tacoma market and thats how i was alerted to your post. Your valuation for 4 plexes may be a bit high for the area but ball parkish may be closer for B+/A areas . I have b properties in b/c tacoma area. Multis are a bit pricy right now so your cash flow goal will require work to acheive locally but is fairly realistic. My advice is to stay nimble and evaluate duplexes as well as larger units. Why 4 plexes? 20% is available but you may find 25% to be more accessable. Larger units or areas closer to sea-town or pemium neighborhoods in tacoma would allow you to get closer to your 600k price point but honestly that sounds like a cali price to me. Higher price generally lower cash flow but better appreciation. If you you like to talk feel free to reach out to me. Good luck in your quest.
Welcome to BP Daniel Ahern You have certainly come to the right place!
I love your goals and it sounds like you will do very well this year! There are so many options in what market to invest in, and you will hear a lot of different ideas on how to invest your money. Here is my take:
One of the biggest downsides to the LA market is it is so expensive to get into. You have the luxury of being able to get into the market here. You probably won't get 2k per month here, but you will still cash flow well while having assets in one of the top markets in the U.S.
Don't write off LA just because you hear people, especially on BP, complain about how hard or crazy it is here. There are success stories everyday.
I don't understand, if you have capital to put 20% down on $3 million worth of assets, why are you wanting to operate in the small multi-family arena, where value is a function of demand, rather than larger multi-families, where value is a function of income?
[EDIT] Also, welcome to BP! It's a great place!
Welcome to Bigger Pockets. It is a good community to network and learn about all aspects of real-estate investing.
@Alex Gaw Hi Alex, good question, appreciate your input. If I buy 4-plexes, I can put 20% down and use 30 year mortgages (locking in current low rates). If I buy larger than 4-plex, now it's commercial and I need 30% or 35% down and can only use variable rate 7 year loans.
I have about $600K to work with. At 35% down, that extends to ~$1.7 Mil in properties. At 20% down, that leads to ~$3 Mil in purchases. Huge difference right? That along with being able to lock in low interest rates has me thinking it's the right path.
What are your thoughts? Anything I'm not seeing or misunderstanding here?
@Eric Dowling Thanks Eric. Yes, this is exactly what I'm wrestling with now. Stay local or venture out. I'd definitely prefer to stay local and I want to believe what you're saying but I'm not seeing the opportunities locally at the moment. Any advice on micro-areas & property type combo in LA to maximize cash flow?
@Mark Nolan Thanks Mark, learning more every day!
@Daniel Ahern, have you considered South LA? Many people smarter than me are saying that that's where the appreciation is going to be in LA over the next decade or so.
Originally posted by @Daniel Ahern:
@Alex Gaw Hi Alex, good question, appreciate your input. If I buy 4-plexes, I can put 20% down and use 30 year mortgages (locking in current low rates). If I buy larger than 4-plex, now it's commercial and I need 30% or 35% down and can only use variable rate 7 year loans.
I have about $600K to work with. At 35% down, that extends to ~$1.7 Mil in properties. At 20% down, that leads to ~$3 Mil in purchases. Huge difference right? That along with being able to lock in low interest rates has me thinking it's the right path.
What are your thoughts? Anything I'm not seeing or misunderstanding here?
Also interested in seeing the answer to this last question...
I looked at 4-plex in LA....and I learned your better off buying a 4-plex out of state because higher rate of return. Turn-key.
Realistically, you could buy a house in LA for $600-800k and bring in the same cash flow with 4 tenants. The choice is either to buy and risk all your egg under one tenant or reduce your risk and hope all four tenants stay.
@Simon Gill Hi Sam, thanks for jumping in. Could throw some numbers together for you what your are thinking regarding cash flow for $600-$800k home in LA? You're saying rent out 4 rooms in an SFR? That sounds nightmarish to manage... maybe I'm not understanding correctly.
Let me try one more time... too many typos (and not sure how to edit a previous post)
Hi Sam, thanks for jumping in. Could you throw some numbers together for what you are thinking regarding cash flow for a $600-$800k home in LA? You're saying rent out 4 rooms in an SFR? That sounds nightmarish to manage... maybe I'm not understanding correctly.
@Logan Allec Hi Logan, thanks for chipping in. Any more specifics regarding South LA? Is that mostly about spill over from USC or other dynamics happening there?
I meant you could buy a hous between $600-$800k or a 4-plex which generate the same cash flow number. The question is you want one tenant stress or 4 tenant stress. I'm not sure if 4-pled appraisal r usually higher than a house
I just spoke with a RE Agent in LA. She said from time to time
"many income properties in LA are priced at a loss." "Returns around 4-5% are for turn key properties... if that. If you're willing to venture into sketchy areas and willing to deal with relocations, you will get a lot more."
I'm still researching but I'm seeing other investors talk about 10%... as much as 20% Cash on Cash. That compared to 4%-5%. OK, the 10% to 20% was certainly not Turn Key so maybe that isn't fair. Still crunching numbers...